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Great American Insurance Co. v. Linderman

United States District Court, D. Oregon, Portland Division

July 15, 2015

GREAT AMERICAN INSURANCE COMPANY, an Ohio Corporation, Plaintiff,
v.
MATTHEW LINDERMAN and RAQUEL LINDERMAN, husband and wife; JEFF WALDIEN, an individual; PRECISION MOBILE INTEGRATION, LLC, an Oregon Limited Liability Company; and J. WALDIEN DESIGNS, an Oregon Limited Liability Company, Defendants

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For Great American Insurance Group, an Ohio Corporation, Plaintiff: Ryan J. Hall, LEAD ATTORNEY, Cole Wathen Leid Hall PC, Seattle, WA.

For Matthew Linderman, husband, Raquel Linderman, wife, Defendants: Bridget M. Donegan, LEAD ATTORNEY, Larkins Vacura, Portland, OR; Julie R. Vacura, Larkins Vacura, LLP, Portland, OR.

For Precision Mobile Integration, LLC, an Oregon Limited Liability Company, Jeffery Waldien, an individual, J. Waldien Designs, an Oregon Limited Liability Company, Defendants: Kevin M. Sali, LEAD ATTORNEY, Kevin Sali LLC, Lake Oswego, OR.

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OPINION AND ORDER

MICHAEL W. MOSMAN, United States District Judge.

Plaintiff Great American Insurance Co. (" Great American" ) brought this action against Defendants Matthew Linderman and Racquel Linderman, husband and wife (collectively, " the Lindermans" ); and Jeff Waldien, along with two companies listing Mr. Waldien as registered agent, Precision Mobile Integration, LLC (" PMI" ) and J. Waldien Designs (" JWD" ) (collectively, " the Waldien defendants" ). Great American asserted seven claims against all defendants: (1) common-law conversion; (2) theft pursuant to Oregon Revised Statute § 164.015; (3) theft by deception pursuant to Oregon Revised Statute § 164.085; (4) violation of the Oregon Racketeer Influenced and Corrupt Organization Act (" ORICO" ), Or. Rev. Stat. § 166.715; (5) common-law civil fraud; (6) unjust enrichment pursuant to Oregon Revised Statute § 646.465; and (7) fraudulent and illegal conduct such that the corporate veil of PMI and JWD should be pierced. The complaint invokes this Court's jurisdiction under 28 U.S.C. § 1332.

The Lindermans filed a Motion to Dismiss all claims against Ms. Linderman and claims two, three, four, five, and seven against Mr. Linderman [13]. The Waldien defendants filed a Motion to Dismiss all claims [26].

For the reasons explained below, I GRANT all motions and dismiss Great American's complaint. With respect to all defendants, the following claims are DISMISSED WITH PREJUDICE: (1) common-law conversion, (2) theft pursuant to

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§ 164.015, and (3) theft by deception pursuant to § 164.085. With respect to all defendants, the following claims are DISMISSED WITH LEAVE TO AMEND: (1) violation of ORICO, (2) common-law civil fraud, (3) unjust enrichment, and (4) conduct such that the corporate veil of PMI and JWD should be pierced.

BACKGROUND

Great American is an insurance company that paid a claim to compensate its insured for damages it alleges the defendants in this case caused. Great American insured Trimble Navigation Limited, Inc. (" Trimble" ) against mercantile crime. Pl.'s 1st Am. Compl. [5] at ¶ 3.1-3.3. In November 2014, Trimble submitted a claim to Great American for $2,268,471.54. Id. at ¶ 3.33. Great American paid $1,333,873.20 on the claim. Id. at ¶ 3.34. Trimble assigned to Great American its rights against the defendants. Id. at ¶ 3.35.

Trimble provides global positioning equipment and software to businesses, including logging operations in Oregon. Id. at ¶ ¶ 3.1, 3.5. Trimble's project in Oregon was called " Blue Ox." Trimble hired Mr. Linderman in 2008 and later promoted him to be its business area manager.[1] Id. at ¶ 3.7. Mr. Linderman served in this capacity until Trimble fired him in March 2013. Id. at ¶ 3.21.

Great American alleges that Mr. Linderman formed PMI in 2009 to provide services and equipment to Trimble. Id. at ¶ 3.8. The complaint then alleges that Mr. Linderman established PMI as a Trimble vendor without disclosing to Trimble that he owned PMI. Id. at ¶ ¶ 3.10-3.11. The complaint also alleges that JWD was " set up to do business with Trimble by [Mr.] Linderman." Id. at ¶ 3.12. Though " set up" by Mr. Linderman, JWD was owned by Mr. Waldien, who was an acquaintance and PMI employee of Mr. Linderman. Id. at ¶ 3.9, 3.12.

Great American alleges that PMI and JWD over-billed Trimble for services and goods. According to the complaint, " PMI invoicing routinely included unusually high quantities of Blue Ox brackets." Id. at ¶ 3.24. PMI also allegedly " routinely noted miles driven that were not actually driven," " routinely overbilled for truck installs, or billed for installs which actually did not occur," and " routinely failed to return inventory items to Trimble forestry while claiming invoice offsets for the same." Id. at ¶ ¶ 3.24-3.27. For its part, JWD is alleged to have " routinely billed Trimble for design and marketing services that were either not provided or significantly overcharged." Id. at ¶ 3.29. The complaint alleges that Trimble overpaid PMI by at least $226,104.38 and overpaid JWD by at least $822,562.00. Id. at ¶ ¶ 3.31-3.32.

The complaint alleges that Mr. Linderman had approval responsibility over invoices issued by PMI and JWD, though the complaint does not specify whether it refers to Mr. Linderman's approval of PMI's and JWD's issuance of invoices or Trimble's payment of the invoices. The complaint alleges that " [a]ll invoices submitted by the defendant vendors PMI and JWD were within [Mr.] Linderman's approval authority of $25,000 per invoice," " [Mr.] Linderman was the sole individual responsible for approving PMI and JWD's invoices," " [Mr.] Linderman was the sole individual responsible for verifying receipt of goods and services from PMI and

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JWD," and " [Mr.] Linderman was also the only contact person for PMI and JWD correspondence with [Mr.] Waldien." Id. at ¶ ¶ 3.13-3.16. The complaint also alleges that when Trimble managers questioned Mr. Linderman about " large expenses from PMI and JWD," Mr. Linderman provided " inaccurate and misleading responses." Id. at ¶ ¶ 3.19-3.20.

The complaint alleges that Mr. Waldien owned JWD, that he was an employee of PMI, and that he " assisted in the operations of both vendors." Id. at ¶ ¶ 3.9, 3.12, 3.23. The complaint also alleges that Mr. Waldien benefitted personally from his relationship with the vendors. Id. at P 3.30.

The complaint's only allegations regarding Ms. Linderman are that she is married to Mr. Linderman and that she " endorsed at least one PMI check." Id. at ¶ ¶ 1.2, 3.28.

DISCUSSION

I. Legal Standard

Federal Rule of Civil Procedure 8 requires that complaints in federal court consist of " a short and plain statement of the claim showing that the pleader is entitled to relief...." Pleadings need not contain detailed factual allegations, but the plaintiff must provide more than " labels and conclusions, and a formulaic recitation of the elements of a cause of action...." Bell A. Corp. v. Twombly, 550 U.S. 544, 545, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007).

On a motion for failure to state a claim, the court is limited in the evidence it may consider. Am. Family Ass'n, Inc. v. City & County of S.F., 277 F.3d 1114, 1120 (9th Cir. 2002). The court may consider the pleadings themselves, exhibits that are physically attached to the complaint, and matters of which the court may take judicial notice. Lee v. City of L.A., 250 F.3d 668, 688 (9th Cir. 2001). For all other factual matters, the court must assume all allegations in the complaint are true and draw all " reasonable inferences in favor of the nonmoving party." Holden v. Hagopian, 978 F.2d 1115, 1118 (9th Cir. 1992).

Federal Rule of Civil Procedure 9(b) applies a heightened particularity requirement to pleadings of fraud or mistake. Although state law defines the elements of a claim in a diversity case, the Federal Rules of Civil Procedure govern the manner in which claims are pleaded. Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1102 (citing Hanna v. Plumer, 380 U.S. 460, 85 S.Ct. 1136, 14 L.Ed.2d 8 (1965) (" The Federal Rules of Civil Procedure apply irrespective of the source of subject matter jurisdiction, and irrespective of whether the substantive law at issue is state or federal." ). State law claims sounding in fraud must be pleaded with particularity. Id. at 1103 (" It is established law, in this circuit and elsewhere, that Rule 9(b)'s particularity requirement applies to state-law causes of action." ); see also Moore v. Brewster, 96 F.3d 1240, 1245 (9th Cir. 1996) (superseded by statute on other grounds). Rule 9(b) " requires more specificity including an account of the 'time, place, and specific content of the false representations as well as the identities of the parties to the false representations as well as the identities of the parties to the misrepresentations.'" Swartz v. KPMG LLP, 476 F.3d 756, 764 (9th Cir. 2007) (citing Edwards v. Marin Park, Inc., 356 F.3d 1058, 1066 (9th Cir. 2004)). The Rule 9(b) particularity requirement is designed " to assure that the charge of fraud is responsible and supported, rather than defamatory and extortionate." Ackerman v. Nw. Mutual Life Ins. Co., 172 F.3d 467, 469 (7th Cir. 1999).

II. Conversion Claim

Great American's first claim is titled " Common law conversion." Pl.'s 1st Am. Compl. [5] at ¶ ¶ 4.1-4.6. The Waldien defendants

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moved for dismissal of this claim. Mot. to Dismiss by Defs. Jeff Waldien, et. al. (" Waldien Mot." ) [26] at 4-6. The Lindermans did not move for dismissal of this specific claim, but did move for dismissal of all claims against Ms. Linderman.

A. The Requirement of a Chattel

The Waldien defendants cite Rice v. Rabb, 354 Or. 721, 320 P.3d 554 (Or. 2014), for a definition of conversion. That case holds that " [c]onversion is an intentional exercise of dominion or control over a chattel which so seriously interferes with the right of another to control it that the actor may justly be required to pay the other the full value of the chattel." Id. at 556, n. 4 (quoting Mustola v. Toddy, 253 Or. 658, 456 P.2d 1004, 1007 (Or. 1969)) (quoting, in turn, Restatement (Second) of Torts § 222A(1) (1965)). The Waldien defendants argue that a dispute over a chattel is a threshold requirement for a conversion claim and that no chattel is at issue here.

The Waldien defendants argue that a conversion claim requires physically identifiable money, not just an identified amount of money. They rely on Gray v. Liberty National Life Insurance Company, 623 So.2d 1156 (Ala. 1993). The court in that case wrote:

[a]n action alleging conversion of cash lies only where the money involved is 'earmarked' or is specific money capable of identification, e.g. money in a bag, coins or notes that have been entrusted to the defendant's care, or funds that have otherwise been sequestered, and where there is an obligation to keep ...

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