Marani v. Cramer

Background

Keven Marani sued Michael Cramer, Jon Hanna, Florence Cramer, Mark Cramer, Scott Cramer, Zhanna Cramer, Travis Capson, Harvey Flemming, Gateway Financial Concepts Limited, New Zealand, and Gateway Financial Concepts Limited, Panama. The complaint asserted seven causes of action: civil racketeering under the Racketeer Influenced and Corrupt Organizations Act, conspiracy to violate that law, intentional misrepresentation, concealment, conversion, unjust enrichment, and breach of contract.

Capson moved to enforce a settlement agreement or, alternatively, to dismiss under Federal Rule of Civil Procedure 12(b)(6), which permits dismissal for failure to state a legally sufficient claim. The settlement agreement stated that, if Marani received $590,000 from escrow, Marani and the other identified parties would release one another and related persons and entities from claims connected to the investment through the agreement’s effective date.

Settlement-enforcement issue

The court explained that it may summarily enforce a settlement agreement when the agreement is complete and the parties either agreed to its terms or authorized their attorneys to settle. Capson argued that both requirements were met because the agreement released claims through the settlement date and was signed by Capson and Marani and otherwise executed by the parties.

Marani argued that California Civil Code section 1668 barred the release. That provision generally prohibits contracts that exempt a person from responsibility for the person’s own fraud. Marani argued that the settlement agreement itself was a tool used to further a larger fraud scheme.

The court stated that section 1668 generally applies to concurrent or future torts, rather than settlements concerning completed past conduct. It also recognized that courts may apply the provision when an agreement was fraudulently induced or was part of a civil racketeering scheme. But the court found that Marani’s complaint did not allege those circumstances as to Capson. The allegations concerning Capson stopped with the settlement agreement, concerned actions before the agreement, and did not adequately connect him to the other defendants through factual allegations.

The court identified missing allegations concerning whether Capson committed or knew of later acts supporting a pattern of racketeering, made misrepresentations after the settlement or return of Marani’s funds, fraudulently induced the settlement, or made the settlement agreement part of the alleged racketeering scheme. The court therefore concluded that section 1668 did not appear to prevent enforcement of the settlement agreement based on the complaint as currently pleaded.

Disposition

The court granted Capson’s motion to dismiss with leave to amend. Although the court noted that the complaint was already 87 pages long and questioned whether amendment could currently satisfy Rule 11, it allowed amendment under the general policy favoring liberal amendment if amendment could be supported. Marani was permitted to file an amended complaint within 21 days of the order. The court denied Capson’s motion to enforce the settlement agreement as moot and declined to reach Capson’s alternative motion to dismiss for forum non conveniens, meaning that the court did not decide whether another forum would be more appropriate. The order terminated Docket Number 34.