Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_04-cv-04632/USCOURTS-cand-3_04-cv-04632-3/pdf.json

Nature of Suit Code: 470
Nature of Suit: Civil (Rico)
Cause of Action: 18:1961 Racketeering (RICO) Act

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United States District Court

For the Northern District of California

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United States District Court

For the Northern District of California

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

SAN FRANCISCO BAY AREA RAPID

TRANSIT DISTRICT,

Plaintiff,

 v.

WILLIAM D. SPENCER, et al.,

Defendants.

 /

No. C 04-04632 SI

ORDER GRANTING IN PART AND

DENYING IN PART DEFENDANTS’

MOTION TO DISMISS PLAINTIFF’S

FIRST AMENDED COMPLAINT; AND

DENYING DEFENDANTS’ MOTION TO

STRIKE 

On Friday, September 2, 2005, the Court heard argument on defendants’ Motion to Dismiss and

Motion to Strike Plaintiff’s First Amended Complaint. Having carefully considered the parties’ arguments, and

for good cause appearing, the Court hereby GRANTS defendants’ Motion to Dismiss plaintiff’s claims under

California Business & Professions Code § 17200 with leave to amend, and DENIES the remainder of

defendants’ Motion to Dismiss. The Court further DENIES defendants’ Motion to Strike.

BACKGROUND

Plaintiff, San Francisco Bay Area Rapid Transit District (“BART”), seeks to recover from WilliamD.

Spencer (“Spencer”), his companies, and their employees, for damages it claims were caused by the

defendants’ fraudulent practices in connection with work performed under BART construction subcontracts.

BART allegesthat the defendants charged it forthousands ofdollarsin fees thatwere used to pay “kickbacks”

to another construction firm.

According to BART’s Complaint, Spencer is the sole owner of two San Francisco Bay Area

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1 The following facts are taken from plaintiff’s First Amended Complaint. At this stage of the

proceedings, the Court accepts the allegations in plaintiff’s Complaint as true. McGary v. City of Portland,

386 F.3d 1259, 1261 (9th Cir. 2004).

2 Specifically, federal regulations govern public transit contracts paid for by federal funds, such as

BART’s contracts at issue in this case. Under the regulations then in effect, BART was required to establish

specific DBE participation goals, expressed as a percentage of the total dollar value of work to be awarded

on each prime contract. 49 C.F.R. § 23.45 (1998). In addition, prime contractors on BART bids were

required to commit to meeting BART’s DBE participation goals, or to make good faith efforts to do so. Id.

3 Under the governing regulations, work performed by a joint venture between a certified DBE and a

non-DBE business counted towards contractual DBE participation goals in proportion to the ownership and

controlofthe DBE partner in the joint venture. 49 C.F.R. § 23.47(a) (1998). If a DBE owned at least 51%

of the joint venture, however, then the entire amount ofthe work performed by the joint venture was counted

towards the DBE goal. Id.

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construction firms:F.W. Spencer and Son, Inc. (“FWS”); and Brisbane MechanicalCo. (“BMC”).1 In 1996,

Spencer met with Virgilio Talao (“Talao”), the owner and operator of San Luis Gonzaga Construction

Company (“SLG”). At this meeting, Spencer proposed that the two enter into a joint venture to bid on

construction subcontracts.

The purported rationale for this joint venture was SLG’s status as a minority-owned company.

Because government contracts usually contain a requirement that prime contractors make good faith efforts to

use disadvantaged business enterprises (“DBEs”) in performing construction contracts,2 partnering with SLG

would generally make a company more attractive to a prime contractorforsubcontracting work. With this goal

in mind, Spencer and Talao formed a joint venture between SLG and BMC, which they called SLG/Brisbane

Mechanical JV (“SLG/BMC”).

The Complaint alleges that, while nominally a joint venture that qualified for DBE participation credit,

SLG/BMC did not operate as such.3Instead, Spencer and Talao agreed to an arrangement in whichSpencer

would pay SLG for the use of its name and DBE status, while Spencer’s company would perform the actual

construction work. Talao’s only responsibility under the agreement was to convince the awarding agency that

SLG/BMC was a legitimate DBE joint venture. He was to attend all pre-bid meetings and speak as if he were

the controlling partner of SLG/BMC. In return, Talao received 1-3% ofthe amount of the subcontract – 3%

of subcontracts worth up to $1 million, 2% of subcontracts worth between $2 and $3 million, and 1% of

subcontracts for more than $3 million.

Spencer’s role in the joint venture was to perform the construction work. His company provided the

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financing, labor, and equipment for the construction job, and received progress payments under the

subcontract. When Spencer’s company received these payments, Talao would create an after-the-fact invoice

for “Engineering Services” for the agreed upon percentage of the payment. He would then submit the invoice

to either FWS or BMC and Spencer would pay SLG from a bank account held in the name of SLG/BMC.

In 1999, Spencer and Talao agreed to use SLG/BMC to bid on subcontracts for planned construction

at San Francisco International Airport (“SFO”). Those plans included expanding and modernizing the airport

through the construction of a new international terminal and new parking garages. They also included the

construction of a BART line extension to SFO, covering both design and construction of the line as well as

design and construction of the South San Francisco, San Bruno, and Millbrae BART stations. All told, the

prime contracts forthe BART extension initially totaled over $700 million, and the total cost of the project has

now reached $1.5 billion.

Two separate prime contractors, Tutor-Saliba/Slattery JV (“Tutor”) and Sverdrup-Conco AJV

(“Sverdrup”), were ultimately awarded the contracts for the principal projects at issue. Both of these prime

contractors, in turn, awarded SLG/BMC subcontracts now valued at over $10 million. SLG/BMC also was

awarded an additional subcontract for the expansion of BART’s Concord Shop.

Tutor and Sverdrup eventually sought DBE credit from BART for work performed by SLG/BMC on

the contracts. In response, BART’s Office ofCivilRights(“OCR”) conducted an examination of SLG/BMC

to determine if it met BART’s DBE criteria. As part of this examination, OCR requested a copy of the

SLG/BMCjointventure agreement. After receiving this request, William McGahan (“McGahan”), the in-house

counsel for FWS, drafted a joint venture agreement that would meet BART’s DBE requirements. This

agreement represented that:(1) SLG made an initial contribution of $5,000 to the joint venture, when, in fact,

SLG had contributed no funds; (2) SLG had a 51% interest in the joint venture, when SLG did not have such

an interest; and (3) revenue from the joint venture would be distributed according to the respective interests

of the joint venturers, when, in fact, SLG received only 1-3% of the revenue, as discussed above.

In February 1999, OCR made the determination that SLG/BMC did not qualify forDBE participation

credit under BART’s guidelines. Spencer continued to fight this determination until August 1999. At that time,

Spencer disassociated SLG from the joint venture, nominally because SLG’s contractors license had been

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 In connection with their Motion to Dismiss, defendants have requested that the Court take judicial

notice of a series of ten documents, the majority of which BART does not oppose. The Court therefore

GRANTS defendants’ Request for Judicial Notice with respect to Exhibits 1, 2, 3, 4, 5, 7, 8, and 9. For

reasons provided below, however, the Court DENIES defendants’ Request for Judicial Notice with respect

to Exhibits 6 and 10.

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suspended by the California State LaborBoard (“CSLB”). In September 1999, the CSLB allowed BMC to

continue to operate the joint venture without SLG’s participation. BMC continued as a subcontractor on the

projects, submitting invoices to the prime contractors through 2003.

In 2003, forthe first time, BART learned fromthe SanFranciscoCityAttorney’s Office that the BART

projects had been a target of the fraudulent scheme perpetrated by the defendants. BART subsequently

conducted an investigation and filed this lawsuit in November 2004. Now before the Court is defendants’

Motion to Dismiss.4

LEGAL STANDARD

Under Federal Rule of Civil Procedure 12(b)(6), a district court must dismiss a complaint if it fails to

state a claim upon which relief can be granted. The question presented by a motion to dismiss is not whether

the plaintiff will prevail in the action, but whether the plaintiffis entitled to offer evidence in support ofthe claim.

See Scheuer v. Rhodes, 416 U.S. 232, 236 (1974). In answering this question, “[a]ll allegations of material

fact in the complaint are taken as true and construed in the light most favorable to the plaintiff.” McGary v.

City of Portland, 386 F.3d 1259, 1261 (9th Cir. 2004). “Dismissal of the complaint is appropriate only if

it appears beyond doubt that the claimant can prove no set offacts in support ofthe claim which would entitle

him to relief.” ARC Ecology v. United States Dept. of the Air Force, 411 F.3d 1092, 1096 (9th Cir. 2005).

FederalRule ofCivil Procedure 12(b)(7) provides that a party maymove to dismiss a case for “failure

to join an party under Rule 19.” Fed. R. Civ. P. 12(b)(7). In applying Rule 19, a court must conduct three

separate inquiries. “First, the court must determine whether a non-party should be joined under Rule 19(a).”

EEOC v. Peabody Western Coal Co., 400 F.3d 774, 779 (9th Cir. 2005). If the court determines that a

non-party should be joined, “the second stage is for the court to determine whether it is feasible to order that

the absentee be joined.” Id. “Finally, if joinder is not feasible, the court must determine at the third stage

whether the case can proceed without the absentee, or whether the absentee is an ‘indispensable party’ such

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that the action must be dismissed.” Id.

Under Federal Rule of Civil Procedure 12(f), a court “may order stricken from any pleading . . . any

redundant, immaterial, impertinent, or scandalous matter.” Fed. R. Civ. P. 12(f).

DISCUSSION

I. Motion to Dismiss

Defendants raise a host of challenges to plaintiff’s First Amended Complaint. The Court addresses

each in turn.

A. RICO Claims

Defendants raise a number of challenges to BART’s civil RICO claims. For the following reasons, the

Court DENIES defendants’ Motion to Dismiss the RICO claims.

(1) Res Judicata

The doctrine ofresjudicata “is centralto the purpose of which civil courts have been established, the

conclusive resolution of disputes within their own jurisdiction.” Headwaters, Inc. v. United States Forest

Service, 399 F.3d 1047, 1052-53 (9th Cir. 2005). The doctrine provides that a final judgment on the merits

bars further claims by parties or their privies based on the same cause of action. Id. at 1052. Thus, to establish

res judicata, a defendant must establish three elements: (1) an identity of claims; (2) a final judgment on the

merits; and (3) privity between parties. Id. at 1053. Defendants argue that a lawsuit brought in this district by

the city of San Francisco in 2002, and ultimately dismissed with prejudice, is res judicata to BART’s RICO

claim. See City and County of San Francisco, et al. v. Spencer, et al., No. 02-5086 PJH.

Defendants have failed to establish, however, that San Francisco and BART were in privity with each

other. Rather than arguing that the two entities had a traditionalprivity relationship, defendants argue that San

Francisco was BART’s “virtual representative.” See generally Irwin v. Mascott, 370 F.3d 924, 929 (9th

Cir. 2004) (detailing when a party may be bound by its “virtual representative”). In support oftheir position,

defendants have requested that the Court take judicial notice of a “Common Interest Agreement” executed

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In support ofthis argument, defendants request that the Court take judicialnotice of a February 1999

interoffice memorandum composed by OCR. The memorandum concludes that the SLG/BMC joint venture

did not qualify as a DBE. Once again, however, this memorandum is not a public record. The Court therefore

finds it inappropriate at this stage ofthe proceedings to take judicialnotice ofthe memorandum. See Lee, 250

F.3d at 688-89.

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between San Francisco and BART in connection with the previous litigation.

As an initial matter, the Court finds that the Common Interest Agreement is not a matter of public

record and is therefore inappropriate for consideration on a motion to dismiss. See Lee v. City of Los

Angeles, 250 F.3d 668, 688-89 (9th Cir. 2001) (holding that extrinsic evidence may be considered on a

motion to dismiss only where it is material submitted with the complaint or where it is a “matter[] of public

record”). Defendant’s arguments in support of privity are likewise premature. Virtual privity requires two

elements:identity ofinterests and adequate representation. Headwaters, 399 F.3d at1054. The Ninth Circuit

has cautioned, however, that “the requisites for finding nontraditional forms of privity . . . are not readily

determined from the pleadings.” Id. Rather, “the pertinent ‘virtual representation’ privity factors . . . require

factual development beyond the bare record.” Id. at 1055. Thus, at this stage of the proceedings, the Court

cannotfind that privity has been established, and the Motion to Dismissthe RICO claims based onresjudicata

must be DENIED.

(2) Statute of Limitations

Although RICO does not provide an express statute of limitations for actions brought under its civil

enforcement provision, the Supreme Court has held that RICO actions must be brought within four years of

the time the RICO claim accrued. Agency Holding Corp. v.Malley-Duff Assoc., Inc., 483 U.S. 143, 156,

107 S. Ct. 2759, 2767 (1987). Defendants argue that, on the face of its Complaint, BART’s RICO claims

accrued in early 1999, and that the statute of limitations had therefore expired by the time BART filed its

Complaint in November 2004.5

Under federallaw, a claim accrues “when a plaintiff knows or should know of the injury that underlies

his cause of action.” Pincay v. Andrews, 238 F.3d 1106, 1109 (9th Cir. 2001). “[W]here the issue of

limitations requires determination of when a claim begins to accrue, the complaint should be dismissed only if

the evidence is so clear that there is no genuine factual issue and the determination can be made as a matter of

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law.” Sisseton-Wahpeton Sioux Tribe v. United States, 895 F.2d 588, 591 (9th Cir. 1990).

As above, the Court finds defendants’ statute oflimitations argument to be premature. While BART’s

Complaint admits thatit discovered that SLG/BMC was not a bona fide DBE in 1999, it is not fully clear that

such a discovery was sufficient to put BART on notice of its injury. Certainly there could be situations in which

contractors fail to qualify for DBE status that do not involve fraud or illegal kickback payments. And nothing

in BART’s Complaintsuggeststhat it had reason to believe in 1999 that the joint venture was fraudulent, rather

than a legitimate venture that was simply unable to qualify for DBE status. Thus, at this stage of the

proceedings, the Court cannot find that defendants have met their burden of proving the statute of limitations

affirmative defense.

(3) Adequacy of Pleading

Defendants also argue that BART has failed to plead adequately a violation of 18 U.S.C. § 1962(c).

Defendants pointto two perceived shortcomingsinBART’s First Amended Complaint. First, defendants argue

thatBART failed to allege the existence of a RICO enterprise that had some existence beyond that which was

necessary to commit the predicate racketeering offenses. Second, defendants argue that BART has failed to

allege concrete financial loss to business or property.

As to the former argument, RICO definesthe term“enterprise” to include “any individual, partnership,

corporation, association, or other legal entity.” 18 U.S.C. § 1961(4). In its Complaint, BART alleges that

SLG/BMC was a joint venture licensed by the State of California. First Amended Complaint ¶¶ 42-46. This

is a sufficient to establish an enterprise under the statute. See Battlefield Builders, Inc. v. Swango, 743 F.2d

1060, 1064 (4th Cir. 1984) (allegations of joint real estate venture sufficiently alleged existence of an

enterprise). Defendants also cannot prevail with their related argument that SLG/BMC was not an enterprise

because it was created for wholly illegitimate reasons. The Supreme Court soundly rejected that argument in

United States v. Turkette, 452 U.S. 576, 587, 101 S. Ct. 2524, 2531 (1981) (“[N]either the language or

the structure of RICO limits its application to legitimate ‘enterprises.’”) 

Defendant’s second argument – that BART has failed to allege concrete financial loss to business or

property – also fails. Defendants’ main contention is that BART was required by law to award contracts to

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the lowest bidder. Thus, because SLG/BMC performed under its contract at the agreed upon price,

defendants argue thatBART was not injured by the alleged kickback payments to SLG. While this argument

may eventually have merit, it would be inappropriate to accept it, at the pleading stage, without further

elaboration of the factual record. To survive a Rule 12(b)(6) motion, BART must make only a very minimal

showing of possible injury. See National Org. for Women, Inc. v. Scheidler, 510 U.S. 249, 256, 114 S. Ct.

798, 803 (1994) (“At the pleading stage, generalfactualallegations ofinjury fromthe defendant’s conductmay

suffice.”). Its general allegations of harm are sufficient for the minimal requirements of Rule 12(b)(6). E.g.,

First Amended Complaint ¶¶ 68 (alleging thatBART was injured by the amounts Spencer paid to Talao), 122

(alleging that BART “paid to prime contractors amounts that were excessive” based on defendants’ fraud).

In addition, the First Amended Complaint, construed in the light most favorable to BART, suggests that the

overall price of a construction contract is by no means fixed;through change orders and other mechanisms the

price of a construction contract can increase substantially. See First Amended Complaint ¶¶ 41 (alleging that

Spencer told Talao that in generala $3 millioncontract would likely become a $5 million contract after change

orders), 58 (alleging that cost ofBART extension increased from $700 million to $1.5 billion). At a minimum,

BART should have the opportunity to establish that SLG/BMC passed on the costs ofthe kickback payments

through changes to its original subcontract price.

(4) RICO Claims Against McGahan

Defendants also argue that the claims againstMcGahan, corporate counselforFWS, mustbe dismissed

because “furnishing a client with ordinary professional assistance . . . does not rise to the level of participation

sufficient” to create liability. In Reves v.Ernst & Young, 507 U.S. 170, 113 S. Ct. 1163 (1993), the Supreme

Court adopted the “operation and management” test for RICO liability: “In order to ‘participate, directly or

indirectly, in the conduct of [an] enterprise’s affairs,’ one must have some part in directing those affairs.” Id.

at 179, 113 S. Ct. at 1170. Defendants argue that McGahan, as corporate counsel for FWS, had no role in

directing the SLG/BMC joint venture.

BART’s Complaint, however, adequately alleges that McGahan had a part in directing the affairs of

SLG/BMC to survive the Reves standard. BART alleges that, at the creation of the joint venture, McGahan

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took responsibility for “handling all legal documentation and responding to all of the legal requirements of the

joint venture.” First Amended Complaint ¶ 42. McGahan thereafter filled out “the application for a joint

venture license and submitted it to the Contractors State License Board’s office.” First Amended Complaint

¶ 43. BART further alleges that, when OCR began investigating SLG/BMC, McGahan drafted a false joint

venture agreement in order to prevent OCR’s detection of the fraudulent joint venture. First Amended

Complaint ¶ 76-77. Finally, BART alleges that McGahan instructed Talao to meet with OCR to attempt to

convince it that SLG/BMC was legitimate. First Amended Complaint ¶¶ 86-88.

Thus, this case is distinguishable from Baumer v. Pauchl, 8 F.3d 1341 (9th Cir. 1993), in which the

Ninth Circuit held that an outside attorney was not liable under RICO. The attorney in that case did not

become involved in the fraudulentscheme until six years after it was formed and “his role thereafter was at best

sporadic.” Id. at 1344. In contrast, BART alleges that McGahan was involved throughout the entire existence

of the SLG/BMC joint venture, and was an active participant in directing the fraudulent scheme.

(5) RICO Conspiracy Claims

Defendant’s final point of contention with BART’s RICO claim is that BART has failed to allege

adequately the existence of a RICO conspiracy. Specifically, defendants argue that BART has failed to allege

a tacit understanding or agreement between the defendants. BART’s Complaint, however, includes multiple

allegations that the defendants agreed to use the SLG/BMC joint venture to fraudulently obtain subcontracting

work. See, e.g., First Amended Complaint ¶¶ 38-42 (alleging agreement between Spencer, Talao, and

McGahan to form joint venture), 53 (alleging agreement on method for paying kickbacks), 54-57 (alleging

agreements to bid on SFO subcontracts), 84-88 (alleging agreement to submit falsified legaldocumentation to

OCR).

B. State-Law Claims

Defendants alsomove to dismiss BART’s state law claims. For the reasons provided below, the Court

GRANTS defendants’ motionwith respect to BART’s claims under California Business and Professions Code

§ 17200, and DENIES the motion with respect to the remainder of BART’s state law claims.

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(1) California Business and Professions Code § 17200

Defendants maintain that BART’s claims under California Business and Professions Code § 17200

must be dismissed because BART is not authorized to bring suit for a violationofsection 17200. In response,

BART claims that it is a “person” and is therefore authorized to bring suit by Business and Professions Code

§ 17204. The Court finds that BART is not a person within the meaning of section 17204.

Section 17204 authorizes “any person who has suffered injury in fact and has lost money or property

as a result of . . . unfair competition” to sue forrelief. Cal. Bus. & Prof. Code § 17204. “Person,” in turn, is

defined as “natural persons, corporations, firms, partnerships, joint stock companies, associations, and other

organizations of persons.” Cal. Bus. & Prof. Code § 17201. With one exception, the California Courts of

Appeal have uniformly held that governmental agencies do not fit within the definition of “person” in section

17201. See, e.g., Santa Monica Rent Control Bd. v. Bluvshtein, 230 Cal. App. 3d 308, 318 (1990)

(holding rent control board could not bring suit because “[it] is a government agency; it is none of the things

included in the definition of a person.”); see also Cal. Med. Ass’n v. Regents of the Univ. of Cal., 79 Cal.

App. 4th 542, 550-51 (2000) (holding that University could not be sued under section 17200 because, as a

public entity, it was not a “person” within the meaning of section 17201); Trinkle v. Cal. State Lottery, 71

Cal. App. 4th 1198, 1203 (1999) (holding that lottery commission could not be sued because it was not a

“person”).

BART attempts to call the above cases into doubt by citing to Nortica v. StateComp. Ins. Fund, 70

Cal. App. 4th 911 (1999), inwhich the court found the State Compensation Insurance Fund (“SCIF”), a public

entity, to be a “person” within the meaning ofsection 17201. Id. at 943-44. The holding in that case, however,

was based upon the specific statutory provisions that governed SCIF’s existence; SCIF was statutorily

empowered to act as a private insurer and was subject to suit “in all actions arising out of any act or omission

in connectionwith its business or affairs.” Id. at 943. In such circumstances, the court found SCIF to qualify

as a person under section 17201.

There is no dispute that BART is a public entity. Nor has BART demonstrated that the California

legislature intended that it act as a private entity to the same degree as SCIF. Thus, the Court finds that BART

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6 Section 17204 also authorizes suits by specified public officials “upon the complaint of any board,

officer, person, corporation, or association.” Cal. Bus. & Prof. Code § 17204. As BART is not represented

by one ofthe specified public officials, it does not contend that it is authorized to bring suit under this provision

of section 17204. BART has requested to amend its Complaint, however, both to cure this defect by adding

an appropriate public official, as well as to make severalother minor corrections. BART may file an amended

Complaint before October 14, 2005. The Court reserves judgment on whether such an amendment will cure

the defects in its section 17200 claim.

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 BART’s Complaint alleges that Bruce Bonar was “an employee of FWS, and . . . also represented

and held himself out as a project manager for BMC.” First Amended Complaint ¶ 10.

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does not qualify as a “person” under section 17201, and is therefore not authorized by bring suit under section

17204.6

(2) Statute of Limitations

Defendants also move to dismiss plaintiff’s claims for fraud and those it brought under the California

False Claims Act, Cal. Gov. Code § 12654, arguing that both actions are precluded by the relevant statutes

of limitations. For the reasons provided above, the Court finds that further factual development is needed to

determine precisely when BART’s state-law causes of action accrued. It is therefore premature to dismiss

those claims on statute of limitations grounds. 

///

C. Claims Against McGahan and Bonar

Defendants also argue that all claims against McGahan and Bonar7should be dismissed because, as

employees of FWS, BMC, and SLG/BMC, they are incapable of conspiring with their employer. In support

of this argument, defendants cite a number of state-law cases holding that “[a]gents and employees of a

corporation cannot conspire with their corporate principalor employerwhere they act in their officialcapacities

on behalf of the corporation.” Doctor’s Co. v. Superior Court, 49 Cal. 3d 39, 45 (1989).

As an initialmatter, the intracorporate conspiracy doctrine covers only causes of action for conspiracy,

and thus does notrelieve McGahan and Bonar ofliability forthe torts they personally committed orparticipated

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in. See Cedric Kushner Promotions, Inc. v. King, 533 U.S. 158, 163-64, 121 S. Ct. 2087, 2091-92

(2001) (RICO action may include a corporation and its employees); Coastal Abstract Serv., Inc. v. First

Am. Title Ins. Co., 173 F.3d 725, 734 (9th Cir. 1999) (“A corporate officer or director is, in general,

personally liable for all torts which he authorizes or directs orin which he participates, notwithstanding that he

acted as an agent of the corporation and not on his own behalf.”).

As for the single conspiracy claim alleged in the Complaint – a claim of civil RICO conspiracy in

violation of 18 U.S.C. § 1962(d) – the Ninth Circuit has squarely held that the intracorporate conspiracy

doctrine does not insulate civilRICO conspiracies. See Webster v. Omnitrition Int’l, Inc., 79 F.3d 776, 787

(9th Cir. 1996) (“We agree with the reasoning of our sister circuit, and hold that § 1962(d) applies to

intracorporate conspiracies.”).

For the foregoing reasons, defendants’ motion to dismiss BART’s claims against McGahan and Bonar

is DENIED.

D. Failure to Join an Indispensable Party

Finally, defendants argue that this case must be dismissed because BART has failed to join Talao and

SLG, both of which it claims are indispensable parties under Rule 19. Even assuming Talao and SLG are

necessary parties, however, defendants have provided no reasons whytheir joinder in this matter is notfeasible.

See EEOC v. Peabody Western Coal Co., 400 F.3d 774, 779 (9th Cir. 2005) (“Rule 19(a) sets forth three

circumstances in which joinder is not feasible: when venue is improper, when the absentee is not subject to

personal jurisdiction, and when joinder would destroy the subject matter). Nor is it readily apparent to the

Court why defendants could notjoin Talao and SLG ifthey desired. Thus, defendants’ motion to dismiss under

Rule 12(b)(7) is DENIED.

II. Motion to Strike

 “Motions to strike are generally not granted unlessit is clear that the matter to be stricken could have

no possible bearing on the subject matter of the litigation.” LeDuc v. Kentucky Cent. Life Ins. Co., 814 F.

Supp. 820, 830 (N.D. Cal. 1992). In particular, “allegations supplying background or historical material . .

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. will not be stricken unless unduly prejudicialto defendant.” Id. Defendants seek to strike various paragraphs

ofBART’s Complaint:paragraphs 26-28, 31-38 and 48-57. The challenged paragraphs, however, generally

provide a description of the origins of the fraudulent scheme that was later used in BART’s construction

contracts, or a description of the evolution of the fraudulent scheme and the beginnings ofthe SLG/BMC joint

venture. This information may be included in the Complaint as background material.

Defendant’s motion to strike is DENIED.

CONCLUSION

For the foregoing reasons and for good cause shown, the Court GRANTS defendants’ Motion to

Dismiss with respect to plaintiff’s claims under the California Business and Professions Code § 17200, and

DENIES the remainder of the motion and the Motion to Strike. Plaintiff may file an amended complaint on or

before October 14, 2005. [Docket ## 19, 21.]

IT IS SO ORDERED.

Dated: September 2, 2005

 

SUSAN ILLSTON

United States District Judge

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