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Puri v. Khalsa

United States District Court, D. Oregon, Portland Division

October 8, 2017

BIBIJIINDERJIT KAUR PURI; RANBIR SINGH BHAI; KAMALJ1T KAUR KOHLI; KULBIR SINGH PURI, Plaintiffs,
v.
SOPURKH KAUR KHALSA; PERAIM KAUR KHALSA; SIRI RAM KAUR KHALSA; KARTAR SINGH KHALSA; KARAM SINGH KHALSA; SIRI KARM KAUR KHALSA; ROY LAMBERT; SCHWABE, WILLIAMSON & WYATT, an Oregon Professional Corporation; LEWIS M. HOROWITZ; LANE POWELL PC, an Oregon Professional Corporation; UNTO INFINITY, LLC, an Oregon Limited Liability Company; SIRI SINGH SAHIB CORPORATION, an Oregon non-profit corporation; GURUDHAN SINGH KHALSA; GURU HARI SINGH KHALSA; AJEET SINGH KHALSA; EWTC MANAGEMENT, LLC; DOES, 1-5, Defendants.

          OPINION AND ORDER

          MICHAEL W. MOSMAN CHIEF UNITED STATES DISTRICT JUDGE

         This matter comes before me on Defendants' five Motions to Dismiss the Second Amended Complaint ("SAC"). [245, 247, 249, 250, 257], For the reasons below, I GRANT in part and DENY in part the Motion to Dismiss or in the Alternative Motion to Strike [245] filed by Defendants Kartar Singh Khalsa, Sopurkh Kaur Khalsa, Unto Infinity, LLC ("UI"), Siri Karm Kaur Khalsa, Peraim Kaur Khalsa, Siri Singh Sahib Corporation ("SSSC"), and Karam Singh Khalsa; GRANT the Motion to Dismiss [247] filed by Defendants Lewis Horowitz and Lane Powell; GRANT the Motion to Dismiss [249] filed by Defendant Siri Ram Kaur Khalsa; GRANT the Motion to Dismiss [250] filed by Defendants Schwabe, Williamson & Wyatt ("Schwabe") and Roy Lambert; and GRANT the Motion to Dismiss [257] filed by Defendants Gurudhan Singh Khalsa, EWTC Management, LLC ("EWTC"), Guru Hari Singh Khalsa, and Ajeet Singh Khalsa.

         BACKGROUND

         After this Court granted Defendants' Motions to Dismiss the First Amended Complaint ("FAC")[1] [215, 220], the Ninth Circuit affirmed in part, vacated in part, and remanded. In a published opinion, the Ninth Circuit concluded that dismissal pursuant to the ministerial exception was not warranted and that this Court could address Plaintiffs' claims without violating the First Amendment. Puri v. Khalsa, 844 F.3d 1152 (9th Cir. 2017). In an accompanying unpublished memorandum disposition, the Ninth Circuit: (1) affirmed the dismissal with prejudice of all derivative claims; (2) ordered this Court to dismiss without prejudice Plaintiffs' fraud claim against all Defendants other than Sopurkh, Kartar, Lambert, and Schwabe for failure to plead fraud with particularity; (3) affirmed the dismissal with prejudice of Plaintiffs' claim for negligent misrepresentation as to Lane Powell and Horowitz and ordered this Court to dismiss without prejudice as to the other Defendants for failure to plead fraud with particularity; (4) ordered this Court to dismiss without prejudice Plaintiffs' claim for tortious interference with prospective economic advantage for failure to plead fraud with particularity, as to all defendants other than Sopurkh[2], Lambert, and Schwabe; (5) ordered this Court to dismiss without prejudice Plaintiffs' RICO/ORICO claim for failure to plead fraud with particularity, as to all defendants other than Sopurkh, Lambert, and Schwabe.[3] Puri v. Khalsa, 674 Fed.Appx. 679 (9th Cir. 2017).

         In the Second Amended Complaint ("SAC"), Plaintiffs bring five claims: (1) Claim One for declaratory relief (Claim One in the FAC); (2) Claim Two for fraud (Claim Three in the FAC); (3) Claim Three for negligent misrepresentation (Claim Four in the FAC); (4) Claim Four for tortious interference with prospective economic advantage (Claim Five in the FAC); and (5) Claim Five for RICO/ORICO (Claim Eight in the FAC). SAC [234].[4] In the SAC, Plaintiffs added four Defendants: Gurudhan, Hari, Ajeet, and ETWC Management, LLC. SAC [234].

         Defendants Kartar, Sopurkh, UI, Kami, Peraim, SSSC, and Karam filed a Motion to Dismiss [245], arguing the Court should dismiss Claim One for declaratory relief, or in the alternative, strike the derivative requests for relief; dismiss Claim Two for fraud as to each of these Defendants other than Sopurkh and Kartar; dismiss Claim Three for negligent misrepresentation as to each of these Defendants; dismiss Claim Four for tortious interference with prospective economic advantage as to each of these Defendants other than Sopurkh; and dismiss Claim Five for RICO/ORICO as to each of these Defendants. [245]. The Motion to Dismiss filed by Lambert and Schwabe [250] argues the derivative claims and the ORICO/RICO claims should be dismissed as to both of these Defendants and that the claims against Schwabe for declaratory relief and negligent misrepresentation as to Plaintiffs Ranbir, Kamaljit, and Kulbi should also be dismissed. [250], The Motions to Dismiss filed by Defendants Horowitz and Lane Powell [247], Ram [249], and by Gurudhan, Hari, Ajeet, and ETWC Management, LLC [257] each argue the Court should dismiss all claims against these defendants. [247, 249, 257].

         LEGAL STANDARD

         When reviewing a motion to dismiss, the court must "accept all factual allegations in the complaint as true and construe the pleadings in the light most favorable to the nonmoving party." Kmevelv. ESPN, 393 F.3d 1068, 1072 (9th Cir. 2005). A court need not accept legal conclusions as true because "[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). To survive a motion to dismiss for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6), "a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face."' Id. (quoting Bell All. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A pleading that offers only "labels and conclusions" or '"naked assertion[s]' devoid of 'further factual enhancement'" will not suffice. Id. (quoting Twombly, 550 U.S. at 555, 557). While a plaintiff does not need to make detailed factual allegations at the pleading stage, the allegations must be sufficiently specific to give the defendant "fair notice" of the claim and the grounds on which it rests. See Erickson v. Pardits, 551 U.S. 89, 93 (2007) (per curiam) (citing Twombly, 550 U.S. at 555).

         Rule 15 provides that a court should freely give leave to amend a complaint "when justice so requires." Fed.R.Civ.P. 15(a)(2). As such, when a court dismisses a complaint for failure to state a claim, "leave to amend should be granted 'unless the court determines that the allegation of other facts consistent with the challenged pleading could not possibly cure the deficiency.'" DeSoto v. Yellow Freight Sys., Inc., 957 F.2d 655, 658 (9th Cir. 1992) (quoting Schreiber Distrib. Co. v. Serv- Well Furniture Co., 806 F.2d 1393, 1401 (9th Cir. 1986)). If amendment would be futile, the court need not grant leave to amend. Id. "Leave to amend may also be denied for repeated failure to cure deficiencies by previous amendment." Abagninm v. AMVAC Chem. Corp., 545 F.3d 733, 742 (9th Cir. 2008).

         DISCUSSION

         I. Conceded Claims

         Plaintiffs concede in their briefing on the Motions to Dismiss that the following claims in their SAC should be dismissed: (1) Claim One for declaratory relief as to all Defendants except UI and SSSC; (2) Claim Two for fraud as to UI and SSSC; (3) all Plaintiffs' Claim Three for negligent misrepresentation as to Sopurkh, Peraim, Siri Ram, Karm, Kartar, Karam, Gurudhan, Hari, Ajeet, EWTC, UI, and SSSC, and Ranbir's, Kamaljit's, and Kulbir's Claim Three against Lambert and Schwabe; (4) Claim Four for tortious interference with prospective economic advantage against Karam, Gurudhan, Hari, Ajeet, EWTC, UI, and SSSC; and (5) Claim Five for ORICO against all Defendants and for RICO against UI and SSSC, [258] at 9-11, [259] at 9, [260] at 13, [262] at 9, [272] at 2-3, Accordingly, I GRANT Defendants' Motions as to these claims.

         After Plaintiffs' conceded claims are dismissed, the claims still before this Court in these Motions to Dismiss are:

• Claim One for declaratory relief: claimed by all Plaintiffs against UI and SSSC.
• Claim Two for fraud: claimed by all Plaintiffs against all Defendants other than UI and SSSC.
• Claim Three for negligent misrepresentation: claimed by Bibiji against Defendants Lambert and Schwabe.
• Claim Four for tortious interference with prospective economic advantage: claimed by all Plaintiffs against Defendants Sopurkh, Peraim, Ram, Karm, Karter, Lambert, Schwabe, Horowitz, and Lane Powell.
• Claim Five for RICO: federal RICO claims by all Plaintiffs against all Defendants other than UI and SSSC.

         I address the arguments raised by the parties as to each of these claims in turn.

         II. Claim One: Declaratory Relief

         The Declaratory Judgments Act ("DJA") states: "In a case of actual controversy within its jurisdiction . . . any court of the United States . . . may declare the rights and other legal relations of any interested party seeking such declaration." 28 U.S.C. § 2201(a), Plaintiffs seek declaratory relief against UI and SSSC in the form of a judgment declaring:

• 3 9.1 That BIBIJI has been a Manager of UI from and after July 26, 2004.
• 39.2 That every act by the Board of Managers of UI after July 26, 2004, and all actions taken by Defendants as Managers of UI from and after July 26, 2004, are void for lack of proper notice.
• 39.3 That all amendments to the Organization Agreement from and after July 26, 2004 are void for lack of proper notice.
• 39.4 That the Settlement Agreement is invalid.
• 39.5 That Defendants SOPURKH, RAM, PERAIM, KARTAR and KARM KAUR KHALSA have breached their fiduciary duties and are not fit to serve as Managers/Members of UI.
• 39.6 That Plaintiff is the sole remaining legitimate Manager of UI.

         SAC [234] ¶¶ 39.1-39.6. Plaintiffs also "request that the Court issue a judgment declaring that Plaintiffs are managers/directors/trustees of SSSC." SAC [234] ¶ 40.

         UI and SSSC argue that these requests for relief are derivative and therefore barred by the Ninth Circuit's ruling affirming this Court's dismissal with prejudice of Plaintiffs' derivative claims. [245] at 15-16. Plaintiffs argue they are not seeking derivative relief and instead "[t]he allegations defendants complain about are necessary background to Plaintiffs' claims and related to the conspiratorial nature of the Defendants['] acts." Response [260] at 9.

         UI and SSSC are correct that Paragraphs 39.2 to 39.6 ask for derivative relief. Under Oregon law, which applies in this case because UI and SSSC are Oregon LLCs, if "a shareholder has a 'special' injury, then the shareholder has standing to assert a direct claim. A special injury is established where there is a wrong suffered by the shareholder not suffered by all shareholders generally or where the wrong involves a contractual right of the shareholders, such as the right to vote." Loewen v. Galligan,882 P.2d 104, 111 (Or. Ct. App. 1994). Here, Plaintiffs have not alleged they suffered special injury by actions of the board (including the settlement agreement), by any alleged breaches of fiduciary duties, or by the presence of other board members. But paragraphs 39.1 and 40, which ask for declaratory relief as to Plaintiffs' membership on the SSSC board and Bibiji's membership on the UI board, are injuries special to Plaintiffs. I therefore GRANT in part and ...


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