Young v. Schultz

1

JACALYN A YOUNG, et al., Plaintiffs, v. RONALD J SCHULTZ, Defendant.

No. 22-cv-05203-TSH

United States District Court, N.D. California

May 8, 2023

ORDER GRANTING MOTION TO DISMISS

Re: Dkt. No. 25

THOMAS S. HIXSON, MAGISTRATE JUDGE

I. INTRODUCTION

Pending before the Court is Defendant Ronald J. Schultz's Motion to Dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6). ECF No. 25. Plaintiffs Jacalyn A. Young and Diane Lynn filed an Opposition (ECF No. 26) and Defendant filed a Reply (ECF No. 27). For the reasons stated below, the Court GRANTS the motion.^[1]

II. BACKGROUND

A. Factual Background

Plaintiffs Young and Lynn reside in “The Woodlands,” a townhome complex in Santa Rosa, California. ECF No. 24 ¶¶ 3-5. Young and Lynn are members of The Woodlands Owners' Association (“HOA”). Id. Defendant Schultz also resides in the Woodlands and is a member of the HOA. Id. ¶ 7.

On multiple occasions between April 14, 2021 and April 20, 2021, Schultz, or his wife Jo Schultz, emailed Young, as President of the Board of Directors of the HOA, requesting financial information about management of the HOA. Id. ¶¶ 22-28.

On April 21, 2021, Schultz sent an email to Young, and he, or possibly others, hand-delivered a letter to Lynn and their other neighbor, Mary Ann Burwell. Id. ¶¶ 11, 16. The letters and email demanded “things of value” from all of them, including that Young resign from the HOA Board of Directors. Id. ¶ 11. Schultz threatened to publish false information to residents of the HOA and The New York Times if Young, Lynn, and Burwell did not meet his demands. Id. This false information included that Plaintiffs and their church were possibly engaging in tax fraud and money laundering. Id.

Schultz had stated to others that he wanted to be the “sole HOA Board member.” Id. ¶ 13. He said he wanted Woodlands to fire the other two members of the HOA Board of Directors and pay him a salary. Id.

On July 6, 2021, Young filed a Request for a Civil Harassment Restraining Order against Schultz in Sonoma County Superior Court. Id. ¶ 34. The parties signed a Settlement Agreement on July 27, 2021, wherein Schultz agreed to stay away from Young for three years. Id.; ECF No. 24-12, Exhibit 12.

On July 19, 2022, Schultz nominated himself to the Board of Directors, in violation of the Settlement Agreement as Young was still on the Board of Directors. Id. ¶¶ 37-38.

On August 5, 2022, Young filed a second Request for Civil Restraining Order against Schultz in Sonoma Superior Court. Id. ¶ 40. On October 11, 2022, the day before trial in the new Sonoma Superior Court action, Schultz emailed to counsel for Lynn and Young another letter stating “with the help of the Press, my goal is to motivate the IRS, The California Attorney General, and the Franchise Tax Board to seriously investigate” Lynn and Young's involvement in their church. Id. ¶ 41; ECF No. 24-15, Exhibit 15. The letter also stated that Schultz wanted Lynn and Young “to CEASE and DESIST weaponizing the judicial system to restrict [Schulz's] free speech.” ECF No. 24-15, Exhibit 15.

B. Procedural Background

On September 12, 2022, Plaintiffs Young and Lynn filed the instant action against Defendant Schultz and DOES 1-20 for blackmail (18 U.S.C. § 873), mailing threatening communications (18 U.S.C. § 876(d)), and stalking (18 U.S.C. § 2261A). ECF No. 1. On October 4, 2022, Schultz filed a Motion to Dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6).^[2]ECF No. 7. On November 18, 2022, the Court dismissed all causes of action, finding the claims were brought under criminal statutes. ECF No. 15. The Court granted leave to file an amended complaint. Id.

On December 2, 2022, Young and Lynn filed a First Amended Complaint (“FAC”) against Schultz and DOES 1-20 alleging violation of the Racketeer Influenced and Corrupt Organizations statute (“RICO”). ECF No. 16. On December 28, 2022, Schultz filed a Motion to Dismiss the FAC pursuant to Federal Rule of Civil Procedure (“Rule”) 12(b)(6). ECF No. 20. On February 6, 2023, the Court granted Defendant's Motion to Dismiss Plaintiffs' FAC, with leave to amend. ECF No. 23.

On March 7, 2023, Plaintiffs filed a Second Amended Complaint (“SAC”) against Schultz and DOES 1-20 alleging violation of the RICO statute. ECF No. 24.

On March 21, 2023, Schultz filed a Motion to Dismiss the SAC pursuant to Rule 12(b)(6). ECF No. 25. On April 4, 2023, Plaintiffs filed an Opposition. ECF No. 26. On April 11, 2023, Schultz filed a Reply. ECF No. 27.

III. LEGAL STANDARD

A motion to dismiss under Rule 12(b)(6) “tests the legal sufficiency of a claim. A claim may be dismissed only if it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.” Cook v. Brewer, 637 F.3d 1002, 1004 (9th Cir. 2011) (citation and quotation marks omitted). Rule 8 provides that a complaint must contain a “short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). Thus, a complaint must plead “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). Plausibility does not mean probability, but it requires “more than a sheer possibility that a defendant has acted unlawfully.” Ashcroft v. Iqbal, 556 U.S. 662, 687 (2009). A complaint must therefore provide a defendant with “fair notice” of the claims against it and the grounds for relief. Twombly, 550 U.S. at 555 (quotations and citation omitted).

In considering a motion to dismiss, the court accepts factual allegations in the complaint as true and construes the pleadings in the light most favorable to the nonmoving party. Manzarek v. St. Paul Fire & Marine Ins. Co., 519 F.3d 1025, 1031 (9th Cir. 2008); Erickson v. Pardus, 551 U.S. 89, 93-94 (2007). However, “the tenet that a court must accept a complaint's allegations as true is inapplicable to threadbare recitals of a cause of action's elements, supported by mere conclusory statements.” Iqbal, 556 U.S. at 678.

If a Rule 12(b)(6) motion is granted, the “court should grant leave to amend even if no request to amend the pleading was made, unless it determines that the pleading could not possibly be cured by the allegation of other facts.” Lopez v. Smith, 203 F.3d 1122, 1127 (9th Cir. 2000) (en banc) (citations and quotations omitted). However, a court “may exercise its discretion to deny leave to amend due to ‘undue delay, bad faith or dilatory motive on part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party . . ., [and] futility of amendment.'” Carvalho v. Equifax Info. Servs., LLC, 629 F.3d 876, 892-93 (9th Cir. 2010) (alterations in original) (quoting Foman v. Davis, 371 U.S. 178, 182 (1962)).

IV. DISCUSSION

A. Judicial Notice

As part of Schultz's Reply, he submitted a request for judicial notice. See ECF No. 27-1. Schultz seeks judicial notice of an opinion issued March 30, 2023, by the California Court of Appeal, First Appellate District, Division Three, in the action Jacalyn Young, et al. v. Ronald J. Schultz, Case No. A165581. Id. Schultz argues that the document is relevant to his Motion to Dismiss because the California Court of Appeal found that Schultz's April 21, 2021 letters were “protected activity” under the First Amendment. Id. Schultz argues that the letters, therefore, cannot serve as predicate acts of racketeering activity. ECF No. 27 at 10-11. The argument that Schultz's letters are protected activity was not raised in the Motion to Dismiss and the Court thus declines to address it herein. See Provenz v. Miller, 102 F.3d 1478, 1483 (9th Cir. 1996) (“It is well accepted that raising of new issues and submission of new facts in [a] reply brief is improper.”); Ass n of Irritated Residents v. C & R Vanderham Dairy, 435 F.Supp.2d 1078, 1089 (E.D. Cal. 2006) (“It is inappropriate to consider arguments raised for the first time in a reply brief.”). As a result, the Court considers the Court of Appeal's decision irrelevant to determination of the Motion to Dismiss and declines to take judicial notice. See CYBERsitter, LLC v. People's Republic of China, 805 F.Supp.2d 958, 963-64 (C.D. Cal. 2011) (declining to take judicial notice of a fact because it “is irrelevant to the instant motions”). Defendant's request for judicial notice is DENIED.

B. RICO Claims

“To state a civil RICO claim under 18 U.S.C. § 1964(c), a plaintiff must allege ‘(1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity (known as “predicate acts”) (5) causing injury to the plaintiff's business or property.'” Abcarian v. Levine, 972 F.3d 1019, 1027 (9th Cir. 2020) (quoting Grimmett v. Brown, 75 F.3d 506, 510 (9th Cir. 1996)). Plaintiffs allege that Schultz committed two acts of extortion between March 2021 and October 12 2022, working with other members of the HOA. See ECF No. 24 ¶¶ 12, 14, 29. Schultz argues that Plaintiffs have failed to plead the second, third, fourth, and fifth elements of the claim. See ECF No. 25-1.

1. Statutory Standing

Schultz contests both that Plaintiffs have alleged an injury to business or property and that any such injury is by reason of the alleged RICO predicate acts. ECF No. 25-1 at 16-21. He argues that the SAC fails because the allegations of injury are vague, conclusory, and rely solely on emotional distress. ECF No. 25-1 at 16-18. Plaintiffs respond that they have alleged harm to their business, loss of time, and injury to Plaintiffs' position on the Board of Directors of the HOA. ECF No. 26 at 12. Schultz also argues that Plaintiffs do not allege that Schultz's conduct proximately caused Young's decreased income. ECF No. 25-1 at 18-21. Plaintiffs...