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. He alleged that the defendants operated an international fraud scheme by creating the appearance of legitimate investment opportunities and business dealings. His First Amended Complaint asserted seven causes of action: violations of the Racketeer Influenced and Corrupt Organizations Act under 18 U.S.C. §§ 1962(c) and 1962(d), intentional misrepresentation, concealment, conversion, unjust enrichment, and breach of contract.

The motion addressed in this order was filed by Mark Cramer, Florence Cramer, and Scott Cramer. The complaint alleged that they helped maintain the alleged racketeering enterprise by establishing shell companies, serving as company directors, operating a front company, and helping move allegedly fraudulent funds.

Personal Jurisdiction

The defendants moved under Federal Rule of Civil Procedure 12(b)(2), which permits dismissal when a court lacks authority over a defendant. The court explained that personal jurisdiction may be general or specific. General jurisdiction ordinarily applies where an individual is domiciled. Specific jurisdiction requires a sufficient connection between the defendant’s forum-related conduct and the claims, along with a reasonable exercise of jurisdiction.

The court found that Marani had not made the required initial showing. Mark and Florence Cramer were alleged to be Canadian citizens living in Calgary, Alberta, and Scott Cramer was alleged to be a Canadian citizen living in Vancouver, British Columbia. The complaint did not allege that they were domiciled in California or that their alleged activities were directed at California. It also did not allege that the businesses they allegedly established were in California or that Scott Cramer’s company was incorporated or operated there. The defendants submitted declarations stating that they did not maintain businesses, registered agents, or property in California.

The court also considered whether the RICO statute supplied a basis for jurisdiction over these nonresident defendants. It found that Marani had not shown that no other federal district could exercise jurisdiction over all defendants, one of the requirements for using RICO’s nationwide jurisdiction provision. The court noted allegations suggesting that another district, including the District of Nevada, might have jurisdiction over some defendants, but Marani provided no evidence addressing whether another district could exercise jurisdiction over all of them.

The court therefore granted the motion to dismiss for lack of personal jurisdiction with leave to amend.

Private Securities Litigation Reform Act

The defendants argued that the Private Securities Litigation Reform Act barred Marani’s RICO claim. That statute prevents a plaintiff from using conduct that would have been actionable as securities fraud as the basis for a RICO violation. The court determined that the alleged money laundering, a $150,000 loan, a joint venture, and alleged inducement to create entities were not pleaded as conduct involving the purchase or sale of securities. It therefore concluded that the statute did not bar those alleged predicate acts.

The court nevertheless stated that any predicate act based on the purchase or sale of a security was barred. It granted in part and denied in part the motion to dismiss on this ground. Specifically, the court denied dismissal to the extent the alleged predicate acts were unrelated to the purchase or sale of securities.

Fraud Pleading Standard

The defendants also argued that the complaint did not satisfy Federal Rule of Civil Procedure 9(b), which requires fraud to be pleaded with particularity. The court found that the complaint identified specific alleged conduct by the three defendants, including creating and using companies to move funds, communicating with Marani, organizing companies, accepting allegedly fraudulently obtained financing, helping launder Marani’s funds through a film company, and presenting themselves as officers, directors, or shareholders of alleged sham entities.

The court found these allegations sufficient to meet Rule 9(b)’s heightened pleading standard and denied the motion to dismiss on that ground.

Conclusion

The court stated that it granted the defendants’ motion to dismiss because the current allegations did not establish personal jurisdiction over the three Cramer defendants, and it granted that dismissal with leave to amend. It also granted in part and denied in part the motion under the Private Securities Litigation Reform Act and denied dismissal based on Rule 9(b). Marani was ordered to file an amended complaint by January 7, 2022. The three defendants were ordered to respond within 14 days after the amended complaint was filed. The order terminated docket number 63.