The opinion
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8 UNITED STATES DISTRICT COURT
9 FOR THE EASTERN DISTRICT OF CALIFORNIA
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11 SHI BAI, et al., No. 2:24-cv-00807-DJC-SCR
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Plaintiffs,
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v. ORDER
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CMB EXPORT INFRASTRUCTURE
15 INVESTMENT GROUP 48, LP, et al.,
16 Defendants.
17
18 Plaintiffs are foreign nationals who claim they lost millions in investment funds
19 in part due to Defendants’ acts or omissions in connection with a redevelopment
20 project. This case is presently before the Court on Defendant Lewis Brisbois Bisgaard
21 & Smith LLP’s and CMB Defendants’ second Motions to Dismiss. (ECF Nos. 74, 76.)
22 For the reasons stated below, the Court grants in part and denies in part both
23 Defendant Louis Brisbois’ Motion to Dismiss and CMB Defendants’ Motion to Dismiss.
24 BACKGROUND
25 The Court provided a summary of the factual background of this case in its
26 order resolving the prior motion to dismiss. (ECF No. 68.) Given the prior summary
27 and that the facts are well known to the Court and parties, the Court will not repeat
28 them here.
1 The Court previously granted Defendant Lewis Brisbois Bisgaard & Smith LLP’s
2 first motion to dismiss in its entirety and granted in part and denied in part CMB
3 Defendants’ first motion to dismiss. (See id.) The Court denied CMB Defendants’
4 Motion as to (1) Plaintiffs’ third cause of action for breach of fiduciary duty related to
5 the Participation Agreement, (2) Plaintiffs’ seventh and eighth cause of action, except
6 as to the claim regarding representations of First Midwest Bank’s credit status for
7 which the motion was granted, and (3) Plaintiffs’ tenth cause of action for breach of
8 contract against Defendants CMB Export and NK. CMB Defendants’ Motion was
9 granted as to all other claims. Plaintiffs were granted leave to amend on all claims
10 except Plaintiffs’ breach of contract claim against Defendants Group 48 and Hogan,
11 and Plaintiffs’ UCL claim against CMB Defendants.
12 On April 30, 2025, Plaintiffs filed a Second Amended Complaint (“SAC”) that is
13 the present operative complaint. (SAC (ECF No. 69).) Defendants’ Motions to Dismiss
14 are fully briefed. (LB Mot. (ECF No. 74-1); Opp’n to LB (ECF No. 79); LB Reply (ECF
15 No. 80); CMB Mot. (ECF No. 76); Opp’n to CMB Mot. (ECF No. 81); CMB Reply. (ECF
16 No. 82).) The Court took this matter under submission without oral argument
17 pursuant to Local Rule 230(g). (ECF No. 83.)
18 CMB DEFENDANTS’ MOTION TO DISMISS AS TO DEFENDANT LEE FOR LACK OF
19 PERSONAL JURISDICTION
20 I. Legal Standard
21 A. Personal Jurisdiction Generally
22 Rule 12(b)(2) allows a party to assert a lack of personal jurisdiction as a defense
23 and request dismissal of the suit. Fed. R. Civ. P. 12(b)(2). “Although the defendant is
24 the moving party on a motion to dismiss [for lack of personal jurisdiction], the plaintiff
25 bears the burden of establishing that jurisdiction exists.” Rio Props., Inc. v. Rio Int'l
26 Interlink, 284 F.3d 1007, 1019 (9th Cir. 2002). “[I]n the absence of an evidentiary
27 hearing, the plaintiff need only make ’a prima facie showing of jurisdictional facts to
28 withstand the motion to dismiss.’” Brayton Purcell LLP v. Recordon & Recordon, 606
1 F.3d 1124, 1127 (9th Cir. 2010) (quoting Pebble Beach Co. v. Caddy, 453 F.3d 1151,
2 1154 (9th Cir. 2006)). “The court may consider evidence presented in affidavits to
3 assist it in its determination and may order discovery on the jurisdictional issues.” Doe
4 v. Unocal Corp., 248 F.3d 915, 922 (9th Cir. 2001), abrogated on other grounds by
5 Daimler AG v. Bauman, 571 U.S. 117, 126 (2014) (citing Data Disc, Inc. v. Sys. Tech.
6 Assocs., Inc., 557 F.2d 1280, 1285 (9th Cir. 1977)). Facts presented by the plaintiff are
7 taken as true for the purposes of a 12(b)(2) motion to dismiss, except where
8 contradicted by an affidavit, and any “conflicts between the facts contained in the
9 parties' affidavits must be resolved in [plaintiff's] favor for purposes of deciding
10 whether a prima facie case for personal jurisdiction exists.” AT&T v. Compagnie
11 Bruxelles Lambert, 94 F.3d 586, 588 (9th Cir. 1996) (citations omitted); see Mavrix
12 Photo, Inc. v. Brand Techs., Inc., 647 F.3d 1218, 1223 (9th Cir. 2011) (“We may not
13 assume the truth of allegations in a pleading which are contradicted by affidavit, but
14 we resolve factual disputes in the plaintiff's favor.” (citations and internal quotations
15 removed)).
16 “In exercising personal jurisdiction, a federal district court is constrained by the
17 Fourteenth Amendment's Due Process Clause and the long-arm statute of the state in
18 which it sits.” Impossible Foods Inc. v. Impossible X LLC, 80 F.4th 1079, 1086 (9th Cir.
19 2023). California’s long-arm statute allows the exercise of personal jurisdiction to the
20 extent allowed by the United States Constitution. See Cal. Code Civ. Proc. § 410.10.
21 Accordingly, the Court need only assess whether the exercise of jurisdiction in this
22 case comports with due process.
23 B. General and Specific Jurisdiction
24 “The Due Process Clause permits the exercise of personal jurisdiction if the
25 defendant has sufficient minimum contacts with the forum state such that the
26 maintenance of the suit does not offend traditional notions of fair play and substantial
27 justice.” Impossible Foods, 80 F.4th at 1086. Courts may have general or specific
28 jurisdiction over an entity depending on the nature and extent of that entity’s contact
1 with the forum state. A court may exercise general jurisdiction over a corporation in a
2 state where the corporation is “at home,” which is the case when its “affiliations . . . are
3 so ‘continuous and systematic’ as to render [it] essentially at home in the forum State.”
4 Daimler, 571 U.S. at 127 (quoting Goodyear Dunlop Tires Operations, S.A. v. Brown,
5 564 U.S. 915, 919 (2011)). This is generally where the corporation is incorporated and
6 where it maintains its principal place of business. Id. Here, it is uncontested that the
7 Court does not have general jurisdiction over Neal Lee. (See Opp’n to CMB Mot. at 3–
8 6 (arguing only that the Court has specific jurisdiction over Defendant Lee).)
9 Where general jurisdiction is lacking, courts may have specific jurisdiction over
10 corporations if there is sufficient contact with the forum state and the claims arise out
11 of that contact. Bristol-Myers Squibb Co. v. Superior Court, 582 U.S. 255, 262 (2017)
12 (“[T]here must be ‘an affiliation between the forum and the underlying controversy,
13 principally, [an] activity or an occurrence that takes place in the forum State and is
14 therefore subject to the State's regulation.’” (quoting Goodyear, 564 U.S. at 919)). In
15 the Ninth Circuit, specific jurisdiction is determined by a three-prong test: “(1) the
16 defendant must either ‘purposefully direct his activities’ toward the forum or
17 ‘purposefully avail[ ] himself of the privileges of conducting activities in the forum’; (2)
18 ‘the claim must be one which arises out of or relates to the defendant's forum-related
19 activities’; and (3) ‘the exercise of jurisdiction must comport with fair play and
20 substantial justice, i.e. it must be reasonable.’” Axiom Foods, Inc. v. Acerchem Int'l,
21 Inc., 874 F.3d 1064, 1068 (9th Cir. 2017) (quoting Dole Food Co., Inc. v. Watts,
22 303 F.3d 1104, 1111 (9th Cir. 2002)). “The plaintiff bears the burden of satisfying the
23 first two prongs of the test” while the burden of the third prong shifts to the
24 defendant. Schwarzenegger v. Fred Martin Motor Co., 374 F.3d 797, 802 (9th Cir.
25 2004).
26 1. Purposeful Availment
27 While the first prong of the specific jurisdiction test is often called the
28 “purposeful availment” prong, courts situationally apply either a purposeful availment
1 or purposeful direction analysis. See Yahoo! Inc. v. La Ligue Contre Le Racisme Et
2 L'Antisemitisme, 433 F.3d 1199, 1210 (9th Cir. 2006). The question of whether to
3 apply a purposeful direction or purposeful availment analysis “turns on the nature of
4 the underlying claims.” Impossible Foods, 80 F.4th at 1088 (citing Ayla, LLC v. Alya
5 Skin Pty. Ltd., 11 F.4th 972, 979 (9th Cir. 2021)). While there is no “rigid dividing line
6 between purposeful availment and purposeful direction[,]” purposeful direction is
7 generally preferred when analyzing tort claims as these claims typically involve fact
8 patterns where “a defendant's conduct primarily occurs outside the forum state.” Id.
9 at 1088–89.
10 “To have purposefully availed itself of the privilege of doing business in the
11 forum, a defendant must have performed some type of affirmative conduct which
12 allows or promotes the transaction of business within the forum state.” Boschetto v.
13 Hansing, 539 F.3d 1011, 1016 (9th Cir. 2008) (citations and internal quotations
14 removed). “A showing that a defendant purposefully availed himself of the privilege
15 of doing business in a forum state typically consists of evidence of the defendant's
16 actions in the forum, such as executing or performing a contract there.”
17 Schwarzenegger, 374 F.3d at 802. Likewise, purposeful direction involves intentional
18 contact with the forum state. It is “the defendant's contacts with the forum State itself,
19 not the defendant's contacts with persons who reside there” that are relevant to the
20 inquiry. Walden v. Fiore, 571 U.S. 277, 285 (2014). The defendant’s mere knowledge
21 that the plaintiff resides in the forum state “will not, on its own, support the exercise of
22 specific jurisdiction.” Axiom Foods, 874 F.3d at 1070. However, “a defendant's
23 contacts with the forum State may be intertwined with his transactions or interactions
24 with the plaintiff . . . .” Walden, 571 U.S. at 286. Only purposeful contacts, and not
25 random, fortuitous, or attenuated contacts will give rise to personal jurisdiction. Id.
26 2. Relation of Claim to Forum Activities
27 The claims brought by the plaintiff must arise out of or relate to the defendant’s
28 contacts with the forum in order for the court to exercise jurisdiction. Ford Motor Co.
1 v. Montana Eighth Jud. Dist. Ct., 592 U.S. 351, 361–62 (2021). However, a strict causal
2 relationship is not required to satisfy the relation prong. Id. Rather, there need only
3 be a “connection” between the forum-related activity and the injury claimed. Id. The
4 Ninth Circuit employs a “but for” test to determine whether a plaintiff’s claims arise out
5 of the defendant’s forum-related activities. Menken v. Emm, 503 F.3d 1050, 1058 (9th
6 Cir. 2007).
7 3. Reasonableness
8 The final prong of the personal jurisdiction analysis examines whether the court
9 exercising jurisdiction would be reasonable. Menken, 503 F.3d at 1058. This
10 determination requires consideration of seven factors: “(1) the extent of the
11 defendants' purposeful interjection into the forum state's affairs; (2) the burden on the
12 defendant of defending in the forum; (3) the extent of conflict with the sovereignty of
13 the defendants' state; (4) the forum state's interest in adjudicating the dispute; (5) the
14 most efficient judicial resolution of the controversy; (6) the importance of the forum to
15 the plaintiff's interest in convenient and effective relief; and (7) the existence of an
16 alternative forum.” Id.
17 II. Analysis
18 The Court finds that Plaintiffs have alleged sufficient facts to establish that this
19 Court has personal jurisdiction over Defendant Neal Lee. Plaintiffs assert that this
20 Court has specific jurisdiction on the basis of purposeful availment. In support,
21 Plaintiffs allege in the SAC that Defendant Lee “was actively involved in negotiating
22 and financing CMB’s loan to the Borrower to construct the Project[,]” “had numerous
23 communications with the various lenders and borrowers, their respective counsel, and
24 CMB’s counsel LB[,]” and “communicated with Michael Rosenfeld[,] the developer for
25 the Project and personal guarantor of CMB’s loan.” (SAC ¶ 39.) These allegations,
26 while still relatively minimal, are a far cry from the insufficient allegations contained in
27 the First Amended Complaint.
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1 Under the presently alleged facts, Defendant Lee engaged in business activities
2 related to the Project, which was located in California, including negotiating financing
3 and securing loans for the Project and communicating with the developer of the
4 Project. This sort of affirmative action that promotes business in the forum state is
5 sufficient to establish purposeful availment. See Boschetto, 539 F.3d at 1016.
6 Defendant Lee’s purported acts preceding the Project, as well as the contemplated
7 future consequences of those negotiations, are sufficient to serve as the basis for a
8 finding that Defendant Lee had minimum contacts with the forum. See Burger King
9 Corp v. Rudzewicz, 471 U.S. 462, 479 (1985). These actions are also sufficiently
10 connected to Plaintiffs’ claims; but for Defendant Lee’s purported coordination of the
11 financing for the Project, these claims would not have arisen.
12 The Court’s exercise of personal jurisdiction, at this stage, also satisfies the
13 reasonableness factors: (1) Based solely on the facts alleged in the SAC, Defendant
14 Lee’s involvement in the forum through the Project was not minimal; (2) The burden in
15 defending in the forum is minimal given Defendant Lee is represented with the CMB
16 defendants who will be litigating in this forum regardless; (3) There is no clear conflict
17 with the sovereignty of the defendant’s state.; (4) California has some, if minimal,
18 interest in adjudicating the dispute; (5) Judicial efficiency counsels in favor of keeping
19 the claims against Defendant Lee with the rest of this action; (6) Similarly, Plaintiffs
20 have an interest in resolution of Plaintiffs’ claims in a single action which is partially
21 reliant on the forum; and (7) There may exist alternative forums. Considering these
22 factors together, a finding that the Court has personal jurisdiction over Defendant Lee
23 is reasonable.
24 The Court notes that Defendants strongly object to the factual allegations made
25 in the SAC. (CMB Mot. at 11.) But Defendants’ challenge otherwise is a facial one
26 and, as a result, the Court relies on the facts as alleged in the Complaint. As alleged,
27 the facts in the SAC are sufficient to establish personal jurisdiction over Defendant
28
1 Lee. The Court’s ruling here does not prevent further challenges to personal
2 jurisdiction at a later stage of these proceedings.
3 MOTIONS TO DISMISS FOR FAILURE TO STATE A CLAIM
4 Given that the Court previously addressed many of the arguments related to
5 Plaintiffs’ claims, the Court’s discussion of these claims below does not repeat many of
6 the factual and legal discussions provided in the Court’s prior order. Instead, the
7 Court focuses on new factual or legal issues that are not resolved by that order.1 The
8 Court also addresses arguments raised in connection with Defendant Louis Brisbois
9 and CMB Defendants’ Motions jointly given the overlapping issues presented in the
10 briefing.
11 I. Legal Standard
12 A party may move to dismiss for “failure to state a claim upon which relief can
13 be granted.” Fed. R. Civ. P. 12(b)(6). The motion may be granted only if the complaint
14 lacks a “cognizable legal theory or sufficient facts to support a cognizable legal
15 theory.” Mendiondo v. Centinela Hosp. Med. Ctr., 521 F.3d 1097, 1104 (9th Cir. 2008).
16 The court assumes all factual allegations are true and construes “them in the light
17 most favorable to the nonmoving party.” Steinle v. City & County of San Francisco, 919
18 F.3d 1154, 1160 (9th Cir. 2019). However, if the complaint's allegations do not
19 “plausibly give rise to an entitlement to relief” the motion must be granted. Ashcroft v.
20 Iqbal, 556 U.S. 662, 679 (2009). A complaint need contain only a “short and plain
21 statement of the claim showing that the pleader is entitled to relief,” Fed. R. Civ. P.
22 8(a)(2), not “detailed factual allegations,” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555
23 (2007). However, this rule demands more than unadorned accusations; “sufficient
24 factual matter” must make the claim at least plausible. Iqbal, 556 U.S. at 678. In the
25 same vein, conclusory or formulaic recitations of elements do not alone suffice. Id. “A
26
27 1 This includes the choice of law analysis conducted in the prior order. As these issues are not directly
raised in connection with the present motion, the Court does not provide any further discussion or
28 analysis of which state’s law is applicable.
1 claim has facial plausibility when the plaintiff pleads factual content that allows the
2 court to draw the reasonable inference that the defendant is liable for the misconduct
3 alleged.” Id.
4 II. RICO
5 C. 18 U.S.C. § 1962(c)
6 As with Plaintiffs’ First Amended Complaint, Plaintiffs’ first cause of action in the
7 SAC is a RICO claim based on 18 U.S.C. § 1962(c). Section 1962(c) provides for claims
8 against parties who conduct an enterprise through a pattern of racketeering activity.
9 “To state a claim under [section] 1962(c), a plaintiff must allege (1) conduct (2) of an
10 enterprise (3) through a pattern (4) of racketeering activity.” Odom v. Microsoft Corp.,
11 486 F.3d 541, 547 (9th Cir. 2007) (en banc). Other cases have recognized a fifth
12 element: “[T]he conduct must be . . . the proximate cause of harm to the victim.”
13 Eclectic Props. E., LLC v. Marcus & Millichap Co., 751 F.3d 990, 997 (9th Cir. 2014).
14 1. RICO Enterprise
15 To state a RICO claim, the plaintiff must first adequately allege the existence of
16 an “association-in-fact” enterprise. For purposes of RICO, an “enterprise” is “. . . any
17 individual, partnership, corporation, association, or other legal entity, and any union
18 or group of individuals associated in fact although not a legal entity.” 18 U.S.C.
19 § 1961(4). Satisfying the association-in-fact enterprise element requires that the
20 plaintiff sufficiently plead that the enterprise had “(A) a common purpose, (B) a
21 structure or organization, and (C) longevity necessary to accomplish the purpose.”
22 Eclectic Props. E., LLC, 751 F.3d at 997.
23 To establish a common purpose, a plaintiff must plausibly allege that the
24 members of the enterprise had a common purpose. Courts disagree on whether
25 conduct must be fraudulent to qualify as a common purpose. See Singh v. AutoZone
26 Parts, Inc., No. 2:23-cv-01379-TLN-CSK, 2024 WL 3673063, at *7 (E.D. Cal. Aug. 5,
27 2024) (“In the Ninth Circuit, the law is unsettled as to whether the common purpose
28 must be fraudulent.” (internal citations and quotations omitted)). Even so, there is
1 agreement that a RICO enterprise cannot be constituted of entities engaged in
2 ordinary commercial activities. See Jimenez v. Serv. Emps. Int. Union Local 775, 590 F.
3 Supp. 3d 1349, 1362 (E.D. Wash. 2022) (collecting cases).
4 The Court previously dismissed Plaintiffs’ section 1962(c) claim on the grounds
5 that the allegations in the First Amended Complaint did not establish a common
6 purpose outside Defendant Louis Brisbois’ primary business activity and a routine
7 business relationship between Defendant Louis Brisbois and the CMB Defendants.
8 (ECF No. 68 at 13.) Plaintiffs’ claimed that the enterprise “engaged in an intentional
9 scheme to defraud Plaintiffs in an effort to cover up its willful and wanton misconduct
10 and/or gross negligence in protecting the Plaintiff’s investment” through the use of
11 communications to Plaintiffs and meritless lawsuits. (ECF No. 37 ¶ 132–37.) The Court
12 found that these allegations could not establish a common purpose because they
13 functionally asserted that the primary business activity of a member of the enterprise
14 was conducted fraudulently. (ECF No. 68 at 13 (citing In re Toyota Motor Corp.
15 Unintended Acceleration Mktg., Sales Pracs., and Prods. Liab. Litig., 826 F. Supp. 2d
16 1180, 1202–03 (C.D. Cal. 2011) and Maye v. Online Land Sales LLC, No. 2:23-cv-
17 00173-DAD-CKD, 2024 WL 382294, at *9 (E.D. Cal. 2024)).) The Court also rejected
18 these allegations as insufficient, as they sought to establish a RICO enterprise based
19 on a routine business relationship between parties. (ECF No. 68 at 13 (citing Pac.
20 Recovery Sols. v. United Behav. Health, 481 F. Supp. 3d 1011, 1026–27 (N.D. Cal.
21 2020) and Gomez v. Guthy–Renker, LLC, No. 14-cv-01425-JGB-KKx, 2015 WL
22 4270042, at *11 (C.D. Cal. July 13, 2015) (collecting cases)).)
23 Based on the allegations in the SAC, however, the Court finds that Petitioner’s
24 allegations are sufficiently similar to those raised in Living Designs, Inc. v. E.I. Dupont
25 de Nemours and Co., 431 F.3d 353 (9th Cir. 2005) such that Plaintiffs have adequately
26 established the existence of a RICO enterprise. Plaintiffs have alleged that Defendant
27 Louis Brisbois and CMB Defendants acted with a common purpose of “shield both LB
28 and CMB from liability and extract fees from Plaintiffs.” (SAC ¶ 136.) Plaintiffs allege
1 that in doing so, the enterprise participants “operated beyond LB’s standard role as
2 counsel” in an effort to “misrepresent Plaintiffs’ loss as caused by a ‘secret’
3 Participation Agreement, to preserve CMB and LB’s reputations, maintain control of
4 partnership funds, run the statute of limitations on any claims Plaintiffs would have
5 against LB and CMB for their wrongful conduct, and enrich LB’s pockets through
6 payment for legal services.” (Id. ¶¶ 136–37.) These allegations place Plaintiffs’ claims
7 in a sufficiently similar factual posture to Living Designs, such that they are not readily
8 distinguishable at this stage.
9 In addition to identifying a common purpose, the SAC also adequately alleges
10 an organization and the necessary longevity. Defendant Louis Brisbois contends that
11 the allegations are insufficient as the purported enterprise’s structure and the
12 predicate acts are one and the same. (Def. Louis Brisbois Mot. at 8.) But this does not
13 appear to be true. Plaintiffs have alleged that CMB Defendants and Defendant Louis
14 Brisbois created an enterprise through which Defendant Louis Brisbois and CMB
15 Defendants engaged in a broad scheme of litigation conduct and misrepresentative
16 communications. But the connection between Defendant Louis Brisbois and CMB
17 Defendants undoubtedly exists beyond the alleged predicate acts. Plaintiffs allege a
18 sustained enterprise between CMB Defendants and Defendant LB through which
19 Defendants “sought to preserve their reputations, avoid the risk of ruin, and maintain
20 control of partnership funds.” (SAC ¶ 135.) Thus, Plaintiffs have alleged both an
21 enterprise consisting of the Defendants engaged in an ongoing scheme to conceal
22 and defraud Plaintiffs, and separate predicate acts used to further this scheme.
23 CMB Defendants also contend that Plaintiffs have not adequately alleged that
24 each defendant “directed the affairs” of the enterprise. (CMB Defendants’ Mot. at 13–
25 14.) But the SAC is reasonably clear about the alleged participation of each of the
26 Defendants in the alleged enterprise. (SAC ¶¶ 142–61.) Contrary to CMB Defendants’
27 assertions otherwise, the allegations in the SAC are not simply group pleading, but
28 allegations of specific conduct by the individual defendants that relates to their
1 participation in the enterprise. Defendant Louis Brisbois also raises an individual
2 argument regarding the sufficiency of the allegation that Defendant Louis Brisbois
3 directed the affairs of the enterprise. (Def. Louis Brisbois Mot. at 8–9.) Defendant
4 Louis Brisbois categorizes Plaintiffs’ allegations as boilerplate allegations that only
5 show they “did nothing more than perform legal services for Group 48.” (Id. at 9.) But
6 the actual allegations in the SAC clearly allege conduct beyond “[s]imply performing
7 services for the enterprise . . . .” Walter v. Drayson, 538 F.3d 1244, 1249 (9th Cir.
8 2008).Plaintiffs allege Defendant Louis Brisbois active direction of the alleged efforts
9 to mislead the Limited Partners, mainly through the New York and California litigation.
10 (See SAC ¶¶ 152–53.) Plaintiffs clearly alleged Defendant Louis Brisbois took direction
11 from CMB Defendants, knowingly implemented the efforts of the enterprise, and was
12 indispensable to the achievement of the enterprise’s goal in their role as the
13 Partnership’s counsel who could file and pursue the frivolous legal action necessary to
14 conceal Defendants’ misconduct. See Walter, 538 F.3d at 1249 (noting that a
15 defendant’s actions did not meet the direction requirement where, among other
16 things, “the conduct attributed to [the defendant] would not support recovery for
17 giving, or taking, direction[,]” the defendant did not “knowingly implementing
18 decisions of upper management[,]” and the defendant “was not indispensable to
19 achievement of the enterprise's goal.”). As alleged in the SAC, Defendant Louis
20 Brisbois’ role is not that of an unaffiliated, uninvolved participant, but an active
21 member of the “chain of command” of the enterprise. See id.; see also United States
22 v. Oreto, 37 F.3d 739, 750 (1st Cir. 1994).
23 Certainly, with the benefit of discovery, it may become clear that Defendant
24 Louis Brisbois did not direct the alleged enterprise. At this stage though, Plaintiffs’
25 factual allegations are sufficient to establish the existence of an enterprise.
26 2. Pattern of Racketeering Activity
27 At the pleading stage, Plaintiffs have adequately alleged a pattern of
28 racketeering activity. Plaintiffs allege that Defendants committed predicate acts of
1 mail and wire fraud under 18 U.S.C. §§ 1341 and 1343 through their communications
2 with the Limited Partners and the filing of two lawsuits.2 (SAC ¶¶ 142-43, 145–46, 150–
3 58, 165.) “Wire fraud and mail fraud share the same elements: (1) that the defendant
4 formed a scheme to defraud; (2) used the United States wires [for wire fraud] or
5 United States mail [for mail fraud] in furtherance of the scheme; and (3) did so with a
6 specific intent to deceive or defraud.”3 LD v. United Behav. Health, No. 4:20-cv-02254-
7 YGR, 2021 WL 930624, at *5 (N.D. Cal. Mar. 11, 2021). Plaintiffs have specified the
8 alleged communications containing the alleged misrepresentations and identified
9 specific pieces of testimony that they allege were false. These allegations, along with
10 allegations as to Defendants’ alleged scheme and intent, are sufficient at this stage to
11 satisfy the elements of the alleged predicate acts. Defendants contend that Plaintiffs’
12 allegations in this regard lack sufficient specificity. (Def. Louis Brisbois Mot. at 9–10;
13 CMB Defs. Mot. at 14–16.) But as stated in the SAC, Plaintiffs have adequately
14 identified specific affirmative, material misrepresentations with adequate specificity
15 for the pleading stage. To the extent Defendants dispute whether the
16 communications contained misrepresentations or the litigation was frivolous based on
17 information outside the SAC, this is not appropriately resolved on motion to dismiss.
18 3. Causation
19 Defendants are correct that Plaintiffs’ claims must partially fail for lack of
20 causation. In the SAC, Plaintiffs assert that Defendants’ actions caused harm to
21 Plaintiffs through their “concealment of the loan documents and misrepresentations
22 about the cause of the loss.” (SAC ¶ 163.) Plaintiffs assert that “[b]ut for the
23 Defendants’ concealment of the Term Sheet and Purchase Option Event, Plaintiffs
24
25 2 Plaintiffs also allege other predicate acts that are not addressed here, as the allegations of mail and
wire fraud are sufficient. (See SAC ¶¶ 168–69.)
26
3 Courts also recognize that mail and wire fraud require that there be “an affirmative, material
27 misrepresentation” made by the defendant. See United States v. Benny, 786 F.2d 1410, 1418 (9th Cir.
1986). Whether this is included as an element is inconsistent, but it remains a requirement for such
28 claims.
1 would have demanded or undertaken action by July 2021 and averting [sic] the
2 August 2022 foreclosure.” (Id.) But notably, the actions Plaintiffs cite in connection
3 with this claim — including both lawsuits, Defendants’ testimony in those suits, and the
4 alleged misleading communication — occurred after this July 2021 date. (Id. ¶ 143
5 (citing a September 14, 2021 email sent to the Limited Partners by Defendant Hogan);
6 ¶¶ 145–146 (citing a July 27, 2022 investor update), 150 (citing an October 15, 2022
7 email sent to the Limited Partners by Defendant Hogan), 153–158 (discussing the
8 lawsuits and related testimony from Defendants in those suits); see id. ¶¶ 111, 117
9 (stating that the California and New York lawsuits were filed on October 14, 2022, and
10 February 6, 2023, respectively).) As these events post-date July 2021, when Plaintiffs
11 assert they would have taken action, Plaintiffs fail to establish any causal connection
12 between the loss of their investment and Defendants’ alleged actions. Thus, all
13 portions of Plaintiffs’ RICO claims predicated on the loss of their investment based on
14 Plaintiffs’ inability to demand or undertake action by July 2021 fail for lack of
15 causation.
16 However, Plaintiffs also assert that they were injured through the “depleti[on of]
17 Partnership assets to the tune of $3.8 million” through the lawsuits filed in New York
18 and California. (SAC ¶ 166.) Plaintiffs further add onto this point by alleging that
19 “Defendants obliterated any chance Plaintiffs had at repayment of their investments by
20 depleting the Partnership of all available assets and prohibiting Plaintiffs from selling
21 their partnership interests before they were essentially worthless.” (Id.) This harm is
22 sufficiently causally linked to Defendants’ alleged misconduct in concealing and
23 misrepresenting their knowledge of the events that led to the loss of Plaintiffs’
24 investment.
25 * * * *
26
27
28
1 Given the above, the Court finds that Plaintiffs have sufficiently alleged a claim
2 under 18 U.S.C. § 1962(c). CMB Defendants and Defendant Louis Brisbois Motions
3 are denied as to this claim.4
4 A. 18 U.S.C. § 1962(d)
5 Defendants move to dismiss Plaintiffs RICO conspiracy claim under section
6 1962(d) on the basis that Plaintiffs’ section 1962(c) substantive RICO claim fails. (Def.
7 Lois Brisbois’ Mot. at 18–19; CMB Defs.’ Mot. at 19–20.) However, for the reasons
8 stated above, the Court finds that Plaintiffs have alleged a substantive RICO claim.
9 Accordingly, Defendants’ Motions to Dismiss as to Plaintiffs’ section 1962(d) claim are
10 denied.
11 III. State Law Claims
12 A. Claims that Include Defendant Louis Brisbois
13 4. Aiding and Abetting and Civil Conspiracy — Agent Immunity Rule
14 Defendant Louis Brisbois argues that Plaintiffs’ claims for aiding and abetting
15 breach of fiduciary duty and civil conspiracy are barred by California’s Agent’s
16 Immunity Rule. “The Agent's Immunity Rule shields an attorney who merely acted as
17 an agent or employee of a third party when the third party had a duty to the plaintiff.”
18 ESG Cap. Partners, LP v. Stratos, 828 F.3d 1023, 1037 (9th Cir. 2016). The two
19 significant limitations on this rule are that it does not prevent claims against “[1] an
20 attorney who had an independent legal duty to the plaintiff, or [2] an attorney who
21 went beyond a professional duty as part of a conspiracy for the attorney's financial
22 gain.” Id.
23 In addressing the state law claims against Defendant Louis Brisbois in
24 connection with the prior motion to dismiss, the Court extensively discussed the
25 application of the agent’s immunity rule and the basis for any potential duty owed by
26
27 4 At this stage, the Court also rejects CMB Defendants’ argument that the RICO claim is duplicative of
the breach of contract claim. Plaintiffs’ breach of contract claim is limited in scope for reasons
28 discussed below. See infra Motions To Dismiss for Failure to State a Claim, III.C.
1 Defendant Louis Brisbois to Plaintiffs. (ECF No. 68 at 22–26.) The Court relies on the
2 same legal principles here.
3 Plaintiffs assert that Defendant Louis Brisbois owed them a duty under both
4 Goodman and fiduciary representation theories of duty. Under the Goodman
5 intended beneficiary theory, Plaintiffs argue they, as limited partners, were the
6 intended beneficiaries based on the statement in the Limited Partnership Agreement
7 (“LPA”) that part of the intended business of the partnership was to permit the limited
8 partners to apply for an EB-5 visa as well as provisions of the loan agreement between
9 CMB and CPMB which ensured that the loan would permit the limited investors to
10 apply for EB-5 visas. These arguments confuse the issue under a Goodman theory of
11 duty.
12 As stated in the Court’s prior order, Goodman supports imposing a duty (and
13 thus liability) on agents where “. . . the purpose of retention of the attorney was for the
14 specific objective of creating such benefit . . .” for the third party. Johnson v. Superior
15 Ct., 38 Cal. App. 4th 463, 471 (1995) (emphasis added). Notably, the question is the
16 purpose of retention of the attorney, not the purpose of the individual or organization
17 the attorney represents. Thus, while the partnership might have had a partial stated
18 purpose to permit the limited partners to apply for EB-5 visas,5 this does not establish
19 that the specific objective in retaining Defendant Louis Brisbois was to provide the
20 limited partners with that specific benefit. Instead, the alleged actions are entirely
21 consistent with an attorney retained for the general representation of a partnership,
22 which naturally includes drafting agreements and contracts that include provisions
23 consistent with the goals of the partnership. Beyond the simple inclusion of these
24
25
26 5 The Court notes that the language from the LPA cited by Plaintiffs states only that the partnership is
intended to be structured so that the limited partners were “able to apply for a visa pursuant the EB-5
27 Immigrant Investor Program.” (SAC ¶ 179; see LPA (ECF No. 69-7) § III.A.) This thus confirms that the
purpose of the partnership was not to provide the limited partners with visas, and this goal was fully
28 satisfied to the extent that the limited partners were able to apply for visas.
1 terms, Plaintiffs do not allege that Louis Brisbois ever took any action to secure EB-5
2 visas for the limited partners.
3 This alone is likely dispositive of a Goodman theory of duty. See Goldberg v.
4 Frye, 217 Cal. App. 3d 1258, 1268 (1990); see also Johnson, 38 Cal. App. 4th at 471–
5 42. The remaining Goodman factors — “(2) the foreseeability of harm to the plaintiff;
6 (3) the degree of certainty that plaintiff suffered injury; (4) the closeness of the
7 connection between the defendant's conduct and the injury suffered; (5) the moral
8 blame attached to the defendant's conduct; (6) the policy of preventing future harm;
9 (7) the likelihood that imposition of liability might interfere with the attorney's ethical
10 duties to the client; and (8) the likelihood that such liability would impose an undue
11 burden on the legal profession[,]” Berg & Berg Enters., LLC v. Sherwood Partners, Inc.,
12 131 Cal. App. 4th 802, 832 (2005) — also weigh against the imposition of a duty.
13 These remain largely the same as discussed in the prior order: the harm was
14 foreseeability but it was not certain that the limited partners would suffer injury; there
15 is a connection between the conduct and the harm as the Partnership was tied to
16 Plaintiffs’ EB-5 visas but it is attenuated as Defendant Louis Brisbois had no direct
17 involvement in the immigration proceedings; some moral blame is attachable to
18 Defendant Louis Brisbois under the alleged facts; and the final three policy-based
19 factors weigh against the imposition of a duty. (See ECF No. 68 at 24–25.)
20 Plaintiffs also assert that Defendant Louis Brisbois had a duty based on fiduciary
21 representation. (Opp’n to LB Mot. at 20.) But Plaintiffs’ assertion that a duty exists on
22 this basis fails to cure the issue identified in the Court’s prior order. In short, the Court
23 previously rejected that Plaintiffs had established the existence of a duty on the basis
24 of fiduciary representation on the grounds that “Plaintiffs have not provided any
25 additional factual allegations that would justify creating a legal duty for Defendant
26 Louis Brisbois via the general partners’ duty to the limited partners.” (ECF No. 68 at
27 26.) As stated in the Prior order, “[t]he authorities since [Morales v. Field, DeGoff,
28 Huppert & MacGowan, 99 Cal. App. 3d 307 (1979)], while not directly taking
1 exception to the rule of the case, appear to have held uniformly that the legal
2 representation of a fiduciary, standing alone, does not impose upon the attorney a
3 fiduciary obligation to the beneficiary.” Johnson, 38 Cal. App. 4th at 473. Plaintiffs do
4 not raise any further facts to support this duty and instead simply rest on Defendant
5 Louis Brisbois provision of services to the General Partner, who in turn owed duties to
6 the Limited Partners. For the same reasons stated in the Court’s prior order, this is
7 insufficient to create a duty. (Id.)
8 Given the above, Plaintiffs have not identified a basis to impose an
9 independent duty on Defendant Louis Brisbois. As such, Plaintiffs’ claims for aiding
10 and abetting breach of fiduciary duty and civil conspiracy are barred by California’s
11 Agent’s Immunity Rule. Defendant Louis Brisbois’ Motion is granted as to these
12 claims.6
13 5. Legal Malpractice
14 The above determination that Plaintiffs have not established that Defendant
15 Louis Brisbois owed a duty to Plaintiffs is also dispositive of Plaintiffs’ legal malpractice
16 claim. The elements of a legal malpractice claim in California are: “(1) the duty of the
17 attorney to use such skill, prudence, and diligence as members of his or her
18 profession commonly possess and exercise; (2) a breach of that duty; (3) a proximate
19 causal connection between the breach and the resulting injury; and (4) actual loss or
20 damage resulting from the attorney's negligence.” Wilkinson v. Zelen, 167 Cal. App.
21 4th 37, 45 (2008). As the question of duty is the same as the Goodman determination
22 above, see Osornio v. Weingarten, 124 Cal. App. 4th 304, 319–20 (2004), Plaintiffs’
23 legal malpractice claim is deficient on the same basis. Accordingly, Defendant Louis
24 Brisbois Motion is granted as to this claim, and Plaintiffs’ Legal Malpractice claim is
25 dismissed.
26
27 6 As Plaintiffs’ claims are predicated on a civil conspiracy between Defendant Louis Brisbois and CMB
Defendants, this is dispositive of the civil conspiracy claim as a whole. CMB Defendants’ arguments
28 against the sufficiency of the civil conspiracy claim are moot.
1 B. Breach of Fiduciary Duty
2 Plaintiffs’ breach of fiduciary duty claim fails as brought against Defendant
3 Group 48. The SAC does not attribute any actions to Group 48 directly, and Group 48
4 cannot be held liable based on the actions of the general partners. Arnold v. Soc. For
5 Sav. Bancorp, Inc., 678 A.2d 533, 540 (Del. 1996).
6 Plaintiffs’ breach of fiduciary duty claim against Defendants Hogan and Lee
7 must also fail. While the human director of an entity general partner may have some
8 limited fiduciary duty, that duty is limited and arises where the owner “acted in a way
9 that is potentially advantageous to their personal interests and at the expense of the
10 limited partners . . .” and caused the general partner to breach its fiduciary duty.
11 Gelfman v. Weeden Invs., LP, 792 A.2d 977, 992 n.24 (Del. Ch. 2001); see In re
12 USACafes, L.P. Litig., 600 A.2d 43, 49 (Del. Ch. 1991). The SAC includes allegations
13 related to Defendants Lee and Hogan in connection with their alleged breach of
14 fiduciary duty. (See SAC ¶¶ 202, 205–215.) But the SAC fails to establish that these
15 defendants caused the general partner to breach its fiduciary duties in order to reap
16 any personal benefit. Accordingly, CMB Defendants’ Motion to Dismiss is also
17 granted as to Plaintiffs’ breach of fiduciary duty claim as to Defendants Hogan and
18 Lee.
19 Finally, CMB Defendants contend that a portion of Plaintiffs’ breach of fiduciary
20 duty claim is untimely. In their Opposition, Plaintiffs argue that the discovery rule
21 tolled Plaintiffs’ breach of fiduciary duty claims. In response, Defendants first argue
22 that this rule only applies where a defendant was allegedly engaged in “self-dealing”
23 that involves “theft of Partnership assets or usurpation of Partnership opportunities.”
24 (CMB Reply at 14.)
25 To the extent Plaintiffs argue that they can assert equitable tolling based
26 exclusively on reliance on fiduciary duty, this might well be true. But self-dealing is not
27 the only recognized scenario where the discovery rule may be invoked. The delayed-
28 discovery rule also applies “where the defendant has fraudulently concealed key
1 facts[,]” without any requirement for self-dealing.7 See Erisman v. Zaitsev, No. 2020-
2 0903-JRS, 2021 WL 6134034, at *12 (Del. Ch. Dec. 29, 2021). Plaintiffs plainly assert
3 that Defendants fraudulently concealed key facts from Plaintiffs. For example, in
4 paragraph 201 of the SAC within the section on breach of fiduciary duties, Plaintiffs
5 assert that “[s]ince receipt of the Term Sheet, Defendants have sought to hide from
6 Plaintiffs their malfeasance in approving and executing the Fourth Amendment to
7 Intercreditor Agreement . . . .” Thus, at this stage, application of this rule, based
8 exclusively on the allegations in the SAC, is at least facially appropriate.
9 Defendants also note that, regardless of this rule, certain portions of the breach
10 of fiduciary duty claim may be untimely as they precede any alleged concealment.
11 However, resolution of these arguments appears to be at least partially reliant on
12 information outside the SAC to determine when information was available to the
13 Plaintiffs. (See CMB Mot. at 23 (citing the Confidential Private Placement
14 Memorandum attached to CMB Defendants’ Motion as an exhibit).) As such, any
15 determination in this regard is not appropriately resolved at this stage and is better
16 left to the summary judgment stage of these proceedings.
17 Accordingly, Defendants’ Motion to Dismiss Plaintiffs’ breach of fiduciary duty
18 claim is granted as to Defendants Lee, Hogan, and Group 48, but it is otherwise
19 denied.
20 C. Breach of Contract
21 In the SAC, Plaintiffs bring additional breach of contract claims alleging the
22 General Partners violated article IV, section C.3 and article VI, section A.3 of the
23 Limited Partnership Agreement (“LPA”) by failing to use commercially reasonable
24
25
7 To the extent Defendants interpret Plaintiffs’ argument as exclusively raising the equitable tolling
26 doctrine, this is a misreading of Plaintiffs’ position. In addition to raising equitable tolling, Plaintiffs
secondarily assert that the discovery rule should apply to Plaintiffs’ breach of fiduciary duty claim “in
27 light of Defendants’ concealment endeavors.” (Pl.’s Opp’n at 22.) While the clarity of the briefing in
raising this argument leaves something to be desired, this argument is entirely consistent with the SAC
28 in arguing that Defendants fraudulently concealed key facts.
1 efforts to meet the objectives of the Partnership.8 (See SAC ¶¶ 242–43.) Article IV,
2 section C.3 of the LPA states:
3
Investments. The Partnership shall use commercially
4 reasonable efforts to advance and accomplish the
Partnership’s business and purpose as set forth in Article III
5
of this Agreement. The Partnership intends to limit its initial
6 investment activities to investments in a private business
located within the geographical jurisdiction of the Regional
7 Center as approved by the USCIS in order to assist in job
creation within the areas comprising the current
8
geographic scope of the Regional Center. Nothing
9 contained in this Section shall be construed to limit the
General Partner’s ability to reinvest the Cash Flow from
10 Return of Investment in another investment, even if such
reinvestment is outside of the geographical jurisdiction of
11
the Regional Center, if such reinvestment is consistent with
12 the business and purpose of the Partnership as stated in
Article III.
13
14 (LPA (ECF No. 69-7) § IV.C.3.) Article VI, section A.3 grants the General Partner the
15 power “to use commercially reasonable efforts to meet the objectives of the
16 Partnership,” along with specific provisions elucidating what this power permitted.
17 (LPA § VI.A.3.)
18 As Defendants identify, neither of these provisions imposes a duty of the
19 general partners that would support a breach of contract claim. Article IV, section C.3
20 seemingly imposes duties on the partnership, not the general partners. Plaintiffs
21 conclusively state that this provision “requires the General Partners to fulfill their duties
22 using ‘commercially reasonable efforts’ in negotiating the Loan Documents.” (Opp’n
23 at 24.) But they fail to address or explain why this provision should be read to impose
24 a duty on the partnership where, by its express terms, it imposes that duty on the
25 partnership. Similarly, by its express language, article VI, section A.3 only grants
26 powers to the General Partners; it does not impose any duties. While Plaintiffs
27
8 The Court previously permitted Plaintiffs to proceed on a portion of their original breach of contract
28 claim. This order does not address the portion of the claim that was already permitted.
1 naturally object to this reading, they do not present any basis to believe that an
2 alternate reading is appropriate. (Opp’n at 24.)
3 Accordingly, Plaintiffs’ breach of contract claim based on a violation of an
4 express duty within the LPA to use “commercially reasonable efforts” must fail as the
5 LPA does not appear to impose such a duty on the General Partners. Defendants’
6 Motion shall be granted as to this claim, with leave to amend.
7 CONCLUSION
8 Accordingly and for the reasons stated above, IT IS HEREBY ORDERED that:
9 1. Defendant Louis Brisbois Motion to Dismiss (ECF No. 74) is GRANTED IN
10 PART as to Plaintiffs’ state law claims against Defendant Louis Brisbois
11 and is DENIED IN PART as to Plaintiffs’ First and Second Causes of Action
12 under 18 U.S.C. §§ 1962(c) and (d).
13 2. CMB Defendants’ Motion to Dismiss (ECF No. 76) is GRANTED IN PART
14 and DENIED IN PART as follows:
15 a. Defendants’ Motion is granted as to Plaintiffs’ civil conspiracy as
16 well as Plaintiffs’ breach of contract claims based on article VI,
17 section A.3 of the LPA.
18 b. Defendants’ Motion is also granted as to Plaintiffs’ Breach of
19 Fiduciary Duty claim against Defendants Lee, Hogan, and Group
20 48.
21 c. Defendants’ Motion is denied as to Plaintiffs’ First and Second
22 Causes of Action under 18 U.S.C. §§ 1962(c) and (d).
23 d. Defendants’ Motion is also denied as to the request to dismiss
24 Plaintiffs’ breach of fiduciary duty claim as untimely.
25 3. Plaintiffs are granted leave to amend only as to Plaintiffs’ breach of
26 contract claim. Should Plaintiffs seek to amend their complaint further,
27 their Third Amended Complaint must be filed within fourteen days of this
28 Order. Any such amendment shall be limited only to Plaintiffs’ breach of
1 contract claim. Leave to amend is denied as to all other dismissed claims
2 on the ground that further amendment would be futile.
3
A IT IS SO ORDERED.
5 | Dated: _March 31, 2026 “Daniel J CoD
Hon. Daniel alabretta
6 UNITED STATES DISTRICT JUDGE
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