Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_15-cv-02526/USCOURTS-caed-2_15-cv-02526-0/pdf.json

Nature of Suit Code: 470
Nature of Suit: Civil (Rico)
Cause of Action: 18:1964 Racketeering (RICO) Act

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UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

----oo0oo----

ANDREW B. KATAKIS and CAPITAL 

EQUITY MANAGEMENT GROUP, 

INC., a California 

corporation,

Plaintiffs,

v.

WILEY CHANDLER, STEVEN 

SWANGER, KENNEN SWANGER, 

RICHARD NORTHCUTT, and DOES 

1-20, inclusive,

Defendants.

CIV. NO. 2:15-02526 WBS KJN

MEMORANDUM AND ORDER RE: MOTION 

TO DISMISS

----oo0oo----

Plaintiffs Andrew B. Katakis and Capital Equity 

Management Group, Inc. (“CEMG”) initiated this civil suit against 

defendants Wiley Chandler, Steven Swanger, Kennen Swanger, and 

Richard Northcutt, alleging violations of the Racketeer 

Influenced and Corrupt Organizations Act (“RICO”), 15 U.S.C. 

§§ 1961 et seq. (Compl. (Docket No. 1).) Presently before the 

court is defendants’ motion to dismiss plaintiffs’ Complaint for 

failure to state a claim upon which relief may be granted 

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pursuant to Federal Rule of Civil Procedure 12(b)(6). (Docket 

No. 10.) 

I. Factual and Procedural History

On March 11, 2014, a jury found Katakis guilty of a bid 

rigging conspiracy to interfere with competition at San Joaquin 

County real estate foreclosure auctions in violation of the 

Sherman Antitrust Act, 15 U.S.C. § 1, and obstruction of justice, 

18 U.S.C. § 1519. (Criminal Docket in United States v. Chandler, 

et al., Cr. No. 2:11-CR-00511 (“Criminal Docket”) No. 277.) This 

court entered a judgment of acquittal on the obstruction of 

justice count, (Criminal Docket No. 317), and the Ninth Circuit 

affirmed, (Criminal Docket Nos. 365, 368). 

On June 2, 2014, Katakis filed a motion for new trial 

on his bid rigging conspiracy conviction. (Criminal Docket No. 

328.) On February 3, 2016, Katakis filed an amended motion for 

new trial, (Criminal Docket No. 445), which is currently pending

before this court. 

In the present civil action, plaintiffs allege 

defendants falsely accused Katakis of knowingly being a part of 

the bid rigging and mail fraud conspiracy by providing false 

information in numerous meetings with federal investigators and 

prosecutors from November 2010 to December 2011, fabricating

emails to corroborate the allegedly false accusations, falsely 

testifying at the grand jury hearing and criminal trial, and 

endeavoring to influence others to falsely testify. (Compl. at 

12-20; Pl.’s Opp’n at 35 (Docket No. 13).) Defendants Chandler, 

Northcutt, and Kennen Swanger testified against Katakis at the 

criminal trial in exchange for plea agreements from the 

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government. (Pl.’s Opp’n at 1.) Steve Swanger also testified 

against Katakis though he had not been criminally charged. (Id.

at 1-2.) 

Plaintiffs assert two causes of action under RICO: (1) 

a pattern of racketeering based on multiple instances of 

obstruction of justice, obstruction of a criminal investigation, 

and witness tampering, 18 U.S.C. § 1962(c); and (2) conspiracy to 

violate 18 U.S.C. § 1962(c), 18 U.S.C. § 1962(d). (Compl. at 22-

27.) Plaintiffs seek damages for the injury caused to 

plaintiffs’ business and property, attorney’s fees, expenses, and 

costs. (Id. at 27.) 

Defendants argue plaintiffs’ Complaint must be 

dismissed under Heck v. Humphrey, 512 U.S. 477 (1994), because a 

judgment in plaintiffs’ favor would require a finding that 

defendants testified falsely against Katakis and such a judgment 

would necessarily imply the invalidity of Katakis’ criminal 

conviction. (Defs.’ Mot. at 14.) The government, in a statement 

of interest filed pursuant to 28 U.S.C. § 517, argues the 

Complaint should not be dismissed at this time but rather the 

court should stay the civil action pending resolution of the 

criminal case against Katakis. (Gov’t’s Statement of Interest at 

1 (Docket No. 12).) Plaintiffs do not object to the court 

staying this civil action pending resolution of Katakis’ motion 

for new trial in the related criminal matter. (Pl.’s Resp. to 

Gov’t’s Statement of Interest at 1 (Docket No. 15).) 

II. Discussion 

A criminal defendant may not bring a civil action for 

damages if judgment in his favor “would necessarily imply the 

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invalidity of his [criminal] conviction or sentence.” Heck, 512

U.S. at 488. If “a judgment in favor of the plaintiff would 

necessarily imply the invalidity of his conviction or sentence” 

than “the complaint must be dismissed unless the plaintiff can 

demonstrate that the conviction or sentence has already been 

invalidated.” Id. A conviction or sentence is invalidated if 

“reversed on direct appeal, expunged by executive order, declared 

invalid by a state tribunal authorized to make such 

determination, or called into question by a federal court’s 

issuance of a writ of habeas corpus, 28 U.S.C. § 2254.” Id. at 

487. The Heck holding is based on “the hoary principle that 

civil tort actions are not appropriate vehicles for challenging 

the validity of outstanding criminal judgments.” Id. at 486; see 

also Wallace v. Kato, 549 U.S. 384, 392 (2007). 

Although Heck dealt specifically with whether a civil 

rights claim was actionable under 42 U.S.C. § 1983, courts within 

the Ninth Circuit have found that Heck “applies with equal force 

to civil RICO claims.” Garcia v. Scribner, Civ. No. 97-0742 CRB, 

1998 WL 397895, at *2 (N.D. Cal. July 10, 1998); see also

Boulware v. Dep’t of Ins., Civ. No. 09-4325-R(E) MLR, 2009 WL 

3271060, at *5 (C.D. Cal. Oct. 8, 2009) (“Heck also applies to 

RICO claims.”); Oberg v. Asotin County, 310 F. App’x 144, 145-46 

(9th Cir. 2009) (finding the district court properly dismissed 

plaintiff’s claims alleging a racketeering conspiracy and 

challenging the investigation under Heck). But see Hunter v. 

Gates, Civ. No. 99-12811, 2001 WL 837697, at *2-3 (C.D. Cal. Apr. 

16, 2001) (finding Heck does not apply to civil RICO claims). 

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The Heck bar takes effect when there is an extant 

criminal conviction or sentence that has not been invalidated. 

If, as in this case, a plaintiff files a civil “claim related to 

rulings that will likely be made in a pending or anticipated 

criminal trial,” it is “within the power of the district court, 

and in accord with common practice, to stay the civil action 

until the criminal case or the likelihood of a criminal case is 

ended.” Kato, 549 U.S. at 393-94. “If the plaintiff is 

ultimately convicted, and if the stayed civil suit would impugn 

that conviction, Heck will require dismissal; otherwise, the 

civil action will proceed, absent some other bar to suit.” Id.

at 394. 

Katakis’ criminal conviction is not yet final as his 

motion for new trial is currently pending before this court. See

Clay v. United States, 537 U.S. 522, 527 (2003). Accordingly, 

under Kato, the court will stay plaintiffs’ civil action unless 

and until Heck no longer bars plaintiffs’ claims. If Katakis is 

ultimately acquitted or his conviction is set aside on collateral 

attack, Heck will not preclude this civil RICO action. 

IT IS THEREFORE ORDERED that plaintiffs’ civil RICO 

action (Docket No. 1) be, and the same hereby is, STAYED pending

resolution of the criminal case. IT IS FURTHER ORDERED that 

defendants’ motion to dismiss (Docket No. 10) be, and the same 

hereby is, DENIED without prejudice as moot.

Dated: March 17, 2016

 

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