Stephen TURNER, M.D., Susana Turner, on behalf of themselves and As Guardian Ad Litem for two minor children Daniel Turner and Deborah Turner, Western Paramedical Services, LLC, and David Turner, Plaintiffs-Appellants, v. David J. COOK, Esq., Cook Perkiss & Lew, a Professional Law Corp., Ah Beng Yeo and E.A. Martini, Defendants-Appellees.
No. 02-16847
United States Court of Appeals, Ninth Circuit
Argued and Submitted October 7, 2003. Decided April 1, 2004.
362 F.3d 1219
Before: B. FLETCHER and TASHIMA, Circuit Judges, and POLLAK, District Judge.
Timothy Carl Aires, Newport Beach, CA, for the appellees.
Appeal from the United States District Court for the Northern District of California; Claudia Wilken, District Judge, Presiding. D.C. No. CV-01-03884-CW.
Before: B. FLETCHER and TASHIMA, Circuit Judges, and POLLAK,* District Judge.
POLLAK, District Judge:
In this suit initiated in the District Court for the Northern District of California and arising under the Fair Debt Collection Practices Act,
From District Court orders sequentially dismissing the FDCPA and RICO claims (and, with them, the supplemental state-law claims), plaintiffs-appellants appeal. We affirm.
Background
On August 21, 1998, after a jury trial in the Superior Court for Contra Costa County, in California, appellees Yeo and Martini obtained a judgment against Stephen Turner for more than $1,000,000. According to appellants’ First Amended Complaint in the District Court, “the judgment arose from allegations of various business interference torts by Stephen Turner against Yeo and Martini.” Yeo and Martini retained Cook and his law firm Cook, Perkiss & Lew to assist in collection of the judgment — assistance which appears to have continued until March, 2002.2 On October 29, 1999, Cook filed a complaint in the Superior Court for Contra Costa County on behalf of Yeo and Martini against Stephen Turner, alleging that Turner, under the express direction of Susana Turner, had fraudulently conveyed his real and personal property, including his home, to a family limited partnership and a limited liability company, each allegedly controlled by the Turners, with the intent to prevent Yeo and Martini from collecting the money owed on the August 21, 1998 judgment.
The First Amended Complaint
In their FDCPA claims, the Turners alleged that appellees, as part of their efforts to collect on the state-court judgment, dispatched false and misleading communications — by mail, fax and telephone — to numerous insurance companies thought to be debtors of WPS, in violation of
In their RICO claims, the Turners, now joined by WPS, charged appellees with violating
The Second Amended Complaint
On April 22, 2002, the Turners and WPS filed a Second Amended Complaint in which they expanded upon their earlier RICO claims. In this complaint appellants alleged that appellees had sent out “hundreds” of letters and facsimiles to third-party insurance companies misrepresenting the substance of the Superior Court order — an activity that amounted to a continuous “pattern of related, non sporadic repetitious and highly numbered incidents... of ... illegal racketeering conduct” in violation of
Appellants also alleged that:
approximately [in] March, 2002, Cook and Cook, Perkiss & Lew substituted out as counsel of record on the fraudulent conveyance and other actions, and thus the racketeering activity is `closed end’ and is not expected to repeat. However, when it was going on, it was open ended and was never expected to stop, because Turner is in fact judgment proof, and as long as the judgment remains unpaid and Cook is on the case, these sort[s] of improper mailings etc[.] would be mailed out. It was the filing of the present lawsuit that caused Cook and Cook, Perkiss and Lew to withdraw of [sic] the cases, and thus shifted the activity to closed end.
On August 28, 2002, the District Court dismissed the Second Amended Complaint, concluding that appellants had failed to allege any threat of continuing illegal activity, which is required to establish a pattern of racketeering under RICO. The court dismissed without prejudice appellants’ state-law claims, and entered final judgment against appellants. Appellants timely filed their appeal on September 20, 2002. This court has jurisdiction under
Standard of Review
A judgment dismissing a case on the pleadings is reviewed on appeal de novo. Mendoza v. Zirkle Fruit Co., 301 F.3d 1163, 1167 (9th Cir.2002). The appellate court must “accept all material allegations in the complaint as true and construe them in the light most favorable to [the non-moving party].” NL Industries, Inc. v. Kaplan, 792 F.2d 896, 898 (9th Cir.1986). A dismissal may be affirmed “only if it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations.” Swierkiewicz v. Sorema N.A., 534 U.S. 506, 514 (2002) (id. at 122 S.Ct. 992) (quoting Hishon v. King & Spalding, 467 U.S. 69, 73 (1984) (id. at 104 S.Ct. 2229)).
Because Stephen Turner has filed for bankruptcy in the United States Bankruptcy Court, Northern District of California, he is no longer a real party in interest in this matter and has no standing to pursue this appeal. When Turner declared bankruptcy, all the “legal or equitable interests” he had in his property became the property of the bankruptcy estate and are represented by the bankruptcy trustee. See
The trustee in Turner‘s bankruptcy case has, in a letter to Turner‘s counsel, indicated his willingness to allow Turner to proceed with his appeal. However, the letter, the pertinent text of which is set forth in the margin,9 is insufficient to confer authority on Turner‘s counsel to prosecute this appeal because it fails to effectuate an actual abandonment of the trustee‘s interest in Stephen Turner‘s causes of action — to the contrary, the letter contemplates the estate‘s pursuit of these causes of action “[i]n the event that,” via this appeal, “the dismissal is overturned.” Section 554 of title 11 of the United States Code requires notice and a hearing for abandonment to occur, and Bankruptcy Rule 6007 requires the trustee to give notice of a proposed abandonment to all creditors. Nothing in the record indicates that these steps have occurred. Accordingly, since we conclude that Stephen Turner has no standing to bring this appeal, the appeal is dismissed as to him.10 However, we do reach the merits of the appeal as to the other appellants.11
Discussion
FDCPA
In enacting the FDCPA, Congress sought to counter the abusive, deceptive and unfair debt collection practices sometimes used by debt collectors against consumers. See
The core of the appellate ruling in Hawthorne was as follows:
By the plain terms of the statute, not all obligations to pay are considered “debts” subject to the FDCPA. Rather, the FDCPA may be triggered only when an obligation to pay arises out of a specified “transaction.” Although the statute does not define the term “transaction,” we do not find it ambiguous. A fundamental canon of statutory construction directs us to interpret words according to their ordinary meaning. The ordinary meaning of “transaction” necessarily implies some type of business dealing between parties. In other words, when we speak of “transactions,” we refer to consensual or contractual arrangements, not damage obligations thrust upon one as a result of no more than her own negligence. While we do not hold that every consensual or business dealing constitutes a “transaction” triggering application of the FDCPA ... at a minimum, a “transaction” under the FDCPA must involve some kind of business dealing or other consensual obligation. Because [appellant‘s] alleged obligation to pay [appellee] for damages arising out of an accident does not arise out of any consensual or business dealing, plainly it does not constitute a “transaction” under the FDCPA.13
Hawthorne, 140 F.3d at 1371 (internal citations omitted).
We agree with this well-reasoned Eleventh Circuit opinion, and we conclude that the District Court did not err in dismissing the FDCPA claims. Appellees brought the fraudulent conveyance action against Stephen Turner14 in an effort to collect a tort judgment. According to appellants’ own pleadings, that judgment resulted from alleged business interference torts, not any consumer transaction. See Hawthorne, 140 F.3d at 1371 (“[A]t a minimum, a `transaction’ under the FDCPA must involve some kind of business dealing or other consensual obligation.“); Bass, 111 F.3d at 1326; see also Bloom, 972 F.2d at 1068-69 (FDCPA does not apply to debts incurred for commercial reasons). Appellants maintain that the FDCPA should apply because the “fraudulent conveyance action isn‘t based on an underlying business tort judgment, but instead involved allegations that the transfer of a personal residence from Stephen Turner and other entities to Susana Turner was to defraud creditors.” However, as the District Court correctly concluded, appellees’ efforts are not converted into an attempt to collect a consumer debt merely because the fraudulent conveyance action involved Stephen Turner‘s home.
Turner‘s underlying “obligation” to pay Yeo and Martini does not arise out of a consumer transaction, and hence is not a “debt” within the meaning of the FDCPA. We therefore hold that the FDCPA does not apply to appellees’ efforts to collect the damages awarded for Stephen Turner‘s commercial torts. Hence, the District Court properly concluded that the FDCPA does not apply.15
Civil liability under RICO is premised on violations of one or more of the provisions of § 1962. The provisions at issue here are
Section 1962(c) provides:
It shall be unlawful for any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise‘s affairs through a pattern of racketeering activity or collection of unlawful debt.
Section 1962(d) states: “It shall be unlawful for any person to conspire to violate any of the provisions of subsection (a), (b), or (c) of this section.”
Because appellants contended that appellees engaged in “a pattern of racketeering activity,” not “collection of unlawful debt,” appellants’ complaint must allege (1) the conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity. See Sun Sav. & Loan Ass‘n v. Dierdorff, 825 F.2d 187, 191 (9th Cir.1987).
As previously described, the “racketeering activity” appellants complained of consisted of representations by appellees in mail, fax and telephone communications to various insurance companies believed to be debtors of plaintiff WPS, that the Superior Court for Contra Costa County had ordered any monies owed to WPS to be turned over to appellees. Appellants contended that the Superior Court‘s turnover order only applied to Stephen Turner; that WPS was not owned, operated or controlled by Stephen Turner; and, therefore, that the Superior Court did not order that monies owed to WPS be turned over to appellees. Appellants maintained that each time appellees misrepresented the substance of the turnover order, they committed an act of mail or wire fraud and of obstruction of justice. The alleged “enterprise” through which this “racketeering activity” was said to have been carried out was, as previously noted, the law firm of Cook, Perkiss & Lew. The District Court dismissed appellants’ RICO claim, ruling that appellants had failed adequately to allege that appellees’ conduct constituted a “pattern of racketeering activity.” Whether the District Court ruled correctly is the question now to be addressed.
“[R]acketeering activity” is any act indictable under several provisions of Title 18 of the United States Code, and includes the predicate acts of mail fraud, wire fraud and obstruction of justice, each of which is alleged in this case. See
“Continuity” is both a closed- and open-ended concept, referring either to a closed period of repeated conduct, or to past conduct that by its nature projects into the future with a threat of repetition.... A party alleging a RICO violation may demonstrate continuity over a closed period by proving a series of related predicates extending over a substantial period of time. Predicate acts extending over a few weeks or months and threatening no future criminal conduct do not satisfy this requirement[.]
Thus, in order to allege open-ended continuity, a RICO plaintiff must charge a form of predicate misconduct that “by its nature projects into the future with a threat of repetition.” See Religious Tech. Ctr. v. Wollersheim, 971 F.2d 364, 366 (9th Cir. 1992); Sever v. Alaska Pulp Corp., 978 F.2d 1529, 1535-36 (9th Cir.1992); Medallion Television Enters., Inc. v. SelecTV of Cal., Inc., 833 F.2d 1360, 1363-64 (9th Cir.1988) (discussed infra). Conversely, an alleged “series of related predicates” not “extending over a substantial period of time” and not “threatening ... future criminal conduct” fails to charge closed-ended continuity. See Howard v. America Online, Inc., 208 F.3d 741, 750 (9th Cir. 2000); Religious Tech. Ctr., 971 F.2d at 366; River City Mkts., Inc. v. Fleming Foods West, Inc., 960 F.2d 1458, 1464 (9th Cir.1992).
Appellants contend that the District Court erred in dismissing their RICO claims for failure to allege a continuing pattern of racketeering activity. They argue that their allegations that appellees had engaged in a “continuous pattern of mailing hundreds of fraudulent letters” satisfied RICO‘s continuity requirement, and, therefore, adequately alleged a “pattern of racketeering activity.” They cite our decision in California Architectural Building Products, Inc. v. Franciscan Ceramics, Inc., 818 F.2d 1466 (9th Cir.1987), as support for this proposition.
In California Architectural, the defendant-appellee contended that the alleged predicate acts did not satisfy RICO‘s continuity requirement because the predicate acts all related to a single criminal episode. Id. at 1469. We disagreed with this contention, finding that multiple criminal episodes are not required to establish a pattern of racketeering under RICO. Id. Appellants in the case at bar argue that the District Court‘s decision was in error in light of California Architectural The District Court canvassed a number of other decisions of this court — decisions subsequent to California Architectural. Thus, the District Court relied on Medallion, in which, in sustaining a grant of summary judgment against RICO plaintiffs, we said: Continuity does not require a showing that the defendants engaged in more than one “scheme” or “criminal episode.” The circumstances of the case, however, must suggest that the predicate acts are indicative of a threat of continuing activity. Here, that threat is absent.... In essence, Medallion‘s allegations concern a single fraudulent inducement to enter a contract. Once the joint venture had acquired the broadcast rights, the fraud, if indeed it was a fraud, was complete. Medallion, 833 F.2d at 1363-64 (internal citations and footnote omitted). Similarly, the District Court looked to Religious Technology Center, in which, in sustaining dismissal of certain RICO defendants, we held that, “[s]ince the only goal of the Greene defendants was the successful prosecution of the Wollersheim state tort suit, there was no threat of activity continuing beyond the conclusion of that suit.” Religious Tech. Ctr., 971 F.2d at 366.16 In the case at bar, appellees’ alleged actions, like those just mentioned, failed to satisfy H.J. Inc.‘s open-ended continuity requirement since the alleged actions were finite in nature in that the mailings, faxes and telephone calls would cease once appellees collected the outstanding tort judgment against Stephen Turner. Indeed, in their Second Amended Complaint, filed on April 22, 2002, appellants acknowledged that “the racketeering activity [was] `closed-end’ and [was] not expected to repeat,” unless “the judgment remained[ed] unpaid and Cook [continued] on the case.” Cook‘s firm had withdrawn from this case in March, 2002. Moreover, appellants’ allegations failed to satisfy H.J. Inc.‘s closed-ended continuity requirement. In their Second Amended Complaint appellants list 94 companies that, according to appellants, received appellees’ alleged fraudulent communications in June or July of 2001, and some of which may have received follow-up calls to these communications at an unspecified time. Besides these 94 communications, appellants only specifically alleged three additional fraudulent communications by appellees. These alleged communications included (1) a letter sent to Travelers Insurance Company on August 4, 2000 (attached to Original Complaint at Exhibit C); (2) a letter “sent by Defendants during September 20, 2000 to a third party” — that third party being appellant WPS (attached to Original Complaint at Exhibit E); and (3) letters, faxes and telephone discussions with the paramedical services company AMSA from December 2000-February 2001(items which appellants failed to allege or document with any specificity). Because almost all of the alleged fraudulent communications occurred during the two month period between June and July of 2001, and the additional three categories of communication occurred only sporadically in the preceding year (and one of these communications was sent to one of the appellants) appellants have failed to allege a “series of related predicates extending over a substantial period of time.” Having also failed to allege a threat of “future criminal conduct,” appellants have not demonstrated continuity over a closed period. Thus, having failed to aver that the alleged acts of mail fraud, wire fraud and obstruction of justice had the requisite continuity, appellants did not sufficiently allege a “pattern of racketeering activity.” Accordingly, the District Court properly dismissed appellants’ RICO claims.17 Conclusion The dismissal of the FDCPA claims and the RICO claims was proper. Accordingly, the judgment of the District Court is affirmed. AFFIRMED.
Notes
Section 1692e prohibits the debt collector from using “any false, deceptive, or misleading representation or means in connection with the collection of any debt[,]” and outlines conduct constituting a violation of the section. Such conduct includes the false representation of “the character, amount, or legal status of any debt[,]”
Section 1692f prohibits the use of “unfair or unconscionable means to collect” a debt, including, pursuant to § 1692f(1), the collection of monies that are not “expressly authorized by the agreement creating the debt or permitted by law.”