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Simms v. Schwab

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

October 29, 2019

CHARLES R. SCHWAB, et al., Defendants.


          J. Richard Creatura United States Magistrate Judge

         Plaintiff, who proceeds pro se and is currently incarcerated, requests to proceed in forma pauperis (“IFP”) in this civil matter alleging federal question jurisdiction. Pursuant to Amended General Order 02-19, the District Court has referred plaintiff's application to the undersigned. The matter is before the Court on plaintiff's first amended proposed complaint.

         Plaintiff brings civil Racketeering Influenced and Corrupt Organizations Act (“RICO”) claims against various Charles Schwab entities and employees as well as plaintiff's wife. Plaintiff's theory of liability is that these defendants formed a scheme together to deprive plaintiff of his separate property. However, plaintiff provides no factual allegations plausibly establishing that defendants acted with a single, common purpose-as necessary to make out a cognizable RICO claim. Plaintiff's other federal claim-brought under 42 U.S.C. § 1985-fails because plaintiff does not plead any facts to support the claim that defendants acted on the basis of plaintiff's membership in a protected class. And the Court will not exercise supplemental jurisdiction over plaintiff's state law claims absent a cognizable claim brought under federal law. Therefore, before the Court will rule on plaintiff's IFP motion, plaintiff must amend his proposed amended complaint (Dkt. 6-1) to correct the deficiencies identified in this Order.


         Plaintiff, who is incarcerated at the Clallum Bay Corrections Center, initiated this matter by filing an IFP motion in July 2019. See Dkt. 1. The undersigned reviewed plaintiff's IFP application-including his proposed complaint-and, determining that the proposed complaint failed to state a claim upon which relief could be granted, dismissed the proposed complaint without prejudice, and directed plaintiff to submit a new proposed complaint in support of his IFP application, if he wished to proceed. See Dkt. 4.

         Plaintiff filed an “ex parte motion to amend complaint.” Dkt. 6. His new proposed complaint (Dkt. 6-1) brings claims against 11 named defendants-first, two executives (the “executive defendants”): Charles Schwab, allegedly the founder and Chairman of Charles Schwab enterprises, and Walter Bettinger II, allegedly the CEO of Charles Schwab enterprises. Dkt. 6-1, at 2. Second, plaintiff lists five Charles Schwab entities (the “company defendants”): Charles Schwab Corporation, Charles Schwab Holdings, Charles Schwab & Co. Inc., Charles Schwab Bank, and Charles Schwab Investment Management, Inc. Dkt. 6-1, at 2-3. Third, plaintiff lists an employee (“defendant Daniel”) of “Charles Schwab enterprises, ” who is identified only by his first name and as an employee of a Lynwood, Washington branch. Dkt. 6-1, at 3. Fourth, plaintiff lists “Michael Campion, ” allegedly the “Senior Manager of the Compliance Department of Charles Schwab enterprises[.]” Dkt. 6-1, at 3. Fifth, plaintiff lists a “Client Advocacy Team” (“defendant team”), “an unknown amount of individuals” apparently working for one of the company defendants. Dkt. 6-1, at 3. Sixth, plaintiff lists his wife, defendant Simms. Dkt. 6-1, at 3. Plaintiff also lists 100 unnamed, Doe defendants who worked for “Charles Schwab enterprises” at some point. See Dkt. 6-1, at 3.

         In summary, the allegations of plaintiff's first amended proposed complaint are as follows: in August 2014, plaintiff and defendant Simms entered into a prenuptial agreement that plaintiff intended “to protect funds earned before marriage.” Dkt. 6-1, at 5. In early 2017, defendants Simms proposed opening a “convenience account”-“a Joint Account that enabled [defendant Simms] to withdraw the separate funds only at [p]laintiff's direction or for [p]laintiff's benefit.” Dkt. 6-1, at 6. Defendant Simms promised that she would not use plaintiff's funds from this account without his consent or direction. See Dkt. 6-1, at 6-7.

         However, defendant Simms, defendant Daniel, and 10 unnamed defendant employees then opened joint brokerage and bank accounts in plaintiff's name. See Dkt. 6-1, at 7. Plaintiff says he had not consented to opening this type of account and that he did not know that this type of account had been opened. See Dkt. 6-1, at 7-8. Plaintiff later deposited approximately $33, 000 into the accounts. Dkt. 6-1, at 9.

         After April 2018, the company defendants and defendant Simms then “secretly” changed the mailing address for the accounts, so that plaintiff stopped receiving “Monthly Transaction Statements, causing [p]laintiff to lose track of his separate funds.” Dkt. 6-1, at 12. In June or July 2018, plaintiff wrote the company defendants to demand his account statements and notify them of potential fraud. See Dkt. 6-1, at 13. He also demanded that defendant Simms change the address back and send him the missing account statements. See Dkt. 6-1, at 13. Allegedly, defendant Simms took over $5, 000 of plaintiff's separate funds from the accounts. See Dkt. 6-1, at 14. Moreover, on November 30, 2018, a Doe defendant contacted defendant Simms to notify her of plaintiff's demand for account statements and threatened to close the accounts in 2019- an action that allegedly allowed defendant Simms to drain the accounts, resulting in plaintiff losing “over fifty-thousand dollars” of separate funds. Dkt. 6-1, at 15-16. Plaintiff alleges that by failing to provide him with the account statements, the company defendants impeded plaintiff's attempt to institute state court proceedings against defendant Simms as well as federal agency investigations. See Dkt. 6-1, at 15-16.

         On November 30, 2018, and January 27, 2019, plaintiff alleges that he again wrote to request documents about his accounts and notify “Charles Schwab” that there was unauthorized activity occurring. See Dkt. 6-1, at 17, 20. However, Doe defendants failed to take action in response to his requests. See Dkt. 6-1, at 21. Plaintiff also wrote defendant Simms in November 2018 and January 2019, demanding account statements and that she change the statement address back. See Dkt. 6-1, at 18, 21. Defendant Simms failed to do so. See Dkt. 6-1, at 21.

         In January 2019, plaintiff also wrote to the Financial Industry Regulatory Authority, requesting that they investigate the matter. See Dkt. 6-1, at 25. The company and executive defendants assigned defendant Campion, his compliance department, and ten Doe defendant employees to plaintiff's complaints. See Dkt. 6-1, at 25. Plaintiff contends that defendants continued to refuse to disclose account statements, contracts, and proof of a change of address notification. See Dkt. 6-1, at 26. In April 2019, plaintiff informed various agencies of defendant Campion's actions. See Dkt. 6-1, at 29. Plaintiff states that defendants then- falsely-informed the agencies that plaintiff had concealed his “incarceration/identity.” See Dkt. 6-1, at 28, 31.

         In sum, plaintiff contends that he lost $53, 245.96 (see Dkt. 6-1, at 43), and he brings a variety of federal and state law claims against defendants. He requests $10 million in damages, as well as an additional $30 million in treble damages for his civil RICO claim. See Dkt. 6-1, at 49.


         The matter is before the Court on plaintiff's “ex parte motion to amend complaint” (Dkt. 6), which this Court interprets as plaintiff's first amended proposed complaint, in response to the Court's order directing plaintiff to amend his proposed complaint. See Dkt. 4. Although received shortly after the deadline that the Court gave plaintiff to amend his proposed complaint, the Court will accept the proposed amended complaint as timely filed.

         I. ...

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