Patrick v. Ramsey

[7] UNITED STATES DISTRICT COURT WESTERN DISTRICT OF WASHINGTON [8] AT SEATTLE [9] 10 ANNA PATRICK, et al., CASE NO. C23-0630JLR 11 Plaintiffs, ORDER v. [12] DAVID L. RAMSEY, III, et al., [13] Defendants. [14] 15 I. INTRODUCTION 16 Before the court is Defendant Happy Hour Media Group LLC’s (“Happy Hour”) 17 renewed1 motion to dismiss. (Mot. (Dkt. # 61); Reply (Dkt. # 67).) Plaintiffs2 oppose [19] 1 Happy Hour filed its original motion to dismiss on October 5, 2023 (Dkt. # 32), and 20 withdrew it on November 1, 2023 (Dkt. # 47). 2 Plaintiffs are Anna Patrick, Douglas Morrill, Roseanne Morrill, Leisa Garrett, Robert [21] Nixon, Samantha Nixon, David Bottonfield, Rosemarie Bottonfield, Tasha Ryan, Rogelio Vargas, Marilyn Dewey, Peter Rollins, Rachael Rollins, Katrina Benny, Sara Erickson, Greg [22] Larson, and James King (collectively, “Plaintiffs”). (Am. Compl. (Dkt. # 55) ¶¶ 16-66.) 1 Happy Hour’s motion. (Resp. (Dkt. # 65).) Defendants David L. Ramsey, III and The 2 Lampo Group, LLC (“Lampo,” and together with Mr. Ramsey, the “Lampo Defendants”) 3 made no filings in relation to Happy Hour’s motion. (See generally Dkt.) The court has 4 considered the motion, the parties’ submissions in support of and in opposition to the 5 motion, the relevant portions of the record, and the governing law. Being fully advised,3 6 the court GRANTS in part and DENIES in part Happy Hour’s motion to dismiss. 7 II. BACKGROUND 8 Below, the court sets forth the factual and procedural background pertinent to 9 Happy Hour’s motion to dismiss. 10 A. Factual Background 11 Plaintiffs are individuals who signed contracts with and paid money to non-party 12 Reed Hein & Associates (“Reed Hein”), which did business under the name “Timeshare 13 Exit Team,” for assistance in “exiting” their obligations with respect to timeshares they 14 owned at various resort properties. (Am. Compl. (Dkt. # 55) ¶¶ 16-66 (alleging facts 15 regarding each of the named Plaintiffs).) Plaintiffs allege that Reed Hein charged them 16 money up front for its services and promised them a “100% refund if they were not 17 relieved of their timeshare obligations.” (Id. ¶ 3; see also id. ¶ 81.) Despite these 18 representations, however, Reed Hein failed to terminate Plaintiffs’ timeshare obligations, 19 made false statements about its services, and refused to refund Plaintiffs’ money when [21] 3 Neither Happy Hour nor Plaintiffs request oral argument (Mot. at 1; Resp. at 1) and the court finds that oral argument would not be helpful to its disposition of the motion, see Local [22] Rules W.D. Wash. LCR 7(b)(4). 1 the “exits” were unsuccessful or resulted in the resort properties foreclosing on Plaintiffs’ 2 timeshares. (Id. ¶¶ 3-4; see also id. ¶¶ 81-98 (describing Reed Hein’s practices).) 3 In October 2021, Brian and Kerri Adolph, who, like Plaintiffs in this case, were 4 represented by the law firm Albert Law PLLC, filed a class action lawsuit against Reed 5 Hein, its co-founders Brandon Reed and Trevor Hein, Mr. Reed’s wholly-owned 6 company Makaymax, Inc. (“Makaymax”), and Mr. Hein’s wholly-owned company Hein 7 & Sons Industries, Inc. (“Hein & Sons”). (See Adolph Compl. (Adolph Dkt. # 1).4) They 8 brought claims arising from the alleged false statements, false advertising, and unfair 9 business practices associated with Reed Hein’s timeshare exit services. (See generally 10 id.) On October 25, 2022, the Adolph court certified the following class: 11 All persons who paid fees to Reed Hein for services to terminate their timeshare obligations, except those persons who received refunds of the fees 12 that they paid. 13 (Class Cert. Order (Adolph Dkt. # 23) at 2.) Thus, Plaintiffs in this matter are also 14 members of the Adolph class. (See Resp. at 8 (so acknowledging); see also Am. Compl. 15 ¶ 210 (setting forth the proposed class definition for this matter).) 16 On December 30, 2022, the Adolph court preliminarily approved a settlement in 17 which the parties agreed to stipulate to entry of judgment in favor of the Adolphs and the [19] 4 The court grants Happy Hour’s unopposed request to take judicial notice of the 20 documents filed in Adolph v. Reed Hein & Assocs., No. C21-1378BJR (W.D. Wash.). (Mot. at 12-13); Fed. R. Civ. P. 201(b); see Rosales-Martinez v. Palmer, 753 F.3d 890, 894 (9th Cir. 2014) (“It is well established that we may take judicial notice of judicial proceedings in other [21] courts.”). The court follows the parties’ convention and refers to “Adolph Dkt. # ____” when citing documents in the Adolph docket. Many of these documents are also attached as exhibits to [22] the declaration of Jack M. Lovejoy. (See generally Lovejoy Decl. (Dkt. # 62).) 1 class of “the amounts paid by each recorded customer of Reed Hein, each trebled to an 2 additional $25,000, attorney fees, and costs” for a total judgment of $630,187,204. 3 (12/5/22 Albert Decl. (Adolph Dkt. # 25) ¶1, Ex. 1 (“Settlement Agreement”) ¶ II.1; 4 Prelim. App. Order (Adolph Dkt. # 27); see 12/5/22 Albert Decl. ¶¶ 29-48 (explaining 5 how plaintiffs’ counsel calculated damages).) Mr. Reed, Reed Hein, and Makaymax5 6 also agreed to assign to the Adolph class a host of claims against various potential 7 defendants (including Mr. Hein and Hein & Sons), cooperate with future litigation, and 8 execute various stipulations as to facts and theories of liability. (See 12/5/22 Albert Decl. 9 ¶¶ 25 (summarizing the benefits to the Adolph class of settlement), 26(d) (describing 10 Reed Hein’s assigned claim against Mr. Hein and Hein & Sons). See generally 11 Settlement Agreement.) In exchange, the Adolphs, the class, and their attorneys agreed 12 to “a covenant . . . not to execute the judgment against . . . or seek recovery from” Reed 13 Hein, Mr. Reed, or Makaymax. (Settlement Agreement ¶ II.1.) 14 In connection with the motion for preliminary approval, Plaintiffs’ counsel 15 represented that Reed Hein “appear[ed] to be insolvent and [would] never again be a 16 going concern.” (12/5/22 Albert Decl. ¶ 23.) Counsel also represented that one of Mr. 17 Reed’s assets was a fifty-percent interest in Happy Hour, a Kirkland, Washington-based 18 marketing firm which, at the time, had $1,489,966.90 in equity and $1,624,028 in debt. 19 (Id.; see also Reed Decl. (Adolph Dkt. # 26) ¶ 2 (listing “substantially all” of Mr. Reed’s 20 assets as of October 1, 2022).) Mr. Reed had also unsuccessfully attempted to collect [21] 5 Mr. Hein and Hein & Sons were dismissed from the Adolph case before the parties [22] moved for preliminary approval. (See 12/5/22 Albert Decl. ¶ 20.) 1 over $623,730 owed to him by Mr. Hein. (12/5/22 Albert Decl. ¶ 23; see also Reed Decl. 2 ¶ 2(g) (listing this account receivable as one of Mr. Reed’s assets).) 3 None of the named Plaintiffs in this matter opted out of the Adolph class 4 settlement. (Compare Adolph Admin Decl. (Adolph Dkt. # 38) ¶ 12 (declaration of the 5 Adolph claims administrator, listing exclusions), with Am. Compl. ¶¶ 15-66 (alleging 6 facts about the named Plaintiffs in this case).) In March 2023, the Adolph parties 7 executed a final confession of judgment and judgment with covenant not to execute. (See 8 generally Adolph COJ (Adolph Dkt. # 44-1).) The purpose of the confession of judgment 9 was “to secure a judgment against Defendants Reed[ ]Hein, Makaymax, and Brandon 10 Reed for the benefit of the Plaintiff Class and to protect the assets, earnings and 11 individual liability of Defendant Parties from claims by the Plaintiff Class that might 12 result in a substantial excess verdict.” (Id. at 2.) Reed Hein, Makaymax, and Mr. Reed 13 agreed that “judgment may be taken against them in the sum of $630,187,204 in favor of 14 the Plaintiff Class,” with interest of 12% per year. (Id. at 5.) Mr. Adolph, “in his 15 individual and representative capacities,” agreed: 16 that he will never execute upon or attempt to enforce any judgment against the assets of the Defendant Parties [except as otherwise stated in the 17 confession of judgment]. The assets of Defendant Brandon Reed may not be used to satisfy this judgment and this judgment may not be recorded against 18 or used as a lien on any assets of Brandon Reed. 19 (Id. at 5-6). Mr. Adolph and the class agreed instead to “execute upon and enforce this 20 judgment only against” certain companies and individuals listed in the confession of 21 judgment. (Id. at 6.) The judgment and covenant not to execute provided: [22] 1 1. Plaintiff is granted judgment against defendants Brandon Reed, Reed Hein & Associates and Makaymax Inc. in the sum of 2 $630,187,204 principal, with interest on all unpaid amounts at 12% per annum from date of entry until satisfied in full. [3] 2. Plaintiff shall hereafter take no action to collect on the above judgment against defendants Brandon Reed, Reed Hein & Associates and [4] Makaymax Inc. [5] (Id. at 11.) [6] The Adolph court entered final approval of the settlement on May 19, 2023. [7] (Adolph Final App. Order (Adolph Dkt. # 43).) It entered the judgment and covenant not [8] to execute on June 15, 2023. (Adolph Judgment (Adolph Dkt. # 45).) [9] B. Procedural Background [10] Plaintiffs now seek a remedy against presumably deeper pockets. They filed this [11] proposed class action on April 28, 2023, against Happy Hour; Mr. Ramsey, a [12] nationally-syndicated radio talk-show host who offers “biblically based” financial advice; [13] and Lampo, Mr. Ramsey’s wholly-owned company. (Compl. (Dkt. # 1) ¶¶ 67-72, 116.) [14] Plaintiffs amended their complaint on December 15, 2023. (See generally Am. Compl.; [15] see also 12/5/23 Order (Dkt. # 53) at 15 (granting Plaintiffs leave to amend their [16] complaint).) [17] Plaintiffs allege that Reed Hein hired Happy Hour and the Lampo Defendants to [18] promote its timeshare exit services through Mr. Ramsey’s radio shows, podcasts, [19] seminars, websites, “Financial Peace University,” and newsletters. (Am. Compl. ¶¶ 5-6, [20] 115-44, 154-72 (describing Mr. Ramsey’s business and his relationship with Reed Hein).) [21] Plaintiffs further allege that Reed Hein paid Mr. Ramsey and The Lampo Group over $30 [22] 1 million “to make false claims and instruct [Mr.] Ramsey’s faithful listeners to hire Reed 2 Hein.” (Id. ¶ 5.) According to Plaintiffs, Mr. Ramsey “assured his listeners that he had 3 vetted Reed Hein,” “promised them that the company was the only trustworthy method to 4 get out of their timeshare contracts,” and “made false statements about Reed Hein’s 5 knowledge, skill, and ability to get customers out of timeshare obligations.” (Id. ¶ 7; see 6 also id. ¶¶ 138-41 (providing examples of statements Mr. Ramsey made when endorsing 7 Reed Hein).) Plaintiffs assert that Mr. Ramsey continued to promote Reed Hein even 8 after listener complaints, multiple lawsuits (including one brought by the Washington 9 State Attorney General), and arbitrations filed against Reed Hein should have placed him 10 on notice that Reed Hein was defrauding his followers. (See, e.g., id. ¶¶ 8, 173-86.) 11 Relevant to this motion to dismiss, Plaintiffs allege that Happy Hour “acted as 12 Reed Hein’s marketing department” and drafted, created, reviewed, and approved Reid 13 Hein’s advertising, scripts, and internet marketing efforts. (Id. ¶¶ 115-19.) According to 14 Plaintiffs, Happy Hour “struck a deal with” the Lampo Defendants in which Mr. Ramsey 15 “agreed to make false statements about Reed Hein to induce his followers to spend 16 money on Reed Hein’s illusory services.” (Id. ¶ 122; see also id. ¶¶ 131 (alleging that in 17 2015, Mr. Ramsey “struck a deal with Reed Hein and Happy Hour . . . to generate tens of 18 millions of dollars sending his followers to Reed Hein”), 150 (alleging that Happy Hour 19 reviewed and approved content on certain of Mr. Ramsey’s webpages that “included 20 deceptive or misleading content and content regarding Reed Hein and its services”).) 21 Plaintiffs assert that Reed Hein paid the Lampo Defendants through Happy Hour. (Id. 22 ¶ 2; see also id. ¶¶ 115-72 (describing Defendants’ relationships with one another and 1 with Reed Hein).) They also allege that Happy Hour and the Lampo Defendants “kept 2 extensive and contemporaneous records of Ramsey listeners referred to Reed Hein by” 3 the Lampo Defendants. (Id. ¶ 145.) These records were important “because Reed Hein 4 paid [the Lampo Defendants] both a flat fee for advertising and a per-lead rate for 5 customer referrals.” (Id. ¶ 146; see also id. ¶¶ 147-53 (explaining how Defendants 6 tracked referrals).) 7 Based on these allegations, Plaintiffs bring claims against Defendants for 8 violations of the Washington Consumer Protection Act (“WCPA”), ch. 19.86 RCW; 9 negligent misrepresentation; conspiracy; and conversion. (Id. ¶¶ 220-42.) 10 III. ANALYSIS 11 Below, the court sets forth the standard of review for motions to dismiss, then 12 considers Happy Hour’s motion. 13 A. Legal Standard 14 Federal Rule of Civil Procedure 12(b)(6) provides for dismissal when a complaint 15 “fail[s] to state a claim upon which relief can be granted.” Fed. R. Civ. P. 12(b)(6). 16 Under this standard, the court construes the allegations in the light most favorable to the 17 nonmoving party, Livid Holdings Ltd. v. Salomon Smith Barney, Inc., 416 F.3d 940 , 946 18 (9th Cir. 2005), and asks whether the claim contains “sufficient factual matter, accepted 19 as true, to ‘state a claim to relief that is plausible on its face,’” Ashcroft v. Iqbal, 556 U.S. 20 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). The 21 court need not accept as true legal conclusions, “formulaic recitation[s] of the legal 22 elements of a cause of action,” Chavez v. United States, 683 F.3d 1102, 1008 (9th Cir. 1 2012) (quoting Twombly, 550 U.S. at 555 ), or “allegations that are merely conclusory, 2 unwarranted deductions of fact, or unreasonable inferences,” Sprewell v. Golden State 3 Warriors, 266 F.3d 979, 988 (9th Cir. 2001). “A claim has facial plausibility when the 4 plaintiff pleads factual content that allows the court to draw the reasonable inference that 5 the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678 . 6 B. Effect of the Adolph Judgment 7 Happy Hour asserts that all of Plaintiffs’ claims against it must be dismissed 8 “because the Adolph judgment precludes the Plaintiffs from obtaining or enforcing a 9 judgment against any of Brandon Reed’s assets, and Happy Hour is one of those assets.” 10 (Mot. at 12.) The court disagrees. 11 First, the language of the confession of judgment, judgment, and covenant not to 12 execute constrain the use of Mr. Reed’s assets only with respect to satisfying the 13 judgment in the Adolph case; they express nothing about whether those assets could be 14 used to satisfy a judgment in any other case. (See Adolph COJ at 5-6 (“The assets of 15 Defendant Brandon Reed may not be used to satisfy this judgment and this judgment may 16 not be recorded against or used as a lien on any assets of Brandon Reed.” (emphasis 17 added)); id. at 11 (“Plaintiff shall hereafter take no action to collect on the above 18 judgment against defendants Brandon Reed, Reed Hein & Associates and Makaymax 19 Inc.” (emphasis added)). Second, even if the Adolph judgment could be read to bar 20 recovery against Mr. Reed’s assets in this action, the language of that judgment does not 21 bar recovery against Happy Hour’s assets. Happy Hour was not a party in Adolph, nor 22 was it ever mentioned in the Adolph complaint, settlement agreement, or confession of 1 judgment and covenant not to execute. (See generally Adolph Compl.; Settlement 2 Agreement; Adolph COJ.) Because Mr. Reed claims only a fifty-percent ownership 3 interest in Happy Hour, it is possible that the remainder could be used to satisfy a 4 judgment issued in this matter. (See Reed Decl. ¶ 2(a).) Finally, the Adolph settlement, 5 judgment, and covenant not to execute did not release any party—not even Mr. Reed or 6 Reed Hein—from liability arising from Reed Hein’s timeshare exit services. (See, e.g., 7 Adolph COJ at 3 (“Reed Hein and Associates, Makaymax, and Brandon Reed agree that 8 the terms and conditions of this agreement do not constitute a release of the Plaintiff 9 Class’s claims against them.”).) Thus, any argument that the Adolph settlement somehow 10 released Happy Hour from liability in this case falls flat. For these reasons, the court 11 denies Happy Hour’s motion to dismiss Plaintiffs’ claims based on the Adolph judgment. 12 C. WCPA 13 The WCPA makes unlawful “[u]nfair methods of competition and unfair or 14 deceptive acts or practices in the conduct of any trade or commerce.” RCW 19.86.020. 15 To state a claim for violation of the WCPA, Plaintiffs must plausibly allege that (1) an 16 unfair or deceptive act or practice, (2) occurred in the course of trade or commerce, 17 (3) impacted the public interest, (4) injured the plaintiff’s business or property, and (5) 18 was caused by the defendant. Hangman Ridge Training Stables, Inc. v. Safeco Title Ins. 19 Co., 719 P.2d 531, 533 (Wash. 1986). A WCPA claim “may be predicated upon 20 a per se violation of statute, an act or practice that has the capacity to deceive substantial 21 portions of the public, or an unfair or deceptive act or practice not regulated by statute but [22] 1 in violation of public interest.” Klem v. Wash. Mut. Bank, 295 P.3d 1179, 1187 (Wash. 2 2013). 3 Happy Hour argues that Plaintiffs’ WCPA claim against it must be dismissed 4 because Plaintiffs have failed to identify any conduct by Happy Hour that constitutes an 5 unfair or deceptive practice within the meaning of the statute. (See Mot. at 18-21; see 6 also Reply at 8-9 (confirming that its motion is based on Plaintiffs’ failure to plead an 7 unfair or deceptive act or practice).) It points out that although Plaintiffs enumerate nine 8 “unfair and deceptive trade practices” that the Lampo Defendants “specifically 9 committed” (Am. Compl. ¶ 221(a)-(h)), they do not specify in pleading their WCPA 10 claim what conduct by Happy Hour allegedly constituted an unfair and/or deceptive trade 11 practice (see id. ¶¶ 220-22 (making no mention of conduct by Happy Hour)). (Mot. at 8.) 12 Plaintiffs respond that they have satisfied the pleading standard by alleging that Happy 13 Hour “promoted false or misleading advertising through its dealings with Reed Hein and 14 the [Lampo] Defendants.” (Resp. at 19 (citing Am. Compl. ¶¶ 119-20, 137-44).) They 15 assert that “[i]t is plausible that the promotion and sale of false or misleading advertising 16 is an act with the capacity to deceive a substantial portion of the public.” (Id.) 17 The court agrees with Plaintiffs. False advertising can be an unfair or deceptive 18 practice under the WCPA. See Nemykina v. Old Navy, LLC, 461 F. Supp. 3d 1054 , 19 1060-61 (W.D. Wash. 2020) (denying motion to dismiss WCPA claim based on false 20 advertising). Here, Plaintiffs allege that Happy Hour “drafted advertising and marketing 21 content used by” Reed Hein and the Lampo Defendants; “drafted or reviewed advertising 22 scripts used by” the Lampo Defendants; created, reviewed, and approved Reed Hein’s 1 marketing efforts; reviewed or approved advertising created by the Lampo Defendants; 2 and reviewed and approved content posted on Mr. Ramsey’s web pages. (Am. Compl. 3 ¶¶ 119-20.) Plaintiffs allege throughout their amended complaint that the Lampo 4 Defendants made false or misleading representations about Reed Hein’s services and that 5 those representations led them to contract with Reed Hein for its services. (See generally 6 Am. Compl.) Although Happy Hour repeatedly asserts that Plaintiffs make no allegation 7 that Happy Hour was aware that the advertising and content it was drafting was false and 8 misleading, the parties do not dispute that Brandon Reed was a principal of both Reed 9 Hein and Happy Hour. (See, e.g., Am. Compl. ¶¶ 115, 117; see generally Mot.) Based 10 on this shared leadership, the court concludes, viewing the allegations in the light most 11 favorable to Plaintiffs, that it is plausible that Happy Hour was aware that the information 12 it promoted about Reed Hein was false. (See, e.g., id. ¶¶ 121-22 (alleging that “Reed 13 Hein, through Happy Hour,” relied on Mr. Ramsey for advertising and that Defendants 14 agreed that Mr. Ramsey would make false statements about Reed Hein to induce his 15 followers to use Reed Hein’s services).) The court concludes, based on these allegations, 16 that Plaintiffs have plausibly alleged that Happy Hour engaged in an unfair and/or 17 deceptive act or practice within the meaning of the WCPA and therefore denies Happy 18 Hour’s motion to dismiss Plaintiffs’ WCPA claim. 19 D. Negligent Misrepresentation 20 To state a claim for negligent misrepresentation, Plaintiffs must plausibly allege 21 that: [22] 1 (1) the defendant supplied information for the guidance of another in his or her business transactions, (2) the information was false, (3) the defendant 2 knew or should have known that the information was supplied to guide the plaintiff in his or her business transactions, (4) the defendant was negligent 3 in obtaining or communicating the false information, (5) the plaintiff relied on the false information, (6) the plaintiff’s reliance was reasonable, and 4 (7) the false information proximately caused the plaintiff damages. 5 Repin v. State, 392 P.3d 1174, 1191 (Wash. Ct. App. 2017) (citing Ross v. Kirner, 172 6 P.3d 701 , 704 (Wash. 2007)); see also ESCA Corp. v. KPMG Peat Marwick, 959 P.2d 7 651, 654 (Wash. 1998) (quoting Restatement (Second) of Torts § 552(1) (Am. Law Inst. 8 1977)). 9 Happy Hour argues that the court must dismiss Plaintiffs’ negligent 10 misrepresentation claim against it because Plaintiffs have failed to plausibly allege the 11 first element and the fourth through seventh elements of that claim. (Mot. at 21-22.) 12 With respect to the first element, Happy Hour asserts that Plaintiffs have not alleged that 13 Happy Hour “supplied any statement or other representation for the guidance of anyone.” 14 (Mot. at 21; (asserting that although the amended complaint refers to Happy Hour 15 creating advertising, it doesn’t say that Happy Hour “created or came up with any false 16 claim about Reed Hein”).) With respect to the fourth element, Happy Hour argues that 17 Plaintiffs allege only a “formulaic recitation” of the element and allege no facts “to 18 suggest how or why Happy Hour should have known that the information it received 19 from Reed Hein about Reed Hein’s services was false.” (Id. at 22.) And with respect to 20 the fifth through seventh elements, Happy Hour argues that Plaintiffs do not allege that 21 any of them relied on information supplied by Happy Hour, that it was reasonable to rely [22] 1 on that information, or that the information caused them to suffer damages. (Id.) The 2 court disagrees. 3 As with Plaintiffs’ WCPA claim, the court concludes, based on Mr. Reed’s status 4 as a principal of both Happy Hour and Reed Hein, that Plaintiffs have plausibly alleged 5 that Happy Hour was aware that it was supplying false information in the advertising and 6 marketing content it drafted for Mr. Ramsey’s media properties for the purpose of 7 inducing Plaintiffs and others like them to enter into contracts with Reed Hein. In 8 addition, Plaintiffs have alleged that they relied on information provided by Mr. Ramsey 9 when deciding whether to contract with Reed Hein for its services, that they did enter into 10 such contracts, and that they were damaged as a result. (See Am. Compl. ¶¶ 16-66 11 (alleging facts about each Plaintiff), 228 (alleging reasonable reliance).) The court 12 concludes that Plaintiffs have plausibly alleged a claim for negligent representation and 13 denies Happy Hour’s motion to dismiss that claim. 14 E. Civil Conspiracy 15 “Under Washington law, a plaintiff proves a civil conspiracy by showing “by 16 clear, cogent and convincing evidence that (1) two or more people contributed to 17 accomplish an unlawful purpose, or combined to accomplish a lawful purpose by 18 unlawful means; and (2) the conspirators entered into an agreement to accomplish the 19 object of the conspiracy.” Williams v. Geico Gen. Ins. Co., 497 F. Supp. 3d 977 , 985 20 (W.D. Wash. 2020) (quoting Wilson v. State, 929 P.2d 448, 459 (Wash. Ct. App. 1996)). 21 Happy Hour argues that Plaintiffs’ conspiracy claim must be dismissed because 22 Plaintiffs allege only that Happy Hour and the Lampo Defendants “struck a deal” to make 1 false statements about Reed Hein to Mr. Ramsey’s listeners to induce customers to pay 2 money for Reed Hein’s services and say nothing about “what sort of ‘deal’ Happy Hour 3 allegedly struck or what Happy Hour’s duties or benefits were in the deal.” (Mot. at 23 4 (citing Am. Compl. ¶¶ 122, 131, 234-35).) Taking the allegations in the amended 5 complaint, however, the court concludes that Plaintiffs have plausibly alleged the 6 existence of a civil conspiracy among Defendants and Happy Hour’s duties in furtherance 7 of that conspiracy. (See Am. Compl. ¶¶ 2 (alleging that Reed Hein paid the Lampo 8 Defendants through Happy Hour), 115-19 (describing Happy Hour’s role with respect to 9 Reed Hein’s advertising), 145-46 (alleging that Defendants worked together to keep 10 records of Mr. Ramsey’s referrals); 150 (alleging that Happy Hour approved content for 11 Mr. Ramsey’s webpages).) The court denies Happy Hour’s motion to dismiss Plaintiffs’ 12 conspiracy claim. 13 F. Conversion 14 “Conversion is the unjustified, willful interference with a chattel which deprives a 15 person entitled to the property of possession.” In re Marriage of Langham & Kolde, 106 16 P.3d 212 , 218 (Wash. 2005) (quoting Meyers Way Dev. Ltd. P’ship v. Univ. Sav. Bank, [17] 910 P.2d 1308, 1320 (Wash. Ct. App. 1996)). Money can be converted “only if the 18 defendant ‘wrongfully received’ the money or ‘was under obligation to return the specific 19 money to the party claiming it.’” Davenport v. Wash. Educ. Ass’n, 197 P.3d 686 , 695 20 (Wash. Ct. App. 2008) (quoting Pub. Util. Dist. of Lewis Cnty. v. Wash. Pub. Power 21 Supply Sys., 705 P.2d 1195, 1211 (Wash. 1985)). A claim for conversion of money is 22 possible only where the money is “is capable of being identified, as when delivered at 1 one time, by one act and in one mass, or when the deposit is special and the identical 2 money is to be kept for the party making the deposit, or when wrongful possession of 3 such property is obtained.” Brown ex rel. Richards v. Brown, 239 P.3d 602, 610 (Wash. 4 Ct. App. 2010) (quoting Westview Invs., Ltd. v. U.S. Bank Nat’l Ass’n, 138 P.3d 638 , 646 5 (Wash. Ct. App. 2006)). 6 Happy Hour argues that Plaintiffs cannot sustain their conversion claim because 7 they have not plausibly alleged that they “will be able to identify any dollar in Happy 8 Hour’s possession as a dollar that came from them.” (Mot. at 24.) They point out that 9 the money the named Plaintiffs paid to Reed Hein is only a small portion of Reed Hein’s 10 total revenue and argue that Plaintiffs have not alleged “any plausible way to identify the 11 money that went from Reed Hein to Happy Hour as their money.” (Id. at 11 (noting that 12 Reed Hein “took in over $200,000,000 in customer funds” (citing Adolph Prelim. App. 13 Mot. (Adolph Dkt. # 24) at 5)); see also id. at 12 & n.7 (calculating named Plaintiffs’ 14 payments to Reed Hein as totaling $115,818.70 (citing Am. Compl.)).) 15 Plaintiffs do not meaningfully address Happy Hour’s argument. First, they appear 16 to read the court’s December 5, 2023 order as having settled that they have plausibly 17 pleaded a conversion claim. (See Resp. at 23-24 (citing 12/5/23 Order at 10-13).) In that 18 order, the court granted Plaintiffs’ motion for leave to add their conversion claim over the 19 Lampo Defendants’ objection, and noted that whether the “money that Reed Hein was 20 supposed to hold in trust [for Plaintiffs] but instead transferred to Defendants remains 21 identifiable” was a “question of fact that [could] not be resolved” at that stage of the 22 proceedings. (12/5/23 Order at 11-13.) Plaintiffs’ reliance on the December 5, 2023 1 order, however, is misplaced because Happy Hour now raises arguments specific to its 2 own role in the events underlying Plaintiffs’ claims that were not before the court when it 3 granted Plaintiffs’ motion for leave to amend. (See id at 1 n.2 (noting that Happy Hour 4 did not respond to the motion to amend).) Second, Plaintiffs assert that they have 5 plausibly alleged that Happy Hour “wrongfully received” their money because it was 6 “allegedly an active participant in the fraud at the core of this case and wrongfully 7 received the funds in payment for its participation in that fraud.” (Resp. at 24-25.) 8 Whether Happy Hour wrongfully received money, however, does not address whether 9 that money remained identifiable as originating from Plaintiffs. The court agrees with 10 Happy Hour that Plaintiffs have not explained how the “specific” or “identical” money 11 that they paid to Reed Hein remained identifiable when Reed Hein paid Happy Hour for 12 advertising and marketing services. Davenport, 197 P.3d at 695 ; Brown, 239 P.3d at 610 ; 13 (see generally Am. Compl.). Therefore, the court grants Happy Hour’s motion to dismiss 14 Plaintiffs’ conversion claim. Because the court is not convinced that amendment of the 15 claim against Happy Hour would be futile, this dismissal is with leave to amend. See 16 Fed. R. Civ. P. 15(a)(2) (“The court should freely give leave when justice so requires.”). 17 F. Statutes of Limitations 18 Finally, Happy Hour argues that the court should dismiss certain Plaintiffs’ claims 19 as barred by the applicable statutes of limitations. (Mot. at 26-28.) Dismissal is proper 20 on the ground that a claim is barred by the applicable statute of limitations if the running 21 of the limitations period is apparent on the face of the complaint. See Jones v. Bock, 549 22 U.S. 199 , 215 (2007) (“If the allegations . . . show that relief is barred by the applicable 1 statute of limitations, the complaint is subject to dismissal for failure to state a claim[.]”); 2 Morales v. City of Los Angeles, 214 F.3d 1151, 1153 (9th Cir. 2000). WCPA claims are 3 subject to a four-year statute of limitations. RCW 19.86.120. Claims for negligent 4 misrepresentation, civil conspiracy, and conversion under Washington law are subject to 5 a three-year statute of limitations. RCW 4.16.080(2) (setting a three-year statute of 6 limitations for actions for “any other injury to the person or rights of another not 7 hereinafter enumerated”). Plaintiffs filed this action on April 28, 2023. (See Compl.) 8 Thus, absent an applicable exception, the relevant statutes of limitations bar negligent 9 misrepresentation and conspiracy claims that accrued before April 28, 2020, and WCPA 10 claims that accrued before April 28, 2019. 11 In Washington, a “cause of action accrues and the statute of limitations begins to 12 run when a party has the right to apply to a court for relief.” Shepard v. Holmes, 345 13 P.3d 786, 790 (Wash. Ct. App. 2014) (quoting O’Neil v. Estate of Murtha, 947 P.2d 14 1252, 1254 (Wash. Ct. App. 1997)). A plaintiff has this right “when the plaintiff can 15 establish each element of the action.” Id. (quoting Hudson v. Condon, 6 P.3d 615 , 620 16 (Wash. Ct. App. 2000)). The discovery rule is an exception to this rule of accrual. Id. 17 Washington courts apply the discovery rule to claims when the “injured parties do not, or 18 cannot, know they have been injured.” Id. (quoting In re Estates of Hibbard, 826 P.2d 19 690, 694 (Wash. 1992)). “Where the discovery rule applies, ‘a cause of action accrues 20 when the plaintiff, through the exercise of due diligence, knew or should have known the 21 basis for the cause of action.’” Id. (quoting Green v. Am. Pharm. Co., 935 P.2d 652 , 655 22 (Wash. Ct. App. 1997), aff’d, 960 P.2d 912 (Wash. 1998)). 1 On October 12, 2023, the court denied the Lampo Defendants’ motion to dismiss 2 certain Plaintiffs’ claims on statute of limitations grounds, holding that the discovery rule 3 applied to toll the statute of limitations because (1) Plaintiffs could not have known that 4 Reed Hein would not honor its commitments and that the Lampo Defendants had 5 misrepresented Reed Hein’s services until after the 18- or 36-month contractual time 6 period for Reed Hein to complete the timeshare exit process expired and (2) Plaintiffs did 7 not suffer damage until Reed Hein breached their contracts by failing to perform its 8 promises. (10/12/23 Order (Dkt. # 35) at 11-12 (citing Compl. ¶¶ 168-69).) Happy Hour 9 now argues that the discovery rule does not toll the statutes of limitations on Plaintiffs’ 10 claims because Plaintiffs now allege that Reed Hein’s misconduct was public knowledge 11 in 2015 based on a ruling by the Authorized Practice Committee of the North Carolina 12 Bar. (Mot. at 27 (citing Am. Compl. ¶¶ 93, 177).) It asserts that, as a result, “Plaintiffs, 13 as members of the public, knew that Reed Hein was misrepresenting itself at or before the 14 time they decided to pay Reed Hein.” (Id.) The court is unconvinced. Plaintiffs do not 15 allege that they were aware of the North Carolina Bar ruling, and the court finds it 16 plausible that Plaintiffs, who are consumers based in Washington and California, neither 17 knew nor had reason to know of that ruling. (See Am. Compl. ¶¶ 16-66 (alleging facts 18 regarding Plaintiffs).) Furthermore, as Plaintiffs point out, the Authorized Practice 19 Committee of the North Carolina Bar is empowered only to investigate the unauthorized 20 practice of law, and its ruling related only to Reed Hein’s alleged violation of North 21 Carolina’s unauthorized practice of law statutes. (See Resp. at 7 (citing N.C. Gen. Stat. 22 § 84-37 (defining the scope of the North Carolina Bar’s investigatory powers). See 1 generally 1/22/24 Albert Decl. (Dkt. # 66) ¶ 8, Ex. 11 (North Carolina Bar ruling).) 2 Thus, it is a reasonable inference that the ruling would not have put Plaintiffs on notice of 3 the conduct giving rise to their claims, even if they were aware of that ruling. As a result, 4 the court denies Happy Hour’s motion to dismiss certain Plaintiffs’ claims as barred by 5 the relevant statutes of limitations. 6 IV. CONCLUSION 7 For the foregoing reasons, the court GRANTS in part and DENIES in part Happy 8 Hour’s motion to dismiss (Dkt. # 61). The court ORDERS as follows: 9 1. Plaintiffs’ conversion claim against Happy Hour is DISMISSED with leave 10 to amend. Plaintiffs may file an amended complaint that amends only their allegations 11 with respect to their conversion claim against Happy Hour by no later than March 6, 12 2024. Failure to file an amended complaint by this deadline will result in dismissal with 13 prejudice of Plaintiffs’ conversion claim against Happy Hour; 14 2. Happy Hour’s motion to dismiss Plaintiffs’ WCPA, negligent 15 misrepresentation, and conspiracy claims is DENIED; and 16 3. Happy Hour’s motion to dismiss certain Plaintiffs’ claims as barred by the 17 relevant statutes of limitations is DENIED. 18 Dated this 23rd day of February, 2024. [19] A [20] 21 JAMES L. ROBART United States District Judge