PCF Insurance Services of the West LLC v. Fritts

THE HONORABLE JOHN C. COUGHENOUR — 1 — — 2 — — 3 — — 4 — — 5 — — 6 — UNITED STATES DISTRICT COURT — 7 — WESTERN DISTRICT OF WASHINGTON 8 AT SEATTLE 9 PCF INSURANCE SERVICES OF THE CASE NO. C23-1468-JCC WEST, LLC, — 10 — ORDER 11 Plaintiff, v. — 12 — JAMES FRITTS, et al., — 13 — Defendants. — 14 — — 15 — 16 This matter comes before the Court on Defendants’ motion to dismiss (Dkt. No. 46). 17 Having thoroughly considered the parties’ briefing and the relevant record, the Court finds oral 18 argument unnecessary and hereby GRANTS in part and DENIES in part the motion for the 19 reasons explained herein. 20 I. BACKGROUND 21 This is a commercial dispute between Plaintiff PCF Insurance Services of the West, LLC 22 (“PCF”), a Utah-based insurance brokerage firm, and Defendant James Fritts, the former leader 23 of Rice Insurance Agency (“Rice”), now1 a PCF subdivision. (Dkt. No. 35 at 6–7.) According to — 24 — 25 1 Prior its purchase by PCF, Rice was known as RI Insurance Services, LLC (“RI Insurance”) and was led by Fritts. (Id. at 1–2.) Both are named defendants in this case (hereinafter — 26 — collectively referred to as “Defendants”). James Fritts is referred to as “Defendant.” 1 the operative complaint, the parties executed two contracts in July 2021: the Asset Purchase 2 Agreement (“APA”) and the Transition Services Agreement (“TSA”). (Id. at 9.) Under the 3 APA’s terms, Plaintiff would purchase substantially all of Defendant’s insurance business and 4 retain Defendant and others to run Rice as a PCF division. (Id. at 2.) And, under the TSA, 5 Defendants agreed to provide Plaintiff certain transition services “in good faith.” (Id. at 12.) 6 One important aspect of the APA is its anticipated earn-out. To incentivize Defendant 7 and other employees to continue to grow Rice’s business, Plaintiff agreed to pay earn-out 8 bonuses if Rice reached certain earnings growth targets in the first five years following the sale. 9 (Id. at 13.) The first year earn-out period presented the most lucrative opportunity. (Id.) At the 10 end of that year, if Rice’s EBIDTA was greater than 3% over its closing EBIDTA, Plaintiff 11 would pay ten times the amount of that growth. (Id.) In later years, Rice would have to reach 12 higher growth targets to achieve this multiple. (Id.) 13 Plaintiff alleges Defendant abused this compensation scheme and, in doing so, defrauded 14 Plaintiff of millions of dollars. (Id. at 1.) Accordingly, Plaintiff brings the following causes of 15 action: (1) fraud in the inducement as to the APA and TSA (two counts); (2) fraudulent 16 misrepresentation or concealment; (3) breach of contract as to the APA and TSA (two counts); 17 (4) breach of the implied covenant of good faith and fair dealing; (5) conversion; (6) unjust 18 enrichment; (7) violation of the Racketeer Influenced and Corrupt Organizations Act (“RICO”), — 19 — 19 U.S.C. § 1961 et seq.; (8) conspiracy to violate RICO; (9) criminal profiteering; and 20 (10) declaratory judgment. (Dkt. No. 35 at 41–53.) Defendant moves to dismiss each under 21 Federal Rule of Civil Procedure 12(b)(6). (Dkt. No. 46.) 22 II. DISCUSSION 23 A. Legal Standard 24 Dismissal is proper when a plaintiff “fails to state a claim upon which relief can be 25 granted.” Fed. R. Civ. P. 12(b)(6). To survive a motion to dismiss, a complaint must contain 26 sufficient factual matter, accepted as true, to state a claim for relief that is plausible on its face. 1 Ashcroft v. Iqbal, 556 U.S. 662 , 677–78 (2009). A plaintiff is obligated to provide grounds for 2 their entitlement to relief that amount to more than labels and conclusions or a formulaic 3 recitation of the elements of a cause of action. Bell Atl. Corp. v. Twombly, 550 U.S. 544 , 545 4 (2007). A claim has facial plausibility when the plaintiff pleads factual content that allows the 5 court to draw the reasonable inference that the defendant is liable for the misconduct alleged. 6 Iqbal, 556 U.S. at 678 . “[T]he pleading standard Rule 8 announces does not require ‘detailed 7 factual allegations,’ but it demands more than an unadorned, the-defendant-unlawfully-harmed8 me accusation.” Id. (citing Twombly, 550 U.S. at 555 ). Dismissal under Rule 12(b)(6) “can [also] 9 be based on the lack of a cognizable legal theory.” Balistreri v. Pacifica Police Dep’t, 901 F.2d 10 696, 699 (9th Cir. 1988). 11 In cases involving allegations of fraud or mistake, “a party must state with particularity 12 the circumstances constituting fraud or mistake.” Fed. R. Civ. P. 9(b). The allegations must “be 13 specific enough to give defendants notice of the particular misconduct . . . so that they can 14 defend against the charge and not just deny that they have done anything wrong.” Kearns v. Ford 15 Motor Co., 567 F.3d 1120, 1124 (9th Cir. 2009) (citation omitted). Said another way, they “must 16 be accompanied by the who, what, when, where, and how of the misconduct charged.” Id. 17 (citations and quotation marks omitted). 18 B. Fraudulent Inducement & Fraudulent Misrepresentation or Concealment 19 Under Washington law, the elements of fraudulent inducement and fraudulent 20 misrepresentation or concealment are the same. To assert either, a plaintiff must show: “(1) a 21 representation of existing fact, (2) its materiality, (3) its falsity, (4) the speaker’s knowledge of 22 its falsity, (5) the speaker’s intent that it be acted upon by the person to whom it is made, 23 (6) ignorance of its falsity on the part of the person to whom the representation is addressed, 24 (7) the latter’s reliance on the truth of the representation, (8) the right to rely upon it, and 25 (9) consequent damage.” Elcon Const., Inc. v. E. Washington Univ., 273 P.3d 965, 970 (Wash. — 26 — 1 2012).2 2 In moving to dismiss, Defendants dispute the first three elements3—that Plaintiff fails to 3 adequately allege a false misrepresentation of material fact. (See Dkt. No. 46 at 21–23.) The 4 Court disagrees. Washington law provides that “a promise made with no intention of keeping it 5 is a ‘misrepresentation of an existing fact’—the speaker’s state of mind—and may be the basis of 6 an action in fraud if the other elements are present.” Beckendorf v. Beckendorf, 457 P.2d 603 , 7 607 (Wash. 1969). Here, in the APA and TSA, Defendant promised to “cooperate and assist in 8 good faith in the preparation of the Earn-Out EBITDA,” to provide transition services “in good 9 faith,” and that “[a]ll revenue . . . [would] be booked in the Ordinary Course of Business.” (Dkt. 10 No. 35 at 12–14.) Nonetheless, Plaintiff’s allegations plausibly suggest that Defendant had no 11 intention of honoring those promises when he made them. In one pre-sale e-mail, for example, 12 Defendant instructed an employee to delay recording commission checks until after closing so 13 that he could get “10x in the earn out.” (Id. at 15.) And to the extent this is insufficient to raise an 14 inference of bad faith, it is supplemented by allegations that Defendants later misrepresented 15 Rice’s earnings and maintained a secret accounting system, payroll system, and bank account. 16 (See id. at 16–21); see also J2 Cloud Services, Inc. v. Fax87, 2016 WL 6833904 , slip op. at 3 17 (C.D. Cal. 2016) (noting that post-signing facts supplemented the plausibility of plaintiffs’ 18 allegations that defendant did not intend to keep promises in the licensing agreement). This is 19 sufficient to raise an inference that Defendant made a promise with no intention of keeping it. — 20 — — 21 — 2 Fraudulent concealment may also be established by showing that the defendant breached a duty to disclose a material fact. Moodie v. Remington Arms Co., LLC., 2013 WL 12191352 , slip op. at 22 3 (W.D. Wash. 2013) (citation omitted). 3 Defendants do not meaningfully dispute the remaining elements of fraud, beyond a footnote — 23 — stating Plaintiff “has not alleged the other required elements of a fraudulent inducement claim.” 24 (See id. at 27 .) “Relegating substantive arguments to footnotes is dangerous business.” F.D.I.C. v. Red Hot Corner, LLC, 2014 WL 5410712 , slip op. at 1 (D. Nev. 2014). “If an argument is 25 worth making, a party should put the argument in the body of its brief.” Bach v. Forever Living Prod. U.S., Inc., 473 F. Supp. 2d 1127, 1132 (W.D. Wash. 2007). To the extent Defendants’ — 26 — conclusory statement can even be deemed an “argument,” the Court declines to consider it. 1 Defendants next argue Plaintiff’s fraudulent inducement claims fail because the APA 2 contains a “no-reliance” clause which, under Washington law, precludes Plaintiff from relying 3 on extra-contractual representations to establish fraud. (Dkt. No. 46 at 23) (citing FMC Techs., 4 Inc. v. Edwards, 2007 WL 1725098 , slip op. at 4–5 (W.D. Wash. 2007)). But here, as previously 5 explained, Plaintiff’s fraudulent inducement claims are based on promises in the contracts (i.e., 6 the APA and TSA)—not “extra-contractual representations,” as Defendants suggest. See Pac. 7 Contours Corp. v. Fives Machining Sys., Inc., 2018 WL 6204579 (C.D. Cal. 2018) (no-reliance 8 clause does not apply to fraud claim where the claim was based on representations in the 9 contract), report and recommendation adopted, 2018 WL 6198461 (C.D. Cal. 2018). Thus, 10 because Defendants’ argument rests upon a faulty premise, the Court rejects it. 11 The Court DENIES Defendants’ motion to dismiss the fraudulent inducement and 12 fraudulent misrepresentation or concealment claims.4 13 C. Breach of Contract 14 Under Washington law, a breach of contract claim requires three elements: (1) a contract 15 imposing a duty; (2) breach of that duty; and (3) damages proximately caused by the breach. 16 Seattle Pac. Indus., Inc. v. S3 Holding LLC, 831 F. App’x 814 , 817 (9th Cir. 2020). Defendants 17 argue Plaintiff fails to adequately allege any breach of the APA or the TSA. (See Dkt. No. 46 at 18 30–31.) Alternatively, they argue the breach of contract claims are premature because Plaintiff 19 failed to exhaust the APA’s dispute resolution procedures regarding earn-out amounts. (Id. at 20 31–32.) On both fronts, the Court disagrees. 21 First, Plaintiff adequately alleges a breach of the APA. The APA requires Fritts to 22 “cooperate and assist in good faith in the preparation of the Estimated Earn-Out EBITDA — 23 — 4 Defendants also argue that the independent tort doctrine bars Plaintiff’s fraudulent 24 misrepresentation or concealment claim. (See Dkt. No. 46 at 27.) But as Plaintiff notes, (see Dkt. No. 47 at 27), and Defendants fail to dispute, (see generally Dkt. No. 49), the Washington 25 Supreme Court has “repeatedly recognized a fraud claim to be outside the doctrine’s scope, allowing such claims to be decided based on established tort precedent.” Elcon, 273 P.3d at 970 . — 26 — The Court therefore rejects this argument. 1 . . . including making available, to the extent reasonably necessary, books, records, work papers 2 and personnel at such reasonable times as any Party shall request . . . .” (Dkt. No. 35 at 44–45.) 3 According to the complaint, Fritts caused Rice to overstate its revenues and understate its 4 expenses, maintained separate accounting and payroll systems and a separate bank account, and 5 deliberately obstructed Plaintiff’s access to information necessary to verify Rice’s financial 6 records. (See id. at 15–21, 25, 34–35, 45.) He allegedly did so “to deliberately inflate the bonus 7 earn-out payments contemplated in the sale.” (Id. at 2.) Assuming these allegations are true, as 8 this Court must, they are sufficient to raise a reasonable inference that Fritts breached the APA. 9 See Iqbal, 556 U.S. at 678 . Indeed, the APA requires cooperation in good faith, and Defendants’ 10 alleged conduct here suggests a lack thereof. See Black’s Law Dictionary (11th ed. 2019) (good 11 faith defined as, among other things, the “absence of intent to defraud”). 12 Second, Plaintiff adequately alleges a breach of the TSA. The TSA, in relevant part, 13 requires Defendants to operate “in good faith” and “in the ordinary course of business.” (Dkt. 14 No. 35 at 12–13.) This includes “provid[ing] payroll services . . . in a consistent manner with 15 [the company’s] past practices.” (Id. at 13) (emphasis added). Prior to the sale, Defendants did 16 not maintain two separate sets of books or use two separate payroll systems. (See id. at 46.) After 17 the sale, however, Defendants changed their past practices and began using separate systems. 18 (Id.) Accepting these allegations as true, they are sufficient to state a claim for breach of the TSA 19 that is plausible on its face. See Iqbal, 556 U.S. at 677–78. Defendants attempt to downplay their 20 alleged conduct by arguing “there was no need for two systems pre-close because there was only 21 one legal entity employing personnel and no earn-out payments to share with those employees.” 22 (Dkt. No. 49 at 15.) They contend Plaintiff’s reading of the TSA would thus place them “in 23 breach . . . if they changed any pre-close practice, even if such practice was obviously mooted in 24 response to post-close circumstances.” (Id.) But this argument misses the mark. It is not merely 25 Defendants’ use of separate systems that amounts to a potential breach of the TSA, but the covert 26 nature of those actions. Even the company’s controller, James Heerspink, acknowledged that 1 maintaining a “side payroll” was “shady.” (Dkt. No. 35 at 18.) This suggests that Defendants 2 knew their change in practice was, at best, problematic. 3 Third, the APA’s dispute resolution procedures do not preclude Plaintiff’s breach of 4 contract claims. The relevant provision establishes that “[i]f [Fritts] in good faith disagrees with 5 [Plaintiff’s] calculation of the Estimated Earn-Out EBITDA, [Fritts] may, within sixty (60) days 6 after receipt of such statement . . . deliver to [Plaintiff] a notice disagreeing therewith and setting 7 forth his objections.” (Dkt. No. 1 at 40–41.) As an initial matter, this provision appears to 8 contemplate procedures for resolving Fritts’s objections, not Plaintiff’s. Moreover, as Plaintiff 9 observes and Defendants fail to dispute, the breach of contract claims at issue are not a dispute 10 over the “Estimated Earn-Out EBITDA.” (See Dkt. No. 47 at 38.) Rather, they involve alleged 11 breaches of Defendants’ contractual duties to act in good faith, as set forth in the APA and TSA. 12 The Court DENIES Defendants’ motion to dismiss the breach of contract claims. And 13 because those claims form the basis for Plaintiff’s declaratory judgment claim, the Court further 14 DENIES Defendants’ motion to dismiss the declaratory judgment claim. 15 D. Breach of the Implied Covenant of Good Faith and Fair Dealing 16 Under Washington law, “[t]here is in every contract an implied duty of good faith and 17 fair dealing that obligates the parties to cooperate with each other so that each may obtain the full 18 benefit of performance.” Rekhter v. State, Dep’t of Soc. & Health Servs., 323 P.3d 1036 , 1041 19 (Wash. 2014) (citation omitted). This, however, is not “a free-floating duty of good faith 20 unattached to the underlying legal document,” but instead “exists only in relation to performance 21 of a specific contract term.” Badgett v. Sec. State Bank, 807 P.2d 356, 360 (Wash. 1991). 22 Plaintiff claims Fritts breached this implied duty by (1) intentionally misstating the 23 business’s earnings to inflate the earn-out payments, and (2) failing to operate it in Plaintiff’s 24 interest and consistent with past practice. (Dkt. No. 35 at 47.) Defendants, in response, argue that 25 neither the APA nor the TSA impose any obligations upon them with respect to the business’s 26 earnings, and that a conclusion to the contrary would create new contractual obligations. (See 1 Dkt. No. 46 at 32.) Again, the Court disagrees. As previously noted, the APA explicitly requires 2 Fritts to “cooperate and assist in good faith in the preparation of” Rice’s earnings. (Dkt. No. 35 at 3 13–14.) Nonetheless, Fritts allegedly misrepresented Rice’s earnings and prevented Plaintiff 4 from receiving accurate financial information to correct the earnings. (Id. at 47.) Defendants 5 cannot seriously contend that such conduct, if true, would not potentially contravene the APA’s 6 good faith requirement—particularly where it allegedly caused Plaintiff to overpay the first earn7 out payment by at least $28 million. (See id. at 6, 26.) 8 The Court DENIES Defendants’ motion to dismiss Plaintiff’s claim for breach of the 9 implied covenant of good faith and fair dealing. 10 E. Conversion 11 Defendants next argue Plaintiff’s conversion claim should be dismissed under the 12 independent tort doctrine. (Dkt. No. 46 at 33.) On this matter, at least, the Court agrees with 13 Defendants. 14 Under the independent tort doctrine, a plaintiff can recover tort damages only if the injury 15 “traces back to the breach of a tort duty arising independently of the terms of the contract.” 16 Eastwood v. Horse Harbor Found., Inc., 241 P.3d 1256, 1262 (Wash. 2010) (“When no 17 independent tort duty exists, tort does not provide a remedy.”). The existence of an independent 18 tort duty “is a question of law and depends on mixed considerations of logic, common sense, 19 justice, policy, and precedent.” Id. Here, Plaintiffs claim Defendant Fritts had an independent 20 “duty not to deprive PCF of its property through deceptive acts.” (Dkt. No. 47 at 41.) This duty, 21 according to Plaintiff, would exist even in the absence of Fritts’ affirmative contractual 22 obligation to provide Plaintiff with accurate information. (See id.) But Plaintiff provides no 23 meaningful explanation establishing the existence of this supposed “duty.” Instead, it concludes 24 that such duty exists and cites to cases that are either nonbinding or inapposite.5 — 25 — 5 Plaintiff cites to Burke v. Napieracz, 674 So. 2d 756, 758 (Fla. Dist. Ct. App. 1996), which was 26 cited in passing in King v. Rice, 191 P.3d 946 , 952 n.27 (Wash. Ct. App. 2008). (See Dkt. No. 47 1 Accordingly, the Court GRANTS Defendants’ motion with respect to Plaintiff’s 2 conversion claim and DISMISSES it with leave to amend. See Krainski v. Nev. ex rel. Bd. of 3 Regents of Nev. Sys. of Higher Educ., 616 F.3d 963, 972 (9th Cir. 2010). 4 F. Unjust Enrichment 5 Defendants next argue Plaintiff’s unjust enrichment claim should be dismissed because 6 “[a]n unjust enrichment claim cannot proceed where there is a contractual relationship between 7 the parties.” (Dkt. No. 46 at 33) (citing Harris v. U.S. BankCorp, 2019 WL 5536402 , slip op. at 7 8 (W.D. Wash. 2019)). Plaintiff, in response, asserts that “‘the mere existence of a contract does 9 not automatically invalidate an unjust enrichment claim, as the contract may be unenforceable or 10 may not explicitly cover the subject matter that forms the basis of the unjust enrichment claim.’” 11 (Dkt. No. 47 at 42) (quoting Olson Kundig, Inc. v. 12th Ave. Iron, Inc., 2022 WL 4534422 , slip 12 op. at 5 (W.D. Wash. 2022)). Defendants respond that “there must still be a plausible factual 13 basis” in the amended complaint “from which to draw [a] reasonable inference that either 14 condition might apply.” (Dkt. No. 49 at 21.) On this issue, Defendants have the better argument. 15 See Ehreth v. Cap. One Servs., Inc., 2008 WL 3891270 , slip op. at 3 (W.D. Wash. 2008) 16 (dismissing unjust enrichment claim where “plaintiff does not argue that the contract is 17 unenforceable” and “had an express contract with defendant that governed the circumstances” 18 underlying the claim). Indeed, neither party has questioned the enforceability of the APA or 19 TPA. (See generally Dkt. Nos. 35, 46, 47.) Moreover, the APA and TPA clearly govern the 20 subject matter that forms the unjust enrichment claim—that is, whether Defendants obtained 21 earn-out payments through unlawful means and in bad faith. 22 Accordingly, the Court GRANTS Defendants’ motion with respect to Plaintiff’s unjust — 23 — 24 at 41.) Plaintiff also cites to Bentham v. Bingham Law Grp., 2013 WL 12186171 , slip op. at 12 (S.D. Cal 2013), ostensibly for the proposition that “where fraud or conversion accompanies a 25 breach of contract, the [independent tort doctrine] does not bar the tort claim.” (Dkt. No. 47 at 41.) But Bentham involved California law, and Plaintiff has not presented this Court with an — 26 — equivalent categorical rule under Washington law. 1 enrichment and DISMISSES it with leave to amend. See Krainski, 616 F.3d at 972 . 2 G. RICO 3 Plaintiff alleges Fritts violated RICO through his employees who, at Fritts’ direction, 4 engaged in an unlawful scheme to defraud Plaintiff. (See Dkt. No. 35 at 48–50.) Under RICO, it 5 is “unlawful for any person employed by or associated with any enterprise . . . to conduct or 6 participate, directly or indirectly, in the conduct of such enterprise’s affairs through a pattern of 7 racketeering activity.” 18 U.S.C. § 1962 (c). To state a claim under this provision, Plaintiff must 8 therefore allege “(1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering 9 activity.” Odom v. Microsoft Corp., 486 F.3d 541, 547 (9th Cir. 2007) (en banc). All 10 requirements but the first are disputed in this case. But because Plaintiff fails to adequately allege 11 the “pattern” element, and because this alone dooms Plaintiff’s RICO claim, the Court only 12 addresses this element. 13 In determining whether a defendant’s conduct constituted a “pattern,” courts consider the 14 relatedness of the predicate acts and continuity. Medallion Television Enters., Inc. v. SelecTV of 15 Cal., Inc., 833 F.2d 1360, 1363 (9th Cir. 1987). And to adequately allege continuity, a plaintiff 16 must allege either “a closed period of repeated conduct” that persisted over a “substantial period 17 of time” (“closed-ended continuity”) or “past conduct that by its nature projects into the future 18 with a threat of repetition” (“open-ended continuity”). H.J. Inc. v. Nw. Bell Tel. Co., 492 U.S. 19 229, 241–42 (1989). Here, Plaintiff alleges closed-ended continuity6 but, for the reasons 20 described below, fails to adequately do so. 21 Under longstanding Ninth Circuit precedent, RICO’s continuity requirement is not 22 satisfied where, as here, plaintiffs merely allege “a single fraud perpetrated on a single victim.” 23 United Energy Owners Comm., Inc. v. U.S. Energy Mgmt. Sys., Inc., 837 F.2d 356, 360 (9th Cir. — 24 — 6 In response to the Court’s request for supplemental briefing regarding whether Plaintiff has 25 shown either closed or open-ended continuity (Dkt. No. 52), Plaintiff exclusively argues for closed-ended continuity. (See Dkt. No. 54 at 2–5.) The Court treats this as a concession that — 26 — Plaintiff has failed to allege open-ended continuity. 1 1988). Indeed, the Ninth Circuit “has found insufficient continuity in every case but two in 2 which there was only a single victim.” David B. Smith & Terrance G. Reed, Civil RICO ¶ 4.04 3 (Matthew Bender 2023). The first, Sun Sav. & Loan Ass’n v. Dierdorff, is an open-ended 4 continuity case—the court found sufficient continuity where the scheme at issue posed a threat of 5 continuing activity. 825 F.2d 187 , 194 & n.5 (9th Cir. 1987) (noting that the defendant “in no 6 way completed the criminal scheme”). Whereas here, Plaintiff fails to point to any facts 7 indicating that Defendants did not complete the criminal scheme. The second single-victim case, 8 Republic of the Philippines v. Marcos, is a sui generis political case in which the “single victim” 9 was the Republic of the Philippines, not an individual or a company, and the racketeering 10 activity was carried out on a scale far more immense than the activity at issue in this case. 862 11 F.2d 1355 , 1358 (9th Cir. 1988) (en banc). Thus, because this case involves a single alleged 12 victim, PCF Insurance, and because both of the Ninth Circuit’s single-victim cases are 13 distinguishable from the instant case, the Court cannot conclude that Plaintiff has adequately 14 alleged closed-ended continuity. 15 In an attempt to escape this conclusion, Plaintiff relies on Kearney v. Foley & Lardner, 16 LLP for the proposition that “a pattern does not require multiple victims” 607 Fed. App’x 757, 17 759 (9th Cir. 2015) (mem.) (citing Sun Savings, 825 F.2d at 191–94). But as multiple courts have 18 noted in response to this same argument, “‘the Court need not rely on an unpublished 19 memorandum disposition [in Kearney].’” Karma Auto. LLC v. Lordstown Motors Corp., 2022 20 WL 17886045 , slip op. at 20 (C.D. Cal. 2022) (quoting Palantir Tech. Inc. v. Abramowitz, 2021 21 WL 2400979 , slip op. at 8 n.2 (N.D. Cal. 2021)). Instead, this Court relies on the binding 22 decision in Medallion which, contrary to Kearney, expressly limited Sun Savings to cases 23 involving “a threat of continuing activity.” 833 F.2d at 1364 . And as the Court has previously 24 noted, Plaintiff fails to allege any such threat in this case. 25 Because Plaintiff has not adequately alleged the “pattern” element, the Court GRANTS 26 Defendants’ motion to dismiss the RICO claim with leave to amend. See Krainski, 616 F.3d at 1 972. And because the conspiracy to violate RICO claim hinges on the underlying RICO claim, 2 the Court further DISMISSES the conspiracy to violate RICO claim with leave to amend. See id. 3 H. Criminal Profiteering 4 Defendants next argue Plaintiff’s criminal profiteering claim should be dismissed 5 because, among other things, the amended complaint fails to allege a pattern of criminal 6 profiteering activity. (Dkt. No. 46 at 39–42.) The Court agrees. “To show a pattern under the 7 [Washington Criminal Profiteering Act], a plaintiff must make the same showing required by 8 RICO: relationship plus continuity.” Straightshot Commc’ns, Inc. v. Telekenex, Inc., 2011 WL 9 1770935, slip op. at 8 (W.D. Wash. 2011). And here, for the reasons discussed above, see supra 10 Section III.G, Plaintiff has failed to adequately allege a pattern. Accordingly, the criminal 11 profiteering claim is DISMISSED with leave to amend. See Krainski, 616 F.3d at 972 . 12 III. CONCLUSION 13 For the foregoing reasons, Defendants’ motion to dismiss (Dkt. No. 46) is GRANTED in 14 part and DENIED in part. Specifically, Plaintiff’s claims for conversion, unjust enrichment, 15 RICO, conspiracy to violate RICO, and criminal profiteering (Counts VII–XI) are DISMISSED. 16 Any amendment is due within 30 days of this order. Plaintiff’s remaining claims survive. 17 DATED this 27th day of March 2024. A — 18 — — 19 — — 20 — John C. Coughenour 21 UNITED STATES DISTRICT JUDGE — 22 — — 23 — — 24 — — 25 — — 26 —