ORDER ON DEFENDANTS' MOTIONS TO DISMISS (Docket Nos. 108, 109, 112, 114, 115, 121 and 122)

CLAUDIA WILKEN, District Judge

Plaintiffs Just Film, Inc., et al., allege that they were defrauded in a scheme involving credit card processing services and equipment. Defendants Merchant Services, Inc., et al., are twenty-one entities and fifteen individuals that are alleged to have been involved in or benefitted from the alleged fraud. Seven groups of Defendants have moved to dismiss Plaintiffs' claims: (1) Defendants Merchant Services, Inc.; Universal Card, Inc.; National Payment Processing, Inc.; Jason Moore; Eric Madura; Nathan Jurczyk; Robert Parisi; Alicyn Roy; JMW Holdings, LLC; La Quinta Holdings, LLC; and Universal Merchant Services, LLC (collectively, MSI Defendants); (2) Defendants MBF Leasing LLC; Northern Funding, LLC; Northern Leasing Systems, Inc.; Golden Eagle Leasing LLC; Lease Finance Group, LLC; RBL Capital Group, LLC; Jay Cohen; Sarah Krieger; Rich Hahn; Brian Fitzgerald; Sam Buono; Lina Kravic and Leonard Mezei (collectively, Northern Leasing Defendants); (3) Defendant Brian Fitzgerald; (4) Defendants MBF Merchant Capital, LLC, and William Healy; (5) Defendants Joseph Sussman and Joseph I. Sussman, PC (collectively, Sussman); (6) Defendants TransFirst Holdings, Inc.; TransFirst, LLC; TransFirst Third Party Sales, LLC; and Columbus Bank and Trust Company (collectively, TransFirst and CB T); and (7) Defendant Fifth Third Bank. Defendant Fiona Walshe and Defendant Lease Source-LSI, LLC, apparently erroneously sued as Lease Source, LLC, did not file their own motions to dismiss, but instead join those above. Plaintiffs oppose the motions. A hearing on the motions was held on September 16, 2010, at which the Court identified deficiencies in Plaintiffs' amended complaint and instructed the parties to file a status report within sixty days of the date of the hearing. The parties timely filed their status report.

Having considered oral argument and the papers submitted by the parties, the Court GRANTS in part and DENIES in part the MSI Defendants' Motion to Dismiss; GRANTS the Northern Leasing Defendants' Motion to Dismiss; GRANTS Defendant Fitzgerald's Motion to Dismiss; GRANTS MBF Merchant Capital LLC and Healy's Motion to Dismiss; GRANTS Sussman's Motion to Dismiss; GRANTS in part and DEFERS its decision in part on the TransFirst Defendants' Motion to Dismiss; and GRANTS Fifth Third Bank's Motion to Dismiss.

BACKGROUND

Plaintiffs are California businesses and their owners, who are California residents. Just Film is owned by Volker Von Glasenapp. Rainbow Business Services d/b/a Precision Tune Auto Care is owned by Jerry Su. Burlingame Motors is owned by Verena Baumgartner. Dietz Towing, Inc., is owned by Terry Jordan. The Rose Dress Inc. is owned by Lewis Bae. Below, for brevity, the Court uses each respective owner's last name to refer to both the business and its owner.

Plaintiffs divide the thirty-five Defendants into three separate categories: (1) Merchant Services Defendants, (2) Leasing Defendants and (3) Processor Defendants. Each category played a different role in the alleged fraudulent scheme. Unless otherwise noted, all parties named below are Defendants.

The Merchant Services category consists of California-based entities and individuals. Plaintiffs allege that Merchant Services, Inc. (MSI) also operates under the names Universal Card, Inc.; National Payment Processing; and Universal Merchant Services LLC. Plaintiffs refer to all of these entities as the Merchant Services Companies and aver that each of them is the alter ego of the others. Plaintiffs allege as follows about the individual Merchant Services Defendants: Moore is MSI's CEO and majority shareholder; Jurczyk is MSI's Vice President of Operations and an MSI shareholder; Parisi is MSI's Senior Vice President and an MSI shareholder; Madura is MSI's Manager of Corporate Operations; Walshe was a regional sales manager for MSI; and Roy was a senior account executive for MSI. Plaintiffs contend that the Merchant Services Companies are alter egos of Moore, Jurczyk and Parisi.

Although Plaintiffs include in the Merchant Services category JMW Holdings, LLC, and La Quinta Holdings, LLC, these entities were not involved directly in the alleged fraud. Instead, Plaintiffs allege that these are alter egos of Moore to which Moore transferred various properties purchased with profits from the fraudulent scheme. Plaintiffs refer to JMW Holdings and La Quinta Holdings as the Moore Shell Companies. Because the Moore Shell Companies were not directly involved in the alleged fraud, any reference below to the Merchant Services Defendants does not include them.

The Leasing Defendants category consists of entities and individuals based outside of California. Plaintiffs allege that Northern Leasing Systems Inc. has a principal place of business in New York and owns MBF Leasing LLC; Golden Eagle Leasing LLC; Lease Source, Inc.; Lease Finance Group, LLC; and Forrester UK Holdings LLC. Plaintiffs refer to all of these entities as the Northern Leasing Companies and contend that each of them is the alter ego of the others. Plaintiffs allege that the following individual Leasing Defendants are associated directly with the Northern Leasing Companies: Cohen is Northern Leasing's President and CEO and Forrester UK Holdings's President; Mezei is Northern Leasing's chairman of the board; Krieger is Northern Leasing's Vice President of Operations; Hahn is Northern Leasing's Vice President for Sales; Fitzgerald is MBF Leasing's Executive Vice President for Business Development; Kravic is MBF Leasing's Operations Manager; and Buono is MBF Leasing's Vice President of Collections and Customer Service. Plaintiffs aver that Sussman is a New York-based attorney and is the principal of Joseph I. Sussman, P.C., a law firm. MBF Merchant Capital has a principal place of business in Illinois, and RBL Capital Group, LLC, has a principal place of business in New York. Plaintiffs allege that Healy is MBF Merchant Capital's president and sole shareholder and RBL Capital Group's former president.

The Processor Defendants category consists entirely of entities. Plaintiffs aver that TransFirst Holdings, Inc., is the parent company of TransFirst LLC and TransFirst Third Party Sales, Inc. Plaintiffs allege that TransFirst Holdings is headquartered in Texas and that the TransFirst subsidiaries operate in Colorado. Also included in this category are CB T and First Third Bank, to which Plaintiffs refer as the Bank Defendants. The Bank Defendants are not California citizens.

The alleged fraudulent scheme operated as follows. The Merchant Services Companies marketed credit card processing services and equipment. Through their agents, such as Walshe, the Merchant Services Companies misled Plaintiffs about the rates for the services and the necessity and value of the equipment. In reliance on the alleged misrepresentations, Plaintiffs entered into two agreements: a Merchant Card Processing Agreement (MCPA) and an Equipment Finance Lease (EFL). The MCPA governed credit card transaction services, and the EFLs governed the equipment leases. Von Glasenapp's, Su's, Baumgartner's and Jordan's MCPAs were with TransFirst and CB T; Bae's MCPA was with Fifth Third. Plaintiffs allege that, along with the Leasing Defendants, the Merchant Services Defendants altered the terms of the MCPAs and EFLs by adding pages that had not been previously presented to Plaintiffs, changing material terms of the contracts and completing fields that were blank at the time of execution. With regard to the added pages, Plaintiffs maintain that they never saw them. Plaintiffs allege that any initials or signatures indicating that they reviewed the pages were forged.

The Leasing Defendants financed the EFLs. Specifically, MBF Merchant Capital and RBL Capital Group provided the Northern Leasing Companies with the funds necessary to finance the leases. Krieger executed the EFLs on behalf of the Northern Leasing Companies. To collect from lessees who defaulted on their payments, Buono and Sussman filed collection lawsuits in New York, intending to "obtain default judgments which can be sold to collection agencies and also to extort payment from Class members who wish to preserve their good credit ratings." Am. Compl. ¶ 137. In addition to working with the Merchant Services Defendants to make fraudulent alterations to the terms of the EFLs, the Leasing Defendants engaged in other fraudulent activities, including charging Plaintiffs for a "personal property tax," even though no such tax was owed to a governmental entity. Id. ¶ 124.

The Processor Defendants provided credit card transaction services. Specifically, TransFirst, which had contracts with the Merchant Services Defendants, offered "credit card acceptance and processing services on behalf of" the Bank Defendants. Am. Compl. ¶ 45. The Bank Defendants authorized "the Merchant Services Defendants and the TransFirst Defendants to market and sell credit card processing services." Id. ¶¶ 46-48. Plaintiffs allege that TransFirst, along with the Merchant Services Defendants, used "different bill formats to confuse customers and hide false charges." Id. ¶ 128.

The pages allegedly added to Von Glasenapp's, Su's, Baumgartner's and Jordan's MCPAs contained arbitration and forum selection clauses, requiring disputes based on the agreements to be arbitrated and litigated in Colorado. Bauer Decl., Exs. 1-4. The pages allegedly added to Bae's MCPA designated Cincinnati or Hamilton County, Ohio as the proper forum for any lawsuit arising from the contract; however, his MCPA did not require arbitration. Bauer Decl., Ex. 5.

Plaintiffs bring nine claims: (1) violation of the federal Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. § 1962(c); (2) conspiracy to commit a RICO violation, in violation of 18 U.S.C. § 1962(d); (3) "Fraud, Deceit and/or Misrepresentation;" (4) negligent misrepresentation; (5) violation of California's False Advertising Law, Cal. Bus Prof. Code § 17500; (6) breach of contract; (7) breach of the implied covenant of good faith and fair dealing; (8) violation of California's Unfair Competition Law (UCL), Cal. Bus. Prof. Code §§ 17200, et seq.; and (9) fraudulent conveyance.

On March 26, 2010, Plaintiffs filed their action in San Francisco County Superior Court. On May 7, 2010, Defendants removed the action to federal court. On June 25, 2010, Plaintiffs filed an amended complaint. Plaintiffs intend to move for class certification.

On November 23, 2010, Plaintiffs filed a notice stating that they voluntarily dismissed without prejudice their claims against Merrick Bank, which they had named as a Defendant in their amended complaint.

DISCUSSION

I. Dismissal under Federal Rule of Civil Procedure 12(b)(2)

Under Rule 12(b)(2) of the Federal Rules of Civil Procedure, a defendant may move to dismiss for lack of personal jurisdiction. The plaintiff then bears the burden of demonstrating that the Court has jurisdiction. Schwarzenegger v. Fred Martin Motor Co., 374 F.3d 797, 800 (9th Cir. 2004). The plaintiff "need only demonstrate facts that if true would support jurisdiction over the defendant." Ballard v. Savage, 65 F.3d 1495, 1498 (9th Cir. 1995). Uncontroverted allegations in the complaint must be taken as true. AT T v. Compagnie Bruxelles Lambert, 94 F.3d 586, 588 (9th Cir. 1996). However, the court may not assume the truth of such allegations if they are contradicted by affidavit. Data Disc, Inc. v. Systems Technology Assocs., Inc., 557 F.2d 1280, 1284 (9th Cir. 1977). If the plaintiff also submits admissible evidence, conflicts in the evidence must be resolved in the plaintiff's favor. AT T, 94 F.3d at 588.

There are two independent limitations on a court's power to exercise personal jurisdiction over a non-resident defendant: the applicable state personal jurisdiction rule and constitutional principles of due process. Sher v. Johnson, 911 F.2d 1357, 1361 (9th Cir. 1990); Data Disc, Inc., 557 F.2d at 1286. California's jurisdictional statute is co-extensive with federal due process requirements; therefore, jurisdictional inquiries under state law and federal due process standards merge into one analysis. Rano v. Sipa Press, Inc., 987 F.2d 580, 587 (9th Cir. 1993).

The exercise of jurisdiction over a non-resident defendant violates the protections created by the due process clause unless the defendant has "minimum contacts" with the forum state so that the exercise of jurisdiction "does not offend traditional notions of fair play and substantial justice." Int'l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945).

The individual Leasing Defendants assert that the Court lacks personal jurisdiction over them. Plaintiffs assert that the Court may exercise jurisdiction under the RICO statute or, in the alternative, specific jurisdiction. Plaintiffs do not contend that general jurisdiction is proper.

A. RICO Jurisdiction

Plaintiffs maintain that 18 U.S.C. § 1965(b) supports the exercise of personal jurisdiction over all individual Leasing Defendants.

Section 1965(b) provides that, in any civil RICO action,

in any district court of the United States in which it is shown that the ends of justice require that other parties residing in any other district be brought before the court, the court may cause such parties to be summoned, and process for that purpose may be served in any judicial district of the United States by the marshal thereof.

"Congress provided for service of process upon RICO defendants residing outside the federal court's district when it is shown that 'the ends of justice' require it." Butcher's Union v. SDV Inv., Inc., 788 F.2d 535, 539 (9th Cir. 1986) (citation omitted). However, "the right to nationwide service in RICO suits is not unlimited." Id. A court "must have personal jurisdiction over at least one of the participants in the alleged multidistrict conspiracy and the plaintiff must show that there is no other district in which a court will have personal jurisdiction over all of the alleged co-conspirators." Id.

As explained in further detail below, Plaintiffs do not allege sufficient facts to support their RICO claims. Until and unless they state RICO claims, the Court cannot exercise personal jurisdiction under § 1965(b) over the individual Leasing Defendants.

B. Specific Jurisdiction

The Court has specific jurisdiction over a defendant when the cause of action arises out of or relates to the defendant's activities within the forum. Data Disc, Inc., 557 F.2d at 1286. The "minimum contacts" required to assert specific jurisdiction are analyzed using a three-prong test: (1) the non-resident defendant must purposefully direct its activities towards, or consummate some transaction with, the forum or a resident thereof, or perform some act by which it purposefully avails itself of the privilege of conducting activities in the forum, thereby invoking the benefits and protections of its laws; (2) the claim must be one which arises out of or results from the defendant's forum-related activities; and (3) the exercise of jurisdiction must be reasonable. Lake v. Lake, 817 F.2d 1416, 1421 (9th Cir. 1987). Each of these conditions is required for asserting jurisdiction.Ins. Co. of N. Am. v. Marina Salina Cruz, 649 F.2d 1266, 1270 (9th Cir. 1981).

Plaintiffs argue that the individual Leasing Defendants purposefully directed their activities toward California residents. This suggests that Plaintiffs intend to bring only tort claims against them; Plaintiffs do not offer a purposeful availment analysis, which generally applies to contract claims.See Schwarzenegger, 374 F.3d at 802 ("A purposeful availment analysis is most often used in suits sounding in contract. A purposeful direction analysis, on the other hand, is most often used in suits sounding in tort.").

For a defendant's conduct to demonstrate purposeful direction, the defendant must "allegedly have (1) committed an intentional act, (2) expressly aimed at the forum state, (3) causing harm that the defendant knows is likely to be suffered in the forum state." Id. (quoting Dole Food Co., Inc. v. Watts, 303 F.3d 1104, 1111 (9th Cir. 2002)).

Plaintiffs make only broad, general allegations against Cohen, Mezei, Hahn, Fitzgerald and Kravic. Plaintiffs aver that these Defendants directed and controlled the Northern Leasing Companies, which is not sufficient to support personal jurisdiction. Without more, the fiduciary shield doctrine applies to these Defendants. Under this doctrine, "a person's mere association with a corporation that causes injury in the forum state is not sufficient in itself to permit that forum to assert jurisdiction over the person." Davis v. Metro Prods., Inc., 885 F.2d 515, 520 (9th Cir. 1989). The doctrine is subject to two exceptions: "(1) where the corporation is the agent or alter ego of the individual defendant; or (2) by virtue of the individual's control of, and direct participation in the alleged activities." Wolf Designs, Inc. v. DHR Co., 322 F. Supp. 2d 1065, 1072 (C.D. Cal. 2004) (citations omitted). However, Plaintiffs do not allege facts that suggest any of the Northern Leasing companies is an alter ego of any of these Defendants. Nor do Plaintiffs' general allegations explain how these Defendants controlled or directly participated in the alleged fraudulent scheme. Thus, Plaintiffs have not justified specific jurisdiction over these Defendants.

Although Plaintiffs plead additional facts with regard to Krieger, Buono and Sussman, they are not sufficient to support specific jurisdiction. Plaintiffs aver that Krieger executed Von Glasenapp's EFL on behalf of the Northern Leasing Companies. However, Plaintiffs do not plead facts suggesting that Krieger knew or could reasonably foresee that, by executing the lease, she would cause harm to Von Glasenapp. See Brayton Purcell LLP v. Recordon Recordon, 606 F.3d 1124, 1131 (9th Cir. 2010). Thus, under Plaintiffs' current allegations, the Court lacks specific jurisdiction over Krieger.

Plaintiffs allege that Buono filed lawsuits in New York to collect monies due under the purportedly fraudulent contracts. However, Plaintiffs do not allege that they were the subjects of Buono's lawsuits. Nor do they plead that Buono took any other action against any of them. Consequently, Plaintiffs' allegations do not support specific jurisdiction over Buono.

Plaintiffs aver that Sussman served Bae with a complaint and summons for a collection lawsuit filed in New York state court. However, Plaintiffs do not allege facts tending to show that Sussman knew of the alleged fraudulent scheme or that the filing of the New York lawsuit constituted malicious prosecution or some other tort. Plaintiffs offer no authority that the filing of a single lawsuit, in the court of another state, is sufficient to support specific jurisdiction in California. Without more, the Court lacks specific jurisdiction over Sussman.

Finally, Plaintiffs fail to establish that specific jurisdiction over Healy is appropriate. Plaintiffs allege that Healy purposefully directed activities against forum residents by causing MBF Merchant Capital and RBL Capital Group "to unlawfully deduct monies from accounts of Plaintiffs and other Californians." Am. Compl. ¶ 41. However, Healy filed an affidavit stating that neither he nor MBF Merchant Capital "ever deducted payments from any person's account related to" EFLs. Healy Decl. ¶ 12. Plaintiffs did not address Healy's assertions in their opposition or proffer an affidavit with contrary facts. Plaintiffs also allege that Healy recruited the Merchant Services Defendants to market credit card processing services and equipment. However, Plaintiffs do not plead that Healy knew or reasonably foresaw that this action would cause them harm. Consequently, Plaintiffs have not justified specific jurisdiction over Healy.

C. Jurisdictional Discovery

Plaintiffs request leave to conduct jurisdictional discovery, which the Court has discretion to grant. Boschetto v. Hansing, 539 F.3d 1011, 1020 (9th Cir. 2008). "Discovery may be appropriately granted where pertinent facts bearing on the question of jurisdiction are controverted or where a more satisfactory showing of the facts is necessary." Data Disc, Inc., 557 F.2d at 1285 n. 1. A district court abuses its discretion only if it is evident that denying discovery "results in actual and substantial prejudice to the complaining litigant." Id.

In accordance with Defendants' proposal in the parties' status report, the Court grants Plaintiffs leave to conduct jurisdictional discovery. Plaintiffs may propound discovery requests on the individual Leasing Defendants by December 10, 2010. These requests shall be limited to discovering facts necessary to establish personal jurisdiction. The individual Leasing Defendants shall respond to the requests by January 20, 2011.

Because the Court grants Plaintiffs leave to take jurisdictional discovery, the individual Leasing Defendants' motions to dismiss for lack of personal jurisdiction are granted and Plaintiffs are granted leave to amend their complaint to plead facts to establish jurisdiction. Defendants may file their Rule 12(b)(2) motions anew after Plaintiffs file their second amended complaint.

II. Dismissal under Federal Rule of Civil Procedure 12(b)(3)

A defendant may raise a Rule 12(b)(3) motion to dismiss for improper venue in its first responsive pleading or by a separate pre-answer motion. Fed.R.Civ.P. 12(b)(3). Once the defendant challenges venue, the plaintiff bears the burden of establishing that venue is proper. Piedmont Label Co. v. Sun Garden Packing Co., 598 F.2d 491, 496 (9th Cir. 1979).

When considering a Rule 12(b)(3) motion to dismiss, the pleadings need not be accepted as true, and the court "may consider facts outside of the pleadings." Richards v. Lloyd's of London, 135 F.3d 1289, 1292 (9th Cir. 1998). In "the context of a Rule 12(b)(3) motion based upon a forum selection clause, the trial court must draw all reasonable inferences in favor of the non-moving party and resolve all factual conflicts in favor of the non-moving party." Murphy v. Schneider Nat'l, Inc., 362 F.3d 1133, 1138 (9th Cir. 2004). If "the facts asserted by the non-moving party are sufficient to preclude enforcement of the forum selection clause, the non-moving party is entitled to remain in the forum it chose for suit unless and until the district court has resolved any material factual issues that are in genuine dispute." Id. at 1139. "As a result, at least until facts are resolved, in many cases the non-moving party will survive the Rule 12(b)(3) motion." Id.

Courts have discretion in resolving factual disputes related to the enforcement of a forum selection clause. As the Murphy court explained,

To resolve such motions when genuine factual issues are raised, it may be appropriate for the district court to hold a Rule 12(b)(3) motion in abeyance until the district court holds an evidentiary hearing on the disputed facts. Whether to hold a hearing on disputed facts and the scope and method of the hearing is within the sound discretion of the district court. . . . Upon holding an evidentiary hearing to resolve material disputed facts, the district court may weigh evidence, assess credibility, and make findings of fact that are dispositive on the Rule 12(b)(3) motion. These factual findings, when based upon an evidentiary hearing and findings on disputed material issues, will be entitled to deference.

TransFirst and CB T argue that Von Glasenapp, Su, Baumgartner and Jordan's claims must be dismissed for improper venue because their MCPAs contain a forum selection clause designating "the county and district courts in and for Boulder County, Colorado" as the proper venue. See, e.g., Sullivan Decl., Ex. 2 at 20. In the alternative, TransFirst and CB T move to transfer this action to the District of Colorado pursuant to 28 U.S.C. § 1406(a). As an additional alternative, TransFirst and CB T ask the Court to stay this action pending arbitration, which is purportedly required under these Plaintiffs' MCPAs; however, TransFirst and CB T did not move to compel arbitration. TransFirst and CB T's motion does not apply to Bae's claims because his agreement with Fifth Third Bank contains a clause designating the courts of "Cincinnati or Hamilton County, Ohio" as the proper venue. In their Consolidated Reply, the other Defendants indicate they do not oppose TransFirst and CB T's transfer request.

Forum selection clauses are "presumptively valid" and "should be honored 'absent some compelling and countervailing reason.'"Murphy, 362 F.3d at 1140 (quoting Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 12 (1972)). There are three reasons, however, that "make enforcement of a forum selection clause unreasonable: (1) 'if the inclusion of the clause in the agreement was the product of fraud or overreaching'; (2) 'if the party wishing to repudiate the clause would effectively be deprived of his day in court were the clause enforced'; and (3) 'if enforcement would contravene a strong public policy of the forum in which suit is brought.'"Murphy, 362 F.3d at 1140 (quoting Richards, 135 F.3d at 1294).

Von Glasenapp, Su, Baumgartner and Jordan claim that the arbitration and forum selection clauses are unenforceable based on their allegations that their inclusion was the product of fraud. TransFirst and CB T argue, however, that the clauses are enforceable and contests these Plaintiffs' allegations that their signatures and initials were forged.

There appears to be a dispute of material fact concerning the enforceability of the arbitration and forum selection clauses in Von Glasenapp's, Su's, Baumgartner's and Jordan's agreements. Accordingly, the Court reserves its decision on TransFirst and CB T's motion to dismiss under Rule 12(b)(3) pending resolution of this issue.

In accordance with Defendants' proposal in the parties' status report, TransFirst, CB T and Plaintiffs shall conduct limited discovery concerning the alleged forgeries. Discovery on this topic shall be propounded by December 10, 2010. Responses shall be due by January 20, 2011.

To resolve whether the documents were forged, Plaintiffs and TransFirst and CB T shall file cross-motions for partial summary judgment. Plaintiffs shall file their motion for partial summary judgment on February 17, 2011. TransFirst and CB T's cross-motion for partial summary judgment and opposition to Plaintiff's motion shall be due March 3, 2011. Plaintiffs' opposition to TransFirst and CB T's cross-motion and reply to TransFirst and CB T's opposition shall be due March 10, 2011. TransFirst and CB T's reply to Plaintiffs' opposition to their cross-motion shall be due March 17, 2011. A hearing on the cross-motions will be held on March 31, 2011 at 2:00 p.m., unless the matter is taken under submission on the papers. If necessary, an evidentiary hearing will be scheduled.

III. Dismissal under Federal Rule of Civil Procedure 12(b)(6)

A complaint must contain a "short and plain statement of the claim showing that the pleader is entitled to relief." Fed.R.Civ.P. 8(a). Dismissal under Rule 12(b)(6) for failure to state a claim is appropriate only when the complaint does not give the defendant fair notice of a legally cognizable claim and the grounds on which it rests. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). In considering whether the complaint is sufficient to state a claim, the court will take all material allegations as true and construe them in the light most favorable to the plaintiff. NL Indus., Inc. v. Kaplan, 792 F.2d 896, 898 (9th Cir. 1986). However, this principle is inapplicable to legal conclusions; "threadbare recitals of the elements of a cause of action, supported by mere conclusory statements," are not taken as true. Ashcroft v. Iqbal, ____ U.S. ____, 129 S. Ct. 1937, 1949-50 (2009) (citing Twombly, 550 U.S. at 555).

When granting a motion to dismiss, the court is generally required to grant the plaintiff leave to amend, even if no request to amend the pleading was made, unless amendment would be futile. Cook, Perkiss Liehe, Inc. v. N. Cal. Collection Serv. Inc., 911 F.2d 242, 246-47 (9th Cir. 1990). In determining whether amendment would be futile, the court examines whether the complaint could be amended to cure the defect requiring dismissal "without contradicting any of the allegations of [the] original complaint." Reddy v. Litton Indus., Inc., 912 F.2d 291, 296 (9th Cir. 1990). Leave to amend should be liberally granted, but an amended complaint cannot allege facts inconsistent with the challenged pleading. Id. at 296-97.

A. RICO Claims

Plaintiffs allege claims for violations of 18 U.S.C. § 1962(c) and conspiracy to violate § 1962(c). These claims are directed at all Defendants, except the Moore Shell Companies.

"To state a claim under § 1962(c), a plaintiff must allege '(1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity.'" Odom v. Microsoft Corp., 486 F.3d 541, 547 (9th Cir. 2007) (quoting Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 496 (1985)). Stating a § 1962(c) claim is necessary to assert a claim under § 1962(d) for a RICO conspiracy; thus, the failure to state the former requires dismissal of the latter. See Howard v. Am. Online Inc., 208 F.3d 741, 751 (9th Cir. 2000).

1. RICO Enterprise

The Northern Leasing Defendants, TransFirst and CB T argue that Plaintiffs fail to allege the existence of a RICO enterprise. Lease Source-LSI; Walshe; MBF Merchant Capital, LLC; and Healy join this argument.

An "associated-in-fact enterprise is 'a group of persons associated together for a common purpose of engaging in a course of conduct.'" Odom, 486 F.3d at 552 (quoting United States v. Turkette, 452 U.S. 576, 583 (1981)). To plead the existence of such an enterprise, a plaintiff must allege "both evidence of an ongoing organization, formal or informal, and evidence that the various associates function as a continuing unit." Odom, 486 F.3d at 552 (citation and internal quotation marks omitted).

Plaintiffs allege sufficient facts to meet their pleading burden. According to their complaint, Defendants associated for the common purpose of "executing a scheme to defraud class members through a pattern of racketeering consisting of distinct acts of mail fraud, wire fraud, and money laundering." Am. Compl. ¶ 311. Further, they allege facts that, if proven, would establish that Defendants participated in an ongoing organization. Finally, Plaintiffs plead that Defendants' activities took place over several years, which is sufficient to satisfy the continuity requirement.

Accordingly, Plaintiffs plead the existence of a RICO enterprise.

2. "Conduct" of a RICO Enterprise

TransFirst, CB T and Fifth Third move to dismiss Plaintiffs' § 1962(c) claim on the ground that Plaintiffs fail to allege facts tending to show that they conducted a RICO enterprise. Walshe; MBF Merchant Capital, LLC; and Healy join this argument.

To be liable under § 1962(c), one must have "participated in the operation or management of the enterprise itself." Reves v. Ernst Young, 507 U.S. 170, 183 (1993). To do so, one must demonstrate "some degree of direction." Id. at 179. "RICO liability is not limited to those with primary responsibility for the enterprise's affairs," nor is it limited to "those with a formal position in the enterprise." Id. However, one must have "some part in directing the enterprise's affairs." Id. (emphasis in original). "Simply performing services for the enterprise does not rise to the level of direction." Walter v. Drayson, 538 F.3d 1244, 1249 (9th Cir. 2008).

Plaintiffs argue that TransFirst and the Bank Defendants were parties to and attempted to enforce the fraudulently-obtained MCPAs, extracted previously undisclosed fees, and generated and sent misleading billing statements. However, none of these allegations suggest that these Defendants directed the affairs of the RICO enterprise. As a result, Plaintiffs' RICO claims against TransFirst and the Bank Defendants fail.

Plaintiffs do not address the joinder of Walshe; MBF Merchant Capital, LLC; and Healy in this argument. The allegations against these Defendants do not evince any direction of the enterprise. Walshe was a regional sales manager who marketed the Merchant Services Defendants' products. Although Plaintiffs aver generally that Walshe "directed and controlled" the Merchant Services Defendants, Am. Compl. ¶ 20, they also allege that she was one of many "independent sales agents" contracted by these Defendants,id. ¶ 76, which suggests she did not exercise the control necessary under § 1962(c). Based on Plaintiffs' existing allegations, it appears that Walshe only performed services on behalf of the enterprise, which is insufficient. Consequently, Plaintiffs fail to state RICO claims against Walshe.

Plaintiffs do not appear to allege that MBF Merchant Capital had any part in directing the enterprise's affairs. Thus, Plaintiffs' RICO claims against MBF Merchant Capital must be dismissed.

However, Plaintiffs make sufficient allegations against Healy, who is alleged to be MBF Merchant Capital's president. Plaintiffs aver that he, among other things, directed MBF Merchant Capital "to consummate the unlawful transactions described herein with Plaintiffs and other Californians, to unlawfully deduct monies from accounts of Plaintiffs and other Californians, and to attempt to enforce unlawful contractual provisions against Plaintiffs and other Californians." Am. Compl. ¶ 41. These allegations suggest that Healy exercised some part in directing the enterprise's affairs.

Plaintiffs' RICO claims against TransFirst, the Bank Defendants, Walshe and MBF Merchant Capital are dismissed with leave to amend. In any amended complaint, Plaintiffs must allege that all parties plead as RICO defendants demonstrated some degree of direction over the purported enterprise.

3. Racketeering Activity

Plaintiffs allege that the RICO statutes were violated through wire and mail fraud, which constitute predicate acts for a pattern of racketeering activity. 18 U.S.C. § 1961(1). "A wire fraud violation consists of (1) the formation of a scheme or artifice to defraud; (2) use of the United States wires or causing a use of the United States wires in furtherance of the scheme; and (3) specific intent to deceive or defraud." Odom, 486 F.3d at 554 (internal quotation marks omitted); 18 U.S.C. § 1343. The elements of mail fraud differ only in that they involve the use of the United States mails rather than wires. See 18 U.S.C. § 1341.

Federal Rule of Civil Procedure 9(b) requires that wire and mail fraud be plead with particularity. See Odom, 486 F.3d at 553-54. The allegations must be "specific enough to give defendants notice of the particular misconduct which is alleged to constitute the fraud charged so that they can defend against the charge and not just deny that they have done anything wrong."Semegen v. Weidner, 780 F.2d 727, 731 (9th Cir. 1985). Statements of the time, place and nature of the alleged fraudulent activities are sufficient, id. at 735, provided the plaintiff sets forth "what is false or misleading about a statement, and why it is false." In re GlenFed, Inc., Secs. Litig., 42 F.3d 1541, 1548 (9th Cir. 1994). Scienter may be averred generally, simply by saying that it existed. Id. at 1547; see Fed.R.Civ.Proc. 9(b) ("Malice, intent, knowledge, and other condition of mind of a person may be averred generally."). Based on this heightened pleading standard, the only elements of wire and mail fraud "that require particularized allegations are the factual circumstances of the fraud itself." Odom, 486 F.3d at 554.

In Swartz v. KPMG LLP, the Ninth Circuit addressed the effect of Rule 9(b) in cases involving allegations of a fraudulent scheme perpetuated by multiple defendants. 476 F.3d 756, 764 (9th Cir. 2007). The court stated that

there is no absolute requirement that where several defendants are sued in connection with an alleged fraudulent scheme, the complaint must identify false statements made by each and every defendant. Participation by each conspirator in every detail in the execution of the conspiracy is unnecessary to establish liability, for each conspirator may be performing different tasks to bring about the desired result. On the other hand, Rule 9(b) does not allow a complaint to merely lump multiple defendants together but requires plaintiffs to differentiate their allegations when suing more than one defendant and inform each defendant separately of the allegations surrounding his alleged participation in the fraud. In the context of a fraud suit involving multiple defendants, a plaintiff must, at a minimum, identify the role of each defendant in the alleged fraudulent scheme.

Plaintiffs interpret Swartz to mean that Rule 9(b) only requires that they identify each defendant's role "where possible." Opp'n at 28. Swartz does not contain such a qualification; the case states in unequivocal language that Rule 9(b) mandates the identification of each defendant's role.

Because Plaintiffs allege that each category of Defendants made different fraudulent statements and had various roles in the alleged schemes, the three categories are considered separately below.

a. Merchant Services Defendants

According to the complaint, the Merchant Services Defendants engaged in mail fraud by, among other things, sending Plaintiffs altered versions of their contracts, which contained forged signatures. They also aver that these Defendants sent the purportedly fraudulent contracts to the Leasing and Processing Defendants. To support their claims of wire fraud, Plaintiffs allege that these Defendants emailed and faxed the fraudulent contracts.

Parisi, Jurczyk and Madura assert that Plaintiffs' wire and mail fraud allegations related to them are not plead with sufficient specificity. In particular, they argue that Plaintiffs fail to allege what role they played in the purported fraud. Walshe joins this argument. The Merchant Services Companies, Moore and Roy do not challenge the sufficiency of Plaintiffs' § 1962(c) allegations related to them.

Although Plaintiffs allege with sufficient specificity the factual circumstances of the fraud, they fail to allege the roles played by Parisi, Jurczyk and Madura in the fraudulent scheme. They allege that Parisi, Jurczyk and Madura "direct and control the Merchant Services Defendants and worked in concert to cause the Merchant Services Defendants to engage in the conduct described in this complaint." Am. Compl. ¶ 20. This general allegation is not sufficient. Thus, Plaintiffs' RICO claims against Parisi, Jurczyk and Madura fail.

Plaintiffs sufficiently allege Walshe's role in the alleged fraud. According to the complaint, among other tasks, Walshe procured contracts on behalf of the Merchant Services Defendants and, in doing so, made misrepresentations. Nevertheless, as explained above, Plaintiffs' RICO claims against Walshe fail because they do not allege facts to suggest she conducted the enterprise.

Accordingly, because the allegations of wire and mail fraud against them were not plead with sufficient specificity, the RICO claims against Parisi, Jurczyk and Madura are dismissed with leave to amend.

b. Leasing Defendants

The Northern Leasing entities; MBF Merchant Capital, LLC; and the individual Leasing Defendants argue that Plaintiffs fail to plead wire and mail fraud against them with particularity. Lease Source-LSI joins this argument.

Plaintiffs allege that the "Leasing Defendants in Illinois" sent letters to Von Glasenapp and Jordan, notifying them of a "personal property tax" and a fee to file a personal property tax return. Am. Compl. ¶¶ 193 and 265. Leasing Defendants subsequently withdrew funds from Von Glasenapp's and Jordan's accounts for the tax and filing fee. Plaintiffs aver that the letters and the subsequent withdrawals for the purported tax were fraudulent because no property tax returns were ever filed on behalf of Von Glasenapp or Jordan.

These allegations are not sufficient to support wire and mail fraud claims against the Leasing Defendants. Although they plead fraudulent statements with specificity, Plaintiffs do not allege the roles each of these Defendants played in the fraudulent scheme. At a minimum, because they have the letters, Plaintiffs could plead which entity sent the letters. They did not do so.

Plaintiffs also allege that the Leasing Defendants sent letters seeking payment on "leases [they] knew to be forged." Am. Compl. ¶ 335. However, Plaintiffs do not allege a factual basis for their claim that the each of the Leasing Defendants knew of the purported forgeries. Further, Plaintiffs fail to differentiate the roles of each of the Leasing Defendants. Thus, this allegation is not plead in accordance in Rule 9(b).

Accordingly, Plaintiffs' RICO claims against the Leasing Defendants are dismissed with leave to amend. In any amended complaint, Plaintiffs must, at a minimum, identify the roles each Leasing Defendant played in perpetuating wire or mail fraud.

c. Processor Defendants

TransFirst and CB T complain that Plaintiffs have not alleged mail or wire fraud against them with sufficient specificity. In its separate brief, Fifth Third echoes this objection.

Plaintiffs generally allege that TransFirst engaged in mail fraud by sending "details of transaction processing it knew to be fraudulent and in violation of" Plaintiffs' contracts. Am. Compl. ¶ 341. Plaintiffs appear to claim that these details were fraudulent because the fees charged for credit card transactions were at "a much higher rate than what" was represented by the Merchant Services Defendants. See Am. Compl. ¶ 189. This is not sufficient to plead mail fraud against TransFirst. Although the Merchant Services Defendants may have misrepresented the transaction rates, Plaintiffs do not allege that TransFirst played a role in making the falsehoods. Nor do Plaintiffs allege a factual basis on which it could be inferred that TransFirst knew of them or intended for them to be made. Based on Plaintiffs' allegations, TransFirst cannot be held liable for mail fraud.

Plaintiffs also aver that TransFirst sent misleading and deceptive billing statements. Although the statements disclosed all the fees charged, Plaintiffs maintain that they were "complicated and hid the fact that" each credit card transaction incurred a fee higher than what was represented when Plaintiffs entered into their agreements. Am. Compl. ¶ 189. Again, this allegation is not sufficient. Plaintiffs do not allege that TransFirst knew of or had any role in the failure to disclose the fees at the time the agreements were executed. Further, because Plaintiffs plead that TransFirst disclosed all of the fees it charged on the statements, it does not appear to have engaged in any independent fraud.

Plaintiffs do not allege any instances of mail fraud by the Bank Defendants. Nor do they aver the Bank Defendants' roles in the perpetration of mail fraud.

With regard to wire fraud, Plaintiffs allege that the Bank Defendants caused credit card transactions to be processed at "unreasonable transaction rates that had not been disclosed." Id. ¶ 365. TransFirst is alleged to have debited, through electronic transfers, various amounts from Plaintiffs' bank accounts. For reasons already stated, these allegations are not sufficient. Plaintiffs have not averred that any of these Defendants knew of or played any role in the fraudulent conduct that led to the imposition of these fees.

In sum, Plaintiffs fail to plead mail or wire fraud against any of the Processor Defendants. Accordingly, for this additional reason, the RICO claims against these Defendants are dismissed with leave to amend. Plaintiffs must plead with specificity that these Defendants made or had a role in the making of false statements.

5. RICO Conspiracy

The MSI Defendants and Fifth Third argue that Plaintiffs' § 1962(d) claim must be dismissed because, even if Plaintiffs alleged a substantive RICO violation, they do not aver facts evincing an agreement to commit wire and mail fraud.

Section 1962(d) proscribes conspiracies to violate any of the substantive provisions of RICO. To state a claim under § 1962(d), plaintiffs must "allege either an agreement that is a substantive violation of RICO or that the defendants agreed to commit, or participated in, a violation of two predicate offenses." Howard, 208 F.3d at 751 (citation omitted). The conspiring defendants must be alleged to "have been 'aware of the essential nature and scope of the enterprise and intended to participate in it.'" Id. (quoting Baumer v. Pachl, 8 F.3d 1341, 1346 (9th Cir. 1993)).

Plaintiffs point to three paragraphs in their amended complaint in which they explain the benefits obtained by the Merchant Services Defendants, Leasing Defendants and Processor Defendants through associating together. However, none of these allegations suggest that Defendants agreed to commit a substantive violation of RICO or to commit the alleged predicate offenses. Nor do Plaintiffs allege that all Defendants were aware of the nature and scope of the enterprise or had intent to participate in it.

Accordingly, Plaintiffs' § 1962(d) claims are dismissed with leave to amend.

6. RICO Injury

To have standing to bring a civil RICO claim, shareholders of a corporation must allege a direct injury from the alleged violation. Sparling v. Hoffman Const. Co., 864 F.2d 635, 640 (9th Cir. 1988). Corporate shareholders lack standing to assert RICO claims if their harm "derivative of harm to the corporation." Id.

The MSI and TransFirst Defendants argue that the individual Plaintiffs' RICO claims must be dismissed because they did not suffer direct and actual harm from the alleged racketeering activity. However, Plaintiffs allege that they were personal guarantors of the agreements at issue. The contracts proffered by TransFirst do not indicate otherwise.

Accordingly, the individual Plaintiffs have standing to bring their RICO claims.

7. RICO Statute of Limitations

RICO actions are subject to a four-year statute of limitations.Pincay v. Andrews, 238 F.3d 1106, 1108 (9th Cir. 2001) (citation omitted). Under the Ninth Circuit's "separate accrual rule," the limitations period can be reset by an overt act with two characteristics: (1) it must be "a new and independent act that is not merely a reaffirmation of a previous act;" and (2) it must inflict "new and accumulating injury on the plaintiff." Grimmett v. Brown, 75 F.3d 506, 513 (9th Cir. 1996) (emphasis in original); see also Tanaka v. First Hawaiian Bank, 104 F. Supp. 2d 1243, 1246 (D. Hawaii 2000).

The MSI Defendants argue that Bae's RICO claims are time-barred. Bae signed contracts for services in May, 2005. Thus, under the statute of limitations, his RICO claims were time-barred as of May, 2009. This action was initiated on March 26, 2010, and Bae was not a named Plaintiff until June 25, 2010, the date the amended complaint was filed.

Plaintiffs argue that the separate accrual rule applies to Bae's claims, resetting the statute of limitations. They point to "negative marks" placed on his credit report, although they do not plead when these notations were made. Opp'n at 48. Plaintiffs also point to the collection lawsuit Sussman filed against Bae in March, 2010.

Plaintiffs do not address how this conduct reflects new and independent acts separate from the injury Bae allegedly suffered "when he signed the contract." Opp'n at 48. Instead, these acts appear to arise from the contract. Furthermore, placing negative information on a credit report and filing a lawsuit do not appear to be predicate acts of racketeering activity that would trigger application of the separate accrual rule. See Klehr v. A.O. Smith Corp., 521 U.S. 179, 190 (1997) (explaining that the rule requires "the commission of a separable, new predicate act within a 4-year limitations period"); Tanaka, 104 F. Supp. 2d at 1246.

Accordingly, based on Plaintiffs' current pleading, Bae's RICO claims are time-barred. In any amended complaint, Plaintiffs may plead facts suggesting that Bae's RICO claims accrued within the limitations period.

B. Common Law Fraud Claims

Plaintiffs allege common law claims for "Fraud, Deceit and/or Misrepresentation" (hereinafter, intentional misrepresentation) and negligent misrepresentation, which are subject to the heightened pleading requirements of Federal Rule of Civil Procedure 9(b). Although Plaintiffs bring their intentional misrepresentation claims against all Defendants except the Moore Shell Companies, they plead their negligent misrepresentation claims only against Merchant Services Defendants. They state that this was a "typographical error," and seek leave to amend to plead this claim against the Leasing Defendants, TransFirst and the Bank Defendants. Opp'n at 40 n. 27. The Merchant Services Companies, Moore and Roy do not move to dismiss the common law fraud claims alleged against them.

To state a claim for fraud, a plaintiff must plead "'(a) misrepresentation; (b) knowledge of falsity (or scienter); (c) intent to defraud, i.e., to induce reliance; (d) justifiable reliance; and (e) resulting damage.'" In re Napster, Inc. Copyright Litig., 479 F.3d 1078, 1096 (9th Cir. 2007) (quotingSmall v. Fritz Cos., Inc., 30 Cal. 4th 167, 173 (2003)); see generally Cal. Civ. Code §§ 1709- 10. In relevant part, deceit is defined as the "suppression of a fact, by one who is bound to disclose it, or who gives information of other facts which are likely to mislead for want of communication of that fact." Cal. Civ. Code § 1710. The elements of negligent misrepresentation are similar to those for intentional misrepresentation, except that a plaintiff need not plead knowledge of falsity; instead, negligent misrepresentation requires that the defendant made a representation "without reasonable ground for believing it to be true." Glenn K. Jackson, Inc. v. Roe, 273 F.3d 1192, 1200 n. 2 (9th Cir. 2001).

Plaintiffs state claims for intentional and negligent misrepresentation against Walshe. In particular, they allege that in or about June, 2007, Walshe represented to Von Glasenapp that the Merchant Services Defendants' rates were lower than those for which he was subsequently charged. She also provided Von Glasenapp an EFL that had many of "the fields for the cost of the equipment and terms of the lease" left blank, Am. Compl. ¶ 177, which he signed, apparently under a misimpression as to the nature of the EFL. These allegations are sufficient.

Plaintiffs do not allege that Parisi, Jurczyk or Madura made any misrepresentations. Instead, Plaintiffs argue that the Merchant Services Companies' acts should be imputed to Parisi, Jurczyk or Madura, who were officers of the entities. However, to be held liable for torts of a corporation, officers must authorize, direct or otherwise actively participate in the alleged tortious activity. PMC, Inc. v. Kadisha, 78 Cal. App. 4th 1368, 1379-80 (2000). Plaintiffs have not plead any facts suggesting that Parisi, Jurczyk or Madura consented to or approved of the Merchant Services Companies' alleged torts. Plaintiffs also argue that the Merchant Services Companies were alter egos of Parisi and Jurczyk. This argument is unavailing, however, because Plaintiffs offer no factual allegations to support their alter ego theory. The Court need not accept as true "a legal conclusion couched as a factual allegation." Iqbal, 129 S. Ct. at 1950 (citation and internal quotation marks omitted). Accordingly, Plaintiffs' intentional and negligent misrepresentation claims against Parisi, Jurczyk and Madura are dismissed with leave to amend.

Plaintiffs' intentional misrepresentation claims against the Leasing Defendants, TransFirst and the Bank Defendants fail for the same reasons that their allegations of the RICO predicate acts of wire and mail fraud fail.

In sum, because they were not subject to a motion to dismiss, Plaintiffs' fraud claims against the Merchant Services Companies, Moore and Roy may go forward. Plaintiffs also state cognizable common law fraud claims against Walshe. The Court dismisses with leave to amend Plaintiffs' intentional misrepresentation claims against Parisi, Jurczyk, Madura, the Leasing Defendants, Transfirst and the Bank Defendants. Plaintiffs' negligent misrepresentation claims against Parisi, Jurczyk and Madura are likewise dismissed with leave to amend.

C. Claims for Breach of Contract and Breach of the Implied Covenant of Good Faith and Fair Dealing

Plaintiffs bring claims for breach of contract and the implied covenant of good faith and fair dealing against the Merchant Services Defendants, the Leasing Defendants, TransFirst and CB T. Plaintiffs have voluntarily dismissed such claims against Fifth Third and the Moore Shell Companies.

To assert a cause of action for breach of contract, a plaintiff must plead: (1) the existence of a contract; (2) the plaintiff's performance or excuse for non-performance; (3) the defendant's breach; and (4) damages to the plaintiff as a result of the breach. Armstrong Petrol. Corp. v. Tri-Valley Oil Gas Co., 116 Cal. App. 4th 1375, 1391 n. 6 (2004).

Without any citation to authority, the Northern Leasing Defendants argue that, because Plaintiffs allege fraudulent conduct related to the MCPAs and EFLs, their claims for breach of contract and the implied covenant should be subject to Rule 9(b). The Court understands Plaintiffs to allege that they were fraudulently induced to enter into their contracts, in that they were led to believe that the forms they signed contained all material terms of the agreements, and that the contracts were later breached. While the former is subject to Rule 9(b), the latter is not. Thus, Plaintiffs' breach of contract claims are subject to the general pleading standard set forth in Rule 8.

1. Existence of Contracts

Plaintiffs appear to allege that they entered into three contracts: (1) the MCPAs, (2) the EFLs and (3) the "Rate Estimation Comparison Sheet," or "Rate Sheet."

As noted above, Von Glasenapp's, Su's, Baumgartner's and Jordan's MCPAs indicate that they contracted with TransFirst and CB T; Bae's MCPA states that he contracted with Fifth Third. Plaintiffs' MCPAs do not name the Merchant Services Defendants or the Leasing Defendants as parties. Plaintiffs nevertheless argue that, because they plead that these Defendants were parties, their allegations must be taken as true. This is incorrect. Courts "need not accept as true allegations contradicting documents that are referenced in the complaint." Lazy Y Ranch Ltd. v. Behrens, 546 F.3d 580, 588 (9th Cir. 2008). Thus, Plaintiffs' claims for breach of contract against the Merchant Services Defendants and the Leasing Defendants, insofar as these claims are based on the MCPAs, are dismissed with leave to amend. If Plaintiffs intend to maintain breach of contract claims based on the MCPAs against these Defendants, they must explain how these Defendants were parties to the MCPAs, notwithstanding these agreements' plain language.

Plaintiffs allege that the EFLs, which are not before the Court, are contracts with the eighteen Leasing Defendants. Am. Compl. ¶ 100. Plaintiffs, who presumably have the EFLs, must plead which of the Leasing Defendants are parties to the agreements. Plaintiffs do not allege that the Merchant Services Defendants or the Processor Defendants are parties to the EFLs. Accordingly, Plaintiffs' claims for breach of contract, insofar as these claims are based on the EFLs, are dismissed with leave to amend. If Plaintiffs intend to maintain breach of contract claims related to the EFLs, they shall identify which Defendants were parties to them.

Finally, Plaintiffs maintain that the Rate Sheet was a contract that was breached. However, Plaintiffs do not allege that any Defendant was a party to a contract contained in the Rate Sheet. Nor do they allege that the Rate Sheet was incorporated into any contract to which a Defendant was a party. Accordingly, to the extent that Plaintiffs' claims for breach of contract are based on the Rate Sheet, they are dismissed with leave to amend. If Plaintiffs intend to maintain breach of contract claims related to the Rate Sheet, they must plead which Defendant was a party to it or, alternatively, that the Rate Sheet was incorporated into a contract to which a named Defendant was a party.

2. Defendants' Breach

Plaintiffs theorize that the MCPAs and EFLs were breached in three ways: (1) by "charging and collecting sums in excess" of disclosed amounts, (2) by "injecting new contractual provisions" and (3) by "imposing lengthy terms on the lease and contract durations." Am. Compl. ¶ 411. Only the first appears to support a claim for breach of contract. However, Plaintiffs do not identify the challenged fees or the contractual provisions that set out the agreed-upon rates. Without additional information, Plaintiffs do not provide adequate notice as to how the contracts were breached. Accordingly, Plaintiffs' first theory of breach does not support their breach of contract claims.

As for Plaintiffs' second theory, they have not identified an MCPA or EFL provision that would be breached based on the insertion of new provisions. Indeed, they do not even allege facts to suggest that TransFirst and CB T inserted new terms into the MCPAs. Further, this allegation appears to pertain to Plaintiffs' fraud theories, not a breach of contract claim. Without more, Plaintiffs' second theory fails to support their claims for breach of contract.

Finally, it is not apparent how contracts could be breached by the imposition of "lengthy terms." If Plaintiffs intend to allege that these terms were inserted after they entered into the contracts, their theory of breach based on these added terms fails for reasons already stated. If they intend to allege that these terms were imposed in contravention of other contractual terms, they must do so explicitly. However, if these "lengthy terms" existed at the time the contracts were executed, it is not apparent how they could constitute a breach of contract.

Plaintiffs do not plead adequately how any Defendant breached the respective contracts. Accordingly, Plaintiffs' breach of contract claims are dismissed with leave to amend.

3. Breach of the Implied Covenant of Good Faith and Fair Dealing

The existence of a contract is necessary for any claim for breach of the implied covenant of good faith and fair dealing.Spinks v. Equity Residential Briarwood Apartments, 171 Cal. App. 4th 1004, 1033 (2009) (citation and internal quotation marks omitted). "The implied covenant of good faith and fair dealing is limited to assuring compliance with the express terms of the contract, and cannot be extended to create obligations not contemplated by the contract." Pasadena Live, LLC v. City of Pasadena, 114 Cal. App. 4th 1089, 1094 (2004) (emphasis in original). The implied covenant "not only imposes upon each contracting party the duty to refrain from doing anything which would render performance of the contract impossible by any act of his own, but also the duty to do everything that the contract presupposes that he will do to accomplish its purpose." Id. (citation and internal quotation marks omitted).

Because Plaintiffs have not adequately plead that they had a contract with the Merchant Services Defendants and the Leasing Defendants, their claims for breach of the implied covenant against these Defendants are dismissed with leave to amend.

Plaintiffs plead that TransFirst and CB T interfered with their rights under their MCPAs by "refusing to address complaints by Plaintiff[s] and the class about billing and service." Am. Compl. ¶ 416. However, Plaintiffs do not point to a contractual provision that governed how TransFirst and CB T were to respond to complaints or explain how these Defendants' conduct prevented any party from performing obligations required by the MCPAs.

Plaintiffs also plead that TransFirst and CB T violated the implied covenant by "including additional pages and terms into the contract" and "engaging in a pattern of threats and harassment to enforce the fraudulent terms and conditions of the contracts." Am. Compl. ¶ 416. It is not clear how these acts precluded compliance with the express terms of the contracts. Furthermore, even if they did, Plaintiffs do not allege facts that suggest TransFirst and CB T committed these acts.

Accordingly, Plaintiffs' claims for breach of the implied covenant of good faith and fair dealing against TransFirst and CB T are dismissed with leave to amend.

D. False Advertising Claims

Plaintiffs bring a claim under section 17500 of the California Business and Professions Code against the Merchant Services Defendants, the Leasing Defendants and the Processor Defendants. The Merchant Services Companies, Moore and Roy did not move to dismiss these claims.

Section 17500 prohibits "any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising." A false advertising claim under this section may be brought "where the advertising complained of is not actually false, but thought likely to mislead or deceive, or is in fact false." Day v. AT T Corp., 63 Cal. App. 4th 325, 332 (1998). Section 17500 proscribes "not only those advertisements which have deceived or misled because they are untrue, but also those which may be accurate on some level, but will nonetheless tend to mislead or deceive." Id.

Plaintiffs state a section 17500 claim against Walshe. As already explained, Plaintiffs allege that she made misrepresentations in marketing and advertising credit card processing services and equipment.

However, Plaintiffs' section 17500 claims against Parisi, Jurczyk, Madura, the Leasing Defendants and the Processor Defendants fail. Plaintiffs have not plead that any of these Defendants marketed or advertised services or equipment to them. And, as noted above, Plaintiffs fail to provide a factual basis for alter ego liability against Parisi and Jurcyzk.

Accordingly, Plaintiffs' section 17500 claims against the Merchant Services Companies, Moore, Roy and Walshe may go forward. Their section 17500 claims against Parisi, Jurcyzk, Madura, the Leasing Defendants and the Processor Defendants fail.

E. Unfair Competition Claims

Plaintiffs plead claims under California's UCL against the Merchant Services Defendants, the Leasing Defendants and the Processor Defendants. The Merchant Services Companies, Moore and Roy did not move to dismiss these claims.

The UCL prohibits any "unlawful, unfair or fraudulent business act or practice." Cal. Bus. Prof. Code § 17200. The UCL incorporates other laws and treats violations of those laws as unlawful business practices independently actionable under state law. Chabner v. United Omaha Life Ins. Co., 225 F.3d 1042, 1048 (9th Cir. 2000). Violation of almost any federal, state or local law may serve as the basis for a UCL claim. Saunders v. Superior Court, 27 Cal. App. 4th 832, 838-39 (1994). In addition, a business practice may be "unfair or fraudulent in violation of the UCL even if the practice does not violate any law." Olszewski v. Scripps Health, 30 Cal. 4th 798, 827 (2003).

Because Plaintiffs' section 17500 claims against the Merchant Services Companies, Moore, Roy and Walshe are actionable, they also state section 17200 claims against these Defendants. However, Plaintiffs have not plead an adequate basis for their UCL claims against Parisi, Jurcyzk, Madura, the Leasing Defendants, TransFirst or the Bank Defendants.

Accordingly, Plaintiffs' UCL claims against the Merchant Services Companies, Moore, Roy and Walshe may go forward. Their UCL claims against Parisi, Jurcyzk, Madura, the Leasing Defendants, TransFirst and the Bank Defendants are dismissed with leave to amend.

F. Fraudulent Conveyance Claims

Plaintiffs bring fraudulent conveyance claims against Moore and the Moore Shell Companies.

The Uniform Fraudulent Transfer Act (UTFA) "permits defrauded creditors to reach property in the hands of a transferee." Mejia v. Reed, 31 Cal. 4th 657, 663 (2003). Transfers can be fraudulent "both as to present and future creditors." Id. at 664.

A transfer can be invalid if a debtor transfers with the "actual intent to hinder, delay, or defraud any creditor of the debtor." Cal. Civ. Code § 3439.04(a)(1). "Whether a conveyance was made with fraudulent intent is a question of fact, and proof often consists of inferences from the circumstances surrounding the transfer." Filip v. Bucurenciu, 129 Cal. App. 4th 825, 834 (2005). In determining a debtor's intent, courts may consider whether "the debtor retained possession or control of the property transferred after the transfer;" whether "before the transfer was made or obligation was incurred, the debtor had been sued or threatened with suit;" and whether "the value of the consideration received by the debtor was reasonably equivalent to the value of the asset transferred or the amount of the obligation incurred." Cal. Civ. Code § 3439.04(b)(2), (4) and (8).

Plaintiffs do not plead in their complaint that Moore retained control or possession of the transferred properties. Plaintiffs argue that, because the Moore Shell Companies are alter egos of Moore, he retained possession and control of the properties and did not receive reasonably equivalent value for the transfers. However, Plaintiffs do not offer an adequate factual basis to support their legal conclusion that the Moore Shell Companies were alter egos. Nor do they allege a factual basis for their conclusion that he did not receive sufficient consideration for the transfers.

Plaintiffs also argue that, when he initiated the transfers in April, 2009, Moore had been sued or had notice of impending lawsuits. However, Plaintiffs identify only one lawsuit, Navratil v. Merchant Services, Inc., No. 2:09-cv-05945-DDP-SS (C.D. Cal.), which was apparently filed in July, 2009. Plaintiffs do not allege that Moore received notice of this suit before it was filed. The filing of Navratil, on its own, does not support their fraudulent conveyance claims.

Finally, Plaintiffs argue that Moore "was profiting from a massive scheme of defrauding small business and that Moore used the profits from this scheme to purchase the properties in question." Opp'n at 44. This, without more, is not sufficient to show Moore's fraudulent intent. Plaintiffs allege that the purported fraudulent scheme had existed since at least 2005. This dissipates any reasonable inference that, in April, 2009, Moore fraudulently transferred properties because of his involvement in the scheme.

Accordingly, Plaintiffs' fraudulent conveyance claims against Moore and the Moore Shell Companies are dismissed with leave to amend. Plaintiffs must plead a factual basis to support their assertions that Moore had fraudulent intent.

IV. Preliminary Discovery

Pursuant to Federal Rule of Civil Procedure 26(d)(1) and in accordance with Defendants' proposal in the parties' joint status report, the Court grants the parties leave to conduct discovery on the following matters: (1) the alleged forgeries of Plaintiffs' initials or signatures, (2) alter ego theories of liability and (3) personal jurisdiction. Discovery requests shall be propounded by December 10, 2010. Responses are due January 20, 2011. The parties shall not take discovery on matters outside of the scope of those listed above.

The Court notes that several of Plaintiffs' discovery requests, contained in Exhibit A of the parties' status report, appear overbroad, particularly in light of the issues raised by the Court at the September 16 hearing. To be clear, the Court grants limited preliminary discovery only to resolve issues of personal jurisdiction and proper venue. Plaintiffs shall not take discovery that relates solely to the merits of their case. All discovery-related motions shall be referred to a magistrate judge.

CONCLUSION

For the foregoing reasons, the Court GRANTS in part and DENIES in part the MSI Defendants' Motion to Dismiss (Docket No. 112); GRANTS the Northern Leasing Defendants' Motion to Dismiss (Docket No. 114); GRANTS Defendant Fitzgerald's Motion to Dismiss (Docket No. 115); GRANTS MBF Merchant Capital LLC and Healy's Motion to Dismiss (Docket No. 108); GRANTS Sussman's Motion to Dismiss (Docket No. 122); GRANTS in part and DEFERS its decision in part on the TransFirst Defendants' Motion to Dismiss (Docket No. 121); and GRANTS Fifth Third Bank's Motion to Dismiss (Docket No. 109).

The Court's rulings are summarized as follows:

1. Plaintiffs have not established that the Court has personal jurisdiction over the individual Leasing Defendants. Plaintiffs may conduct discovery to establish jurisdictional facts. Plaintiffs are granted leave to amend their complaint to add facts that support personal jurisdiction. The individual Leasing Defendants may renew their motions to dismiss for lack of personal jurisdiction after Plaintiffs file their second amended complaint.

2. There is a dispute concerning the enforceability of the arbitration and forum selection clauses in Von Glasenapp's, Su's, Baumgartner's and Jordan's MCPAs. TransFirst, CB T and Plaintiffs may conduct discovery on whether Von Glasenapp's, Su's, Baumgartner's and Jordan's initials and signatures were forged. To resolve this matter, TransFirst, CB T and Plaintiffs shall then file cross-motions for partial summary judgment on the alleged forgeries. Plaintiffs shall file their motion on February 17, 2011. TransFirst and CB T's cross-motion and opposition to Plaintiff's motion shall be due March 3, 2011. Plaintiffs' opposition to TransFirst and CB T's cross-motion and reply to TransFirst and CB T's opposition shall be due March 10, 2011. TransFirst and CB T's reply to Plaintiffs' opposition to their cross-motion shall be due March 17, 2011. A hearing on the cross-motions will be held on March 31, 2011 at 2:00 p.m. if the matter is not submitted on the papers. An evidentiary hearing will be scheduled if necessary.

3. Because they were not subject to a motion to dismiss, Plaintiffs' RICO claims under 18 U.S.C. § 1962(c) against the Merchant Services Companies, Moore and Roy are cognizable. However, their § 1962(c) claims against the other Defendants are dismissed with leave to amend to plead, among other things, that these Defendants conducted the RICO enterprise and engaged in a pattern of racketeering activity.

4. Plaintiffs' claim under 18 U.S.C. § 1962(d) for conspiracy to commit a RICO violation is dismissed with leave to amend to plead a conspiratorial agreement and each Defendants' awareness of the RICO conspiracy.

5. Bae's RICO claims are dismissed as time-barred. He is granted leave to amend to plead facts indicating that his RICO claims accrued during the limitations period.

6. Because they were not subject to a motion to dismiss, Plaintiffs' common law fraud claims against the Merchant Services Companies, Moore and Roy are cognizable. Plaintiffs have stated actionable common law fraud claims against Walshe. However, their common law fraud claims against the other Defendants are dismissed with leave to amend to plead with specificity, among other things, the actionable misrepresentations these Defendants made. In the alternative, Plaintiffs may allege an alter ego theory of liability, so long as evidence obtained through discovery supports their claim. Plaintiffs are also granted leave to amend to plead negligent misrepresentation claims against Defendants other than the Merchant Services Defendants, so long as they have a factual basis to do so.

7. Plaintiffs' breach of contract claims against the Merchant Services Defendants and Leasing Defendants are dismissed with leave to amend to plead facts indicating that these Defendants were parties to Plaintiffs' contracts. Plaintiffs' breach of contract claims against TransFirst and CB T are dismissed with leave to amend to plead the provisions breached by these Defendants.

8. Plaintiffs' claims for breach of the implied covenant of good faith and fair dealing against the Merchant Services Defendants and Leasing Defendants are dismissed with leave to amend to plead facts that these Defendants were parties to Plaintiffs' contracts. Their claims against TransFirst and CB T are dismissed to plead conduct that violated the implied covenant.

9. Because they were not subject to a motion to dismiss, Plaintiffs' section 17500 claims against the Merchant Services Companies, Moore and Roy are cognizable. Plaintiffs have stated cognizable section 17500 claims against Walshe. Plaintiffs' section 17500 claims against the other Defendants are dismissed with leave to amend to plead that they made actionable statements. In the alternative, Plaintiffs may allege an alter ego theory of liability, so long as evidence obtained through discovery supports their claim.

10. Because they were not subject to a motion to dismiss, Plaintiffs' UCL claims against the Merchant Services Companies, Moore and Roy are cognizable. Plaintiffs have stated cognizable UCL claims against Walshe. Plaintiffs' UCL claims against the other Defendants are dismissed with leave to amend to plead actionable conduct. In the alternative, Plaintiffs may allege an alter ego theory of liability, so long as evidence obtained through discovery supports their claim.

11. Plaintiffs' fraudulent conveyance claims against Moore and the Moore Shell Companies are dismissed with leave to amend to plead facts that suggest Moore had fraudulent intent.

Plaintiffs' second amended complaint shall be filed fourteen days after the Court issues an order on the cross-motions for partial summary judgment on the alleged forgeries. Defendants shall answer or move to dismiss the second amended complaint fourteen days after it is filed. If Defendants intend to move to dismiss Plaintiffs' second amended complaint, those represented by the same counsel shall support their motion in a consolidated opening brief. Plaintiffs' opposition to the motions to dismiss shall be contained in a consolidated brief not to exceed forty-five pages filed fourteen days thereafter. Defendants may file their replies seven days after that. The motions will be decided on the papers, unless the Court sets a hearing.

As noted above, claims against the Merchant Services Companies, Moore, Roy and Walshe are cognizable. The Court extends the time these Defendants have to answer Plaintiffs' complaint. If this action is not dismissed for improper venue or transferred, these Defendants' answers shall be due fourteen days after the Court enters an order on any motion to dismiss the second amended complaint. These Defendants may not move to dismiss claims in Plaintiffs' second amended complaint that are identical to those alleged in Plaintiffs' current pleading.

The case management conference, previously scheduled for March 15, 2011, is reset for March 31, 2011.

IT IS SO ORDERED.

Dated: 11/29/2010