Opinion
CV-01-105-ST
July 25, 2001
OPINION AND ORDER
INTRODUCTION
Plaintiffs Pierre and Sandrine Arboireau moved from France to Portland, Oregon, in January 2000 so that Pierre Arboireau could work for defendants as the "Head of Worldwide Footwear Costing." Less than six months after relocating, however, Pierre Arboireau was discharged and the Arboireaus had to return to France. They now bring numerous claims against defendants adidas- Salomon AG ("adidas AG") and adidas America, Inc. ("adidas America").
They allege claims for misrepresentation against both defendants (First Claim for Relief); breach of contract against only adidas America (Second Claim for Relief); breach of the covenant of good faith and fair dealing against both defendants (Third Claim for Relief); promissory estoppel against both defendants (Fourth Claim for Relief); tortious breach of the covenant of good faith and fair dealing against both defendants (Fifth Claim for Relief); interference with economic advantage against only adidas America (Sixth Claim for Relief); violation of ORS 166.720(3) ("ORICO") against only adidas America (Seventh Claim for Relief); and violation of 18 U.S.C. § 1962(c) ("RICO") against only adidas America (Eighth Claim for Relief). This court has federal question jurisdiction over the RICO claim under 28 U.S.C. § 1331, diversity jurisdiction under 28 U.S.C. § 1332, and supplemental jurisdiction over the state law claims under 28 U.S.C. § 1367. All parties have consented to allow a Magistrate Judge to enter final orders and judgment in this case in accordance with FRCP 73 and 28 U.S.C. § 636(c). Now before the court is defendants' Motion to Dismiss plaintiffs' misrepresentation, ORICO, and RICO claims (First, Seventh, and Eighth Claims for Relief, respectively) (docket #17) for failure to plead fraud with sufficient particularity. For the reasons set forth below, that motion is granted.
STANDARDS
Federal Rule of Civil Procedure ("FRCP") 12(b)(6) provides in part:
Every defense, in law or fact, to a claim for relief in any pleading, whether a claim, counterclaim, cross-claim, or third-party claim, shall be asserted in the responsive pleading thereto if one is required, except that the following defenses may at the option of the pleader be made by motion . . . (6) failure to state a claim upon which relief can be granted.
A motion to dismiss under FRCP 12(b)(6) will be granted only if it appears beyond doubt that the claimant can prove no set of facts which would entitle him to relief. See Conley v. Gibson, 355 U.S. 41, 45 (1957); Allwaste, Inc. v. Hecht, 65 F.3d 1523, 1527 (9th Cir 1995); Parks Sch. of Bus., Inc. v. Symington, 51 F.3d 1480, 1484 (9th Cir 1995). "The issue is not whether [the claimant] will ultimately prevail but whether the [claimant] is entitled to offer evidence to support the claims." Scheuer v. Rhodes, 416 U.S. 232, 236 (1974). Thus, the review is limited to the complaint [or counterclaim], and all allegations of material fact are taken as true and viewed in the light most favorable to the nonmovant. Buckey v. County of Los Angeles, 968 F.2d 791, 794 (9th Cir), cert denied, 506 U.S. 999 (1992); Love v. United States, 915 F.2d 1242, 1245 (9th Cir 1989).
ALLEGATIONS
In 1997, adidas AG acquired Salomon SA ("Salomon"), located in France. Complaint, ¶ 4. This made adidas AG the second largest manufacturer of sports equipment in the world. Id. In 1999, the position known as "Head of Worldwide Footwear Costing" became vacant. Id, ¶ 5. This position was located in Portland and the employer was adidas America. Id. It required global travel and interaction with all adidas America subsidiaries involved in producing and sourcing footwear. Id. Defendants recruited Pierre Arboireau, who worked for Salomon in France, for this position. Id. They knew that if Pierre Arboireau accepted the position as Head of Worldwide Footwear Costing, he and his wife, Sandrine Arboireau (who also worked for Salomon), would need to leave their employment and move to the United States. Id. In order to induce the Arboireaus to leave their employment at Salomon and accept the new position in Oregon, defendants made numerous representations, including: (1) the new position would entail valuable experience and would enhance Pierre Arboireau's career development; (2) the position would last for three years; (3) after the three years, Pierre Arboireau could return to his employment with Salomon; (4) Pierre Arboireau could expect to be employed in the United States for three years; (5) Pierre Arboireau would be a valuable contributor to adidas AG's plan to increase market share and profitability in the United States; (6) plaintiffs and their children would benefit from living in a foreign culture for three years; and (7) adidas America would sponsor plaintiffs and obtain a visa permitting employment and a three year residence in the United States. Id, ¶ 6.
Adidas America also made certain material representations in order to induce the Arboireaus to move to the United States: (1) the document attached as Exhibit A to the Complaint did not, contrary to its terms, set forth the true terms of Pierre Arboireau's employment; (2) Pierre Arboireau was required to sign Exhibit A in order to obtain a visa; and (3) a different document, reflecting the true terms of employment with adidas America, would be signed when Pierre Arboireau came to the United States. Id, ¶ 7.
In addition to above described misrepresentations, defendants knew or should have known the following facts and failed to disclose them to the Arboireaus: (1) moving the Head of Costing position to Germany was a material subject under their consideration; (2) filling the Head of Costing position in Portland was a "stop-gap" measure; (3) there was no reason to believe that Pierre Arboireau would hold the position for three years or that the position would not be moved to Germany at any time; (4) the operational structure and job positions with adidas America, particularly those connected with the international division, were volatile, unstable, and uncertain; and (5) defendants believed that Pierre Arboireau could be terminated at any time and without any cause. Id, ¶ 8. Defendants made similar representations to the United States government, knowing that the government would rely on these representations in determining whether to issue a visa to the Arboireaus. Id, ¶ 9.
In reliance on the representations made by defendants, the Arboireaus relinquished their positions at Salomon and moved with their two children to Portland, Oregon, in or about January 2000. Id, ¶ 10. Shortly thereafter, Pierre Arboireau learned of pressure to move the Head of Costing position to Germany. Id, ¶ 13. Adidas America reassured him, however, that there were no plans to move the position to Germany, that he was well-qualified, and that he was performing satisfactorily. Id. The Arboireaus relied on these additional representations and made further financial and emotional investments in their new home. Id.
Despite the above representations, less than six months after moving to the United States, defendants discharged Pierre Arboireau and moved the Head of Costing position to Germany. Id, ¶ 14. The family's visa then expired and they returned to France. Id. Sandrine Arboireau was unable to return to her former position with Salomon, which was no longer vacant. Id.
DISCUSSION
Defendants seek dismissal of the fraud-based claims (First, Seventh, and Eighth Claims for Relief) because plaintiffs have failed to plead the fraud allegations with the particularity required by Federal Rule of Civil Procedure ("FRCP") 9(b). In the alternative, defendants want plaintiffs to replead their fraud allegations with greater particularity.
I. Legal Standard
FRCP 9(b) requires that "[i]n all averments of fraud or mistake, the circumstances constituting the fraud or mistake shall be stated with particularity. Malice, intent, knowledge, and other condition of mind of a person may be averred generally." The Ninth Circuit has explained that:
Rule 9(b) serves not only to give notice to defendants of the specific fraudulent conduct against which they must defend but also "to deter the filing of complaints as a pretext for the discovery of unknown wrongs, to protect [defendants] from the harm that comes from being subject to fraud charges, and to prohibit plaintiffs from unilaterally imposing upon the court, the parties and society the enormous social and economic costs absent some factual basis."
Bly-Magee v. California, 236 F.3d 1014, 1018 (9th Cir 2001), quoting In re Stac Elec. Sec. Litig., 89 F.3d 1399, 1405 (9th Cir 1996).
FRCP 9(b) imposes a burden beyond FRCP 8(a)'s pleading requirement that the plaintiff need only give the defendant fair notice of its claim. Instead, FRCP 9(b) requires particularized allegations of the circumstances constituting fraud. Miscellaneous Serv. Workers v. Philco-Ford Corp., 661 F.2d 776, 782 (9th Cir 1981) (the pleader must state the "specific content of the false representations as well as the identities of the parties to the misrepresentations").
FRCP 9(b) applies equally to RICO claims. Moore v. Kayport Package Express, Inc., 885 F.2d 531, 541 (9th Cir 1989). Allegations of fraud which form the basis of a RICO claim must "identify the time, place, and manner of each fraud plus the role of each defendant in each scheme." Id. Federal courts interpret ORICO consistently with RICO. Schneitzer v. Oppenheimer, 633 F. Supp. 92, 99 (D Or 1985). Therefore, both the RICO and ORICO claims must comply with FRCP 9(b).
In order to state a claim under 18 U.S.C. § 1962(a), (b) and (c), a plaintiff must plead facts establishing: (1) that the defendant; (2) through the commission of predicate criminal acts which constitute a pattern of racketeering activity; (3) directly or indirectly invests in, or maintains an interest in, or participates in; (4) an enterprise. Sebastien Intl. v. Russolillo, 128 F. Supp.2d 630, 634 (C.D. Cal 2001) (citations omitted). Of course, the real question here is whether plaintiffs have adequately alleged predicate acts of fraud.
The plaintiff must set forth an explanation as to why the statement or omission complained of was false or misleading. In re Glenfed, Inc. Secur. Litig., 42 F.3d 1541, 1548 (9th Cir 1994). Furthermore, "[w]hile mere conclusory allegations of fraud are insufficient, statements of the time, place, and nature of the alleged fraudulent activities are sufficient." Wool v. Tandem Computers, Inc., 818 F.2d 1433, 1439 (9th Cir 1987), citing Semegen v. Weidner, 780 F.2d 727, 735 (9th Cir 1985). Ultimately, a pleading is sufficient under FRCP 9(b) if it identifies the circumstances constituting fraud so that a defendant can prepare an adequate answer from the allegations. Id.
II. Analysis
The Complaint alleges that defendants made numerous representations to induce the Arboireaus to move to the United States and also failed to disclose certain material facts known only to defendants (such as information that the position at issue might be moved to Germany at any time). However, the Complaint does not identify with specificity the details of such inducements such as the time, place, or manner in which these statements were rendered. Significantly, plaintiffs also fail to identify the source of such misrepresentations.
Paragraphs 6 and 8 of the Complaint, for example, allege that "defendants" made a number of misrepresentations or failed to disclose material facts. Plaintiffs do not identify which defendant, adidas AG or adidas America, is responsible for which alleged statement or material omission. More specifically, the Complaint does not name any individual or group of individuals at either adidas AG or adidas America who may have made such misrepresentations or omissions or to which plaintiff they were made. Furthermore, these allegations do not detail the time, place, or manner in which the alleged misstatements were made. Paragraph 7, as paragraphs 6 and 8, also fails to specify the time, place, and manner of the alleged misrepresentations. Again, the Arboireaus fail to identify any particular person who may have made the representations.
Since defendants have obtained some discovery, including depositions of the Arboireaus, they now know many of these details omitted from the Complaint. Nevertheless, defendants are entitled to an amendment of the Complaint to comply with FRCP 9 for the purposes of completing discovery and filing dispositive motions.
The Arboireaus' RICO and ORICO claims suffer from the same flaw. The RICO claim alleges that adidas America "placed Exhibit A and other documents in the United States Mail[,]" "transmitted communications to Salomon by means of wire in foreign commerce[,]" and "sponsored and obtained a visa for plaintiffs' residence and employment in the United States, knowing that it was procured by fraud." Complaint, ¶ 54. The ORICO claim alleges that adidas America "obtained the signatures of plaintiffs and of agents of the United States government, on written instruments, by knowingly misrepresenting the facts alleged in paragraph 7." Id, ¶ 50.
These allegations refer generally to documents, communications, and written instruments, but more is needed to specify the predicate acts underlying these claims. At a minimum, the Arboireaus must identify the particular documents, communications, and written instruments required to constitute the requisite number of predicate acts. Moreover, these allegations do not "attribute specific conduct to individual defendants." See Moore, 885 F.2d at 541. As in Moore, these allegations do not specify the time or place of the alleged wrongful conduct. Certainly, as plaintiffs point out, their pleadings are more specific than those in Moore, but still fail the requisite pleading requirement. "'Allegations of fraud under section 1962(c) 'must identify the time, place, and manner of each fraud plus the role of each defendant in each scheme.'" Id (quotations omitted).
Plaintiffs argue that they should not be held to the letter of FRCP 9(b), pointing to Wool, in which the Ninth Circuit relaxed the pleading requirements when the corporate defendant had all the information it needed within its grasp and the plaintiff was without the information needed for pleading with specificity. Wool entailed a fairly discrete situation, however. First, it found that the plaintiff's pleadings based on "information and belief" satisfied FRCP 9(b) because "in cases of corporate fraud, the plaintiffs cannot be expected to have personal knowledge of the facts constituting the wrongdoing'" Wool, 818 F.2d at 1439, quoting Zatkin v. Primuth, 551 F. Supp. 39, 42 (S.D. Cal 1982). Second, the Ninth Circuit found that the plaintiff's pleadings sufficient even though they did not identify by name the particular corporate officers involved: "In cases of corporate fraud where the false or misleading information is conveyed in prospectuses, registration statements annual reports, press releases, or other 'group-published information,' it is reasonable to presume that these are the collective actions of the officers." Id at 1440 (citations omitted).
Here, in contrast, the Arboireaus are in possession of the information they need to satisfy FRCP 9(b). They undoubtedly know who made the alleged representations to them and in what manner and should be able to approximate when those alleged misrepresentations took place. Unlike the plaintiffs in Wool, the Arboireaus are capable of meeting FRCP 9(b)'s pleading requirements and must do so.
III. Conclusion
In sum, the allegations in the Complaint, while sufficient under FRCP 8(a)'s pleading requirement that a plaintiff need only give a defendant fair notice of its claim, fail to satisfy the heightened pleading requirement of FRCP 9(b).
Because the Arboireaus are willing and able to replead with more specificity, the First, Seventh, and Eighth Claims of the Complaint are dismissed with leave to replead.
ORDER
Defendants' Motion to Dismiss (docket #17) is granted with leave to replead. The Amended Complaint shall be filed no later than August 23, 2001.