Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_05-cv-00997/USCOURTS-cand-3_05-cv-00997-6/pdf.json

Nature of Suit Code: 710
Nature of Suit: Fair Labor Standards Act
Cause of Action: 28:1331 Fed. Question: Fair Labor Standards

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1 All parties have consented to the jurisdiction of a

United States Magistrate Judge for all proceedings including

entry of final judgment pursuant to 28 U.S.C. § 636(c). 

Defendants have filed several other motions in this case, on

which I have separately ruled.

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UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

KIMBERLY JONES,

Plaintiff(s),

v.

DEJA VU, INC., et al.,

Defendant(s).

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No. C 05-0997 BZ

ORDER ON DEFENDANTS’ MOTION

TO DISMISS “SUBCLASS ONE”

CAUSES OF ACTION

Now before me is defendants’ motion to dismiss

plaintiffs’ second claim for unfair competition under the

Sherman Act, 15 U.S.C. §§ 1, 2; third claim for tortious

interference with economic relations; fourth claim for

negligent interference with economic relations; and fifth

claim for violation of the Racketeer Influence and Corrupt

Organizations Act (“RICO”), 18 U.S.C. § 1961 et seq.1

 

Plaintiffs are eight exotic female dancers who have

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brought this action on behalf of themselves and other

similarly situated dancers who provide, or provided, nude and

semi-nude live performances at various adult nightclubs in San

Francisco (the “Plaintiff Class”). Plaintiffs’ second through

fifth claims relate to an alleged Plaintiff Subclass One which

consists of those members of the Plaintiff Class who are, or

have been during the relevant period, owners of the Lusty

Lady, a San Francisco nightclub that allegedly competes with

defendants.

Defendants motion to dismiss plaintiffs’ second claim for

violations of section 1 and 2 of the Sherman Act is DENIED. 

Section 1 of the Sherman Act prohibits agreements that

unreasonably restrain trade. See 15 U.S.C. § 1. To state a

claim under section 1, a plaintiff must allege: “(1) that

there was a contract, combination or conspiracy; (2) that the

agreement unreasonably restrained trade under either the per

se or rule of reason analysis; and (3) that the restraint

affected interstate commerce.” Tanaka v. University of

Southern Cal., 252 F.3d 1059, 1062 (9th Cir. 2001) (citations

and internal quotation marks omitted); Bhan v. NME Hospitals

Inc., 929 F.2d 1404, 1410 (9th Cir. 1991). 

Defendants erroneously contend that plaintiffs have

failed to allege the existence of a contract, combination or

conspiracy. Plaintiffs allege that defendants are through

illegal means, “concertedly restricting and diminishing

legitimate business trade and commerce of its competitors . .

. in an attempt to unreasonably restrain trade.” First

Amended Compl. (“FAC”) ¶ 99. The complaint also contains

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relatively detailed allegations concerning those facts that

underlie defendants’ concerted efforts to restrict

competition. See e.g., FAC ¶¶ 39-50. 

Defendants’ contention that plaintiffs have failed to

sufficiently define the relevant market also lacks merit. A

plaintiff bears the initial burden of establishing that the

restraint produces significant anticompetitive effects within

the relevant product and geographic markets. Tanaka, 252 F.3d

at 1063. “The geographic market extends to the ‘area of

effective competition’ . . . where buyers can turn for

alternative sources of supply.” Id. “The product market

includes the pool of goods or services that enjoy reasonable

interchangeability of use and cross-elasticity of demand.” 

Id. (citations omitted). 

The complaint alleges that defendants have restrained

competition within “the regional San Francisco area – which is

specifically defined as comprising San Francisco County,

Alameda County, Marin County, Sonoma County, Contra Costa

County, and San Mateo County.” FAC ¶ 44, 99. It further

alleges that the relevant product market is “nude and seminude dancing.” FAC ¶ 41. While defendants may disagree with

the plaintiffs’ characterization of the relevant market based

on the facts presented in their motion, these issues are not

properly raised on a motion to dismiss. See Farr v. United

States, 990 F.2d 451, 454 (9th Cir. 1993).

In their reply, defendants’ raise several additional

challenges to plaintiffs’ Sherman Act claims, which are

untimely. See Lentini v. California Center for the Arts,

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Escondido, 370 F.3d 837, 843 n.6 (9th Cir. 2004) (“We decline

to consider new issues raised for the first time in a reply

brief.”); Gold v. Wolpert, 876 F.2d 1327, 1331 n.6 (7th Cir.

1989) (“It is well settled that new arguments cannot be made

for the first time in reply.”); Schwartz v. Upper Deck Co.,

183 F.R.D. 672, 682 (S.D. Cal. 1999) (“It is well accepted

that raising of new issues and submission of new facts in [a]

reply brief is improper.”) (citing Provenz v. Miller, 102 F.3d

1478, 1483 (9th Cir. 1996)). In any event, plaintiffs’ have

sufficiently alleged that defendants engaged in a number of

anticompetitive acts, which decreased lawfully-operated clubs’

ability to compete in the marketplace. See SmileCare Dental

Group v. Delta Dental Plan of California, Inc., 88 F.3d 780,

783 (9th Cir. 1996); see e.g., FAC ¶¶ 88, 100-101.

Defendants’ motion to dismiss plaintiffs’ third cause of

action for tortious interference with economic relations, or

intentional interference with prospective economic advantage,

is GRANTED with leave to amend. To state a claim for

intentional interference prospective economic advantage, a

plaintiff must allege: (1) the existence of a valid contract

or some other economic relationship between the plaintiff and

a third party containing a probability of future economic

benefit to the plaintiff; (2) defendant’s knowledge of the

existence of the relationship; (3) intentional acts on the

part of the defendants designed to disrupt the relationship;

(4) actual disruption of the relationship; and (5) damages to

the plaintiff proximately caused by defendants’ acts. Blank

v. Kirwin, 39 Cal. 3d 311, 330 (1985); see also Pardi v.

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Kaiser Found. Hosp., 389 F.3d 840, 852 (9th Cir. 2004). 

Defendants contend that plaintiffs have failed to sufficiently

allege the existence of a contract or some other economic

relationship between plaintiff and a third party containing a

probability of future economic benefit. At the hearing,

plaintiffs contended that defendants allegedly interfered with

plaintiffs’ economic relationship with their customers. While

this can be inferred from the complaint, it is not clearly

alleged. In repleading their complaint, plaintiffs should

clarify the economic relationship with which defendants

allegedly interfered.

Defendants’ motion to dismiss plaintiffs fourth claim for

negligent interference with prospective economic advantage is

GRANTED with leave to amend. Plaintiffs’ have failed to

sufficiently allege that defendants’ owed them a duty of care. 

See J’Aire Corp. v. Gregory, 24 Cal. 3d 799, 803 (1979).

Defendants’ motion to dismiss plaintiffs’ fifth claim for

violation of RICO, 18 U.S.C. § 1961 et seq., is GRANTED with

leave to amend. Plaintiffs broadly allege on information and

belief that defendants “conspired to, and engaged in, a

racketeering scheme, which included numerous illegal acts

including prostitution and unlawful employment agreements.” 

FAC ¶ 111. To carry out this scheme defendants allegedly

“conspired to, and did transmit wire communications in

interstate commerce via telephone calls in violation of 18

U.S.C. §§ 371, 1343 and 1346.” FAC ¶ 115. At the hearing,

plaintiffs conceded that they had not alleged that defendants

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2 18 U.S.C. § 1962 lists four separate acts which form

the basis for RICO liability: “(a) to invest income derived

from a pattern of racketeering activity in an enterprise; (b)

to acquire or maintain an interest in an enterprise through a

pattern of racketeering activity; (c) to conduct the affairs of

an enterprise through a pattern of racketeering activity; or

(d) to conspire to commit any of the above acts.” See Diaz v.

Gates, 354 F.3d 1169, 1172 (9th Cir. 2004) (citing 18 U.S.C. §

1962(a)-(d)).

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violated a particular subsection of RICO.2 Plaintiffs also

clarified that they intended to predicate their RICO claims on

violations of the Travel Act, yet this is not alleged. See 18

U.S.C. § 1952.

A RICO claim predicated on acts of fraud must be pled

with particularity pursuant to Rule 9(b) of the Federal Rules

of Civil Procedure. Edwards v. Marin Park, Inc., 356 F.3d

1058, 1065-66 (9th Cir. 2004); Tate v. Pacific Gas & Elec.

Co., 230 F. Supp. 2d 1072, 1084 (N.D. Cal. 2002). This

requires the plaintiff to particularize the “time place, and

manner of each act of fraud, plus the role of each defendant

in the scheme.” Tate, 230 F. Supp. 2d at 1084 (quoting

Lancaster Cmty. Hosp. v. Antelope Valley Hosp. Dist., 940 F.2d

397, 405 (9th Cir. 1991)). Plaintiffs are granted leave to

amend the complaint to state with particularity those portions

of their RICO claim that are predicated on acts of fraud. If

plaintiffs intend to rely on other predicate acts to support

their RICO claim, they should so allege in their complaint. 

While defendants raise a host of other issues with respect to

plaintiffs’ RICO allegations, I need not address each of them

in light of the fact that I have granted plaintiffs leave to

amend. 

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For the foregoing reasons, IT IS HEREBY ORDERED that

defendants’ motion to dismiss plaintiffs’ second through fifth

claims is granted in part, and denied in part. Defendants’

motion is DENIED with respect to plaintiffs’ second claim, and

GRANTED with leave to amend with respect to plaintiffs’ third

through fifth claims. Plaintiffs must amend their complaint

by July 25, 2005. In amending, plaintiffs should consider the

concerns expressed at the hearing as to whether the proper

party plaintiff is before the court.

Dated: July 6, 2005

Bernard Zimmerman 

 United States Magistrate Judge

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