Court Opinion

ID: 2685960
Source: CourtListenerOpinion
Date Created: 2014-07-28 21:00:43.536769+00
Date Added: 2024-06-11T09:34:23.916446
License: Public Domain

FILED
                           NOT FOR PUBLICATION                                 JUL 28 2014

                                                                          MOLLY C. DWYER, CLERK
                    UNITED STATES COURT OF APPEALS                          U.S. COURT OF APPEALS

                            FOR THE NINTH CIRCUIT

PORTFOLIO INVESTMENTS LLC, a                     No. 13-35333
Washington limited liability corporation;
STEVEN J NIKOLICH, managing                      D.C. No. 2:12-cv-00104-RAJ
member, Portfolio Investments, LLC;
MARCIA A NIKOLICH, both
individually and on behalf of the marital        MEMORANDUM*
community comprised thereof,

              Plaintiffs - Appellants,

  v.

FIRST SAVINGS BANK NORTHWEST,
a Washington state chartered bank;
EXECUTIVE HOUSE INC, a Washington
corporation; JOHN P MILLS, individually
and on behalf of the marital community
comprised thereof; DAVID KROEGER;
JEFF GREGG; JAMES PRESTON;
VICTOR KARPIAK; FIRST FINANCIAL
NORTHWEST INC; FIRST FINANCIAL
DIVERSIFIED CORPORATION, a
Washington corporation; TAX
ATTORNEYS INC, a Washington
corporation; SUSAN CHANG; JOHN E
CICERO, II; JANE DOES, both
individually and on behalf the marital
communities of John E. Cicero, II and Jane

        *
             This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
Doe Cicero and Justin Cicero and Jane
Doe Cicero,

                Defendants - Appellees.

                     Appeal from the United States District Court
                       for the Western District of Washington
                     Richard A. Jones, District Judge, Presiding

                         Argued and Submitted July 11, 2014
                                Seattle, Washington

Before: ALARCÓN, TASHIMA, and MURGUIA, Circuit Judges.

      Plaintiffs–appellants Portfolio Investments LLC, Stephen Nikolich, and

Stephen’s wife, Marcia Nikolich (collectively “Portfolio”), appeal from the district

court’s dismissal of their amended complaint with prejudice for failure to state a

claim under Rule 12(b)(6) of the Federal Rules of Civil Procedure. Portfolio

alleged before the district court that the First Savings Bank Northwest (“FSB”)

defendants–appellees1 and the Tax Attorneys, Inc. defendants–appellees2

collectively violated the Racketeer Influenced and Corrupt Organizations Act

(“RICO”), 18 U.S.C. §§ 1961–1968, by depriving Portfolio of its intangible right

      1
       FSB; Executive House, Inc.; John P. Mills; David Kroeger; Jeff Gregg;
James Preston; Victor Karpiak; First Financial Northwest, Inc.; and First Financial
Diversified Corporation.
      2
          Tax Attorneys, Inc; Susan Chang; and John E. Cicero II.
                                           2
to honest services. The district court held that Portfolio had failed to allege

statutory standing under RICO and dismissed Portfolio’s amended complaint with

prejudice. We have jurisdiction under 28 U.S.C. § 1291, and we affirm.

                                           I

      To state a claim under 18 U.S.C. § 1964(c), Portfolio must have established

statutory standing under RICO by pleading “(1) that [its] alleged harm qualifies as

injury to [its] business or property; and (2) that [its] harm was ‘by reason of’ the

RICO violation.” Canyon Cnty. v. Syngenta Seeds, Inc., 519 F.3d 969, 972 (9th

Cir. 2008). Portfolio argues on appeal that its intangible right to receive honest

services—of which Portfolio contends it has been deprived by FSB and Tax

Attorneys’ actions—suffices as a property interest for RICO statutory standing

purposes. This Court has specifically held, however, that the deprivation of honest

services alone “does not constitute concrete financial loss” for purposes of

pleading RICO’s statutory standing requirement. Ove v. Gwinn, 264 F.3d 817, 825

(9th Cir. 2001); see also United States v. Kincaid-Chauncey, 556 F.3d 923, 941

n.14 (9th Cir. 2009) (“The public’s intangible right to honest services cannot be

construed as ‘property’ traditionally understood.”), abrogated on other grounds by

Skilling v. United States, 561 U.S. 358 (2010). Furthermore, Portfolio’s amended

complaint itself never alleges that (or how) Portfolio was injured in its business or

                                           3
property at all. Portfolio therefore failed to plead facts demonstrating that FSB and

Tax Attorneys proximately caused it to sustain injury to its business or property

through a fraudulent scheme to deprive it of honest services. Because we conclude

that Portfolio lacks RICO standing, we do not reach any of the other arguments

raised, including whether honest-services fraud can ever serve as a predicate RICO

act.

                                          II

       Portfolio also contends the district court erred by denying it leave to amend

to correct any pleading deficiencies. Despite Portfolio’s failure to seek leave to

amend before the district court, we may review the issue on appeal “[b]ecause the

issue was expressly addressed and decided by the district court, raised on appeal,

and fully briefed by both parties.” United States v. Corinthian Colls., 655 F.3d
984, 995 (9th Cir. 2011).

       “When the district court denies leave to amend because of futility of

amendment, we will uphold such denial if it is clear, upon de novo review, that the

complaint would not be saved by any amendment.” Carvalho v. Equifax Info.

Servs., LLC, 629 F.3d 876, 893 (9th Cir. 2010) (internal quotation marks omitted).

Portfolio’s amended complaint was riddled with deficiencies and fell woefully

short of the specificity required to meet Federal Rule of Civil Procedure 9(b)’s

                                          4
heightened pleading standard for Portfolio’s fraud contentions. See Schreiber

Distrib. Co. v. Serv-Well Furniture Co., 806 F.2d 1393, 1400 (9th Cir. 1986)

(“Rule 9(b) requires that the circumstances constituting fraud be stated with

particularity.” (omission and internal quotation marks omitted)). Perhaps the most

glaring deficiency is Portfolio’s failure to allege the bribery or kickback scheme

necessary to establish its honest-services fraud claim. See Skilling, 561 U.S. at

404. This is particularly problematic insofar as Skilling’s bribery-or-kickback

requirement, established in June 2010, was not new at the time Portfolio filed its

original complaint in January 2012 or its amended complaint in August 2012.

      The great number of pleading deficiencies in Portfolio’s amended

complaint—combined with Portfolio’s complete failure to specify what, if

anything, it could allege to cure those deficiencies—demonstrates Portfolio’s

inability to plead sufficient facts to state a viable RICO claim. We therefore

conclude that any attempt at amendment would have been futile.

AFFIRMED.

                                          5