N O T FO R PUB L ICAT IO N UNITED STATES C OUR T OF APPEALS FOR THE NINTH C IR C UIT
M ARK M OR

A N; PATRIC IA B AILEY W HITE, individually and on be ha lf of a c la s s of sim ila

rly situa te d pe rsons, Pla i ntiffs-Appe lla

nts,
v. HUGH B R OM M A; JAY PEAR SON, AKA Je rry

Pe arson, AKA Je rry

O. Pe arson, Jr.; ENTR

UST GR OUP, INC .; ENTR U ST ADM INISTR

A TION, INC .; ENTR U ST M ID-SOUTH, LLC , AKA M i d South R e tire m e nt Se rvic e s, LLC ,

De fe nda n ts-Appe lle e s. No. 15-15512 D.C . No. 2:13-c v-00487-JAM -C KD
M EM O R ANDUM *

Appe a l from

the Unite d

Stat e s Distric t C ourt for the Ea ste rn Distric t of C a lifornia J ohn A. M e nde z , Distric t Judge , Pre siding A rgue d a nd Subm itte d De c e m

be r 14, 2016 San Fran c isc o , C a lifornia B e fore : KOZINSKI, B Y B EE, a nd N.R . SM ITH, C i rc u it Judge s. 

# FIL ED JAN 18 2017 M OLLY C. DW Y ER, CLERK U
. S
. CO URT O F APPEALS

* This disposition is not a ppropria te for public a t ion a

nd is not pre c e de nt e xc e pt a s provide d

by Ninth C irc uit R

ule 36-3.Pla intiffs M ark M oran a nd Patric ia

B a i le y Wh ite a p pe a l the distric t c ourt’ s dism issa l of the ir c la i m s for fra ud a nd viola tions of theR a c ke te e r Influe nc e d a nd C orrupt Orga

niz a t ions Ac t

(“ R IC O” ) a ga inst The Entrust Group, Inc ., Entrust Adm inistra

tion, Inc ., a

n d Hugh B rom

m a (“ De fe nda

nts” ). 1 White a lso a

ppe a ls the distric t c o urt’ s dism issa l of he r c la im a ga i nst De fe nda

nts for fina

n c ia l e l de r a

buse unde r C a lifornia

W e lfare & Institutions C o de § 15610.30. W e re vie w de novo the gran t of a m otion to dism

iss, C ousins v
. Loc k

y e r , 568 F.3d 1063, 1067 (9th C ir. 2009), a nd c an a ffirm

on a ny ground supporte d

by the re c ord, Liv id Holdings Ltd.
v . Salomon Smith Barne

y , Inc
. , 416 F.3d 940, 950 (9th C ir. 2005). W e a ffirm the dism issa l of a ll c la im s but re ve rse the distric t c ourt’ s de nia l of le ave to a m e nd with
re spe c t to W

h ite ’ s R IC O c la im

a ga inst B rom

m a and he r e lde r a

b use c la i m . 1. C a lifornia

im pose s a thre e -y e ar statute of lim ita tions on fra

ud c l a im s. C a l. C iv. Proc . C ode § 338(d). “ Unde r the disc ove ry rule , the sta

tute of lim ita

tions be gins to run when the pla intiff suspe c ts or should suspe c t tha t he r injury

wa s c a use d by wrongdoing . . . .”

J o lly v . Eli Lilly

& C o. , 751 P.2d 923, 927 (C a l. 1988). Pla intiffs c onte nd tha t the y are subje c t to a

“ re la xe d” disc ove ry

rule be c a use De fe nda

nts owe d the m

fiduc ia ry dutie s. The only

diffe re nc e be twe e n the

1 The distric t c ourt e nte re d a de fa ult judgm e nt a g a inst De fe nda nts Entrust M id-South, LLC and Ja

y Pe arson, a

nd the y are not pa

rtie s to this a

ppe a l. 2ordina

ry disc ove ry

rule and the “ re la xe d ” disc o ve ry rule “ is tha

t in the latte r situa tion theduty to inve stiga

te m a y arise late r by

re a son of the fa c t tha

t the pla i ntiff is e n title d to re ly upon the a ssum

ption tha t his fiduc ia

ry is a c ting in his be ha lf.” Be dolla v . Logan &Fraze r , 52 C a l . App. 3d 118, 131 (1975). “ B ut, onc e the p la intiff be c o m e s a

ware of fa c ts whic h would m a k e a re a sona bly prude nt pe rson suspic ious, theduty to inve stiga

te arise s a nd the pla i ntiff m ay

the n be
c ha rge d with theknowle dge of fa c t s whic h would ha ve be e n disc ove re d

by suc h a n inve stiga tion.” Id. (c ita

tion omitte d). Pla intiffs file d

this a c tion on M arc h

11, 2013. The ir fra

u d c la im s a

re the re fore ba

rre d if the y

suspe c t e d or should ha

ve suspe c te d wrongdoing be fore M arc h 11, 2010. As of July 2008, M oran kne w tha

t his prom issory

note ha d
m a ture d without repa

ym e nt a nd tha t he “ re c e ive d substa

ntia lly le s s tha n the 12% in
a c c rue d inte re st he wa s suppose d to re c e ive .” He m a de re pe a te d phone c a lls to Ja y Pe arson “ to find out wha

t wa s going on with his inve stm e nt,” but Pe a rson ne ve r re turne d M oran’ s c a lls. Give n the fa ilure to c om ply with theprom issory

note ’ s te rm s a nd Pe arson’ s re fusa l to re turn M oran ’ s re pe a te d phone c a lls, a re a sona ble pe rson would ha

ve suspe c te d wrongdoing. S e eK line v . Turne r , 87 C a l. App. 4th 1369, 1375 (2001) (holding tha t a re a sona ble pe rson would ha

ve suspe c t e d wrongdoing whe n the de fe nda nt ine xplic a

bly fa i le d to pa

y unde r a c ontra c t). The
3distric t c o urt the re fore c orre c t ly c onc lude d tha

t M oran’ s fra

ud c l a im wa s tim e ba rre d. The sa m e is true a s to W

hite . White stoppe d re c e iving intere st pa y m e nts in the t hird qua rte r of 2008. She c onta c te d Pe arson shortly the re a fte r and le a

rne d tha t
a ll of his inve stm e nts ha d gone ba d, at whic h point she kne w that he r Se lf-Dire c te d Individua l R e tire m e nt Ac c ount wa s worthle s s. W hite re c ogniz e d tha

t he r a c c ount sta te m e nts showe d a

fa ir m a rke t va lue of $120,000 de spite the fa c t tha t he r a c c ount
wa s worthle ss. W

he n White c o m

pla ine d a bout the disc re p anc y , she wa s sim ply told shec ould ta

ke he r busine ss e lse whe re . White argue s tha t she wa s e ntitle d to
re ly on the July 2 0 09 re pre se n tation from Pe arson’ s attorne y tha t Pe arson would pa y he r ba c k sta

rting in July

2010, but W

hite ne ve r re c e ive d the prom ise d
se ttle m e nt doc um e nts to fina liz e this a gre e m e nt or the prom ise d qua rte rly re ports. R e ga rdle ss of whe the r De fe nda nts owe d White fiduc ia

ry dutie s, the distric t c ourt

4prope rly

c onc lude d tha

t White should ha

ve suspe c t e d wrongdoing be fore M arc h 2010. He r fraud c la im is the re fore ba rre d. 2 2. The sta

tute of lim ita

tions for a

c ivil R IC O c la im

is four y e ars. Age nc

y Holding C

orp. v . Malle

y -Duff &Assoc

s., Inc
. , 483 U.S. 143, 156 (1987). For the
re a s ons disc usse d a

bove , the distric t c ourt prope rly c onc lude d tha

t M oran disc ove re d his injury

in 2008, m ore tha

n four y e ars be fore he brought his R IC O
c la im
. Se e Grimme tt v . Brow n , 75 F.3d 506, 510 (9th C ir. 1996) (“ [T] he c ivil R IC O lim ita

tions pe riod ‘ be gins to run when a pla intiff knows or should know of the i njury tha t unde rlie s his c a

use of a c tion.’ ” (c ita

tion omitte d )). As to W hite , the distric t c ourt dismi sse d he r R IC O c la i m for fa ilure to a lle g e the e xiste nc e of a

distinc t R IC O pe rson a

nd e nte rprise . “ [T] o e sta

blish lia bility unde r § 1962(c ) one m

ust a lle ge and prove the e xiste nc e of two distinc t e ntitie s: (1) a ‘ pe rson’ ; a

nd (2) a n ‘ e nte rprise ’ tha

t is not sim

p ly the sa m e ‘ pe rson’ re fe rre d to by a diffe re n t na

m e .” Liv ing De

s igns, Inc . v . E.I. Dupont de N e mours &C

o. , 431 F.3d 353, 361 (9th C ir. 2005) (a lte ra tion in origina l) (quoting C

e dric K ushne r

2 At ora l argum e nt, Pla intiffs’ c ounse l ra ise d the the o ry of a c o ntinuous tort, sugge s ting tha

t, e ve n if Pla intiffs’ c la im s a

re tim e ba rre d, the y should still be

a ble to re c ove r for fe e s a

nd othe r injurie s tha

t oc c urre d within the

pa s t thre e y e a

rs. Pla i ntiffs did not raise this or other e quita ble e xc e ptions to the thre e -y e ar lim ita tions pe riod in the i r ope ning brie f. Se e Ary e h v . C anon Bus. Sols., Inc
. , 292 P.3d 871, 875–76 (C a l . 2013). The re fore , suc h a rgum e nts a

re wa ive d. Se e Brow n v . Raw son–N e al Psy c hiatric

Hosp. , 840 F.3d 1146, 1148 (9th C i r. 2016).

5Promotions, Ltd. v . K ing , 533 U.S. 158, 161 (2001)). W hite nam e s The Entrust Group, Entrust Adm

inistra tion, Entrust M id-South (“ M id-South” ), B rom m a , a nd Pe arson a s R IC O pe rsons a nd a lle ge s tha

t the y c olle c tive ly

form e d a n a s soc iate din-fa c t R IC O e nte rprise
. A pla intiff m ay nam e a ll m e m

be rs of a n a ssoc iat e d-infa c t e nte rprise a s individual R IC O pe rsons, Riv e r C ity Mk ts., Inc
. v . Fle ming Foods W ., Inc
. , 960 F.2d 1458, 1461–62 (9th C ir. 1992), but m ust e sta blish tha t those individual m e m

b e rs a re “ se pa ra te and distinc t” from

the e nte rprise the y c olle c tive ly

form , Liv ing De

signs , 431 F.3d a

t 361. As to De fe n da

n t B rom m a , a c orporate offic e r is suffic ie ntly distinc t from

the
c orporation for whic h he works suc h tha t a pla intiff c a

n a lle ge the offic e r a s the R IC O pe rson a

nd the c orporation a s the R IC O e nte rprise
. Se e C e dricK ushne r Promotions , 533 U.S. a

t 163; Se v e r v . Alask

a Pulp C orp. , 978 F.2d 1529, 1534 (9th C ir. 1992). B rom

m a , a s C EO of The Entrust Group a nd Entrust Adm inistra

tion, is distinc

t from those c orporations, M id-South, a nd Pe arson. It
wa s thus e rror to dism iss W hite ’ s R IC O c la im

a ga inst B rom

m a on this ground. Although W

hite a lle ge d

suffic ie nt distinc t ive ne ss a s to B rom m a , the Se c ond Am e nde d C om

pla int (“ SAC ” ) fa ils to sa tisfy Fe de ra l R

ule of C i vil Proc e dure 9(b)’ s he ighte ne d ple a d ing sta nda rd, whic h “ re quire s a

ple a de r of fra

ud to de ta il with pa rtic ula rity the tim e , pla c e , a

nd m anne r of e a c h a c t of fra ud.” Lanc aste r
6C

mty . Hosp. v . Ante lopeValle y Hosp. Dist. , 940 F.2d 397, 405 (9th C i r. 1991). W hite ’ s ge n e ra l a l le gations tha t B rom m a “ m a d e fa lse re pre s e ntations in 2012” and that B rom m a kne w a bout Pe arson’ s ille ga l a c ts do not m e e t this sta nda rd. Se e id. ;
se e a lso Sw artz v . K

PMG LLP , 476 F.3d 756, 765 (9th C ir. 2007) (“ C onc lusory
a lle gations tha

t [two de fe nda

n ts] ‘ kne w tha

t [the ir c o -de fe n da

n t s] we re m aking . . . fa lse sta te m e nts to c lie nts . . . a

nd thus we re a c ting in c o nc e rt with [those c ode fe nda n ts] ’ . . . without a

ny sta te d fa c tua l ba sis a

re insuffic ie n t a s a

m a tte r of la w.” ). Eve n a ssum ing B rom m a ’ s Se pte m

b e r 2010 phonec a l l with W h ite would qua lify a s a pre dic a t e a c t, “ a t le a st two pre dic a te a c t s a re re q uire d in orde r to
e sta blish a ‘ patte rn’ for R IC O purpose s.” Lanc aste r C mty . Hosp. , 940 F.2d a

t 405. W hite fa i le d to suffic ie ntly a lle ge a patte rn of ra c ke te e ring with re spe c t to B rom m a , a nd he r c la im

thus fa ils. W e the re fore a ffirm the distric t

c ourt’ s dism issa l of W

hite ’ s R IC O c la im

a ga inst B rom

m a . W e do re v e rse the de nia l of le ave to a m e nd, howe ve r, be c a

use it is possible

tha t White c ould ple a d a d ditiona l fa c t s tha t would c ure this de fic ie nc y . Se e Sw artz , 476 F.3d a t 765. As to The Entrust Group a nd Entrust Adm

inistra t ion, whe the r a

pla intiff c an nam e a c orporation a s the R IC O pe rson a nd the c orporat ion plus its e m ploy e e s a nd
a ffilia te s a s an a ssoc iate d-in-fa c t e nte rprise is a m ore nua nc e d que stion. Se eLiv ing De signs , 431 F.3d a

t 361–62; se e also C

e dric K ushne r Pr omotions , 533 U.S. a t
7164. The re le va nt inquiry is whe the r “ [t] he a ssoc i a te d in fa c t e nte rprise . . . is ‘ a be ing diffe re nt from , not the s am e a s or pa rt of, the pe rson whose be h avior [RIC O]
wa s de signe d to prohibit’ ” and whe the r “ the e nte rprise c an[] be e ithe r form a lly or pra c tic a lly

se pa ra ble from the pe rson.” Liv ing De

signs , 431 F.3d a

t 362 (se c ond
a lte ra tion in origina

l) (quoting Raev . Union Bank , 725 F.2d 478, 481 (9th C ir. 1984)). W

hite m ake s no c ogniz a

ble argum e nts e xpla ining how The Entrust Group
and Entrust Adm

inistra tion a re se pa ra t e and distinc t from

the a lle ge d e n te rprise , c onsisting only

of m e m be rs of the sa

m e c orporate fam ily
. “ W e will not
m anufa c ture argum e n ts for a n a ppe lla nt, a nd a ba re a sse rtion doe s not pre se rve a c la im , pa rtic ula rly whe n, a s he re , a

host of othe r issue s are pre se nte d for re vie w.” Gre e nw o od v . F.A.A. , 28 F.3d 971, 977 (9th C ir. 1994) (c ita tion omi tte d). W e thus
a ffirm the dism issa l of W

hite ’ s R IC O c la im , with pre judic e , a s to The Entrust Group a nd Entrust Adm

inistra tion. 3. The distric t c ourt dismisse d White ’ s e l de r a buse c la im

for fa ilure to c om

ply with R ule 9(b)’ s he ighte n e d ple a ding re quire m e nt. Spe c ific a lly , t he distric t c ourt fa ulte d White for tre a ting De fe n da nts a s a group. S e e Sw artz , 476 F.3d a

t 764 (“ R ule 9(b) doe s not a llow a

c om pla int to m e re ly

lum p m u ltiple de fe nda

nts toge the r . . . .” ). B ut the SAC c onta ins a lle g a tions spe c ific to The Entrust Group, Entrust Administra

t ion, a nd M i d-South, a s we l l a s se p ara te a lle g at ions spe c ific to

8B rom

m a . White a lle ge d tha

t The Entrust Group a

nd its fra nc hise e s a

nd lic e nse e s

“ re fe rre d to the m se lve s c olle c tive ly a s ‘ ENTR UST,’ ” an d tha

t The Entrust Group, Entrust Administra

t ion, a nd M i d-South a c t e d toge the r in se nding out fa l se a c c ount sta te m e nts showing e xtra ordina ry inve stm e nt re t

urns or c onsiste nt va luation while knowing thea c c o unts we re worthle ss. Ac c e pting the se fa c ts a s true and m aking a ll
re a s ona ble infe re nc e s in W

hite ’ s favor, Wh ite did not run a foul of R ule 9(b) by grouping the se de fe nda

nts toge the r. White did not shy away from m a k i ng spe c ific
a lle gations a s to e a c h de fe nda nt; she sim

ply a l le ge d that the se de fe nda nts
c olle c tive ly

se nt out fra

udule n t a c c ount sta

t e m e nts. It wa s thus e rror to dismiss W hite ’ s e lde r a

buse c la im on this ground. W hite ’ s e lde r a

buse c la im , howe ve r, should be dism i sse d on a nothe r ground. C a lifornia W e lfare & Institutions C ode § 15610.27 de fine s a n e lde r a s “ any

pe rson re siding in this sta

te , 65 y e ars of a g e or olde r.” Ac c o rdingly , to bring a c l a im for
e lde r a buse , the pla intiff m

ust ha ve be e n sixty -five whe n the a lle g e d fina nc ia l
a buse o c c urre d. Se e Paslay v . State Farm Ge n. Ins. C

o. , 248 C a l. App. 4th 639, 656 & n.14 (2016)
. White a lle g e d tha t she wa s sixty -six y e a

rs old whe n the First Am e nde d C om

pla int a nd the SAC we re file d in M ay 2013 a n d Oc tobe r 2013,
re spe c tive ly . She the re fore did not turn sixty -five until la

te 2011 a t the e arlie st a

nd
we ll a fte r the loss of he r 2006 inve stm e nt.
9W hite sugge sts tha t the re are othe r da

m a g e s tha t oc c urre d a fte r she turne d sixty -five for whic h she should bea ble to re c ove r. She a lle ge s tha t De fe nda nts
m a de una uthoriz e d inve stm e n ts with he r a c c ount m one y and ke pt the funds, though shedoe s not spe c ify whe n. Give n

White ’ s a lle gations tha

t he r a c c ount wa s worthle ss a s of 2008, it is unlike ly tha t the De fe nda

nts m a d e una

uthoriz e d inve stm e nts with he r (none xiste nt) m one y a fte r she turne d sixty -five
. W e the re fore
a ffirm the distric t c o urt’ s dism issa l of W h ite ’ s e lde r a

b use c la i m , but we re ve rse the d e nia l of le a

ve to a m e n d. W e dire c t the distric t c ourt to gra n t Wh i te le ave to
am e nd to c la

rify what injurie s, if a

ny , oc c urre d a fte r she turne d sixty -five
. AFFIRM E D in par t, RE V E RSE D in par t, and RE M ANDE D for fur the r pr oc e e dings.

10