The opinion
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF OREGON
KILLA BEES DISTRIBUTION LLC, et al., Case No. 3:23-cv-1629-JR
Plaintiffs, ORDER
v.
LEFT COAST FINANCIAL SOLUTIONS,
INC., et al.,
Defendants.
Michael H. Simon, District Judge.
United States Magistrate Judge Jolie A. Russo issued Findings and Recommendation
(“F&R”) in this case on April 1, 2025. Judge Russo recommended that this Court Grant
Defendants Dominique Villela and Nicholas Rupp’s motions to dismiss. The F&R is silent
regarding whether to grant leave to amend.
Under the Federal Magistrates Act (“Act”), the court may “accept, reject, or modify, in
whole or in part, the findings or recommendations made by the magistrate.” 28 U.S.C.
§ 636(b)(1). If a party objects to a magistrate judge’s findings and recommendations, “the court
shall make a de novo determination of those portions of the report or specified proposed findings
or recommendations to which objection is made.” Id.; Fed. R. Civ. P. 72(b)(3).
If no party objects, the Act does not prescribe any standard of review. See Thomas v.
Arn, 474 U.S. 140, 152 (1985) (“There is no indication that Congress, in enacting [the Act],
intended to require a district judge to review a magistrate’s report to which no objections are
filed.”); United States v. Reyna-Tapia, 328 F.3d 1114, 1121 (9th Cir. 2003) (en banc) (holding
that the court must review de novo magistrate judge’s findings and recommendations if objection
is made, “but not otherwise”).
Although review is not required in the absence of objections, the Act “does not preclude
further review by the district judge[] sua sponte . . . under a de novo or any other standard.”
Thomas, 474 U.S. at 154. Indeed, the Advisory Committee Notes to Rule 72(b) of the Federal
Rules of Civil Procedure recommend that “[w]hen no timely objection is filed,” the court review
the magistrate judge’s findings and recommendations for “clear error on the face of the record.”
Plaintiffs objected only to the recommended dismissal of their claims against Defendant
Nicholas Rupp. Plaintiffs do not object to the recommended dismissal of their claims against
Defendant Dominique Villela. The Court thus reviews that portion of the F&R for clear error on
the face of the record. No such error is apparent. The Court adopts that portion of the F&R.
Regarding the portion of the F&R relating to claims against Rupp, Plaintiffs argue that
the F&R ignores the “specific factual allegations” in the Second Amended Complaint (“SAC”)
supporting Plaintiffs’ claims against Rupp and failed correctly to apply the Rule 12(b)(6)
standard of accepting Plaintiffs’ well-pleaded allegations as true and construing them in the light
most favorable to Plaintiffs. As pointed out by Judge Russo, however, Plaintiffs did not allege
many specific facts about Rupp in the SAC. Plaintiffs allege that he was a founder of Defendant
Left Coast Financial Solutions (“LCFS”) and that as part of “current” leadership of LCFS, Rupp
failed to inform depositors about the status of and access to their deposits, that Rupp failed to
advance a January 29, 2023 Consent Order from the State of Oregon, and that he intentionally
abandoned deposits overseas.
Plaintiffs generally allege that Defendants Elizabeth Nye-Herrington, Daniel Herrington,
and Rupp used Plaintiffs’ funds for “their own” personal gain, but offer no specific facts
supporting this conclusory allegation, particularly relating to Rupp. Plaintiffs further allege that
Rupp and the Herringtons engaged in deceptive accounting practices to mislead Plaintiffs to cash
checks, when they knew there were insufficient funds to cover the checks, and failed to
communicate with depositors, including Plaintiffs. These allegations appear to contradict
Plaintiffs’ later allegation specific to Rupp. Plaintiffs allege that Rupp “stepped into” his position
as a board member of LCFS “to bring it back into compliance with the licensing authorities and
return Plaintiffs’ deposits.” SAC ¶ 91. This would place Rupp’s board service after the alleged
misconduct of Defendants Elizabeth Nye-Herrington and Daniel Herrington was discovered by
the State of Oregon. This timing does not align with the allegation that Rupp, along with the
Herringtons, used deposited funds for personal gain and engaged in deceptive accounting
practices to mislead Plaintiffs into cashing checks.1
As discussed by Judge Russo, Plaintiffs’ allegations against Rupp do not support the
alleged claims for breach of contract, breach of the implied covenant of good faith and fair
1 Plaintiffs allege other facts relating to “Defendants.” In any Third Amended Complaint,
Plaintiffs “must allege more than generic and conclusory allegations demonstrating that
‘Defendants’ collectively engaged in [misconduct] and allege with at least some degree of
specificity the acts which each defendant is alleged to have engaged in which support Plaintiff’s
claims.” McKeon v. Cent. Valley Cmty. Sports Found., 2018 WL 6436256, at *4 (E.D. Cal.
Dec. 7, 2018) (citing cases); see also Karkanen v. California, 2018 WL 3820916 at * 7 (N.D.
Cal. Aug. 10, 2018) (dismissing complaint where “plaintiff repeatedly lumps ‘defendants’
together in her allegations,” because “a complaint which lumps together multiple defendants in
one broad allegation fails to satisfy the notice requirement of Rule 8(a)(2)” (citing cases)).
Plaintiffs also may not combine allegations relating to Rupp and the Herringtons unless it is clear
how they all engaged in the same alleged conduct.
dealing, unjust enrichment, negligence, fraudulent misrepresentation, dishonored check,
conversion, federal Racketeer Influenced and Corrupt Organizations Act, and breach of fiduciary
duties. Plaintiffs also raise in their objections several arguments, allegations, and positions not
alleged in the SAC. These include allegations of fraud by omission based on “half-truth,” fraud
by active concealment, liability through piercing the corporate veil, and assumption of
contractual obligations. In evaluating a motion to dismiss under Rule 12(b)(6), however, the
Court considers only the well-pleaded allegations contained in the complaint, not assertions first
presented in briefing. Plaintiffs may raise these new factual allegations and legal theories in an
amended complaint, if they believe that they can do so in compliance with Rule 11 of the Federal
Rules of Civil Procedure.
Plaintiffs also object that the F&R failed to consider that Rupp was in a “special
relationship” with Plaintiffs. The Court rejects this contention. Plaintiffs appear to argue, without
legal support, that because the deposited funds allegedly were mishandled after they were
deposited, this was “discretionary” handling of the money and changed the relationship from a
bank and depositor into a fiduciary relationship. Although the Court is skeptical of this theory, at
most it might support a special relationship with LCFS, about which the Court expresses no
opinion at this time. Plaintiffs allege no facts showing that Rupp agreed to act on Plaintiffs’
economic behalf, invest on their behalf, handle their money in a discretionary manner on their
behalf, or had any relationship with Plaintiffs, special or otherwise. Simply alleging that Rupp
was on the board of LCFS and “abandoned” funds overseas does not show a fiduciary
relationship with depositors such as Plaintiffs.
Finally, the Court has considered the other objections raised by Plaintiffs. After a de novo
review, the Court adopts the remaining portions of the F&R.
Plaintiffs request leave to file a Third Amended Complaint if the Court grants the
motions to dismiss. The F&R is silent with respect to leave to amend, and the underlying
motions did not request that the SAC be dismissed with prejudice. Plaintiffs filed the original
complaint, first amended complaint, and SAC before any motions or Court review. Thus, this is
the first evaluation of Plaintiffs’ allegations by the Court. Accordingly, the Court grants
Plaintiffs leave to file a Third Amended Complaint.
The Court ADOPTS the Findings and Recommendation, ECF 82. The Court GRANTS
Defendant Rupp’s Motion to Dismiss, ECF 34, and Defendant Villela’s Motion to Dismiss,
ECF 49. Plaintiffs may file a Third Amended Complaint within two weeks of the date of this
Order.
IT IS SO ORDERED.
DATED this 16th day of May, 2025.
/s/ Michael H. Simon
Michael H. Simon
United States District Judge