Mula v. Mula-Stouky

Background

Paul Mula, Jr. sued members of his family, court-appointed conservators, attorneys, law firms, and others. He alleged that they conspired to deprive him of assets from his deceased grandmother Sara Mula-Ogier’s trusts. The first amended complaint asserted 12 claims, including a claim under the Racketeer Influenced and Corrupt Organizations Act (RICO), fiduciary-duty claims, aiding and abetting and conspiracy claims, unjust enrichment, interference with an expected inheritance, unfair competition, a Fair Debt Collection Practices Act claim, legal malpractice, and conversion.

The Stouky defendants moved to dismiss 11 of the 12 claims asserted against them under Federal Rule of Civil Procedure 12(b)(1), which addresses subject-matter jurisdiction, and Rule 12(b)(6), which tests whether a complaint states a legally sufficient claim. Paul Mula, Jr. separately moved to add allegations about events that occurred after he filed the lawsuit.

Rulings on the Motion to Dismiss

The court denied the motion to dismiss for lack of jurisdiction under the Rooker-Feldman doctrine. That doctrine generally prevents a federal district court from acting as an appeals court over a state-court judgment. The court found that the complaint, as framed, alleged that the defendants committed fraud and sought damages from an alleged conspiracy rather than asking the federal court to invalidate probate-court orders or recover specific assets distributed by that court.

The court also denied the motion to dismiss the state-law claims for lack of supplemental jurisdiction. It held that the federal RICO and Fair Debt Collection Practices Act claims supplied federal-question jurisdiction, even though the court concluded that those claims were not adequately pleaded. The court reserved the question whether to continue exercising supplemental jurisdiction over the state-law claims and allowed the defendants to raise that issue in a later motion.

The court denied the defendants’ arguments based on the Noerr-Pennington doctrine, California’s litigation privilege, and the probate court’s asserted exclusive jurisdiction. The court concluded that the alleged fraud, if proven, could fall within an exception to the protections invoked by the defendants, and that these issues could not be resolved on the motion to dismiss.

The court granted the motion to dismiss all claims against the Stouky defendants for pleading deficiencies, with leave to amend, as follows:

- Claim 1, RICO: Granted. The allegations of mail fraud, wire fraud, and other alleged predicate acts were too general and did not satisfy the heightened requirement for fraud allegations. The court also directed Paul Mula, Jr. to clarify whether he alleged one conspiracy or two. - Claims 2, 3, and 4, breach of fiduciary duties: Granted. The court found that Paul Mula, Jr. lacked standing for some theories and had not adequately identified the conduct supporting the claim involving the Ogier Trust. - Claim 5, aiding and abetting breach of fiduciary duties: Granted. The complaint did not adequately allege an underlying breach of fiduciary duty owed to Paul Mula, Jr. or facts showing that Bye breached such a duty as trustee of the Ogier Trust. - Claim 6, conspiracy to breach fiduciary duties: Granted. The complaint did not adequately allege a breach of fiduciary duties owed to Paul Mula, Jr. or resulting damages. - Claim 7, unjust enrichment: Granted. The complaint did not clearly allege whether Smith received trust assets or was only designated as a beneficiary of them. - Claim 8, intentional interference with an expected inheritance: Granted. The complaint did not adequately allege independently wrongful conduct or that Paul Mula, Jr. lacked an adequate remedy in probate court. - Claim 9, unfair competition: Granted. The complaint did not identify which statutory theory of unfair competition it asserted or specify whether the alleged conduct was unlawful, unfair, or fraudulent. - Claim 10, Fair Debt Collection Practices Act: Granted. The complaint did not describe the collection activity, allege that Bye and Martin were debt collectors, or identify the prohibited act or failure to act. - Claim 12, conversion: Granted. Paul Mula, Jr. did not allege that he had owned or possessed the trust assets, and he could not pursue the claim on behalf of the Ogier Trust because the court found he lacked standing to sue for the trusts.

The court granted leave to amend because Paul Mula, Jr. had not previously amended after receiving the court’s guidance, and the record did not establish undue delay, bad faith, undue prejudice, or futility. The court stated that the amended complaint must comply with Rule 9(b), which requires fraud to be pleaded with particularity.

Motion to Supplement

Paul Mula, Jr. sought to add allegations about two probate-court petitions filed after the lawsuit began. One petition, filed August 5, 2021, sought trust funds for the Stouky defendants’ legal fees, and the other, filed January 20, 2022, sought to collect debts that Paul Mula, Jr. said he had already paid. He alleged that the first petition included false statements and a forged document and that the second involved an extortionate threat.

The court granted the motion to supplement in part and denied it in part. Paul Mula, Jr. may add allegations against Bye and Martin concerning those two petitions and the circumstances surrounding their filing. He may not add Nguyen as a defendant because the record did not show a plausible connection between her and the alleged longstanding RICO conspiracy. He also may not add unspecified “similar conduct” or other events occurring after the lawsuit was filed.

Final Order

The Stouky defendants’ motion to dismiss was granted in part and denied in part, with leave to amend. Paul Mula, Jr.’s motion to supplement was granted in part and denied in part. He was given until September 14, 2022, to file a second amended complaint consistent with the order, and the court reserved the issue of supplemental jurisdiction over the state-law claims. The order was signed by Judge Beth Labson Freeman.