Opinion
Civil No. CV02-1688-MO.
January 20, 2005
OPINION AND ORDER
Plaintiffs bring several claims related to a franchise dispute with the defendants. The court addressed the relevant facts of this case in detail in its Opinions of September 7 and October 12, 2004, and familiarity with those facts is assumed for purposes of this Opinion. This court's Opinion and Order of September 7, 2004, held that plaintiffs' claims under the Oregon Franchise Act were time-barred by the Act's limitations provision. See 331 F. Supp. 2d 1269 (D. Or. Sept. 7, 2004). On October 12, 2004, the court dismissed as time-barred plaintiffs' special relationship and fraud claims, except to the extent plaintiffs could state such claims based on events occurring after December 13, 1999. See 339 F. Supp. 2d 1105 (D. Or. Oct. 12, 2004). The court likewise dismissed plaintiffs' RICO and ORICO claims, except to the extent plaintiffs could state a RICO claim based on events occurring after December 13, 1998. The court further directed the parties to submit briefing identifying any issues left for decision in light of the court's statute of limitations rulings, and invited plaintiffs to show whether they could state RICO, special relationship and fraud claims based on events occurring after the respective limitations periods.
Plaintiffs' subsequent briefing reveals that plaintiffs are unable to state RICO, special relationship, or fraud claims based on events occurring within the limitations period, and that there are no viable claims pending in the instant action. Accordingly, this action is dismissed in its entirety, with prejudice. All remaining motions are DENIED as moot.
I. Special Relationship, Fraud, and Conspiracy to Defraud claims
As noted in the court's October 12, 2004, Opinion, plaintiff's special relationship, fraud and conspiracy to defraud claims are viable only to the extent they are based on events occurring after December 13, 1999. The court directed plaintiffs to inform the court whether they can state any such claims based on events within this time period. In response, plaintiffs identify the following alleged events as falling within the limitations period:
• Defendants' continued dangerous promotion of Anthony Robbins' belief system;
• Plaintiffs' post-December 13, 1999, receipt of brochures boasting of Robbins' expertise regarding "the psychology of peak performance and personal, professional, and organizational turnaround;"
• December 1999, comments made by Robbins to a group of franchisees, including plaintiffs, assuring them that they could continue to run their franchises as they wished, and that Robbins would support them in doing so;
• a July 2002, voicemail from defendant Hunsaker acknowledging the Townes' customized franchise and representing that plaintiffs would not be held to minimum performance standards required under the Franchise Agreement;
• Defendants' refusal to allow plaintiffs to continue to operate the customized franchise, and the issuance of a notice of default based on performance credits, contrary to assurances of Robbins and Hunsaker.
None of the injuries or damages about which plaintiffs complain regarding the special relationship/fraud claims is causally related to any of the post-December 13, 1999, events plaintiffs identify as the bases for these claims. The injuries plaintiffs allege in their summary judgment briefing include:
• the Townes paying to attend Robbins' seminars and meetings;
• the Townes quitting their jobs;
• Cindy Towne closing her computer training business;
• the Townes forgoing other careers and education;
• the Townes' lost savings, earnings or credit;
• the Townes' loss of investment;
• psychological damage to the Townes; and
• mental anguish from the shattering of the Townes' belief system.
The only possible injury related to any of the post-December 13, 1999, conduct plaintiffs have identified appears to be that plaintiffs were not permitted to continue the customized franchise business, apparently in perpetuity, contrary to representations by Robbins and Hunsaker. This cannot serve as the basis for special relationship and fraud claims for several reasons.
First, the court has already determined that the renewal of the Franchise Agreement expired by its terms by August 2001. A necessary corollary to that finding is that plaintiffs had no right to operate the franchise beyond that date. The subsequent termination of the franchise therefore cannot constitute fraud or a breach of special relationship.
In addition, plaintiffs have not alleged, let alone substantiated, that Robbins and Hunsaker knew their representations were false at the time they made them, as is required for a claim of fraud under Oregon law. See, e.g., Maier v. Pacific Heritage Homes, Inc., 72 F. Supp. 2d 1184, 1197 (D.Or. 1999) ("[Plaintiff] has failed to produce any evidence that at the time [Defendant] allegedly made false representations . . . he did not intend to perform. . . . [M]ere nonperformance of a promise made, or the failure to carry out an intention expressed, in the course of negotiations, is neither fraud nor evidence of fraud.") (citing Cameron v. Edgemont Invest. Co., 136 Ore. 385 (1931)).
Finally, plaintiffs' claimed injury from being denied the right to continue to operate the franchise runs contrary to the repeated allegations at the heart of plaintiffs' complaint — to wit, that plaintiffs were duped into operating a failed franchise, which brought them financial ruin. Indeed, this financial loss from operating the franchise is among the specific injuries plaintiffs cite as stemming from their fraud and special relationship claims. Accordingly, plaintiffs cannot base these claims on alleged injuries incurred as a result of being precluded from continuing to operate the same failed franchise.
Plaintiffs' special relationship and fraud claims are time-barred in their entirety.
II. RICO
Plaintiffs identify the following alleged events as post-December 13, 1998, facts supporting their RICO claim:
• December 1999, comments made by Robbins to a group of franchisees, including plaintiffs, assuring them that they could continue to run their franchises as they wished, and that Robbins would support them in doing so;
• a July 31, 2001, letter from Mr. Hunsaker to Mr. Towne referencing a $3,000 renewal fee not mentioned in the Franchise Agreement or in Robbins' 1999 comments;
• a January 28, 2002, letter from Mr. Hunsaker to plaintiffs accompanying a Renewal Agreement that included a unilateral release provision and that did not provide for continuation of the franchise in accordance with Robbins' 1999 representations;
• a July 2002, voicemail from Mr. Hunsaker to plaintiffs acknowledging the existence of the customized franchise;
• an August 12, 2002, letter from defendant Hunsaker to plaintiff Bob Towne stating "keep up the good work. Look forward to continued achievement in the Q3 2002;"
• an August 30, 2002, phone call from Mr. Hunsaker to Mr. Towne pressuring Mr. Towne to sign the renewal agreement;
• a November 13, 2002, Notice of Default sent by Mr. Hunsaker to plaintiffs, contrary to prior assurances by Robbins and Hunsaker that plaintiffs could continue to operate the modified franchise without regard to minimum performance standards.
Plaintiffs argue these facts may form the basis of a viable RICO claim within the limitations period based on the "separate accrual rule." That rule provides that "a cause of action accrues when new overt acts occur within the limitations period, even if a conspiracy was formed and other acts were committed outside the limitations period." Grimmett v. Brown, 75 F.3d 506, 512 (9th Cir. 1996). However, the facts alleged by plaintiffs fail to meet the requirements that an overt act sufficient to restart the statute of limitations "must be a new and independent act that is not merely a reaffirmation of a previous act; and . . . must inflict new and accumulating injury on the plaintiff." Id. at 513 (emphasis in original).
Plaintiffs' purportedly new and independent acts and injuries arose from the same time-barred scheme. Id. at 514 (rejecting acts as "new and independent" where they were part of the same scheme, and the claimed injuries were identical to those alleged prior to that time). Indeed, plaintiffs' complaint repeatedly alleges that the above acts were perpetrated "in furtherance of the Scheme."
Moreover, plaintiffs identify no new injury caused by the alleged acts. See, e.g., Klehr v. A.O. Smith Corp., 521 U.S. 179, 180 (1997) ("the plaintiff cannot use an independent, new predicate act as a bootstrap to recover for injuries caused by other earlier predicate acts that took place outside the limitations period."). From plaintiffs' submissions, the only possibilities include: (1) that the Townes continued to pay royalties to operate their franchise; and (2) that the defendants eventually wrongfully terminated the franchise. The continued payment of royalties cannot serve as a new injury under the separate accrual rule because it constitutes merely "[t]he same injuries resulting from the same policies continuing into the limitations period." Sasser v. Amen, 2001 U.S. Dist. LEXIS 9469, *26 (N.D. Ca. 2001); see also In re Merrill Lynch, 154 F.3d 56, 59-60 (2nd Cir. 1998) (rejecting plaintiff's separate accrual claim where the scheme was alleged to be fraudulent at the outset, and collection of fees into the limitations period did not create new injuries).
As for wrongful termination of the franchise, the court has already determined that the franchise expired by its terms by August 2001. Moreover, as noted above, plaintiffs' claim of injury from not being allowed to continue the franchise contradicts the central allegations of plaintiffs' complaint — i.e., that they were duped into operating a franchise dedicated to promoting Mr. Robbins' "quackery," resulting in plaintiffs' financial and emotional ruin.
Plaintiffs have failed to establish that they can rest their RICO claims on events occurring after December 13, 1998. Accordingly, this claim is dismissed.
III. Declaratory Judgment Count
Under this count of the Third Amended Complaint ("TAC"), plaintiffs seek a declaratory judgment precluding defendants from denying that the Franchise Agreement was amended and modified to permit the plaintiffs' continuation of the customized franchise. In the context of its declaratory judgment count, plaintiffs allege (1) breach of express contract implied-in-fact contract; (2) breach of implied covenant of good faith and fair dealing; and (3) promissory estoppel. Each of these claims rests on the premise that plaintiffs had a right to continue to operate their franchise after August 2001. Because the court has already determined that the renewal of the Franchise Agreement expired by its terms by that date, the court's prior rulings effectively dispose of these claims.
IV. Conspiracy and aiding and abetting
In support of their assertion that plaintiffs have pled claims for conspiracy and aiding and abetting, plaintiffs point to paragraphs found in the TAC under the RICO and common law fraud counts. These "claims" have no independent standing. See, e.g., Beck v. Prupis, 529 U.S. 494, 502-505 (2000) ("a plaintiff could bring suit for civil conspiracy only if he had been injured by an act that was itself tortious"); Levin v. Tiber Holding Corp., 277 F.3d 243, 250-251 (2nd Cir. 2002) ("[t]he elements necessary to prove aiding and abetting . . . [include] the commission of the underlying offense by someone") (emphasis in original; internal quotation omitted). Since the RICO and fraud counts are dismissed, there is no actionable conduct for defendants to have aided or abetted, or to have conspired to effectuate. Even if these could be independent claims, these scattered paragraphs in plaintiffs' 102-page, 238-paragraph complaint are insufficient to put defendants on notice that plaintiffs had pled these as separate claims. See, e.g., Fed.R.Civ.P. 8(a) (requiring a "short and plain statement of the claim"); Garst v. Lockheed, 328 F.3d 374, 378 (7th Cir. 2003) (adverse parties and judges are not required "to fish a gold coin from a bucket of mud" to ascertain the nature of the claims plaintiff seeks to plead). Accordingly, in light of the court's prior rulings, the plaintiffs cannot state claims for conspiracy and aiding and abetting.
V. Alter ego
As the basis for their assertion that the TAC pleads a claim for "alter ego," plaintiffs point to a paragraph in the TAC under the RICO count, as well as a paragraph under the heading "Injuries, Damages and Relief in Addition to the Declaratory Relief Above." As a threshold matter, these scattered paragraphs in a 238-paragraph complaint are insufficient to put defendants on notice of any such claim. More substantively, as with the aiding and abetting "claim," alter ego is not a stand-alone claim, but is a means of obtaining relief for the wrongful conduct of a corporate entity from parties otherwise shielded by the corporate veil. See, e.g., Peacock v. Thomas, 516 U.S. 349, 354 (no independent veil-piercing cause of action); 1 C. KEATING G. O'GRADNEY, FLETCHER CYCLOPEDIA OF PRIVATE CORPORATIONS § 41, p. 603 (perm. ed. 1990) (alter ego is not an independent cause of action, "but rather is a means of imposing liability on an underlying cause of action."). Since there is no actionable wrong that survives summary judgment, alter ego has no remaining application to the case at bar.
VI. Intentional infliction of emotional distress
Plaintiffs attempt to construct an intentional infliction of emotional distress claim from various paragraphs scattered throughout the TAC — specifically, paragraphs in the fraud, RICO, and declaratory judgment counts that allege plaintiffs suffered mental anguish as a result of the fraud perpetrated upon them. The TAC states no separate claim for intentional infliction, and the vague allegations scattered throughout this lengthy complaint are not sufficient to put defendants on notice of any such claim. There is no claim for intentional infliction of emotional distress in the instant action.
VII. Intentional interference with business
One paragraph of the TAC refers to "intentional interference with the Townes' business" as an injury plaintiffs allegedly suffered as a result of defendants' wrongful conduct. The TAC does not assert intentional interference with business as a claim for relief, nor does it put defendants on notice of any such independent claim. In any event, to the extent plaintiff's proposed intentional interference with business claim is based on defendants' alleged frustration of plaintiffs' right to continue to operate the franchise beyond August, 2001, the court has already held that plaintiffs possessed no such right. Accordingly, there is no claim for intentional interference with business in the current action. VIII. Conclusion
For the reasons stated above, there are no remaining claims in the instant action. Accordingly, this action is dismissed in its entirety, with prejudice. All remaining motions are DENIED as moot, including plaintiff's request for arbitration.
IT IS SO ORDERED.