4:18-cv-02539
N.D. Cal.Mar 5, 2019Background
- Plaintiffs (Mocha Mill and related individuals) allege that defendant Mokhtar Alkhanshali and affiliated entities formed a RICO conspiracy to usurp Mocha Mill’s Yemeni specialty‑coffee business and customer relationships, culminating in formation of Port of Mokha and related entities.
- Plaintiffs asserted RICO claims (18 U.S.C. §§ 1962(c), (d)) and multiple state‑law claims in a First Amended Complaint; three motions to dismiss followed and were fully briefed and argued.
- The FAC named as defendants Port of Mokha, Mokha Foundation, Blue Bottle, Metra Computer Group (Metra), T&H Computers, Alkhanshali, and Ahmad, and alleged predicate acts (embezzlement, extortion, mail/wire fraud, money laundering) and a multi‑party enterprise beginning in 2014 and expanding in 2015.
- Court found threshold defects: Monk of Mocha lacked standing (predecessor); individual plaintiffs’ alleged injuries were derivative of Mocha Mill and thus they lacked RICO standing; Mokha Foundation was not shown to be an entity capable of suit; Metra lacked personal jurisdiction on the pleadings.
- On the merits, the court held plaintiffs failed to plead a viable RICO claim: pre‑2015 allegations could not show a person ‘‘conducting’’ the enterprise (a person stealing from the enterprise does not satisfy Reves), and plaintiffs failed to plead RICO continuity (open‑ended and closed‑ended continuity theories rejected).
- The court dismissed all federal claims (RICO §§ 1962(c), (d)) and declined supplemental jurisdiction over state claims; dismissal was generally with leave to amend except where noted (e.g., Monk of Mocha, individual plaintiffs, Mokha Foundation, Metra dismissed as to jurisdictional defects).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing of Monk of Mocha and individual plaintiffs | Monk of Mocha still has independent claims; individuals were injured as partners and thus have direct standing | Monk of Mocha is a predecessor whose claims passed to Mocha Mill; individuals’ harms are derivative of corporate injury | Monk of Mocha dismissed for lack of standing; individual plaintiffs dismissed for lack of non‑derivative injury (no RICO standing) |
| Jurisdiction over Mokha Foundation | Mokha Foundation is an entity/subsidiary and may be sued | POM says Mokha Foundation does not exist; submits CEO declaration; nonentity cannot be sued | Claims against Mokha Foundation dismissed for lack of jurisdiction (plaintiffs failed to prove entity status) |
| Personal jurisdiction over Metra | Metra conducts substantial business in California via T&H; RICO nationwide service or Rule 4(k)(2) applies; request for jurisdictional discovery | Metra denies sufficient forum contacts; no effective U.S. contacts pled beyond California; nationwide bases do not substitute for contacts | Court finds no personal jurisdiction over Metra; denies jurisdictional discovery and dismisses Metra from action |
| Arbitration/forum‑selection clause (Alkhanshali) | Plaintiffs argue clause is void for duress/extortion and that claims arise outside contract interpretation; also argued at hearing Atlantic Marine bars Rule 12(b)(3) dismissal | Alkhanshali invokes partnership agreement arbitration and Sana’a forum clause to dismiss/compel arbitration | Court finds the arbitration/forum clause (as translated) covers contract interpretation only and does not encompass these tort/fraud claims; request to dismiss on that basis denied |
| RICO merits: enterprise, conduct, and pattern/continuity | Plaintiffs allege an association‑in‑fact enterprise (post‑2015) and earlier enterprise with Alkhanshali and Mocha Mill; allege predicate acts and both open‑ and closed‑ended continuity | Defendants argue plaintiffs fail to plead a distinct enterprise conduct pre‑2015, and fail to show continuity or pattern required for RICO | Court: pre‑Summer 2015 allegations fail Reves conduct requirement (a person stealing from the enterprise is not conducting the enterprise); open‑ended continuity theory rejected; closed‑ended continuity insufficient (single victim, short duration); RICO §§1962(c),(d) dismissed |
Key Cases Cited
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (establishes plausibility standard for Rule 12(b)(6))
- Ashcroft v. Iqbal, 556 U.S. 662 (pleading must contain factual content permitting reasonable inference of liability)
- Cedric Kushner Prods., Ltd. v. King, 533 U.S. 158 (RICO requires distinct person and enterprise but not rigid separation)
- Reves v. Ernst & Young, 507 U.S. 170 (person must participate in conduct or operation/management of enterprise)
- Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479 (elements of civil RICO and its remedial purposes)
- H.J., Inc. v. Northwestern Bell Tel. Co., 492 U.S. 229 (defines relatedness and continuity for RICO pattern)
- Daimler AG v. Bauman, 571 U.S. 117 (limits general jurisdiction; due process minimum contacts analysis)
- Walden v. Fiore, 571 U.S. 277 (specific jurisdiction requires defendant’s forum contacts to be linked to the litigation)
- Kokkonen v. Guardian Life Insurance Co. of America, 511 U.S. 375 (party asserting federal jurisdiction bears burden of establishing it)
- Medallion Television Enterprises, Inc. v. SelecTV of California, Inc., 833 F.2d 1360 (single‑victim, short‑duration scheme insufficient to establish closed‑ended continuity under RICO)