United States District Court, District of Columbia
Bwo Marian Chou, B. Marian Chou, Esq., Washington, DC, for Plaintiffs.
Abiye Tibebe, Alexandria, VA, Demetrios C. Pikrallidas, Pikrallidas & Associates, Fairfax, VA, William Francis Coffield, IV, Coffield Law Group, LLP, Washington, DC, for Defendants.
EMMET G. SULLIVAN, District Judge.
This case is before the Court on defendants Kanlaya Intavong's and Paul Surachai's joint motion to dismiss, defendant Pichet Laosiri's Motion to Dismiss, and defendant Piwat Laosiri's Motion to Dismiss. For the reasons explained below, the motions will be GRANTED.
On June 19, 2012, plaintiffs filed a complaint against seven defendants: Solin, Inc. (" Solin" ), LPK, Inc. (" LPK" ), Kanlaya Intavong, Paul Surachai, Piwat Laosiri, Pichet Laosiri, and Michael Strong. Plaintiffs brought various state law causes of action against defendants, including breach of fiduciary duty, breach of contract, embezzlement of corporate funds, conspiracy to defraud, false misrepresentation, negligence, and " piercing the corporate veil." Plaintiffs also sought a declaratory judgment.
All of the individual plaintiffs and defendants are listed in the complaint as having addresses in the State of Virginia. The corporate defendants are incorporated in the District of Columbia. In the jurisdictional allegations of the complaint, plaintiffs stated that " This Court has jurisdiction due to the parties [sic] are D.C. Corporations and all of the individual parties are from different jurisdictions; Both companies are registered to do business in D.C.; Mr. Tran has monetary contributions of $653,649.00 in shares of two companies." Though the complaint contained no further allegations of diversity, plaintiffs' counsel indicated on the accompanying Civil Cover Sheet that jurisdiction in this Court was based on diversity jurisdiction. See ECF No. 1-2.
On July 5, 2012, plaintiffs filed an amended complaint to include two counts under the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1962(c) (" RICO" ). Plaintiffs allege that the defendant corporations Solin and LPK were " enterprises" within the meaning of RICO, 18 U.S.C. § 1961(4). Plaintiffs further allege that all individual defendants, who were employed by or associated with the corporate " enterprises," engaged in a
" pattern of racketeering activity" within the meaning of 18 U.S.C. § 1961(5), in violation of 18 U.S.C. § 1962(c). Plaintiffs allege that the pattern of racketeering activity included the fraudulent execution of a promissory note for stock in the defendant corporations. Amend. Compl. ¶ 11. In particular, plaintiffs state that defendant Kanlaya Intavong " intentionally signed her name in the promissory note of selling the stock to Vinh Tran as ‘ Kanlaya Surachai’ knowing that Vinh Tran did not know she was not married to Paul Surachai." The complaint further alleges that Intavong wrongfully denied that the signature on the promissory note was not hers. Plaintiffs allege that defendants " conduct their business in such a manner constitutes [sic] a ‘ pattern of racketeering activity’ " within the meaning of the RICO statute. This claim only alleges that defendants caused harm to plaintiff Vinh Tran; no facts are alleged as to plaintiff Son Ly.
In the second RICO count, plaintiffs allege that defendants engaged in a conspiracy to engage in racketeering activity, in violation of 18 U.S.C. § 1962(d). Plaintiffs allege that defendants " engaged in numerous overt and predicate fraudulent racketeering acts in furtherance of the conspiracy, including material misrepresentations and omissions designed to defraud plaintiffs of money." Amend. Compl. ¶ 25. Specifically, plaintiffs allege that Kanlaya Intavong and Paul Surachai " have sought to and have engaged in the commission of and continue to commit fraud in the sale of securities in violation of 18 U.S.C. § 1961(1)(D)." Amend. Compl. ¶ 27. It appears that this reference is to the alleged stock transaction referred to in the first RICO count. At the conclusion of the conspiracy claim, plaintiffs add a seemingly unrelated allegation that Michael Strong, an attorney for Intavong and Surachai, knowingly drafted an unnamed agreement and induced Son Ly to sign that agreement in bad faith and in furtherance of the RICO conspiracy. Amend. Compl. ¶ 32. As a result of these alleged acts, plaintiffs state that Vinh Tran lost " all of the money ... he paid for ... 25% of the stocks in Solin, Inc. and LPK, Inc." Amend. Compl. ¶ 29.
Defendants filed several motions to dismiss, each alleging that neither of the RICO counts stated a claim, that diversity jurisdiction did not exist as to the remaining state law claims, and that the Court should decline to exercise supplemental jurisdiction over those remaining claims. See Def. Michael Strong's Mot. to Dismiss, ECF No. 20; Joint Mot. to Dismiss of Kanlaya Intavong and Paul Surachai, ECF No. 22; Def. LPK, Inc.'s Mot. to Dismiss, ECF No. 23; Def. Pichet Laosiri's Mot. to Dismiss, ECF No. 27; and Def. Piwat Laosiri's Mot. to Dismiss, ECF No. 28.
Pursuant to the request of the plaintiffs, the Court agreed to a stay of 60 days to permit the parties to discuss settlement. A settlement was not reached and plaintiffs were directed to respond to the motions to dismiss by November 13, 2012. On that date, plaintiffs moved to voluntarily dismiss without prejudice defendants LPK and Solin pursuant to Rule 41(a). Also on that date, plaintiffs responded to the motions to dismiss filed by Surachai, Intavong, Piwat Laosiri, and Pichet Laosiri. On November 20, 2012, the parties filed a stipulation of dismissal with prejudice as to defendant Michael Strong.
As a result of the voluntary dismissal of several plaintiffs, only several motions remain before the Court: defendants Kanlaya Intavong's and Paul Surachai's joint motion to dismiss, defendant Pichet Laosiri's Motion to Dismiss, and defendant Piwat Laosiri's Motion to Dismiss. Also before the Court is former defendant LPK, Inc.'s opposition to plaintiffs' voluntary dismissal
of their claims against it, in which LPK, Inc. requests the imposition of Rule 11 sanctions against plaintiffs. LPK argues that plaintiffs' complaint was brought in bad faith and in violation of Rule 11 by alleging diversity jurisdiction where none existed and by raising frivolous RICO claims to establish federal subject matter jurisdiction.
II. STANDARD OF REVIEW
Federal district courts are courts of limited jurisdiction and " possess only that power conferred by [the] Constitution and [by] statute." Logan v. Dep't of Veterans Affairs, 357 F.Supp.2d 149, 152 (D.D.C.2004) ( quoting Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377, 114 S.Ct. 1673, 128 L.Ed.2d 391 (1994)). " There is a presumption against federal court jurisdiction and the burden is on the party asserting the jurisdiction, the plaintiff in this case, to establish that the Court has subject matter jurisdiction over the action." Id. at 153 (citing McNutt v. Gen. Motors Acceptance Corp. of Ind., 298 U.S. 178, 182-83, 56 S.Ct. 780, 80 L.Ed. 1135 (1936)). When it perceives that subject matter jurisdiction is in question, the Court should address the issue sua sponte. See Prunte v. Univ. Music Group, 484 F.Supp.2d 32, 38 (D.D.C.2007) (citing Doe by Fein v. District of Columbia, 93 F.3d 861, 871 (D.C.Cir.1996) (noting that, because subject matter jurisdiction " goes to the foundation of the court's power to resolve a case, [ ] the court is obliged to address it sua sponte " )).
In a suit between private litigants, a plaintiff generally demonstrates the existence of subject matter jurisdiction by establishing federal question jurisdiction pursuant to 28 U.S.C. § 1331 or diversity jurisdiction pursuant to 28 U.S.C. § 1332. " A plaintiff properly invokes § 1331 jurisdiction when [he] pleads a colorable claim ‘ arising under’ the Constitution or laws of the United States." Arbaugh v. Y & H Corp., 546 U.S. 500, 513, 126 S.Ct. 1235, 163 L.Ed.2d 1097 (2006) (citing Bell v. Hood, 327 U.S. 678, 681-85, 66 S.Ct. 773, 90 L.Ed. 939 (1946)). Where the district court's jurisdiction is dependent solely on the diversity of citizenship between the parties, there must be " complete diversity," meaning that no plaintiff may have the same citizenship as any defendant. E.g., Owen Equip. & Erection Co. v. Kroger, 437 U.S. 365, 373-74, 98 S.Ct. 2396, 57 L.Ed.2d 274 (1978).
In assessing whether a complaint sufficiently alleges subject matter jurisdiction, the Court accepts as true the allegations of the complaint, see Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009), and liberally construes the pleadings such that the plaintiff benefits from all inferences derived from the facts alleged, Barr v. Clinton, 370 F.3d 1196, 1199 (D.C.Cir.2004). However, " [a] pleading that offers labels and conclusions or a formulaic recitation of the elements of a cause of action will not do. Nor does a complaint suffice if it tenders naked assertions devoid of further factual enhancement." Iqbal, 556 U.S. at 678, 129 S.Ct. 1937 (internal citations, quotation marks and brackets omitted). When the inquiry focuses on the Court's power to hear the claim, " the Court may give the plaintiff's factual allegations closer scrutiny and may consider materials outside the pleadings." Logan, 357 F.Supp.2d at 153 (citing Fed.R.Civ.P. 12(b)(1); Herbert v. Nat'l Academy of Scis., 974 F.2d 192, 197 (D.C.Cir.1992); Grand Lodge of Fraternal Order of Police v. Ashcroft, 185 F.Supp.2d 9, 13 (D.D.C.2001)).
" A claim invoking federal-question jurisdiction under 28 U.S.C. § 1331 ... may be dismissed for want of subject matter jurisdiction if ...