Life Insurance Co., 147 Cal. Rptr. at 29. By way of contrast, Mr. Edde knew that he was misleading the IRS in reporting the Sheikh's gambling winnings as his own and he should have known that making false statements to the IRS is illegal. In Karpinski, the Court concluded that the parties were not in pari delicto because the small dairyman who had been forced to pay a bribe in order to keep his milk contract had virtually no economic alternative but to pay the bribe. Karpinski v. Collins, 60 Cal. Rptr. at 848. While Mr. Edde maintains that his participation in the illegal contract was a condition of his job, his counterclaim is very carefully drafted. It alleges only that he "clearly understood that his signing for the Sheik's gambling winnings was a condition of his employment and that if he refused to do so, he would be discharged." Countercl. P 9 (emphasis added). He does not allege that he was ever threatened with loss of employment and does not set forth any facts, only conclusory statements, from which the Court could infer that he was truly under economic duress or that he lacked an economic alternative to working for Sheikh Al-Ibrahim. Mr. Edde's claim for restitution is dismissed.
In order to state a prima facie case of fraud under California and Nevada law, a party must allege: (1) a misrepresentation of a material fact, (2) knowledge of the falsity, (3) intent to induce reliance, (4) actual and justifiable reliance, and (5) resulting damages. Williams v. Wraxall, 33 Cal. App. 4th 120, 39 Cal. Rptr. 2d 658, 664 n.9 (Cal. Ct. App. 1995); Blanchard v. Blanchard, 108 Nev. 908, 839 P.2d 1320, 1322 (Nev. 1992). In the federal courts, the circumstances constituting an alleged fraud must be pleaded with particularity. Rule 9(b), Fed. R. Civ. P. The pleader must specify "what statements were made in what documents or in what context, the time and place of such statements, who made the statements, the manner in which the statements were misleading, and what the defendants obtained as a consequence of the statements." In re Newbridge Networks Securities Litigation, 767 F. Supp. 275, 282 (D.D.C. 1991); see Kowal v. MCI Communications Corp., 305 U.S. App. D.C. 60, 16 F.3d 1271 at 1278.
Mr. Edde alleges that the Sheikh made promises to him in order to induce him to sign for and pay the Sheikh's taxes, that these promises were made after Mr. Edde had tendered his resignation, that these promises were false at the time they were made and were made for the purpose of inducing reliance by Mr. Edde, that Sheikh Al-Ibrahim had a motive for defrauding Mr. Edde, that Mr. Edde relied on the promises, and that Mr. Edde was damaged as a result. Countercl. PP 8, 12, 13, 18, 19, 22. These allegations are sufficient for the Court to draw an inference of fraud even under Rule 9(b). See Kowal v. MCI Communications Corp., 305 U.S. App. D.C. 60, 16 F.3d 1271 at 1278; Stebbins v. Keystone Ins. Co., 156 U.S. App. D.C. 326, 481 F.2d 501, 511 (D.C. Cir. 1973). Whether Mr. Edde's allegations can be proven at trial is not the issue before the Court. The allegations in the counterclaim are sufficiently pled and he has said enough to withstand a motion to dismiss.
On the other hand, fraud is an equitable remedy, and "he who comes into equity must come with clean hands." Precision Instrument Mfg. Co. v. Automotive Maintenance Machinery Co., 324 U.S. at 814; Fibreboard Paper Products Corp. v. East Bay Union of Machinists, 227 Cal. App. 2d 675, 39 Cal. Rptr. 64 (Cal. Ct. App. 1964); see Locken v. Locken, 98 Nev. 369, 650 P.2d 803, 805 (Nev. 1982). Thus, "equity requires that those seeking its protection shall have acted fairly and without fraud or deceit as to the controversy in issue." Precision Instrument Mfg. Co. v. Automotive Maintenance Machinery Co., 324 U.S. at 814-15; see Blain v. The Doctor's Co., 272 Cal. Rptr. at 258-59. In this case, in order to allege fraud, Mr. Edde has admitted his own involvement in serious illegal conduct. His hands are not washed clean merely because he paid money to the IRS. The very facts alleged in his counterclaim lead to the inescapable conclusion that Mr. Edde has not displayed that standard of conduct in his agreement with the Sheikh that entitles him to maintain an equitable action for fraud. That Sheikh Al-Ibrahim's conduct may have been worse is irrelevant. McAdam v. Dean Witter Reynolds, 896 F.2d at 756-57.
D. Intentional Infliction of Emotional Distress
The tort of intentional infliction of emotional distress was created to punish conduct "exceeding all bounds usually tolerated by a decent society, of a nature which is especially calculated to cause, and does cause, mental distress." Agarwal v. Johnson, 25 Cal. 3d 932, 603 P.2d 58, 67, 160 Cal. Rptr. 141 (Cal. 1979) (internal quotation omitted). A prima facie case requires allegations of (1) outrageous conduct by the defendant, (2) an intention by the defendant to cause, or the reckless disregard of the probability of causing, emotional distress, (3) severe emotional distress, and (4) an actual and proximate causation of the emotional distress. Christensen v. Superior Court, 54 Cal. 3d 868, 820 P.2d 181, 202 (Cal. 1991); Star v. Rabello, 97 Nev. 124, 625 P.2d 90, 92 (Nev. 1981).
There are two problems with Mr. Edde's emotional distress claim. First, the alleged outrageous conduct is not so extreme as to exceed all bounds of that usually tolerated in a civilized society. The fact that Mr. Edde may have suffered real distress as a result of his dealings with Sheikh Al-Ibrahim and his pursuit by the IRS does not render the Sheikh's alleged conduct extreme and outrageous. To the extent that the Court is able to identify the conduct of which Mr. Edde complains, it appears that Mr. Edde has simply alleged a breach of contract and fraud. Indeed, when asked at oral argument which allegations in his counterclaim related to the intentional infliction of emotional distress claim, counsel for Mr. Edde explained that "Sheikh [Al-Ibrahim] knew . . . that Edde did not have the resources to pay these monies . . . that Edde had entered into this agreement with the prospect that he would be paid back . . . that Edde was suffering . . . and he ignored [Mr. Edde's pleas]." Tr. at 14. Accepting Mr. Edde's allegations as true for purposes of this motion, the Sheikh's conduct is not so outrageous as to meet the test announced by the courts of California and Nevada. See Cervantez v. J.C Penney Co., 24 Cal. 3d 579, 595 P.2d 975, 983, 156 Cal. Rptr. 198 (Cal. 1979); Star v. Rabello, 625 P.2d at 92.
Second, a cause of action for intentional infliction of emotional distress, like Mr. Edde's other equitable claims, is barred by the defense of unclean hands. Blain v. The Doctor's Co., 272 Cal. Rptr. at 258 see Locken v. Locken, 650 P.2d at 805. Mr. Edde's emotional distress is directly attributable to his own knowing illegal conduct; it stems from his own illegal agreement with the Sheikh and his own misrepresentations to the IRS. Camp v. Jeffer, Mangels, Butler & Marmaro, 35 Cal. App. 4th 620, 41 Cal. Rptr. 2d 329, 340 (Cal. Ct. App. 1995); Fibreboard Paper Products Corp. v. East Bay Union of Machinists, 39 Cal. Rptr. at 96-97. Because Mr. Edde comes before the Court with unclean hands, his claim for intentional infliction of emotional distress is dismissed.
For these reasons, plaintiff's motion to dismiss defendant's counterclaim is granted. An Order Consistent with this Opinion was entered on August 28, 1995.
PAUL L. FRIEDMAN
United States District Judge