It is currently Tue Jun 19, 2018 6:50 am

All times are UTC - 8 hours [ DST ]

Post new topic Reply to topic  [ 1 post ] 
Author Message
 Post subject: FT - In re Turner (12/5/2005)
PostPosted: Thu Feb 26, 2009 7:02 pm 

Joined: Mon Dec 15, 2008 11:29 am
Posts: 63
In re Turner,
335 B.R. 140 (Bkrpt. N.D.Cal. 12/05/2005)

United States Bankruptcy Court,

N.D. California.

In re Stephen Brian TURNER, etc., Debtor.

John T. Kendall, Chapter 7 Trustee, Plaintiff,


Susana C. Turner, et al., Defendants.

Ah Beng Yeo and E.A. Martini, Plaintiffs,


Stephen Brian Turner, M.D., etc., Defendant.

Bankruptcy No. 02-44874TK.

Adversary Nos. 02-7273 AT, 02-7298 AT.

Dec. 5, 2005.

Timothy Carl Aires, Aires Law Group, Newport Beach, CA, for Plaintiffs Ah Beng Yeo and E.A. Martini.

Chris Kuhner, Kornfield, Paul & Nyberg, Oakland, CA, for Plaintiff John T. Kendall.

Drew Henwood, Law Offices of Drew Henwood, San Francisco, CA, Herman A.D. Franck, Law Offices of Herman Franck, Sacramento, CA, for Defendant Susana Turner.



The two above-captioned adversary proceedings were consolidated for trial. The Court conducted a trial on most of the claims asserted on March 8, 9, and 10, 2005. [FN1] At the conclusion of the trial, the Court took the claims under submission. It deferred rendering a decision pending receipt of the above-captioned debtor's (the "Debtor") tax returns. Pursuant to the Court's direction, the parties filed closing briefs on or about November 7, 2005. Having considered the evidence and argument presented by the parties, the Court finds and concludes as set forth below.

FN1. The Court severed the dischargeability claim asserted in A.P.

No. 02-7298 AT for a later trial, if necessary.


The Debtor graduated from medical school in or about 1980. The Debtor and Susana Turner ("Susana") were married on February 16, 1981. After five years of post-graduate work, the Debtor began practicing medicine. Some time during the 1980s, a complaint about the Debtor's professional conduct was lodged with the Medical Board of California, Department of Consumer Affairs. Thereafter, the Debtor was placed on probation and permitted to practice medicine only on certain conditions.

In November 1991, the Debtor and Susana acquired title to and began living in a residence located in Alameda County, California (the "Home"). The deed by which they acquired title was recorded shortly thereafter. In 1994, while the Debtor was still practicing medicine on probation, he was convicted of a misdemeanor based on an incident involving a patient. This second incident ultimately led to a license revocation proceeding and to the Debtor's surrender of his medical license. Thereafter, the Debtor supported himself and his family by performing paramedical examinations for insurance companies.

In 1994, the Debtor attended a seminar on "asset protection" given by Robert Matthews ("Matthews"). At the conclusion of the seminar, Matthews referred the Debtor to a tax attorney knowledgeable about "asset protection." The attorney provided the Debtor with a form of document entitled Declaration of Trust (the "GG Trust Declaration") which the Debtor and Susana signed but did not record. The GG Trust Declaration purported to establish a Bahamian Trust and declared that certain of the Debtor's and Susana's assets, including the Home, were held in trust for the Debtor's and Susana's three children.

Beginning in the Spring of 1995, the Debtor engaged in conduct with respect to the plaintiffs Ah Beng Yeo and E.A. Martini (the "Plaintiffs") that was ultimately found by a jury to be tortious. At about the same time, the Debtor met with Matthews in Ventura to discuss the subject of "asset protection." The Debtor showed Matthews a transmutation agreement, purporting to change the character of the Home to Susana's separate property (the "Transmutation Agreement") and the GG Trust Declaration as evidence of what efforts he had made previously to "protect" his assets. Matthews advised the Debtor about some of the disadvantages of holding real property in an offshore trust. They discussed the use of limited liability companies to "protect" assets.

In September 1997, the Plaintiffs filed a lawsuit (the "Tort Action") against the Debtor and in August 1998 obtained a money judgment (the "Judgment"). At about the same time, at the Debtor's direction, Matthews created a Nevada limited liability company named Real Investment Capital Holdings LLC ("RICH LLC") and a Nevada corporation named Proset Enterprises, Inc. ("Proset"). [FN2] In publicly filed documents, the GG Trust was identified as the 99 percent owner and Proset was identified as the 1 percent owner of RICH LLC. Alfred Cheung, Susana's brother, a resident of Hong Kong, was identified as Proset's President and Secretary.

FN2. The Debtor and Matthews continue to maintain a business relationship. Matthews owns a company with an office in Las Vegas that serves as the resident agent for the RICH LLC and Proset, as well as for numerous other companies. In addition, for a small annual payment, the Debtor serves as the "nominee" president for at least six limited liability companies formed by Matthews for other clients who do not wish their names to be listed in a public filing. The public filing does not reveal that the Debtor is not a bona fide officer of the companies.

In March 1998, after the Civil Action was filed but before the Judgment was entered, Susana and the Debtor executed a grant deed (the "1998 Deed"), transferring title to the Home to RICH LLC. The 1998 Deed was recorded in April 1998. On March 16, 1999, approximately seven months after the Judgment was entered, the Debtor, acting on behalf of RICH LLP, executed a deed of trust in favor of Proset (the "Proset Deed of Trust"), encumbering the Home to secure a line of credit. The Proset Deed of Trust was recorded on March 18, 1999. [FN3] The Debtor is identified in the Proset Deed of Trust as the managing partner of RICH LLC.

FN3. The Debtor testified at trial that there was never any draw on the line of credit. As a result, the Proset Deed of Trust did not secure any debt. Moreover, there was no credible testimony at trial that Proset ever had the ability to answer a draw. No credible evidence was provided that either Proset or the GG Trust, Proset's interest holder, had any assets other than their interest the Home. The Debtor testified vaguely that the GG Trust had held investments which generated income. The Court did not believe him.

In October 1999, the Plaintiffs filed a fraudulent transfer action against the Debtor and Susana. [FN4] On May 31, 2001, the Plaintiffs obtained a writ of execution and attempted to execute the writ against the Home. In June 2001, the Debtor prepared a dissolution petition for Susana in which she sought to dissolve her marriage to the Debtor. In the petition, the Debtor and Susana stipulated that the Home (which had previously been transferred to RICH LLC) should be "confirmed" as Susana's separate property. A dissolution judgment (the "Dissolution Judgment") was entered in September 2001. Notwithstanding their divorce, the Debtor and Susana both continue to live in the Home and file joint tax returns, identifying themselves as married.

FN4. After the Debtor filed his bankruptcy petition, this action was removed to the bankruptcy court and was designated A.P. No. 02-7273 AT. Thus, it is one of the two above-captioned adversary proceedings. As fraudulent transfer actions belong to the bankruptcy estate, the Trustee has assumed the prosecution of this proceeding in place of the Plaintiffs. See Fed. R. Bankr.Proc. 6009.

On December 27, 2001, RICH LLC executed a deed, transferring title to the Home to Susana (the "2001 Deed"). [FN5] The 2001 Deed was recorded the same day. [FN6] On September 10, 2002, less than one year after the recordation of the 2001 Deed, the Debtor filed a petition seeking relief under chapter 7 of the Bankruptcy Code, thereby commencing this case.

FN5. The Court has not been provided with a copy of the 2001 Deed. However, the Court assumes that the Debtor signed the 2001 Deed on behalf of RICH LLC.

FN6. The Dissolution Judgment had no legal effect on Susana's interest in the Home. Prior to the entry of the Dissolution Judgment, Susana had transferred her separate property interest in the Home, acquired pursuant to the Transmutation Agreement, to RICH LLC.


As noted above, the trial addressed claims asserted in two adversary proceedings: (1) A.P. No. 02-7273 AT (the "Fraudulent Transfer Action") and (2) A.P. No. 02-7298 AT (the "Objection to Discharge Action"). The Fraudulent Transfer Action was filed by the Plaintiffs in state court in October 1999. It was removed to this court when the Debtor filed his chapter 7 bankruptcy petition in September 2002. Pursuant to Rule 6009 of the Federal Rules of Bankruptcy Procedure, the Trustee took over the prosecution of this action. The Plaintiffs filed the Objection to Discharge Action in the bankruptcy court after the Debtor filed his chapter 7 bankruptcy petition. They remain the plaintiffs in that action. The Court will address each action in turn.


The Fraudulent Transfer Action asserts four claims for relief. The first two claims seek to avoid the various pre-petition transfers of the Home by the Debtor as actually and constructively fraudulent pursuant to bankruptcy and state law. Section 548 of the Bankruptcy Code permits a trustee to avoid a transfer of an interest of the debtor in property that is actually or constructively fraudulent provided it was made within one year of the bankruptcy filing. See 11 U.S.C. § 548.

Section 544(b) of the Bankruptcy Code permits a trustee to avoid a transfer that would have been avoidable by an unsecured creditor under applicable state law provided that there is such a creditor with a claim against the bankruptcy estate. See 11 U.S.C. § 544(b). Section 3439 et seq. of the California Civil Code permits a creditor to avoid the transfer of an "asset" of the debtor that is actually or constructively fraudulent that is made within four years prior to the date the avoidance action is filed. See Cal. Civ.Code §§ 3439.07, 3439.09. "Asset" is defined to include only the unencumbered, nonexempt value of the property transferred. See Cal. Civ.Code § 3439.01(a).

Both bankruptcy law and California law define an actually fraudulent transfer as one made with "actual intent to hinder, delay, or defraud a creditor." See 11 U.S.C. § 548(a)(1)(A); Cal. Civ.Code § 3439.04(a)(1). Both bankruptcy law and California law define a transfer that is constructively fraudulent, in essence, as one for which the debtor does not received reasonably equivalent value and which is made when the debtor is insolvent or which renders the debtor insolvent. See 11 U.S.C. § 548(b); Cal. Civ.Code § 3439.05. In sum, despite their similarities, the right to avoid a fraudulent transfer under the Bankruptcy Code differs from the right to avoid a fraudulent transfer under California law in two significant respects. First, the "reach back" period under the Bankruptcy Code is only one year. The "reach back" period under California law is four years or, in the case of "actual fraud," if later, one year after the transfer could reasonably have been discovered. See Cal. Civ.Code § 3439.09(a). Second, under the Bankruptcy Code, the entire transfer is avoided. Under California law, only the transfer of the "asset" is avoided.

In the first claim for relief, the Trustee seeks to avoid all of the transfers referred to above as actually fraudulent under both 11 U.S.C. § 548 and Cal. Civ.Code § 3439 et seq. In the second claim for relief, the Trustee seeks to avoid all of the transfers referred to above as constructively fraudulent under both 11 U.S.C. § 548 and Cal. Civ.Code § 3439 et seq. In the third claim for relief, the Trustee seeks a determination that, despite the numerous transfers, the Debtor retained his equitable interest in the Home at the time he filed his bankruptcy petition. Thus, he seeks a determination that the Home is property of the Debtor's bankruptcy estate. In the fourth claim for relief, he seeks turnover of the Home.

The evidence presented at trial persuaded the Court that all of the transfers in question were made with actual intent to hinder, delay, or defraud creditors. Actual intent must generally be established by reference to external circumstances. California fraudulent transfer law has codified some of the types of circumstances commonly found to indicate actual intent to defraud. Several of these "badges of fraud" are present here. [FN7] The Court was also persuaded that the Debtor received no consideration for any of the transfers and that they rendered the Debtor insolvent.

FN7. For example, all of the transfers were to insiders; the Debtor retained possession and control of the Home after the all of the transfers; the Debtor had been sued before most of the transfers; no consideration was received for the transfers; and the Debtor was rendered insolvent by the transfers. See Cal. Civ.Code § 3439.04(b).

The Court did not believe the Debtor's and Susana's testimony that the transfer reflected by the Transmutation Agreement was made to restore marital harmony and to give Susana a sense of financial security. It was obvious to the Court that the Debtor exerted complete control over the disposition of the Home both before and after the execution of the Transmutation Agreement. However, the transfer reflected by the Transmutation Agreement is irrelevant because, as noted above, in 1998, Susana transferred her separate property interest in the Home to RICH LLC pursuant to the 1998 Deed. The Debtor obviously considered the GG Trust Declaration as not having effected a transfer because he did not bother to have any document executed by the trustee of the GG Trust, transferring title back to the Debtor and Susana (or to Susana alone) before he and Susana executed the 1998 Deed.

During the pre-trial motion stage of the proceeding, the Court viewed the 1998 Deed as the critical transfer for fraudulent transfer purposes. Because this transfer occurred more than one year before the filing of the Debtor's bankruptcy petition, the Court assumed that the Trustee's remedies were limited to avoidance of the "asset" transferred pursuant to the 1998 Deed. As a result, at the Court's direction, Susana and the Trustee each called appraisers as expert witnesses to testify as to the unencumbered, nonexempt value of the Home at the time of the 1998 transfer.

Susana's appraiser testified that the Home had no "asset" value at that time. The Trustee's appraiser testified that the Home had approximately $7,700 in unencumbered, nonexempt value. Although both appraisers were competent and credible, the Court found the Trustee's appraiser methodology more reasonable. Thus, if the Trustee were forced to rely on California fraudulent transfer avoidance law, the Court would grant the Trustee a judgment avoiding the transfer of the Home to the extent of $7,700. However, based on the testimony at trial and further analysis of the series of transfers persuades the Court that the critical transfer is reflected by the 2001 Deed.

The evidence presented persuaded the Court that RICH LLC and Proset were the Debtor's alter egos. The Debtor admitted that these entities were created and their relationship structured to maximize the protection of his assets: i.e., the Home. "Asset protection" is not illegal and is honored by the law if done for a legitimate purpose. For example, an individual may do business through a corporation or limited liability company and will not be held personally liable for the debts of the entity. The assets of the corporation or limited liability company will not be considered the assets of the individual interest holder. However, an entity or series of entities may not be created with no business purpose and personal assets transferred to them with no relationship to any business purpose, simply as a means of shielding them from creditors. Under such circumstances, the law views the entity as the alter ego of the individual debtor and will disregard it to prevent injustice.

Under similar facts, a trial court found that the corporation created by a judgment debtor to hold his assets was the judgment debtor's alter ego. This finding was noted with approval by the Ninth Circuit Court of Appeals. See Fleet Credit Corp. v. TML Bus Sales, Inc., 65 F.3d 119, 120 (9th Cir.1995). In Fleet, the trial court found that Berthold, the judgment debtor, had operated a corporation: an extension of himself. He personally directed the transfer...and did so for reasons that had nothing whatsoever to do with the operation of the corporate entity.... [I]t is beyond cavil that an inequitable result would follow were the Court to permit Berthold to shield himself with Taylor's corporate form. Id. at 120.

Moreover, in Fleet, as here, Berthold caused his alter ego corporation to make a further fraudulent transfer. The Court of Appeals noted that: "for Berthold's creditors to get... [Berthold's assets], they had to penetrate two layers of fraud, the alter ego corporation, and the fraudulent conveyance." Id. at 121. Thus, the fraudulent transfer by the alter ego corporation could be treated as a fraudulent transfer by Berthold. Id. at 121-22.

Thus, the only relevant transfer to be avoided is the transfer reflected by the 2001 Deed: i.e., by the Debtor (through his alter ego, RICH LLC) to Susana. The Court has received no evidence of the value of the "asset" transferred pursuant to the 2001 Deed. However, because this transfer occurred within one year of the bankruptcy filing, there is no need to reopen the evidence for this purpose. The Trustee is entitled to avoid the transfer in its entirety under 11 U.S.C. § 548(a).

The avoidance of this transfer causes the interest in the Home to revert to RICH LLC which, as discussed above, the Court views as the Debtor's alter ego. Because the Debtor and Susana were divorced before the bankruptcy was filed, the avoidance of the transfer reflected by the 2001 Deed causes the entire interest in the Home to reverts to the Debtor as his separate property. Thus, the Home is property of the Debtor's bankruptcy estate in its entirety. As a result, the Trustee is also entitled to a judgment on his fourth claim for relief: i.e., for turnover of the Home pursuant to 11 U.S.C. § 542.


The Denial of Discharge Action seeks denial of the Debtor's discharge under 11 U.S.C. § 727(a)(2), (4), and (5). Section 727(a)(2) of the Bankruptcy Code provides, in pertinent part, that an individual chapter 7 debtor may not obtain a discharge if "the debtor, with intent to hinder, delay, or defraud a creditor...has transferred... or concealed... (A) property of the debtor, within one year before the date of the filing of the petition; or (B) property of the estate, after the date of the filing of the petition." The transfer of the Home by RICH LLC to Susana pursuant to the 2001 Deed occurred within one year of the bankruptcy filing. As discussed above, the Court finds and concludes that RICH LLC was the Debtor's alter ego and that the transfer reflected by the 2001 Deed was made with actual intent to hinder, delay, or defraud the Plaintiffs. Thus, the Debtor's discharge should be denied based on 11 U.S.C. § 727(a)(2).

The Debtor's discharge should also be denied under 11 U.S.C. § 727(a)(4). Section 727(a)(4) provides, in pertinent part, that an individual chapter 7 debtor may not obtain a discharge if "the debtor knowingly and fraudulently, in or in connection with the case(A) made a false oath or account...." The Court concludes that the Debtor knowingly and fraudulently made several false oaths on the Debtor's Schedules of Assets and Liabilities (the "Debtor's Schedules") and Statement of Financial Affairs (the "SOFA"). Both documents were signed by the Debtor under penalty of perjury.

First, the Court views as a knowing and false oath the Debtor's omission of any reference to his interest in the Home. Schedule A of the Debtor's Schedule of Assets and Liabilities (the "Debtor's Schedules") asked the Debtor to list any interest in real property and to describe the nature of the interest. The Court was persuaded that, notwithstanding the numerous paper transfers of his interest in the Home, at the time he filed his bankruptcy petition, the Debtor retained an equitable interest in the Home. He failed to list that interest on Schedule A.

In addition, item 10 on the Debtor's SOFA directed him to list any transfers of property other than in the ordinary course of business within one year prior to the bankruptcy filing. As discussed above, the Court views the 2001 Deed as a transfer by the Debtor. The Debtor failed to list this transfer and marked the box indicating that there were no such transfers. The Court views this omission and mark as a knowing and fraudulent false oath.

Second, Schedule B of the Debtor's Schedules, item 12, asked the Debtor to list any interests in incorporated or unincorporated businesses. As discussed above, the Court was persuaded that the Debtor was the equitable owner of RICH LLC and Proset at the time he filed his bankruptcy petition. The Debtor failed to list these interests and instead checked the space in the column indicating that he had no interest in any incorporated or unincorporated business. The Court also views this omission and mark as a knowing and fraudulent false oath.

Third, Schedule I and J required the debtor to list his income and expenses at the time the bankruptcy petition is filed. On Schedule I, the Debtor identified himself as divorced. He listed a monthly income of $5,000 and, on Schedule J, listed expenses of $5,106, the largest item being an alimony payment of $4,657. This was inconsistent with the Debtor's sworn statements in his tax returns for that year in two respects. As noted above, in their tax returns, filed jointly notwithstanding their prior divorce, the Debtor and Susana identified themselves as married. Not surprisingly, they also listed no alimony payment.

Although the Court believes that the Debtor's and Susana's divorce was effected for fraudulent purposes, they are nonetheless divorced. Thus, the Debtor's false statement under oath concerning his marital status is the one made on his tax returns, not the one made on Schedule I. However, based on the evidence presented, the Court finds and concludes that the Debtor's statement on Schedule J that his monthly expenses included an alimony payment of $4,675 was a knowing and fraudulent false statement. Susana testified credibly that the Debtor did not pay her alimony of $4,675 a month. Instead, he simply gave her money when she asked for it. The Court is persuaded that this false statement, standing alone, warrants denial of the Debtor's discharge.

Finally, 11 U.S.C. § 727(a)(5) of the Bankruptcy Code provides, in pertinent part, that an individual chapter 7 debtor may not obtain a discharge if "the debtor has failed to explain satisfactorily, before determination of denial of discharge...any loss of assets or deficiency of assets to meet the debtor's liabilities...." The Plaintiffs failed to present sufficient evidence to meet their burden of establishing a claim for denial of the Debtor's discharge under this subsection.


With respect to the Fraudulent Transfer Action:

1. With respect to the First Claim for Relief, the Trustee is entitled to a judgment declaring that RICH LLC and Proset were alter egos of the Debtor and avoiding the transfer of the Home to Susana pursuant to the 1998 Deed as an actually fraudulent transfer under 11 U.S.C. § 548(a)(1)(A).

2. Alternatively, with respect to the Second Claim for Relief, the Trustee is entitled to a judgment avoiding the Home to Susana pursuant to the 1998 Deed as a constructively fraudulent transfer under 11 U.S.C. § 548(a)(1)(B).

3. With respect to the Third Claim for Relief, the Trustee is entitled to a judgment declaring that, at the time he filed his bankruptcy petition, the Debtor retained his equitable interest in the Home.

4. With respect to the Fourth Claim for Relief, the Trustee is entitled to a judgment ordering turnover of the Home to the Trustee.

With respect to the Denial of Discharge Action:

1. The Plaintiffs are entitled to a judgment denying the Debtor's discharge pursuant to 11 U.S.C. § 727(a)(2) and (4). Their claim for denial of the Debtor's discharge pursuant to 11 U.S.C. § 727(a)(5) will be dismissed with prejudice.

2. The second claim for relief, seeking to except the Plaintiffs' Judgment from the Debtor's discharge, is dismissed as moot.

Counsel for the Trustee is directed to submit a proposed form of judgment in accordance with this decision.

Turner v. Cook, 362 F.3d 1219 (9th Cir. 2004)

United States Court of Appeals,

Ninth Circuit.

Stephen TURNER, M.D., Susana Turner, on behalf of themselves and As Guardian Ad

Litem for two minor children Daniel Turner and Deborah Turner, Western

Paramedical Services, LLC, and David Turner, Plaintiffs-Appellants,


David J. COOK, Esq., Cook Perkiss & Lew, a Professional Law Corp., Ah Beng Yeo

and E.A. Martini, Defendants-Appellees.

No. 02-16847.

Argued and Submitted Oct. 7, 2003.

Decided April 1, 2004.

Herman A.D. Franck, Sacramento, CA, for the appellants.

Timothy Carl Aires, Newport Beach, CA, for the appellees.

Appeal from the United States District Court for the Northern District of California; Claudia Wilken, District Judge, Presiding. D.C. No. CV-01- 03884-CW.

Before: B. FLETCHER and TASHIMA, Circuit Judges, and POLLAK, [FN*] District Judge.

FN* Honorable Louis H. Pollak, Senior United States District Court Judge for the Eastern District of Pennsylvania, sitting by designation.

POLLAK, District Judge:

In this suit initiated in the District Court for the Northern District of California and arising under the Fair Debt Collection Practices Act, 15 U.S.C. §§ 1692-1692o ("FDCPA"), and the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. §§ 1961-1968 ("RICO"), to which were annexed certain supplemental state-law claims, the plaintiffs-appellants are Stephen Turner; his wife, Susana Turner; the Turner children, Daniel, Deborah and David; and Western Paramedical Services, LLC ("WPS"), an entity that employed the Turners. [FN1] The defendants-appellees are Ah Beng Yeo, E.A. Martini, David J. Cook, and Cook, Perkiss & Lew, a law firm in which Cook is a partner. The plaintiffs-appellants' federal claims are that actions taken by Yeo and Martini, represented by Cook, to levy execution on an antecedent state-court tort judgment in favor of Yeo and Martini and against Stephen Turner, contravened the FDCPA and RICO. The actions of appellees of which appellants complained included pursuing a fraudulent conveyance action against Stephen Turner in a California state court and communicating with numerous insurance companies in order to accelerate the collection process.

FN1. According to appellants' pleadings, WPS was owned by the Golden Gate Trust, a family trust of which the Turner children were beneficiaries. Stephen Turner, a physician, provided medical services to WPS and Susana Turner was WPS' general manager. WPS did not join in the FDCPA cause of action.

From District Court orders sequentially dismissing the FDCPA and RICO claims (and, with them, the supplemental state-law claims), plaintiffs-appellants appeal. We affirm.


On August 21, 1998, after a jury trial in the Superior Court for Contra Costa County, in California, appellees Yeo and Martini obtained a judgment against Stephen Turner for more than $1,000,000. According to appellants' First Amended Complaint in the District Court, "the judgment arose from allegations of various *1223 business interference torts by Stephen Turner against Yeo and Martini." Yeo and Martini retained Cook and his law firm Cook, Perkiss & Lew to assist in collection of the judgment--assistance which appears to have continued until March, 2002. [FN2] On October 29, 1999, Cook filed a complaint in the Superior Court for Contra Costa County on behalf of Yeo and Martini against Stephen Turner, alleging that Turner, under the express direction of Susana Turner, had fraudulently conveyed his real and personal property, including his home, to a family limited partnership and a limited liability company, each allegedly controlled by the Turners, with the intent to prevent Yeo and Martini from collecting the money owed on the August 21, 1998 judgment.

FN2. According to appellants' pleadings, Cook, Perkiss & Lew "substituted out" as attorneys for Yeo and Martini sometime around March, 2002.

On October 15, 2001, in response to the Yeo-Martini fraudulent conveyance action, Stephen and Susana Turner, suing for themselves and on behalf of their children, filed this action in the United States District Court for the Northern District of California, claiming violations of the FDCPA and various state laws. Subsequently an amended complaint was filed, which included all of the allegations in the original complaint and added RICO claims. The amended complaint included WPS as a plaintiff on the RICO claims and on a California Unfair Competition Act claim. WPS was not a plaintiff on the FDCPA claim or on the state-law claims other than the Unfair Competition Act claim.

The First Amended Complaint

In their FDCPA claims, the Turners alleged that appellees, as part of their efforts to collect on the state-court judgment, dispatched false and misleading communications--by mail, fax and telephone--to numerous insurance companies thought to be debtors of WPS, in violation of 15 U.S.C. §§ 1692c(b), 1692e(2)(A), 1692e(3), 1692e(9), 1692f(1). [FN3] According to the Turners, these communications falsely represented that the Superior Court for Contra Costa County had ordered all "accounts, accounts receivable, and other rights ... generated by Stephen Turner, or any entity of [sic] his behalf," including WPS, to be turned over to Yeo and Martini. The Turners asserted that because WPS was not owned, operated or controlled by Stephen Turner, the Superior Court's order applied only to Stephen Turner and not to WPS. The Turners also claimed that appellees' fraudulent conveyance filings in the Superior Court contained "false, deceptive and improper statements." Specifically, the Turners objected to (1) references to Stephen Turner's *1224 prior misdemeanor criminal conviction and (2) a characterization of a Turner family trust--the Golden Gate Trust--suggesting that it was a "collusive trust" created to assist Stephen Turner in hiding his assets. The Turners also alleged that appellees engaged in conduct to "harass, oppress or abuse" them, in violation of 15 U.S.C. § 1692d [FN4] and § 1692f(6). [FN5] This alleged conduct included (1) serving excessive copies of court papers on the Turners; (2) improperly serving them with documents intended for other parties, such as a Nevada limited liability company; (3) making false statements in an August, 2001 court filing regarding the sale of appellants' residence; and (4) Cook's statement to Stephen Turner that: "You dirty Jew, I'll take everything away from you."

FN3. Section 1692c(b) states that, without prior consent, "a debt collector may not communicate, in connection with the collection of any debt, with any person other than the consumer, his attorney, a consumer reporting agency if otherwise permitted by law, the creditor, the attorney of the creditor, or the attorney of the debt collector."

Section 1692e prohibits the debt collector from using "any false, deceptive, or misleading representation or means in connection with the collection of any debt[,]" and outlines conduct constituting a violation of the section. Such conduct includes the false representation of "the character, amount, or legal status of any debt[,]" 15 U.S.C. § 1692e(2)(A), and "[t]he use or distribution of any written communication which simulates or is falsely represented to be a document authorized, issued, or approved by any court, official, or agency of the United States or any State, or which creates a false impression as to its source, authorization, or approval[,]" id. § 1692e(9).

Section 1692f prohibits the use of "unfair or unconscionable means to collect" a debt, including, pursuant to § 1692f(1), the collection of monies that are not "expressly authorized by the agreement creating the debt or permitted by law."

FN4. Section 1692d states that a "debt collector may not engage in any conduct the natural consequence of which is to harass, oppress, or abuse any person in connection with the collection of a debt."

FN5. Section 1692f(6) prohibits the "[t]aking or threatening to take any non-judicial action to effect dispossession or disablement of property" if there is no present right to possession of the property, there is no present intention to take possession of the property, or the property is exempt by law from dispossession.

In their RICO claims, the Turners, now joined by WPS, charged appellees with violating 18 U.S.C. § 1962(c), [FN6] which prohibits a person from participating, "through a pattern of racketeering activity," in the conduct of the affairs of an "enterprise" whose activities affect interstate commerce, and 18 U.S.C. § 1962(d), [FN7] which prohibits conspiring to violate any of the three antecedent provisions of § 1962. The "enterprise," according to appellants' allegations, was Cook's law firm. The alleged "racketeering activity" involved the same mail, fax and telephone communications attributed to Cook's law firm in the Turners' FDCPA claims. This "racketeering activity," according to appellants, had been "continuous since the filing of the subject turnover order (dated July 18, 2000[) ], through the present," and resulted in the "loss of money" for WPS, the loss of the "prospective economic advantage of developing the fledgling business of [WPS] into a viable business entity" for Stephen and Susana Turner, and the Turners' loss of "the prospects of continued and lucrative employment with [WPS]."

FN6. Section 1962(c) provides: "It shall be unlawful for any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise's affairs through a pattern of racketeering activity or collection of unlawful debt."

FN7. Section 1962(d) adds: "It shall be unlawful for any person to conspire to violate any of the provisions of subsection (a), (b), or (c) of this section."

The District Court, in an order issued March 22, 2002, dismissed the FDCPA portions of the amended complaint on the grounds that the debt in question--the tort judgment--was not subject to the FDCPA. The District Court also dismissed appellants' RICO claims for failing to satisfy RICO's continuity requirement, but granted appellants leave to file "an Amended Complaint alleging a RICO violation."

The Second Amended Complaint

On April 22, 2002, the Turners and WPS filed a Second Amended Complaint in which they expanded upon their earlier RICO claims. In this complaint appellants alleged that appellees had sent out "hundreds" of letters and facsimiles to third-party insurance companies misrepresenting the substance of the Superior Court order--an activity that amounted to a continuous "pattern of related, non sporadic repetitious and highly numbered incidents ... of ... illegal racketeering conduct" in violation of 18 U.S.C. §§ 1962(c) and (d). *1225 Each time appellees engaged in this activity, appellants maintained, appellees committed an act of mail or wire fraud that was intended to "snare the continual billing activities of [WPS] by having [these] insurance companies divert payments wave after wave." Beside the economic loss appellees' allegedly fraudulent conduct caused WPS, appellants contended that appellees' conduct would have negative economic consequences for Stephen and Susana Turner because the Turners had "both lost the business expectancy of a good employment relationship with [WPS]," and would not receive their salaries if WPS suffered financial harm. Appellants maintained that the Turner children would also be harmed, since the children were the ultimate beneficiaries of the Golden Gate Trust, the Turner family trust which owned WPS. [FN8]

FN8. See footnote 1, supra. In their Second Amended Complaint, appellants asserted that, in addition to themselves, there were other victims of appellees' fraudulent activities. These alleged additional victims included American Paramedical Services, a New Jersey LLC managed by Stephen Turner's sister; Robert Matthews, who had provided financial services to Stephen Turner; and the insurance companies that received Cook's communications.

Appellants also alleged that:

approximately [in] March, 2002, Cook and Cook, Perkiss & Lew substituted out as counsel of record on the fraudulent conveyance and other actions, and thus the racketeering activity is 'closed end' and is not expected to repeat. However, when it was going on, it was open ended and was never expected to stop, because Turner is in fact judgment proof, and as long as the judgment remains unpaid and Cook is on the case, these sort[s] of improper mailings etc [.] would be mailed out. It was the filing of the present lawsuit that caused Cook and Cook, Perkiss and Lew to withdraw of [sic] the cases, and thus shifted the activity to closed end.

On August 28, 2002, the District Court dismissed the Second Amended Complaint, concluding that appellants had failed to allege any threat of continuing illegal activity, which is required to establish a pattern of racketeering under RICO. The court dismissed without prejudice appellants' state-law claims, and entered final judgment against appellants. Appellants timely filed their appeal on September 20, 2002. This court has jurisdiction under 28 U.S.C. § 1291.

Standard of Review

A judgment dismissing a case on the pleadings is reviewed on appeal de novo. Mendoza v. Zirkle Fruit Co., 301 F.3d 1163, 1167 (9th Cir.2002). The appellate court must "accept all material allegations in the complaint as true and construe them in the light most favorable to [the non-moving party]." NL Industries, Inc. v. Kaplan 792 F.2d 896, 898 (9th Cir.1986). A dismissal may be affirmed "only if it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations." Swierkiewicz v. Sorema N.A., 534 U.S. 506, 514, 122 S.Ct. 992, 152 L.Ed.2d 1 (2002) (quoting Hishon v. King & Spalding, 467 U.S. 69, 73, 104 S.Ct. 2229, 81 L.Ed.2d 59 (1984)).

Standing of plaintiff-appellant Stephen Turner to pursue this appeal

Because Stephen Turner has filed for bankruptcy in the United States Bankruptcy Court, Northern District of California, he is no longer a real party in interest in this matter and has no standing to pursue this appeal. When Turner declared bankruptcy, all the "legal or equitable interests" he had in his property became the property of the bankruptcy *1226 estate and are represented by the bankruptcy trustee. See 11 U.S.C. § 541(a)(1). Causes of action are among such legal or equitable interests. Sierra Switchboard Co. v. Westinghouse Elec. Corp., 789 F.2d 705, 707 (9th Cir.1986).

The trustee in Turner's bankruptcy case has, in a letter to Turner's counsel, indicated his willingness to allow Turner to proceed with his appeal. However, the letter, the pertinent text of which is set forth in the margin, [FN9] is insufficient to confer authority on Turner's counsel to prosecute this appeal because it fails to effectuate an actual abandonment of the trustee's interest in Stephen Turner's causes of action--to the contrary, the letter contemplates the estate's pursuit of these causes of action "[i]n the event that," via this appeal, "the dismissal is overturned." Section 554 of title 11 of the United States Code requires notice and a hearing for abandonment to occur, and Bankruptcy Rule 6007 requires the trustee to give notice of a proposed abandonment to all creditors. Nothing in the record indicates that these steps have occurred. Accordingly, since we conclude that Stephen Turner has no standing to bring this appeal, the appeal is dismissed as to him. [FN10] However, we do reach the merits of the appeal as to the other appellants. [FN11]

FN9. The letter from the attorney for the trustee states: "The Trustee's position is that since the matter has been briefed and argued, the parties should allow the Court to rule on the appeal. In the event that the judgment is affirmed, there is nothing remaining for the estate to administer. In the event that the dismissal is overturned, then the estate will have a claim against the various defendants and will proceed accordingly."

FN10. Turner relies on Bankruptcy Rule 6009, which states, "[w]ith or without court approval, the trustee or debtor in possession may prosecute ... any pending action ..." However, because a trustee has been appointed, Turner is not a debtor in possession, and thus, cannot prosecute this action. (" 'Debtor in possession' means debtor except when a person that has qualified under § 322 of this title is serving as trustee in the case." 11 U.S.C. § 1101.).

FN11. In Dunmore v. United States, 358 F.3d 1107, 1112-13 (9th Cir.2004), this court recognized that if a bankruptcy petitioner were to make an "understandable" mistake in suing in his own name, he could proceed under Fed.R.Civ.P. 17(a) if the real party in interest were to ratify his actions. During a bankruptcy proceeding, Dunmore, the petitioner, secured the bankruptcy trustee's abandonment of his three tax refund claims. Accordingly, we concluded: "We assume without deciding that when the bankruptcy trustee abandoned the refund claims in February 1999, the abandonment could constitute the estate's ratification of Dunmore's lawsuit." Id. In the instant matter there has been no trustee abandonment.



In enacting the FDCPA, Congress sought to counter the abusive, deceptive and unfair debt collection practices sometimes used by debt collectors against consumers. See 15 U.S.C. § 1692. [FN12] The Act allows aggrieved parties to recover damages, attorney's fees and costs. Id. § 1692k(a). Because not all obligations to pay are considered debts under the *1227 FDCPA, a threshold issue in a suit brought under the Act is whether or not the dispute involves a "debt" within the meaning of the statute. Slenk v. Transworld Sys., Inc., 236 F.3d 1072, 1075 (9th Cir.2001). The FDCPA defines debt as "any obligation or alleged obligation of a consumer to pay money arising out of a transaction in which the money, property, insurance, or services which are the subject of the transaction are primarily for personal, family, or household purposes ..." 15 U.S.C. § 1692a(5); see also Bloom v. I.C. Sys. Inc., 972 F.2d 1067, 1068-69 (9th Cir.1992) (explaining that the FDCPA applies to debts incurred for personal rather than commercial reasons). The Act defines "consumer" as "any natural person obligated ... to pay any debt." Id. § 1692a(3). The Act does not define "transaction," but the consensus judicial interpretation is reflected in the Seventh Circuit's ruling that the statute is limited in its reach "to those obligations to pay arising from consensual transactions, where parties negotiate or contract for consumer-related goods or services." Bass v. Stolper, Koritzinsky, Brewster & Neider, S.C., 111 F.3d 1322, 1326 (7th Cir.1997) (citing Shorts v. Palmer, 155 F.R.D. 172, 175-76 (S.D.Ohio 1994) (obligation to pay for shoplifted merchandise not a "debt" under the FDCPA because "plaintiff has never had a contractual arrangement of any kind with any of the defendants.")); see also Mabe v. G.C. Servs. Ltd. P'ship, 32 F.3d 86, 88 (4th Cir.1994) (obligation to pay child support not a "debt" under the FDCPA because it was not incurred in exchange for consumer goods or services).

FN12. "There is abundant evidence of the use of abusive, deceptive, and unfair debt collection practices by many debt collectors." 15 U.S.C. § 1692(a). "Existing laws and procedures for redressing these injuries are inadequate to protect consumers." Id. § 1692(b). "Means other than misrepresentation or other abusive debt collection practices are available for the effective collection of debts." Id. § 1692(c). "It is the purpose of this subchapter to eliminate abusive debt collection practices by debt collectors, to insure that those debt collectors who refrain from using abusive debt collection practices are not competitively disadvantaged, and to promote consistent State action to protect consumers against debt collection abuses." Id. § 1692(e).

This court has not heretofore had occasion to address the question of whether a tort judgment resulting from business-related conduct qualifies as a debt under the FDCPA. However, the Eleventh Circuit in Hawthorne v. Mac Adjustment, Inc., 140 F.3d 1367 (11th Cir.1998), ruled on a similar issue and concluded that a tort judgment does not constitute a debt, and, therefore, that the FDCPA does not apply. In Hawthorne, the plaintiff was in an accident, allegedly resulting from her negligence, for which the defendant had been assigned subrogation rights. Id. at 1369. After the defendant attempted to collect its claim, the plaintiff sued under the FDCPA. Id. The district court ruled in the defendant's favor, concluding that the obligation at issue did not constitute a "debt" under the FDCPA, and the Eleventh Circuit affirmed. Id. at 1369-70.

The core of the appellate ruling in Hawthorne was as follows:

By the plain terms of the statute, not all obligations to pay are considered "debts" subject to the FDCPA. Rather, the FDCPA may be triggered only when an obligation to pay arises out of a specified "transaction." Although the statute does not define the term "transaction," we do not find it ambiguous. A fundamental canon of statutory construction directs us to interpret words according to their ordinary meaning. The ordinary meaning of "transaction" necessarily implies some type of business dealing between parties. In other words, when we speak of "transactions," we refer to consensual or contractual arrangements, not damage obligations thrust upon one as a result of no more than her own negligence. While we do not hold that every consensual or business dealing constitutes a "transaction" triggering application of the FDCPA ... at a minimum, a "transaction" under the FDCPA must involve some kind of business dealing or other consensual obligation. Because [appellant's] alleged obligation to pay [appellee] for damages arising out of an accident does not arise out of any consensual or business dealing, plainly it *1228 does not constitute a "transaction" under the FDCPA. [FN13]

FN13. Some years earlier, the Third Circuit, in Zimmerman v. HBO Affiliate Group, 834 F.2d 1163, 1168 (3d Cir.1987), reached a similar conclusion, observing that "nothing in the [FDCPA] or the legislative history leads us to believe that Congress intended to equate asserted tort liability with asserted consumer debt."

Hawthorne, 140 F.3d at 1371 (internal citations omitted).

We agree with this well-reasoned Eleventh Circuit opinion, and we conclude that the District Court did not err in dismissing the FDCPA claims. Appellees brought the fraudulent conveyance action against Stephen Turner [FN14] in an effort to collect a tort judgment. According to appellants' own pleadings, that judgment resulted from alleged business interference torts, not any consumer transaction. See Hawthorne, 140 F.3d at 1371("[A]t a minimum, a 'transaction' under the FDCPA must involve some kind of business dealing or other consensual obligation."); Bass, 111 F.3d at 1326; see also Bloom, 972 F.2d at 1068-69 (FDCPA does not apply to debts incurred for commercial reasons). Appellants maintain that the FDCPA should apply because the "fraudulent conveyance action isn't based on an underlying business tort judgment, but instead involved allegations that the transfer of a personal residence from Stephen Turner and other entities to Susana Turner was to defraud creditors." However, as the District Court correctly concluded, appellees' efforts are not converted into an attempt to collect a consumer debt merely because the fraudulent conveyance action involved Stephen Turner's home.

FN14. The fraudulent conveyance action listed as defendants Stephen Turner individually and doing business as Insurance Medical Expert, aka California Paramedical Services, aka Worldwide Health Services; Stephen B. Turner Family Trust; Real Investment Capital Holdings, LLC; and unnamed individuals.

Turner's underlying "obligation" to pay Yeo and Martini does not arise out of a consumer transaction, and hence is not a "debt" within the meaning of the FDCPA. We therefore hold that the FDCPA does not apply to appellees' efforts to collect the damages awarded for Stephen Turner's commercial torts. Hence, the District Court properly concluded that the FDCPA does not apply. [FN15]

FN15. In affirming this 12(b) dismissal, we do not suggest that any of appellants' allegations of fraud would be sustained at trial.


Civil liability under RICO is premised on violations of one or more of the provisions of § 1962. The provisions at issue here are 18 U.S.C. §§ 1962(c) and 1962(d). Section 1962(c) provides:

It shall be unlawful for any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise's affairs through a pattern of racketeering activity or collection of unlawful debt.

Section 1962(d) states: "It shall be unlawful for any person to conspire to violate any of the provisions of subsection (a), (b), or (c) of this section."

Because appellants contended that appellees engaged in "a pattern of racketeering activity," not "collection of unlawful debt," appellants' complaint must allege (1) the conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity. See Sun Sav. & Loan Ass'n v. Dierdorff, 825 F.2d 187, 191 (9th Cir.1987).

As previously described, the "racketeering activity" appellants complained of consisted *1229 of representations by appellees in mail, fax and telephone communications to various insurance companies believed to be debtors of plaintiff WPS, that the Superior Court for Contra Costa County had ordered any monies owed to WPS to be turned over to appellees. Appellants contended that the Superior Court's turnover order only applied to Stephen Turner; that WPS was not owned, operated or controlled by Stephen Turner; and, therefore, that the Superior Court did not order that monies owed to WPS be turned over to appellees. Appellants maintained that each time appellees misrepresented the substance of the turnover order, they committed an act of mail or wire fraud and of obstruction of justice. The alleged "enterprise" through which this "racketeering activity" was said to have been carried out was, as previously noted, the law firm of Cook, Perkiss & Lew. The District Court dismissed appellants' RICO claim, ruling that appellants had failed adequately to allege that appellees' conduct constituted a "pattern of racketeering activity." Whether the District Court ruled correctly is the question now to be addressed.

"[R]acketeering activity" is any act indictable under several provisions of Title 18 of the United States Code, and includes the predicate acts of mail fraud, wire fraud and obstruction of justice, each of which is alleged in this case. See 18 U.S.C. § 1961(1) (identifying § 1341 (mail fraud), § 1343 (wire fraud) and § 1503 (obstruction of justice) as predicate acts under RICO). In order to constitute a "pattern," there must be at least two acts of racketeering activity within ten years of one another. 18 U.S.C. § 1961(5). However, while two predicate acts are required under the Act, they are not necessarily sufficient. H.J. Inc. v. Northwestern Bell Tel. Co., 492 U.S. 229, 237-38, 109 S.Ct. 2893, 106 L.Ed.2d 195 (1989) (citing Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 496 n. 14, 105 S.Ct. 3275, 87 L.Ed.2d 346 (1985)). A "pattern" of racketeering activity also requires proof that the racketeering predicates are related and "that they amount to or pose a threat of continued criminal activity." Id. at 239, 109 S.Ct. 2893. Evidence of multiple schemes is not required to show a threat of continued criminal activity, id. at 240, 109 S.Ct. 2893, and, indeed, proof of a single scheme can be sufficient so long as the predicate acts involved are not isolated or sporadic. Sun Sav., 825 F.2d at 193, 194. The Supreme Court, in H.J. Inc., 492 U.S. at 241, 109 S.Ct. 2893, expounded on RICO's continuity requirement, stating:

"Continuity" is both a closed- and open-ended concept, referring either to a closed period of repeated conduct, or to past conduct that by its nature projects into the future with a threat of repetition.... A party alleging a RICO violation may demonstrate continuity over a closed period by proving a series of related predicates extending over a substantial period of time. Predicate acts extending over a few weeks or months and threatening no future criminal conduct do not satisfy this requirement[.]

Thus, in order to allege open-ended continuity, a RICO plaintiff must charge a form of predicate misconduct that "by its nature projects into the future with a threat of repetition." See Religious Tech. Ctr. v. Wollersheim, 971 F.2d 364, 366 (9th Cir.1992); Sever v. Alaska Pulp Corp., 978 F.2d 1529, 1535-36 (9th Cir.1992); Medallion Television Enters., Inc. v. SelecTV of Cal., Inc., 833 F.2d 1360, 1363-64 (9th Cir.1988) (discussed infra ). Conversely, an alleged "series of related predicates" not "extending over a substantial period of time" and not "threatening ... future criminal conduct" fails to charge closed-ended continuity. See Howard v. America Online, Inc., 208 F.3d 741, 750 (9th Cir.2000); Religious Tech. Ctr., 971 F.2d at 366; *1230 River City Mkts., Inc. v. Fleming Foods West, Inc., 960 F.2d 1458, 1464 (9th Cir.1992).

Appellants contend that the District Court erred in dismissing their RICO claims for failure to allege a continuing pattern of racketeering activity. They argue that their allegations that appellees had engaged in a "continuous pattern of mailing hundreds of fraudulent letters" satisfied RICO's continuity requirement, and, therefore, adequately alleged a "pattern of racketeering activity." They cite our decision in California Architectural Building Products, Inc. v. Franciscan Ceramics, Inc., 818 F.2d 1466 (9th Cir.1987), as support for this proposition.

In California Architectural, the defendant-appellee contended that the alleged predicate acts did not satisfy RICO's continuity requirement because the predicate acts all related to a single criminal episode. 818 F.2d at 1469. We disagreed with this contention, finding that multiple criminal episodes are not required to establish a pattern of racketeering under RICO. Id. Appellants in the case at bar argue that the District Court's decision was in error in light of California Architectural. We disagree. The District Court acknowledged that appellants "need not plead multiple 'criminal episodes' in order to state a RICO claim." However, because appellants had alleged only a single scheme, the District Court required confirmation that the criminal activity would continue. The court concluded that appellants' pleadings failed to provide such confirmation because appellees' activities were destined to end once the collection of the tort judgment was complete.

The District Court canvassed a number of other decisions of this court-- decisions subsequent to California Architectural. Thus, the District Court relied on Medallion, in which, in sustaining a grant of summary judgment against RICO plaintiffs, we said:
Continuity does not require a showing that the defendants engaged in more than one "scheme" or "criminal episode." The circumstances of the case, however, must suggest that the predicate acts are indicative of a threat of continuing activity. Here, that threat is absent.... In essence, Medallion's allegations concern a single fraudulent inducement to enter a contract. Once the joint venture had acquired the broadcast rights, the fraud, if indeed it was a fraud, was complete.

833 F.2d at 1363-64 (internal citations and footnote omitted). Similarly, the District Court looked to Religious Technology Center, in which, in sustaining dismissal of certain RICO defendants, we held that, "[s]ince the only goal of the Greene defendants was the successful prosecution of the Wollersheim state tort suit, there was no threat of activity continuing beyond the conclusion of that suit." 971 F.2d at 366. [FN16]

FN16. The District Court also relied on Sever, which, in discussing continuity, followed Medallion. 978 F.2d at 1535-36.

In the case at bar, appellees' alleged actions, like those just mentioned, failed to satisfy H.J. Inc.'s open-ended continuity requirement since the alleged actions were finite in nature in that the mailings, faxes and telephone calls would cease once appellees collected the outstanding tort judgment against Stephen Turner. Indeed, in their Second Amended Complaint, filed on April 22, 2002, appellants acknowledged that "the racketeering activity [was] 'closed-end' and [was] not expected to repeat," unless "the judgment remained [ed] unpaid and Cook [continued] on the case." Cook's firm had withdrawn from this case in March, 2002.

Moreover, appellants' allegations failed to satisfy H.J. Inc.'s closed-ended continuity *1231 requirement. In their Second Amended Complaint appellants list 94 companies that, according to appellants, received appellees' alleged fraudulent communications in June or July of 2001, and some of which may have received follow-up calls to these communications at an unspecified time. Besides these 94 communications, appellants only specifically alleged three additional fraudulent communications by appellees. These alleged communications included (1) a letter sent to Travelers Insurance Company on August 4, 2000 (attached to Original Complaint at Exhibit C); (2) a letter "sent by Defendants during September 20, 2000 to a third party"--that third party being appellant WPS (attached to Original Complaint at Exhibit E); and (3) letters, faxes and telephone discussions with the paramedical services company AMSA from December 2000-February 2001(items which appellants failed to allege or document with any specificity). Because almost all of the alleged fraudulent communications occurred during the two month period between June and July of 2001, and the additional three categories of communication occurred only sporadically in the preceding year (and one of these communications was sent to one of the appellants) appellants have failed to allege a "series of related predicates extending over a substantial period of time." Having also failed to allege a threat of "future criminal conduct," appellants have not demonstrated continuity over a closed period.

Thus, having failed to aver that the alleged acts of mail fraud, wire fraud and obstruction of justice had the requisite continuity, appellants did not sufficiently allege a "pattern of racketeering activity." Accordingly, the District Court properly dismissed appellants' RICO claims. [FN17]

FN17. Because appellants failed to allege the requisite substantive elements of a RICO claim under 18 U.S.C. § 1962(c), appellants' claim under 18 U.S.C. § 1962(d), which makes it "unlawful for any person to conspire to violate any of the provisions of subsections (a), (b), or (c) of this section," also fails.


The dismissal of the FDCPA claims and the RICO claims was proper. Accordingly, the judgment of the District Court is affirmed.


Offline Profile  
Display posts from previous:  Sort by  
Post new topic Reply to topic  [ 1 post ] 

All times are UTC - 8 hours [ DST ]

Who is online

Users browsing this forum: No registered users and 1 guest

You cannot post new topics in this forum
You cannot reply to topics in this forum
You cannot edit your posts in this forum
You cannot delete your posts in this forum

Search for:
Jump to:  
Powered by phpBB © 2000, 2002, 2005, 2007 phpBB Group
Theme created