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Williams v. PRK Funding Services, Inc.

United States District Court, W.D. Washington, Seattle

July 6, 2018

DAMON CHARLES WILLIAMS, Plaintiff,
v.
PRK FUNDING SERVICES, INC., et al., Defendants.

          ORDER ON PENDING MOTIONS

          RICARDO S. MARTINEZ CHIEF UNITED STATES DISTRICT JUDGE.

         I. INTRODUCTION

         Pro se Plaintiff[1] has filed suit against 29 named Defendants and 100 Doe Defendants. Pending before the Court are five motions to dismiss:

1) Motion of Defendants City of Seattle, Melvin Britt Jr., & Ronald Campbell to Dismiss for Lack of Subject Matter Jurisdiction and Failure to State a Claim. Dkt. #24. The Court will refer to the City of Seattle as “Defendant City, ” to Melvin Britt Jr. as “Defendant Britt, ” to Ronald Campbell as “Defendant Campbell, ” and to these Defendants collectively as the “City Defendants.”
2) Defendant Jonathan Dreitzler's Motion to Dismiss and Joinder in City of Seattle Defendants' Motion to Dismiss. Dkt. #41. The Court will refer to Jonathan Dreitzler as “Defendant Dreitzler.”
3) Defendants Windermere Services Company's and Kathyrn [sic] Hinds' Motion to Dismiss for Failure to State a Claim. Dkt. #45. The Court will refer to Windermere Services Company as “Defendant Windermere, ” to Kathryn Hinds as “Defendant Hinds, ” and to these Defendants collectively as the “Windermere Defendants.”
4) King County and Thomas MacKenzie Brown's Motion to Dismiss. Dkt. #53. The Court will refer to King County as “Defendant County, ” to Thomas MacKenzie Brown as “Defendant Brown, ” and to these Defendants collectively as the “County Defendants.”
5) Defendant Wells Fargo Bank, N.A.'s Motion to Dismiss. Dkt. #74. The Court will refer to Wells Fargo Bank, N.A.[2] as “Defendant Wells Fargo.”

         Plaintiff has opposed these Motions.[3] Dkts. #55-60, #79-84, #89, #92-#95, and #97.[4] Also pending before the Court is Plaintiff's Motion and Notice of Motion to Strike the Notice of Appearance of Michael S. Deleo & Michael T. Callan. Dkts. #76-78. Defendant Dreitzler has opposed Plaintiff's Motion. Dkt. #88. Having reviewed the record and for the reasons set forth below, the Court resolves the Motions as follows.

         II. BACKGROUND[5]

         Plaintiff's claims relate to a 2009 non-judicial foreclosure and subsequent trustee sale of property in which Plaintiff may have had an ownership interest. The numerous parties sued by Plaintiff are involved, to varying degree, in the events leading up to or following that sale. The Court will attempt to present a brief overview and detail the involvement of individual Defendants with regard to their specific motions below.

         Plaintiff secured a loan of one million three hundred eleven thousand dollars ($1, 311, 000) from Private Lenders Group, LLC (“PLG”) on or about January 24, 2007. See Dkt. #3-1 at 17- 39. The loan was intended to be used by Williams Family Holdings LLC-of which Plaintiff was a member/manager-for the purpose of financing and funding the construction of a single family residence at 515 35th Avenue South, Seattle, WA. Id. at 17. The loan was secured by a deed of trust upon the property. Id. at 37-38. Following closing of the transaction, PLG assigned the promissory note to PRK Funding Services, Inc. (“PRK”), as custodian for the noteholders in PLG Fund I, LLC. Id. at 32, 37-38.

         Plaintiff began construction on the property but the project was not completed in the anticipated timeframe and ran into financial trouble due to the conduct of PLG and its agents. Dkt. #3 at ¶ 34; Dkt. #3-1 at 2-13. Plaintiff attempted to refinance the project. Id. But the trustee on the deed of trust ultimately initiated non-judicial foreclosure under Chapter 61.24, Revised Code of Washington. Dkt. #3-1 at 37-39; 84-85. The trustee sale was scheduled for September 11, 2009. Id. at 38. Plaintiff filed for voluntary Chapter 7 bankruptcy on September 10, 2009. Id. at 15. Nevertheless, the trustee held the trustee sale, as scheduled, on September 11, 2009, with PRK purchasing the property. Id. at 37-39. Plaintiff's Chapter 7 bankruptcy was later dismissed, on October 7, 2009, “for Failure to File Schedules or Statements.” Id. at 68.

         After the trustee sale, PRK and Plaintiff each asserted ownership over the property. Id. at 78, 84-85. On January 19, 2010, Plaintiff filed a “Notice of Fraud and Intent to Litigate” against the property with the King County Auditor. Id. at 89-92. On January 25, 2010, representatives of PRK and PLG summoned the police to the property, gained entry to the structure, and towed a vehicle from the property. Id. at 41-62. Thereafter, Plaintiff obtained a temporary protection order against Jonathan Dreitzler, an agent of PLG and PRK, on January 26, 2010, from the King County District Court. Id. at 120-27. PRK initiated an unlawful detainer action against Plaintiff in King County Superior Court on January 29, 2010. Id. at 111-17. Also on January 29, 2010, Plaintiff filed a lis pendens against the property with the King County Auditor. Id. at 131-33.

         Ultimately, on December 8, 2010, PRK sold the property to Kirill Gavrylyuk and Chandrika Shankarnarayan and they have remained in possession ever since. Id. at 94.

         III. DISCUSSION

         A. The Court Has Subject Matter Jurisdiction

         As an initial matter, City Defendants and County Defendants seek dismissal under Federal Rule of Civil Procedure 12(b)(1) on the basis that this Court lacks jurisdiction over Plaintiff's action. Dkt. #24 at 5-9; Dkt. #53 at 3-4. Plaintiff bears the burden of establishing that his case is properly within the limited jurisdiction of the federal court. Kokkonen v. Guardian Life Ins. Co., 511 U.S. 375, 377 (1994); In re Ford Motor Co./Citibank (South Dakota), N.A., 264 F.3d 952, 957 (9th Cir. 2001). At the pleading stage, Plaintiff must plead sufficient allegations to show a proper basis for the federal court to assert subject matter jurisdiction over the action. McNutt v. General Motors Acceptance Corp., 298 U.S. 178, 189 (1936).

         Federal question jurisdiction exists when the plaintiff's claim arises “under the Constitution, laws, or treaties of the United States.” 28 U.S.C. § 1331. “[A] federal question [must be] presented on the face of the plaintiff's properly pleaded complaint.” Caterpillear, Inc. v. Williams, 482 U.S. 386, 392 (1987). A complaint making state law claims with passing reference to a federal statute will not establish jurisdiction. Lippitt v. Raymond James Financial Services, Inc., 340 F.3d 1033, 1040-41 (9th Cir. 2003). Rather, the state law claims must implicate a substantial federal question. Id. at 1042. Jurisdiction is proper where “the right to relief depends on the resolution of a substantial, disputed federal question.” Id. (quoting ARCO Envtl. Remediation, L.L.C. v. Dep't of Health and Envtl. Quality of the State of Mont., 213 F.3d 1108, 1114 (9th Cir. 2000)) (quotation marks omitted).

         City Defendants and County Defendants argue that Plaintiff's Complaint fails to assert a federal question because any Constitutional claims are frivolous and mere seasoning to state law claims. Dkt. #24 at 5-9; Dkt. #53 at 3-4. City Defendants argue further that to the extent Plaintiff's Complaint asserts violations of the automatic bankruptcy stay under 11 U.S.C. § 362, the bankruptcy courts have exclusive jurisdiction over those claims. Dkt. #24 at 6-8. But the Court is satisfied that federal question jurisdiction exists here.

         First, Plaintiff asserts somewhat vague allegations related to racketeering, presumably under 18 U.S.C. § 1961 et seq. Dkt. #3 at ¶¶ 37-52. While the allegations do not specifically invoke the federal statute-as opposed to Washington's analog, Chapter 9A.82, Revised Code of Washington-, the allegations utilize the phrasing of the federal statute. Plaintiff's RICO claims alone are sufficient to invoke this Court's jurisdiction and will be addressed below.

         Second, Plaintiff's central grievance is that the trustee sale occurred in violation of the automatic bankruptcy stay, in violation of federal law.[6] Even so, City Defendants argue that violations of the bankruptcy stay are “within the exclusive jurisdiction of the federal bankruptcy courts.” Dkt. #24 at 7 (citing MSR Exploration, Ltd. v. Meridian Oil, Inc., 74 F.3d 910, 916 (9th Cir. 1996)). But City Defendants' reliance on MSR Exploration, Ltd. is misplaced. In that case, the Ninth Circuit concluded that a state law claim of malicious prosecution, which arose out of a creditor's claim against the debtor in an earlier bankruptcy, was preempted by the bankruptcy code. Id. at 913. As part of the court's consideration, it noted that the bankruptcy code provided the debtor with sufficient protections from false creditor claims within the confines of the bankruptcy action. Id. at 915. Thus, while a claim for a violation of the bankruptcy code was not before the court, it opined that such a claim should be asserted within the underlying bankruptcy proceeding. Id. at 916.

         MSR Exploration, Ltd. does not preclude the Court's jurisdiction and more recent precedent supports this Court's jurisdiction, at least at this early stage. See In re Curtis, 571 B.R. 441 (9th Cir. BAP 2017) (noting that that “district courts have jurisdiction over bankruptcy cases and proceedings; the bankruptcy court's jurisdiction over such matters is purely and solely derivative of the district court's jurisdiction . . . . [and] entirely dependent upon the referral by the district court”). While this Court has generally referred bankruptcy matters to the bankruptcy court, LCR 87(a), the Court is permitted to withdraw the referral and may do so by exercising jurisdiction. 28 U.S.C. § 157(d); Anderson v. Fed. Deposit Ins. Corp., 918 F.2d 1139 (4th Cir. 1990) (finding that district court impliedly withdrew referral to bankruptcy court where it exercised jurisdiction over a case in which the bankruptcy trustee was substituted as plaintiff). As noted in In re Curtis, “[l]itigants are not precluded from requesting transfer of a case from a district court to a bankruptcy court.” 571 B.R. at 449; LCR 87(b). But at this early stage and due to the numerous other non-bankruptcy claims, the Court finds it appropriate to consider the case.

         Having found that this Court has subject matter jurisdiction due to a substantial federal question, the Court need not consider whether diversity jurisdiction exists.[7]

         B. Relevant Legal Standards

         1. Motion to Dismiss

         All motioning Defendants have sought dismissal pursuant to Federal Rule of Civil Procedure 12(b)(6). In making a Rule 12(b)(6) assessment, the court accepts all facts alleged in the complaint as true, and makes all inferences in the light most favorable to the non-moving party. Baker v. Riverside Cnty. Office of Educ., 584 F.3d 821, 824 (9th Cir. 2009) (citations omitted). However, the court is not required to accept as true a “legal conclusion couched as a factual allegation.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). “Determining whether a complaint states a plausible claim for relief will . . . be a context-specific task that requires the reviewing court to draw on its judicial experience and common sense.” Id. at 679 (citations omitted).

         A complaint must contain sufficient facts “to state a claim for relief that is plausible on its face.” Id. at 678. This requirement is met when the plaintiff “pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. The complaint need not include detailed allegations, but it must have “more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Twombly, 550 U.S. at 555. “The plausibility standard is not akin to a probability requirement, but it asks for more than a sheer possibility that a defendant has acted unlawfully. . . . Where a complaint pleads facts that are merely consistent with a defendant's liability, it stops short of the line between possibility and plausibility of entitlement to relief.” Iqbal, 556 U.S. at 678 (citing Twombly, 550 U.S. at 556, 557). Absent facial plausibility, a plaintiff's claims must be dismissed.

         2. Pro Se Considerations

         The Court must also remain mindful that Plaintiff is proceeding pro se. “The Supreme Court has instructed the federal courts to liberally construe the ‘inartful pleading' of pro se litigants.” Eldridge v. Block, 832 F.2d 1132, 1137 (9th Cir. 1987) (citing Boag v. MacDougall, 454 U.S. 364, 365 (1982)). Pro se plaintiffs are ultimately held “to less stringent standards than formal pleadings drafted by lawyers.” Haines v. Kerner, 404 U.S. 519, 520 (1972). Nevertheless, “courts should not have to serve as advocates for pro se litigants.” Noll v. Carlson, 809 F.2d 1446, 1448 (9th Cir. 1987). Indeed, “[h]e who proceeds pro se with full knowledge and understanding of the risks does so with no greater rights than a litigant represented by a lawyer, and the trial court is under no obligation to . . . assist and guide the pro se layman[.]” Jacobsen v. Filler, 790 F.2d 1362, 1365, n. 5 (9th Cir. 1986) (quoting United States v. Pinkey, 548 F.2d 305 (10th Cir. 1977)).

         3. Consideration of Materials Outside Pleadings and Judicial Notice

         Lastly, City Defendants, Defendant Dreitzler, [8] County Defendants, [9] and Defendant Wells Fargo have all requested that the Court consider facts or documents outside of the pleadings. Dkts. #25; #41 at 6-7; #42; #53 at 6 n.1; #75. In considering a Rule 12(b)(6) motion, the Court generally considers “the complaint in its entirety, . . . documents incorporated into the complaint by reference, and matters of which a court may take judicial notice.” Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 322 (2007) (citations omitted). Here, the Court has considered the documents Plaintiff attached to his Complaint and has taken judicial notice of, and considered, the documents attached to the Declaration of Josh Johnson (Dkt. #25) and the documents attached to Defendant Wells Fargo's request (Dkt. #75). Judicial notice is appropriate because Plaintiff has not objected, has not contested the authenticity of the documents, and the accuracy of the sources cannot be reasonably questioned. Fed R. Evid. 201.

         C. Plaintiff Fails to Adequately Plead RICO Claims

         As an initial matter, Plaintiff has made vague allegations related to racketeering, presumably under 18 U.S.C. §§ 1961 et seq.[10] Dkt. #3 at ¶¶ 37-52. While Plaintiff's Complaint is far from clear, Plaintiff appears to allege that all Defendants[11] engaged in racketeering and the Court finds it appropriate to address these claims collectively. To successfully state a claim under the Racketeer Influenced and Corrupt Organizations Act (“RICO”), a plaintiff must allege “(1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity (known as ‘predicate acts') (5) causing injury to the plaintiff's ‘business or property.'” Grimmet v. Brown, 75 F.3d 506, 510 (9th Cir. 1996) (citing 18 U.S.C. §§ 1964(c), 1962(c)). Most relevant to Plaintiff's allegations, an “enterprise” is an entity or “group of persons associated together for a common purpose of engaging in a course of conduct.” U.S. v. Turkette, 452 U.S. 576, 583 (1981). Pleading an enterprise requires more than merely pleading a pattern of racketeering activity because “[t]he ‘enterprise' is not the ‘pattern of racketeering activity', it is an entity separate and apart from the pattern of activity in which it engages.” Id.

         Plaintiff fails to adequately plead a RICO claim as to any Defendant. First, Plaintiff does not adequately plead an enterprise. Plaintiff specifically alleges that PLG, PRK, and Defendant Pyatt Broadmark Management, LLC belong to a “syndicate.” Dkt. #3 at ¶ 43. But beyond that conclusory allegation, Plaintiff does not allege any facts demonstrating a plausible enterprise separate from the pattern of alleged racketeering. With regard to all Defendants, Plaintiff relies only on general allegations that track the elements of the cause of action. See e.g. Dkt. #3 at ¶ 41 (“[Plaintiff] has perfected a claim by showing the existence of an enterprise, showing a pattern of racketeering activity: fraud, shown nexus between the Trespassers and the pattern of frauds, and shown resulting injury to property.”). Plaintiff's non-specific allegations are insufficient to plead the existence of an enterprise or a pattern of racketeering through fraud. See Clark v. Countrywide Home Loans, Inc., 732 F.Supp.2d 1038, 1046 (E.D. Cal. 2010) (finding allegations “that every defendant was aware that the notice of default [on a deed of trust] was invalid and that every defendant either participated in or rendered substantial assistance in the issuance of the invalid notice . . . . not remotely sufficient to support” a civil RICO claim).

         Additionally, Plaintiff's current RICO allegations are precluded by the statute of limitations. “The statute of limitations for civil RICO actions is four years” and runs from the time “a plaintiff knows or should know of the injury that underlies his cause of action.” Pincay v. Andrews, 238 F.3d 1106, 1108-09 (9th Cir. 2001) (citations omitted).[12] Even if new predicate acts occurred within the four years prior to Plaintiff filing this action, Plaintiff cannot use a “new predicate act as a bootstrap to recover for injuries caused by other earlier predicate acts that took place outside the limitations period.” Klehr v. A.O. Smith Corp., 521 U.S. 179 (1997) (citations omitted). While Plaintiff points to several events that have taken place within the four years prior to his suit, he does not indicate which events may qualify as “racketeering activity” for the purposes ...


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