Lucero v. IRA Services, Inc.
- Laurel Beeler
- 3:18-cv-05395
- U.S. District Court · Northern District of California
- 11
In Lucero v. IRA Services, Inc., Judge Beeler dismissed RICO claims with prejudice and an aiding-and-abetting claim without prejudice, allowing amendment.
Luis Hurtado Lucero’s claims against the IRA Defendants were affected. The RICO claims were dismissed with prejudice, while the aiding-and-abetting claim was dismissed without prejudice and could be repleaded within 21 days.
What happened
Luis Hurtado Lucero alleged that he was defrauded into investing about $350,000 of retirement savings in a self-directed individual retirement account program. The program used his money to buy shares in two companies that he says were part of an illegal Ponzi scheme. He sued the IRA Defendants under the Racketeer Influenced and Corrupt Organizations Act, California’s unfair-competition law, contract law, and aiding-and-abetting principles.
The IRA Defendants asked the court to dismiss the claims against them because the complaint did not state legally sufficient claims. The court ruled that the alleged fraud centered on buying and selling stock, so federal law barred Lucero’s Racketeer Influenced and Corrupt Organizations Act claims. The court also found that Lucero had not adequately identified the duty the IRA Defendants supposedly helped breach or alleged that they knew about and substantially assisted that breach.
In Lucero v. IRA Services, Inc., Judge Beeler granted the IRA Defendants’ motion to dismiss. She dismissed the Racketeer Influenced and Corrupt Organizations Act claims with prejudice, dismissed the aiding-and-abetting claim without prejudice, and allowed Lucero 21 days to file an amended complaint.
The detailed version
- Lucero v. IRA Services, Inc. · No. 3:18-cv-05395
- Laurel Beeler
- Nov. 7, 2019
Background
Luis Hurtado Lucero alleged that he was persuaded to place approximately $350,000 in retirement savings into the “Lazzaro & Associates five-year trading portfolio,” a self-directed individual retirement account program. He alleged that the program promised $2,000 monthly payments, tax free, for five years and the return of his principal afterward.
The program used Lucero’s money to buy shares in Liber Abaci, Inc. and Enterprise Technologies, LLC, later registered as Atlas Enterprise Technologies, LLC. Lucero alleged that the companies were created to defraud him and that the shares became nearly worthless. He also alleged that the IRA Defendants administered and held his account, transferred money to purchase the shares, and reported inflated share values on his account statements.
Lucero asserted five categories of claims: two claims under the Racketeer Influenced and Corrupt Organizations Act (RICO), one under California’s Unfair Competition Law, breach of contract, and aiding and abetting against the IRA Defendants. The IRA Defendants moved to dismiss the claims against them under Federal Rule of Civil Procedure 12(b)(6), which tests whether a complaint states a legally sufficient claim.
RICO Claims
Lucero alleged that the defendants conducted or conspired to conduct a fraudulent enterprise through mail and wire fraud connected to the sale of stock and membership units. The court held that the alleged scheme’s central feature was the purchase and sale of securities and that the alleged misrepresentations and omissions would constitute securities fraud.
The court applied the Private Securities Litigation Reform Act’s limitation on civil RICO claims. That law bars reliance on conduct that would have been actionable as fraud in connection with buying or selling securities to establish a RICO violation. The court rejected Lucero’s argument that the bar did not apply because he could not sue the IRA Defendants directly for securities fraud. According to the court, the bar does not depend on whether the particular defendant could be sued under the securities laws.
Because the securities-fraud bar was a legal obstacle that additional factual allegations could not overcome, the court dismissed Lucero’s RICO claims against the IRA Defendants with prejudice.
Aiding-and-Abetting Claim
The court explained that an aiding-and-abetting claim requires a plaintiff to identify the specific underlying wrong and allege that the defendant actually knew about that wrong and substantially assisted it. Lucero did not precisely identify the underlying breach of duty that the IRA Defendants allegedly aided and abetted. He also did not adequately allege their actual knowledge of that breach or substantial assistance in carrying it out.
The court therefore dismissed the aiding-and-abetting claim against the IRA Defendants without prejudice. Lucero may file an amended complaint within 21 days of the order and must attach a comparison showing changes from his First Amended Complaint.
Disposition
The court granted the IRA Defendants’ motion to dismiss. It dismissed the RICO claims with prejudice and the aiding-and-abetting claim without prejudice. The opinion does not state a disposition of the claims asserted only against other defendants.
Read the full 11-page opinion on CourtListener, the free public archive maintained by the Free Law Project.