Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_03-cv-05784/USCOURTS-cand-3_03-cv-05784-4/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

DARIUS MOSTOWFI, et al,

Plaintiffs,

v

I2 TELECOM INTERNATIONAL INC, et

al,

Defendants. /

No C-03-5784 VRW

ORDER

Rube Goldberg would be proud of the pleading at bar, a

second amended complaint (SAC) that alleges orchestration of an

unlawful scheme to deprive plaintiffs of control over their

intellectual property and their company, SuperCaller Community, Inc

(“SuperCaller”). The SAC contains three federal claims and

numerous state law claims. A reader of the SAC could well

appreciate the undersigned confining himself to these federal

claims for if these claims fail, the state claims may be able to

proceed, but in state court, not here.

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I

On a motion to dismiss, “[a]ll allegations of material

fact are taken as true and construed in the light most favorable to

the nonmoving party.” Fresher v Shell Oil Co, 846 F2d 45, 46 (9th

Cir 1988). Accordingly, what follows is drawn from the SAC, taking

its allegations as true.

The causes of action in this case, while premised on a

lengthy and complex set of allegations, are all essentially based

on plaintiffs’ contention that defendants orchestrated a scheme to

trick plaintiffs into relinquishing control both over their

company, SuperCaller, and over various intellectual property

rights. SAC (Doc #141) at 3 ¶ 5. Plaintiff Darius Mostowfi, a

California resident, is an electrical engineer and designer of

telecommunications hardware. Id at 2 ¶ 1. Plaintiff Teng Lew Lim

(“Lim”) is a Malaysian citizen residing in California and is an

entrepreneur. Id. Sometime in 2000, Lim started and invested

money in Limcom, Inc, a California corporation. Id at 5 ¶ 16. 

Plaintiffs Fung Chee Lim and Teng Howe Lim, Lew Lim’s uncle and

brother, also invested in Limcom. Id at 2 ¶ 1, 5 ¶ 16. The Lims

collectively owned about 90% of Limcom’s outstanding shares, while

Mostowfi owned the remaining 10%. Id at 5-6 ¶¶ 16, 17. Lim became

Limcom’s CEO and Mostowfi became CTO. Id at 5 ¶ 16.

Mostowfi and Lim collaborated at Limcom to develop and

market Mostowfi’s Voice-over-Internet Protocol (VOIP) technology,

which allows voice telecommunication calls to be routed over the

Internet. Id at 7 ¶ 18. Limcom then changed its name to

SuperCaller and sought additional capital of about $500,000. Id at

6 ¶ 19.

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3

Defendants allegedly acted in concert with one another to

usurp control over SuperCaller and SuperCaller’s intellectual

property rights to VOIP technology. Id at 3 ¶ 5. To accomplish

this fraud, defendants Bernard R Kossar (also acting on behalf of

defendant Millennium Partners), Paul R Arena and Anthony F Zalenski

allegedly created a sham enterprise called Excel Capital, whose

name they changed to I2 Phone when they identified SuperCaller as a

“victim.” Id at 3 ¶ 6. I2 Phone later became defendant I2

Telecom. Id at 3 ¶ 7. Plaintiffs allege that I2 Phone operated

with inadequate capital and that Kossar, Arena and Zalenski falsely

represented to Mostowfi and Lim that I2 Phone provided

telecommunication services using VOIP technology. Id at 3 ¶¶ 6, 7.

Plaintiffs allege that on June 6, 2002, I2 Phone entered

into a Common Stock Purchase Agreement (CSPA) with SuperCaller to

invest in SuperCaller’s VOIP technology. Id at 8 ¶ 28. The CSPA

is attached as Exhibit B to the SAC. Pursuant to this agreement,

I2 Phone agreed to purchase $1,300,000 of SuperCaller’s shares in

four monthly installments. Id at 9 ¶ 33. The agreement also

provided that a designee of I2 Phone would receive one seat on

SuperCaller’s board of directors. Id at 9 ¶ 34. Defendant Arena

filled that seat, but I2 Phone and its successor, I2 Telecom,

allegedly never paid the amount agreed upon. Id at 9 ¶ 34, 11 ¶

42, 12 ¶ 48.

Also on June 6, 2002, I2 Phone entered into a Development

and Licensing Agreement (DLA) with SuperCaller. Id at 8 ¶ 28. The

DLA is attached as Exhibit A to the SAC. “The DLA obligated I2

Telecom to make royalty payments of hundreds of thousands of

dollars every fiscal quarter, and minimum license royalties of $1.5

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million for the year 2003, $2 million per year from the following

year.” Id at 9 ¶ 31.

In entering these agreements, I2 Telecom allegedly

misrepresented its ability and intentions to consummate the

transaction. Id at 12 ¶ 49. I2 Telecom’s actions induced

SuperCaller to expend its cash reserves in reliance of receiving

nonexistent funds from I2 Telecom. Id at 13 ¶ 51.

Thereafter, I2 Telecom wrongfully obtained control of

SuperCaller by forcing the resignation of Lim and Mostowfi. In

teleconferences held on September 12, 2002, Arena and Zalenski

agreed with Jon Roberts and Elliott D Light, attorneys at Roberts,

Abokhair & Mardula LLP (RAM), “to invent an ‘accounting’ dispute

with Lew Lim, because Kossar said it was the corporate crime du

jour after Enron.” Id at 15 ¶ 59. After the meeting, Roberts told

Shauna Wertheim, another attorney at RAM, to draft documents for

merging SuperCaller with I2 Telecom. Id. Arena called Jim

Leimbach, an accountant at Stresser & Associates, who allegedly

agreed to invent an accounting fraud. Id.

On September 16, 2002, Arena called a SuperCaller board

meeting, falsely accused Lim of accounting fraud and threatened him

with criminal prosecution, deportation and physical harm. Id at

18-19 ¶¶ 66-71. That same day, Arena gave the I2 defendants’

relatives and related entities millions of shares of stock. Id at

19-20 ¶¶ 72, 73. The next day, Wertheim prepared minutes falsely

stating that SuperCaller had decided to merge into I2 Telecom. Id

at 20 ¶ 75. Arena again threatened Lim, forcing Lim to resign as

director and CEO of SuperCaller. Id.

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5

Next, I2 defendants systematically removed Mostowfi from

SuperCaller by wrongfully threatening to terminate his employment,

prompting his resignation. Id at 22 ¶ 83. Defendants then

collaborated with Roberts to acquire the rights to Mostowfi’s

intellectual property by threatening Mostowfi with baseless

lawsuits if he did not assign his rights in the VOIP technology to

I2 defendants without any compensation. Id at 21 ¶ 79. Mostowfi

then signed over his rights to a provisional patent application. 

Id.

II

Plaintiffs filed the original complaint in this action on

December 22, 2003, listing eight named defendants and alleging

twenty-two different causes of action. Doc #1. Roberts and RAM,

who were the only attorney defendants at the time, moved to dismiss

the claims against them pursuant to FRCP 12(b)(6) and 9(b). Doc

#17. Roberts and RAM argued that plaintiffs’ claims were based on

allegations of fraud that were not pled with the requisite

particularity mandated by FRCP 9(b). Id at 8-9.

By order dated May 27, 2004, the court granted Roberts

and RAM’s motion to dismiss. Doc #37. Noting that the

requirements of FRCP 9(b) apply to all of plaintiffs’ claims

against Roberts and RAM, the court was unable to identify any

specific statements made by these attorney defendants that

satisfied FRCP 9(b)’s heightened pleading standards and found that

plaintiffs’ allegations were too general. Id at 25-27. 

Accordingly, the court dismissed the claims against Roberts and

RAM, but granted plaintiffs leave to amend their complaint to: (1)

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plead fraud against Roberts and RAM with the requisite degree of

specificity or (2) replead any of the claims that do not require

fraud as an essential element, if plaintiffs are able to assert a

non-fraud basis for any of those claims. Id. The court also

admonished plaintiffs “to file such an amended complaint and any

future filings on paper with numbered lines, as required by Civ

LR 3-4(c)(1).” Id at 28.

In addition to Roberts and RAM’s motion to dismiss, I2

and its affiliated individual defendants moved the court to dismiss

plaintiffs’ complaint pursuant to FRCP 12(b)(6). Doc #8. Because

these defendants failed to demonstrate the essential elements that

were missing from the complaint, the court denied their motion. 

Doc #37 at 19.

On July 20, 2004, plaintiffs filed a first amended

complaint (FAC), adding eleven pages to the original complaint’s

sixty-eight pages. Doc #49. Although the FAC contained the same

twenty-two causes of action, plaintiffs added fourteen new

paragraphs below original paragraph seventy-five in an effort to

plead their allegations of fraud against Roberts and RAM with

sufficient particularity. Id at 21-28 ¶¶ 75a-75m. Roberts and RAM

then filed a second motion to dismiss all claims directed at them,

alleging that plaintiffs still failed to satisfy FRCP 9(b)’s

particularity requirements and also did not adequately plead the

elements of a RICO claim. Doc #65 at 14. The other defendants

also filed a second motion to dismiss. Doc ##60, 61.

//

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In a 42-page order dated May 23, 2005, the court granted

Roberts and RAM’s motion to dismiss and granted in part the other

defendants motion to dismiss. Doc #139. The court noted that

“[p]laintiffs’ failure to allege succinctly, coherently and

nonredundantly the facts giving rise to their claims has occasioned

the parties’ confusing and often unhelpful briefing, considerable

delay in resolving the parties' motions and now this lengthy

order.” Id at 41. Despite “serious reservations” about letting

plaintiffs file yet another complaint, the court granted plaintiffs

leave to amend —— but with certain limitations that will be

discussed below. Id at 40.

Although described as “only” 58 pages long, the SAC is

even more convoluted than the previous two complaints. Plaintiffs

have added 23 defendants and nine claims, for a total of 31

defendants and 31 claims (defendants’ names are listed below only

if the same cause of action is alleged in different counts): (1)

declaratory judgment under Cal Corp Code § 709 against defendants

I2 Telecom, Arena, Kossar and Audrey L Braswell; (2) appraisal

rights under Cal Corp Code § 1300; (3) declaratory judgment under

Cal Corp Code § 709 against individual defendants affiliated with

I2 Telecom and their relatives and related entities who received

stock; (4) judgment to plaintiff Mostowfi for his patent

applications; (5) copyright infringement and conspiracy to infringe

copyrights, asserted by plaintiff Mostowfi; (6) obtaining property

in violation of 18 USC § 1951 and attempts and conspiracies

thereof; (7) conversion and attempt to convert property; (8) breach

of contract against defendant I2 Telecom; (9) unjust

enrichment/restitution; (10) trespass to chattels; (11) accounting;

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(12) constructive trust; (13) interference with prospective

economic advantage; (14) breach of duty of good faith and fair

dealing; (15) civil conspiracy; (16) defamation; (17) breach of

fiduciary duty, duty of loyalty and duty against self-dealing

against defendant Arena; (18) usurpation of corporate opportunity;

(19) breach of fiduciary duty, duty of loyalty and duty against

self-dealing against defendants Roberts and RAM; (20) tortious

interference with attorney-client relationship; (21) infliction of

emotional distress, asserted by plaintiffs Mostowfi and Lim; (22)

wrongful discharge in violation of public policy, asserted by

plaintiff Mostowfi; (23) breach of fiduciary duty against Kossar,

Braswell, Arena and I2 Telecom; (24) racketeering and racketeering

conspiracy; (25) common law fraud and negligent misrepresentation

(violation of Cal Civ Code §§ 1709, 1710) against defendants I2

Telecom, Arena, Kossar and Zalenski; (26) common law fraud and

negligent misrepresentation (violation of Cal Civ Code §§ 1709,

1710) against I2 Telecom’s attorneys (defendants RAM, Roberts, John

Abokhair and Wertheim); (27) breach of contract against defendant

RAM; (28) common law fraud and negligent misrepresentation

(violation of Cal Civ Code §§ 1709, 1710) against I2 Telecom’s

accountants (defendants Leimbach and Stresser & Associates); (29)

breach of fiduciary duty against Leimbach and Stresser &

Associates; (30) violation of Cal Bus & Prof Code §§ 17200, 17500

and (31) professional negligence/legal malpractice against

attorneys for SuperCaller (Jim Berg and the law firm of Reed Smith,

LLP). Various defendants have either moved to dismiss these claims

or moved to join in the motions to dismiss. Doc ##147, 148, 151,

156, 166.

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A federal court’s jurisdiction is limited, Northwest

Airlines v Transport Workers Union, 451 US 77, 95 (1981), so the

court turns first to whether there is federal jurisdiction. 

Happily, the court concludes that there is not.

Plaintiffs assert only three federal claims: copyright

infringement, RICO violations and a private cause of action under

the Hobbs Act. There are also allegations of a conspiracy, but

conspiracy forms a basis for federal jurisdiction only if the

conspiracy’s aim is to violate a federal law.

Claim 4 seeks money for Mostowfi’s patent applications,

but this does not raise a federal question. The claim has nothing

to do with federal patent law and in effect, merely seeks to

rescind Mostowfi’s assignment of his patent applications to

defendants. “[B]ecause an action to rescind or cancel an

assignment is a state-law based claim, absent diversity

jurisdiction it is to a state court that plaintiffs must look in

seeking a forfeiture of the license.” Jim Arnold Corp v Hydrotech

Systems, Inc, 109 F3d 1567, 1577 (Fed Cir 1997) (citation omitted).

III

The court analyzes the three asserted federal claims in

turn.

A

17 USC § 501(b) provides, “The legal or beneficial owner

of an exclusive right under a copyright is entitled * * * to

institute an action for any infringement of that particular right

committed while he or she is the owner of it.” Mostowfi implicitly

employs this provision in claim 5, asserting that “[I2 Telecom]

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infringed and continues to infringe [Mostowfi’s] exclusive right to

his software, which is a criminal violation of 17 USC § 101 et

seq.” SAC at 30 ¶ 136.

But the facts alleged in the SAC do not support a

Copyright Act claim. The allegations of the SAC are a bit confused

and confusing but the agreements attached as exhibits make the

failure to state a claim clear enough (and plaintiffs’ pleading

cannot assert a claim based on facts to the contrary, Sprewell v

Golden State Warriors, 266 F3d 979, 988 (9th Cir 2001)). The

Common Stock Purchase Agreement, Exhibit B to the SAC, provides

that SuperCaller, not Mostowfi, owned the copyrights at issue here. 

CSPA § 2.10(a) states, “To the Company’s knowledge (but without

having conducted any special investigation or patent search), the

Company owns or has licensed under enforceable licenses all right,

title and interest in and to all of the Intellectual Property

Rights (as hereinafter defined) reasonably necessary for the

operation of the Company’s business as presently conducted.” Id,

Ex B at 6. CSPA § 2.10(c)(iii) later defines intellectual property

rights as including “copyrights (registered or unregistered) and

copyrightable works and registrations and applications for

registration thereof.” Id, Ex B at 7. And the complaint indicates

that the software at issue here was indeed necessary for

SuperCaller’s operation. Id at 33 ¶ 163 (“Plaintiffs have lost

control of SuperCaller and its inventory, software, and they cannot

for certain determine the true scope of the immense damage

committed to their business by from [sic] defendants I2 Telecom and

RAM * * *.”).

//

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Plaintiffs argue that the court cannot decide that

SuperCaller owns the copyright at this stage because “[i]mplicit in

[this] argument * * * is that the CSPA was a valid enforceable

contract * * * [which is] not an issue[] for a motion to dismiss.” 

Doc #201 at 3. But plaintiffs themselves rely on the validity of

the CSPA in connection with claim 8, their breach of contract claim

against I2 Telecom. SAC at 32 ¶ 153 (“Defendant I2 Telecom

breached the CSPA when it failed to pay the $1,300,000 for the

shares it contracted to buy.”). And more fundamentally, although

the SAC sometimes refers to the software as “Mostowfi’s software,”

the SAC also refers to the software as belonging to SuperCaller. E

g, id at 3 ¶ 5 (“[Defendants] orchestrated a scheme with other

intermediaries to deceive plaintiffs into relinquishing control of

their company, SuperCaller Community, Inc, its bank accounts, and

intellectual property, to wit, software * * *.” (emphasis added)).

As SuperCaller, not Mostowfi, owned the copyrighted

software, Mostowfi cannot sue for copyright infringement. See

Silvers v Sony Pictures Entertainment, Inc, 402 F3d 881, 885 (9th

Cir 2005) (“[U]nder traditional principles of statutory

interpretation, Congress’ explicit listing of who may sue for

copyright infringement should be understood as an exclusion of

others from suing for infringement.” (emphasis omitted)).

The SAC also indicates that Mostowfi was an employee for

hire whose work was owned by SuperCaller. 17 USC § 201(b)

provides, “In the case of a work made for hire, the employer or

other person for whom the work was prepared is considered the

author for purposes of this title, and, unless the parties have

expressly agreed otherwise in a written instrument signed by them,

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owns all of the rights comprised in the copyright.” 17 USC § 101

defines a “work made for hire” as including “a work prepared by an

employee within the scope of his or her employment.”

Here, the complaint avers that Mostowfi was an employee

of Limcom and SuperCaller. E g, SAC at 5 ¶ 16 (“Mostowfi became

the Chief Technology Officer [at Limcom.]”); id at 46 ¶ 255

(“SuperCaller/I2 Telecom discharged Mostowfi when he complained

that the company's failure to meet its payroll obligations was in

violation of the California Labor Code, and because he alerted

other employees of their rights, to wit, the right to receive wages

timely according to the law.” (emphasis added)). The complaint

also indicates that Mostowfi invented the VOIP devices and the

accompanying software at issue here while employed at Limcom and/or

SuperCaller, and that writing the software was within the scope of

his employment as Chief Technical Officer. Id at 6 ¶ 17 (“Limcom,

Inc decided to develop and market telecommunications devices that

use [VOIP]. Towards that end, Mostowfi designed a device, which he

named Media Gateway (MG-1), which would enable cheap telephone

calls over the Internet.”); id at 30 ¶ 136 (“[Defendants]

reproduced, distributed, stored and sold thousands of SuperCaller

devices containing Mostowfi’s software code * * *.”). Hence, these

facts indicate that the work-for-hire exception squarely applies.

Accordingly, it is plain that SuperCaller, not Mostowfi,

owned the software copyright. Mostowfi’s copyright claim fails as

a matter of law and claim 5 is DISMISSED.

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B

Relying in part on FRCP 9(b), defendants contend that

claim 24 for racketeering and racketeering conspiracy should be

dismissed under FRCP 12(b)(6). To state a claim under RICO, 18 USC

§ 1962(c), plaintiffs must allege: (1) the conduct; (2) of an

enterprise; (3) through a pattern of (4) racketeering activity. 

Forsyth v Humana, Inc, 114 F3d 1467, 1481 (9th Cir 1997).

Defendants argue that plaintiffs have failed to plead the

underlying criminal acts of racketeering activity with sufficient

particularity under FRCP 9(b). Doc ##147 at 20-21; 148 at 5-6. 

“Rule 9(b)’s requirement that ‘in all averments of fraud or

mistake, the circumstances constituting fraud or mistake shall be

stated with particularity’ applies to civil RICO fraud claims.” 

Edwards v Marin Park, Inc, 356 F3d 1058, 1065-66 (9th Cir 2004)

(quoting Alan Neuman Productions, Inc v Albright, 862 F2d 1388,

1392 (9th Cir 1989)). And “Rule 9(b) requires that the pleader

state the time, place, and specific content of the false

representations as well as the identities of the parties to the

misrepresentation.” Moore v Kayport Package Express, Inc, 885 F2d

531, 541 (9th Cir 1989).

In the order dismissing the racketeering claims in the

FAC, the court admonished plaintiffs “to heed the court’s

instructions to plead fraudulent statements and omission with

particularity.” Doc #139 at 40-41. But as with the FAC,

plaintiffs’ SAC fails to plead any predicate acts with enough

particularity. In the section entitled “Predicate Acts” under

claim 24 (SAC at 48 ¶ 273 — 50 ¶ 284), many of the alleged

predicate acts are just bald assertions that defendants violated

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federal statutes. E g, id at 50 ¶ 278 (“They have violated the

Hobbs Act (18 USC § 1951) by using threats of deportation, jail,

criminal prosecution and financial ruin.”); id at 50 ¶ 279 (“They

have violated the Travel Act (18 USC § 1952) by traveling across

state lines to commit extortion.”). And the other alleged

predicate acts are simply general statements about actions that

defendants allegedly committed. E g, id at 48 ¶ 273(a) (alleging a

predicate act “for false statement that I2 Telecom was not formed

for the purpose of investing in SuperCaller.”).

This problem is further exacerbated because plaintiffs

simply lump together the defendants in claim 24 and do not attempt

to describe the particular acts or omissions that each defendant

committed. Compare Vicom, Inc v Harbridge Merchant Servs, Inc, 20

F3d 771, 778 (7th Cir 1994) (“[I]n a case involving multiple

defendants, such as the one before us, ‘the complaint should inform

each defendant of the nature of his alleged participation in the

fraud.’ We previously have rejected complaints that have ‘lumped

together’ multiple defendants.” (first quoting DiVittorio v

Equidyne Extractive Industries, Inc, 822 F2d 1242, 1247 (2d Cir

1987)) (citations omitted)).

In addition, none of the predicate acts include any

specific dates, except for the act described in SAC at 48 ¶ 273, 49

¶ 273(k): “Beginning February 2002, and continuing to the present,

I2 Telecom, RAM, Stresser and the individual racketeers have

violated numerous predicate statutes: * * * for concealing that

Roberts had an actual conflict of interest between I2 Telecom and

SuperCaller on or about September 11, 2002.” But this statement,

like all the others, fails to attribute specific conduct to each

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defendant and does not specify the place of the alleged fraud.

Moreover, although plaintiffs were specifically

instructed in the court’s previous order that “the causes of action

must provide relevant citations (not restatements) to the

underlying factual allegations set forth in the general body of the

complaint,” Doc #139 at 41, claim 24 restates and realleges the

entire facts section (¶¶ 1-104) rather than specifically pointing

to the relevant factual allegations. It is an exercise in futility

to determine which facts, if any, in that tedious section add the

particular details sufficient to describe the alleged fraudulent

acts. For example, plaintiffs allege a predicate act of

“concealing from SuperCaller shareholders that Kossar and Arena had

given themselves and families [sic] watered down shares of I2

Telecom to the detriment of SuperCaller shares * * *.” SAC at 49 ¶

273(p). But after combing through the complaint, the court is

unable to discern which defendants partook in this concealment and 

when, where and how this alleged concealment occurred. And in any

event, this court does not have to hunt down the supporting facts,

if any exist, that are buried in the unnecessarily voluminous SAC. 

Cf United States v Dunkel, 927 F2d 955, 956 (7th Cir 1991) (“Judges

are not like pigs, hunting for truffles buried in briefs.”).

Accordingly, the court finds that plaintiffs have failed

to allege predicate acts of racketeering activity with the

specificity required by FRCP 9(b). Accordingly, claim 24 is

DISMISSED.

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C

Although not specifically stated as a ground for

jurisdiction by plaintiffs in the SAC, the court examines whether

claim 6, which is brought under 18 USC § 1951, provides a basis for

federal question jurisdiction. 18 USC § 1951, which is popularly

known as the Hobbs Act, is a criminal statute that states in

relevant part:

Whoever in any way or degree obstructs, delays, or

affects commerce or the movement of any article or

commodity in commerce, by robbery or extortion or

attempts or conspires so to do, or commits or

threatens physical violence to any person or

property in furtherance of a plan or purpose to do

anything in violation of this section shall be fined

under this title or imprisoned not more than twenty

years, or both.

In their opposition, plaintiffs allege that the court should imply

a private right of action under this provision via Cort v Ash, 422

US 66, 78 (1975). Doc #201 at 4-5; see also Opera Plaza

Residential Parcel Homeowners Association v Hoang, 376 F3d 831,

834-35 (9th Cir 2004).

But “[the Supreme] Court has rarely implied a private

right of action under a criminal statute, and where it has done so

‘there was at least a statutory basis for inferring that a civil

cause of action of some sort lay in favor of someone.’” Chrysler

Corp v Brown, 441 US 281, 316 (1979) (quoting Cort, 422 US at 79). 

Plaintiffs have not cited, and this court has not found, any cases

in which the Hobbs Act formed the basis for an implied private

right of action. Although the Ninth Circuit apparently has not

addressed this issue in a published opinion, other courts have

uniformly declined to infer a private right of action under the

Hobbs Act. E g, Wisdom v First Midwest Bank, 167 F3d 402, 408-09

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(8th Cir 1999) (“We agree that neither the statutory language of 18

USC § 1951 nor its legislative history reflect an intent by

Congress to create a private right of action.”); Neal v Carron,

2006 WL 522361, 9 (WD Ky, Feb 28, 2006) (“[T]he Hobbs Act is a

criminal statute, which does not provide for a private cause of

action.”); Campbell v Austin Air Systems, Ltd, 2005 WL 2405997, 8

(WDNY, Sept 29, 2005) (“[F]ederal courts have consistently found

that the Hobbs Act does not support a private cause of action.”);

Bajorat v Columbia-Breckenridge Development Corp, 944 F Supp 1371,

1377-78 (ND Ill 1996); John’s Insulation, Inc v Siska Const Co,

Inc, 774 F Supp 156, 163 (SDNY 1991) (“There is no implied private

cause of action under the Hobbs Act.”); Peterson v Philadelphia

Stock Exchange, 717 F Supp 332, 336 (ED Pa 1989) (“The Hobbs Act

contains no language which suggests it can provide civil relief. 

Moreover, this court cannot find congressional concern for civil

relief in the legislative history.”); Creech v Federal Land Bank of

Wichita, 647 F Supp 1097, 1099 (D Colo 1986). Accordingly, the

court concludes that 18 USC § 1951 does not implicitly create a

private right of action and does not form a basis for federal

question jurisdiction. Plaintiffs’ claim 6 is therefore DISMISSED.

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Case 3:03-cv-05784-VRW Document 213 Filed 03/27/06 Page 17 of 24
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IV

A

In their opposition, plaintiffs move for leave to amend

“[i]n case the court finds the required level of detail is not

there with respect to any cause of action.” Doc #201 at 23. 

Plaintiffs also state that they “hope and believe that they have

not frittered away the generous grant of leave to amend.” Id at

23.

FRCP 15(a) provides that a party no longer permitted to

amend its pleadings “as a matter of course * * * may amend the

party’s pleading only by leave of court or by written consent of

the adverse party.” “In the absence of any apparent or declared

reason —— such as undue delay, bad faith or dilatory motive on the

part of the movant, repeated failure to cure deficiencies by

amendments previously allowed, undue prejudice to the opposing

party by virtue of allowance of the amendment, futility of

amendment, etc —— the leave sought should, as the rules require, be

‘freely given.’” Foman v Davis, 371 US 178, 182 (1962) (quoting

FRCP 15(a)). The decision to grant or deny leave to amend rests

with the discretion of the court. See Swanson v United States

Forest Service, 87 F3d 339, 343 (9th Cir 1996).

The court declines to grant leave to amend here. First,

in the court’s May 23, 2005, order dismissing claims in the FAC,

the court warned plaintiffs that “No further amendment will be

permitted except for good cause shown.” Doc #139 at 41. Apart

from reciting the general rules governing amendments, plaintiffs

have not provided any reason why leave to amend should be granted

in this particular case. Doc #201 at 23-24.

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Moreover, because plaintiffs have failed to file a proper

complaint even after being given three chances to do so, permitting

additional amendment would likely be futile. The court notes that

in each of the complaints filed, at least some of plaintiffs’

claims were dismissed because they failed to plead fraud with

particularity. Plaintiffs’ “repeated failure to cure deficiencies

by amendments previously allowed” makes it improper to grant leave

to amend here.

Additionally, permitting amendment here would create

undue delay and cause undue prejudice to defendants. Although

plaintiffs’ original complaint was filed in 2003, this case has yet

to proceed past the pleadings stage. Plaintiffs’ case, whether

meritorious or not, hangs as a cloud of uncertainty over

defendants; permitting further amendment would only delay matters

further and enable this cloud to linger.

B

But there is another reason not to allow plaintiffs to

amend; indeed, another reason to dismiss the SAC altogether. 

Dismissal with prejudice would be appropriate pursuant to FRCP

41(b) for failure to comply with the court’s May 23, 2005, order

and the local rules. Defendants have moved to dismiss under this

provision (Doc #147 at 2), which provides:

For failure of the plaintiff to prosecute or to comply

with these rules or any order of court, a defendant may

move for dismissal of an action or of any claim against

the defendant. Unless the court in its order for

dismissal otherwise specifies, a dismissal under this

subdivision * * * operates as an adjudication upon the

merits.

//

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United States District Court

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In its May 23, 2005, order, the court stated:

In view of the unfocused character of the first two

complaints, the court has serious reservations about

granting plaintiffs yet another opportunity to amend the

complaint. But with hope overcoming experience, the

court GRANTS plaintiffs’ request for leave to amend the

FAC. * * *

[S]hould plaintiffs elect to file an amended complaint,

plaintiffs are ordered to amend under the following

constraints: (1) All factual allegations must be set

forth in the general body of the complaint; (2) the

general body must be no greater than twenty-five pages

long and (3) the causes of action must provide relevant

citations (not restatements) to the underlying factual

allegations set forth in the general body of the

complaint.

Doc #139 at 40-41. Sadly, experience has finally vanquished hope,

as plaintiffs’ counsel clearly did not take this order to heart.

As a preliminary matter, the latest complaint is once

again rife with unnecessary evidentiary detail. Plaintiffs

describe their position:

[Defendants] first say that Plaintiffs ignored FRCP

8 when they gave too many pages of details. Then

they argue that the complaint sounded or grounded in

fraud, and did not meet the particularity

requirements of Rule 9(b). They hope to have the

case dismissed somehow, and ask the court to pick a

rule.

Doc #201 at 17. But as the court explained in its previous order:

Plaintiffs are also admonished to heed the court’s

instructions to plead fraudulent statements and

omissions with particularity. Particularity in this

context does not mean rococo evidentiary detail. It

does mean clear and concise allegations of facts

that constitute elements of the claim in question. 

Economical pleading is more likely to satisfy the

particularity requirement than many and verbose

allegations.

Doc #139 at 40-41. To summarize, it is not inconsistent to have a

complaint that is both “short and plain” and one that pleads the

elements of fraud with particularity. See In re Westinghouse

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Securities Litigation, 90 F3d 696, 703 (3d Cir 1996) (“[T]he

particularity demands of pleading fraud under Rule 9(b) in no way

negate the commands of Rule 8.” (Alito, J) (quoting Vicom, 20 F3d

at 776) (internal quotation marks omitted)). The latest complaint,

like the previous two, fails to meet either of these requirements. 

Plaintiffs’ counsel put it best when, in his opposition, he appears

to describe his own complaint: “[I]t is a train wreck.” Doc #201

at 25.

Additionally, plaintiffs’ SAC violates each of the three

specific directives set forth in the May 23, 2005, order. First,

as noted previously, many of plaintiffs’ claims do not “provide

relevant citations * * * to the underlying factual allegations set

forth in the general body of the complaint.”

Next, violating the directive that “[a]ll factual

allegations must be set forth in the general body of the

complaint,” plaintiffs included factual allegations throughout the

SAC. See, e g, SAC at 36 ¶ 185 (states in claim 16, “On December

11, 2002, Doug Bender, the ‘general manager’ of I2 Telecom, told

John Cooney, an employee of Supercaller, that Lew Lim and Darius

were the ‘biggest crooks [he] had ever met’ in his ‘twenty years in

the Silicon Valley.’” (alteration in original)); id at 57 ¶ 356

(states in claim 31, “Berg failed to challenge the 0.0023 ratio

which I2 Telecom used to decimate SuperCaller shares.”). These

allegations, if added to the general body, would greatly expand its

length.

//

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Case 3:03-cv-05784-VRW Document 213 Filed 03/27/06 Page 21 of 24
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Which brings the court to the final contravened

directive: “[T]he general body of the complaint must be no greater

than twenty-five pages long.” In addition to including factual

allegations outside of the 25-page general body, plaintiffs also,

in essence, exceeded the 25-page limit by increasing the number of

lines per page. In support of this maneuver, plaintiffs’ counsel

explained, “Plaintiffs have always used a 1.5 line-spacing which

results in 31 lines per 8.5” x 11” page.” Doc #201 at 25 (emphasis

in original). At oral argument, plaintiffs’ counsel also indicated

that he used the 31-line paper “to save some trees.” The court is,

to say the least, puzzled by these arguments. Plaintiffs’ counsel

is admitting that he consistently violates Civ L R 3-4(c)(2),

because his filings are neither double-spaced nor 28 lines or less

per page, as required by that rule. (Indeed, the opposition in

which plaintiffs’ counsel stated its position also violates this

rule. See Doc #201.) This persistent intransigence is

particularly noteworthy given that the court already admonished

plaintiffs not to violate a different provision of Civ L R 3-4(c)

in the court’s May 27, 2004, order dismissing the original

complaint. Doc #37 at 28 (“Plaintiffs are also ORDERED to file

such an amended complaint and any future filings on paper with

numbered lines, as required by Civ LR 3-4(c)(1).”). Moreover,

because the FAC (Doc #49) has 29 lines per page but the SAC (Doc

#141) has 31 lines per page (e g, compare FAC at 4 with SAC at 4),

this alteration suggests that plaintiffs’ counsel deliberately

increased the lines per page so that plaintiffs’ factual

allegations would fit within the 25-page limit.

//

Case 3:03-cv-05784-VRW Document 213 Filed 03/27/06 Page 22 of 24
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For these reasons, plaintiffs’ motion for leave to amend

(Doc #201) is DENIED. And in light of plaintiffs’ failure to

comply both with this court’s May 23, 2005, order and the local

rules, the court concludes that DISMISSAL WITH PREJUDICE pursuant

to FRCP 41(b) is warranted. The court will limit that dismissal to

the federal claims as they are the only claims that the court has

analyzed and is satisfied are baseless under federal law.

Additionally, because none of plaintiffs’ federal claims

survive, the court declines to exercise supplemental jurisdiction

over the remaining state law claims. See 28 USC § 1367(c)(3) (“The

district courts may decline to exercise supplemental jurisdiction

[if] the district court has dismissed all claims over which it has

original jurisdiction * * *.”). Accordingly, those claims are

DISMISSED.

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Case 3:03-cv-05784-VRW Document 213 Filed 03/27/06 Page 23 of 24
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V

In sum, the court GRANTS defendants’ motions to dismiss

and motions for joinder (Doc ##147, 148, 151, 156, 166) and DENIES

plaintiffs’ motion for leave to amend (Doc #201). The court also

DENIES AS MOOT the various motions for default judgment and motions

to set aside default (Doc ##174, 181, 193). Plaintiffs’ federal

claims are DISMISSED WITH PREJUDICE; plaintiffs’ state law claims

are DISMISSED. The clerk is DIRECTED to close the file and

TERMINATE all pending motions.

IT IS SO ORDERED.

 

VAUGHN R WALKER

United States District Chief Judge

Case 3:03-cv-05784-VRW Document 213 Filed 03/27/06 Page 24 of 24