2:24-cv-05243
C.D. Cal.Jul 28, 2025Background
- Scott Capital Management Fund 1, LLC (an Arizona LLC) sued Agoura Hills Financial, Inc. and Bentley Richards (a California corporation and individual, respectively) over a $1M business-purpose loan transaction in October 2021.
- Plaintiff alleges it was fraudulently induced to purchase the loan secured by a second-position deed of trust, based on false statements about the maturity date of the senior lien and non-disclosure of material facts.
- Plaintiff claims defendants concealed that the senior loan would mature earlier, had restrictive covenants, and that various conflicts of interest and undisclosed risks existed.
- During discovery, plaintiff sought and was granted leave to add a civil RICO claim based on alleged fraudulent enterprise conduct.
- Defendants moved to dismiss all claims in the First Amended Complaint (FAC), arguing failures under Rules 9(b) and 12(b)(6), the economic loss rule, and other legal grounds.
- The court addressed the sufficiency of each claim, denying most of the motion but requiring a detailed RICO case statement and dismissing negligent misrepresentation with leave to amend.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| RICO Claim Sufficiency | Facts support pattern of racketeering (fraud, wire/mail fraud, conspiracy, injury) | FAC lacks sufficient predicate acts, enterprise, causation, and specificity | Reserved judgment pending plaintiff's RICO case statement |
| Fraud-Based Claims Rule 9(b) | Adequately pled who, what, when, and how, plus reliance and damage | Insufficient specificity under Rule 9(b)—no specific dates/acts/intent/alleged | Fraud claims (recission, misrep, concealment, fiduciary duty) survive; negligence out |
| Negligent Misrepresentation & Economic Loss Rule | Fraud exception doesn't apply to negligent misrepresentation, but claim fits tort duties | Economic loss rule bars claim, no "extra-contractual" harm alleged | Negligent misrepresentation dismissed, leave to amend |
| Unjust Enrichment as Standalone Claim | Claim is proper as quasi-contract or in alternative to other claims | Unjust enrichment not a standalone claim, contract controls | Survives, construed as alternative quasi-contract claim |
| Breach of Fiduciary Duty & Economic Loss Rule | Mortgage brokers owe extra-contractual fiduciary duties to investor-lenders | Pure economic loss doctrine bars claim based on contract | Survives; mortgage brokers owe independent fiduciary duties under California law |
Key Cases Cited
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (pleading standard for Rule 12(b)(6))
- Ashcroft v. Iqbal, 556 U.S. 662 (pleading standards, plausibility requirement)
- Conservation Force v. Salazar, 646 F.3d 1240 (Rule 12(b)(6) sufficiency of complaint)
- Sprewell v. Golden State Warriors, 266 F.3d 979 (pleadings and reasonable inferences)
- Erlich v. Menezes, 21 Cal. 4th 543 (economic loss rule in contract/tort cases)
- Robinson Helicopter Co. v. Dana Corp., 34 Cal. 4th 979 (limitations of economic loss rule/fraud exception)
- Barry v. Raskov, 232 Cal. App. 3d 447 (mortgage broker fiduciary duty)
- Wyatt v. Union Mortgage Co., 24 Cal. 3d 773 (mortgage brokers as fiduciaries)
- Kearns v. Ford Motor Co., 567 F.3d 1120 (Rule 9(b) fraud pleading standard)