Misson v. Robles

Background

Hakam Misson and Simrat Mission sued Luis Robles and Mary Robles, described in the opinion as the plaintiffs’ former tenants. The complaint alleged a scheme to defraud and obtain money from the plaintiffs. It asserted two federal claims—misappropriation under the Defend Trade Secrets Act (DTSA) and violations of the Racketeer Influenced and Corrupt Organizations Act (RICO)—as well as numerous state-law claims.

The defendants moved to dismiss the entire complaint for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6) and for insufficient service of process under Rule 12(b)(5). They also moved under Rule 12(f) to strike certain allegations.

Federal claims

The court held that neither federal claim was plausible based on the facts then alleged.

For the DTSA claim, the plaintiffs identified a property inspection report ordered in February 2017 during the escrow phase of their purchase of an apartment complex in Turlock, California. The court found that the complaint did not adequately explain how the report had independent economic value because it was secret, or how it related to interstate or foreign commerce as required for the DTSA to apply. The complaint also did not plausibly allege that the plaintiffs took reasonable measures to protect the report’s secrecy. In particular, it did not allege facts showing that Luis Robles had a duty to keep the report confidential or understood and agreed to do so. The court found the plaintiffs’ allegations that the defendants knew the report was confidential and acquired it improperly to be conclusory.

For the RICO claim, the court found that the complaint did not adequately plead an enterprise, a pattern of racketeering activity, or the required details of the alleged fraud. The complaint did not allege a qualifying legal entity or sufficiently describe an association-in-fact enterprise, which requires a common purpose, organization or structure, and enough duration to accomplish its purpose. The complaint also made general allegations about mail and wire fraud over many years without identifying the time, place, manner, and role of each defendant in the alleged misconduct. The court specifically noted that the complaint contained no allegation specific to Mary Robles’s role. The plaintiffs also failed to support their claimed financial losses or show the required connection between those losses and the alleged RICO violation. Because the substantive RICO claim was inadequately pleaded, the RICO conspiracy claim also failed.

The court expressed serious doubts about whether the alleged conduct could support a RICO claim but allowed the plaintiffs to amend if they could make a good-faith effort to correct the identified deficiencies.

State-law claims and other motions

Because it was unclear whether the plaintiffs could state a viable federal claim, the court declined to address the defendants’ arguments for dismissing the state-law claims at that stage.

The court denied the Rule 12(b)(5) motion based on insufficient service of process. It directed the plaintiffs to serve Mary Robles under the applicable Federal Rules of Civil Procedure with any amended complaint.

The court granted the Rule 12(f) motion to strike allegations concerning Luis Robles’s non-payment of child support. The court otherwise denied the motion to strike.

Disposition

The court granted the Rule 12(b)(6) motion to dismiss with leave to amend, denied the Rule 12(b)(5) motion, and granted in part and denied in part the Rule 12(f) motion to strike. The plaintiffs were permitted to file an amended complaint by January 28, 2023, to correct the deficiencies in the federal claims. The court warned that further pleading deficiencies would likely result in dismissal with prejudice. It declined to address the state-law claims until a federal claim was adequately alleged and stayed the case in all other respects, including discovery, until subject matter jurisdiction was established.