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					                                                                                                                                                CHAMBER’S COPY

                                                                           1   STANBURY FISHELMAN & WISNER, INC.
                                                                               9200 Sunset Boulevard, Penthouse 30
                                                                           2   West Hollywood, CA 90069-3601
                                                                               Tel: (310) 278-1800
                                                                           3   Fax: (310) 278-1802
                                                                           4   GEORGE STANBURY, STATE BAR NO. 60048
                                                                               ALEC B. WISNER, STATE BAR NO. 63221
                                                                           5   H. SCOTT LEVIANT, STATE BAR NO. 200834
                                                                           6   Attorneys for Ancillary Defendants
                                                                               JORDAN LEVINSON and AIS AMERICA, INC.
                                                                           7
                                                                           8
                                                                           9                              UNITED STATES DISTRICT COURT
                                                                          10                   FOR THE NORTHERN DISTRICT OF CALIFORNIA
                                                                          11                                        SAN JOSE DIVISION
STANBURY FISHELMAN & WISNER, INC.




                                                                          12
                                    9200 SUNSET BOULEVARD, PENTHOUSE 30




                                                                          13   GARY KREMEN,                                     Case No.: C 98 20718 JW (PVT)
                                       WEST HOLLYWOOD, CA 90069-3601




                                                                          14                 Plaintiff,
                                                                                                                                ANCILLARY DEFENDANTS’ NOTICE
                                                                          15          vs.                                       OF MOTIONS AND MOTIONS (1) TO
                                                                                                                                DISMISS FIRST AMENDED
                                                                          16   STEPHEN MICHAEL COHEN, et al.,                   ANCILLARY COMPLAINT OR PARTS
                                                                                                                                THEREOF FOR FAILURE TO STATE A
                                                                          17                 Defendants.                        CLAIM; (2) TO STRIKE PORTIONS OF
                                                                                                                                FIRST AMENDED ANCILLARY
                                                                          18                                                    COMPLAINT; MEMORANDUM OF
                                                                               GARY KREMEN,                                     POINTS AND AUTHORITIES IN
                                                                          19                                                    SUPPORT THEREOF
                                                                                             Ancillary Plaintiff,
                                                                          20                                                    [FED. R. CIV. P. 9(b); FED. R. CIV. P. 12]
                                                                                      vs.
                                                                          21                                                    Date:       April 29, 2002
                                                                               JORDAN LEVINSON, an individual, AIS              Time:       9:00 a.m.
                                                                          22   AMERICA, INC., a Florida corporation             Court:      Courtroom of the Honorable
                                                                               and ROES 1-1000,                                             James Ware
                                                                          23
                                                                                             Ancillary Defendants.
                                                                          24
                                                                          25
                                                                          26   TO THE COURT, ALL PARTIES AND THEIR ATTORNEYS OF RECORD:
                                                                          27          PLEASE TAKE NOTICE that on Monday, April 29, 2002 at 9:00 a.m., or as
                                                                          28   soon thereafter as the matter may be heard, in the Courtroom of the Honorable James


                                                                                                                            1

                                                                               Case No.: C 98 20718 JW (PVT)        ANCILLARY DEFENDANTS’ MOTIONS TO DISMISS, ETC.
                                                                                                                    RE FIRST AMENDED ANCILLARY COMPLAINT
                                                                                                                                             CHAMBER’S COPY

                                                                           1   Ware in the United States District Court, Northern District of California, located at
                                                                           2   280 South First Street #2112, San Jose, California, Ancillary Defendants Jordan
                                                                           3   Levinson and AIS America, Inc. (collectively referred to herein as “Ancillary
                                                                           4   Defendants”) will and hereby do move this Court for an order dismissing the First
                                                                           5   Amended Ancillary Complaint. In the alternative, Ancillary Defendants move this
                                                                           6   Court for an order dismissing the Causes of Action for Fraud and RICO. Ancillary
                                                                           7   Defendants additionally move this Court for an order striking all references to
                                                                           8   exemplary damages from the First Amended Ancillary Complaint.
                                                                           9          These Motions are made on the grounds that: The First Amended Ancillary
                                                                          10   Complaint as a whole fails to state a claim for relief pursuant to FED. RULE CIV. PROC.
                                                                          11   12(b)(6); the Fraud and RICO Causes of Action in particular fail to state claims for
STANBURY FISHELMAN & WISNER, INC.




                                                                          12   relief pursuant to FED. RULE CIV. PROC. 12(b)(6) and FED. RULE CIV. PROC. 9(b); and,
                                    9200 SUNSET BOULEVARD, PENTHOUSE 30




                                                                          13   the First Amended Ancillary Complaint asserts impertinent, immaterial and
                                       WEST HOLLYWOOD, CA 90069-3601




                                                                          14   scandalous matter pursuant to FED. RULE CIV. PROC. 12(f).
                                                                          15          These Motions are based upon this Notice of Motion, the Memorandum of
                                                                          16   Points and Authorities attached hereto, the papers and pleadings filed herein, and
                                                                          17   upon such further evidence and argument as may be received by this Court at or
                                                                          18   before the time of hearing of these Motions.
                                                                          19   Dated this 19 th day of February 2002.         Respectfully submitted,
                                                                          20                                                  STANBURY FISHELMAN & WISNER
                                                                                                                              9200 Sunset Boulevard, Penthouse 30
                                                                          21                                                  West Hollywood, CA 90069-3601
                                                                          22
                                                                          23                                            By:
                                                                                                                              George Stanbury
                                                                          24                                                  Attorneys for Ancillary Defendants
                                                                          25
                                                                          26
                                                                          27
                                                                          28


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                                                                               Case No.: C 98 20718 JW (PVT)    ANCILLARY DEFENDANTS’ MOTIONS TO DISMISS, ETC.
                                                                                                                RE FIRST AMENDED ANCILLARY COMPLAINT
                                                                                                                                                                             CHAMBER’S COPY

                                                                           1                                                   TABLE OF CONTENTS
                                                                           2
                                                                           3   TABLE OF CONTENTS ........................................................................................................ 3
                                                                           4   TABLE OF AUTHORITIES ................................................................................................... 6
                                                                           5   I.     INTRODUCTION ........................................................................................................ 10
                                                                           6   II.    THIS COURT DOES NOT HAVE JURISDICTION, ANCILLARY OR
                                                                           7          OTHERWISE. ............................................................................................................... 10
                                                                           8          A.     Ancillary Jurisdiction Has Been Subsumed By Supplemental
                                                                           9                 Jurisdiction. ......................................................................................................... 10
                                                                          10          B.     Diversity Jurisdiction Is Not Present. ............................................................... 11
                                                                          11          C.     Plaintiff’s Claims Are Not Properly Supplemental Claims. ........................... 11
STANBURY FISHELMAN & WISNER, INC.




                                                                          12                 1.      Ancillary jurisdiction does not exist here. ............................................... 12
                                    9200 SUNSET BOULEVARD, PENTHOUSE 30




                                                                          13                 2.      Pendant jurisdiction does not exist here. ................................................. 16
                                       WEST HOLLYWOOD, CA 90069-3601




                                                                          14          D.     By Filing An “Ancillary” Claim, Plaintiff Has Not Properly Invoked
                                                                          15                 Either Diversity Or Federal Question Jurisdiction Before This Court. .......... 17
                                                                          16                 1.      The Absence Of Proper Supplemental Jurisdiction Defeats All
                                                                          17                         Other Jurisdictional Bases. ........................................................................ 18
                                                                          18                 2.      Cohen’s “Stateless” Status Destroys Diversity. ........................................ 18
                                                                          19                 3.      “Doe” Defendants Defeat Diversity. ......................................................... 19
                                                                          20          E.     Cohen Is An Indispensable Party Subject To Compulsory Joinder. .............. 20
                                                                          21                 1.      As An Alleged RICO Co-Conspirator, Good Reason Exists For
                                                                          22                         Joinder. ........................................................................................................ 20
                                                                          23                 2.      Joinder Of Cohen Is Not Feasible Under Present Circumstances. ......... 20
                                                                          24                 3.      As An Indispensable Party, “In Equity And Good Conscience” It
                                                                          25                         Would Be Unfair To Proceed Without Cohen. ........................................ 20
                                                                          26   III. ANCILLARY PLAINTIFF‟S CLAIMS ARE LEGALLY INSUFFICIENT
                                                                          27          AND SHOULD BE DISMISSED ................................................................................. 21
                                                                          28          A.     Plaintiff Does Not Have Standing. .................................................................... 22


                                                                                                                                                  3

                                                                               Case No.: C 98 20718 JW (PVT)                      ANCILLARY DEFENDANTS’ MOTIONS TO DISMISS, ETC.
                                                                                                                                  RE FIRST AMENDED ANCILLARY COMPLAINT
                                                                                                                                                                     CHAMBER’S COPY

                                                                           1        B.   Plaintiff Fails To State A Claim Under Any Section Of RICO. ....................... 22
                                                                           2             1.    Plaintiff’s Own Allegations Defeat The Essential “Intent”
                                                                           3                   Element Necessary To Each Predicate Act. .............................................. 22
                                                                           4             2.    Plaintiff Is Precluded From Asserting A Claim That Could Have
                                                                           5                   Been Brought In The Prior Proceeding. .................................................... 23
                                                                           6                   a)    Identity Of Claims. ............................................................................. 23
                                                                           7                   b)    Final Judgment On The Merits. ........................................................ 24
                                                                           8                   c)    Privity Between Necessary Parties. .................................................. 24
                                                                           9             3.    The Particularity Required Pursuant To Rule 9(B) Is Absent. ............... 24
                                                                          10             4.    Plaintiff Has Failed To Properly Plead A Cause Of Action For
                                                                          11                   Violation Of 18 U.S.C. § 1962(c). ............................................................... 26
STANBURY FISHELMAN & WISNER, INC.




                                                                          12                   a)    Plaintiff Has Failed To Allege A “Pattern” Of Activity. ................ 27
                                    9200 SUNSET BOULEVARD, PENTHOUSE 30




                                                                          13                         (1)    Plaintiff‟s Allegations Do Not Establish “Open-Ended
                                       WEST HOLLYWOOD, CA 90069-3601




                                                                          14                                Continuity”. .......................................................................................27
                                                                          15                         (2)    “Where A Plaintiff Alleges A Single Scheme Promulgated
                                                                          16                                For The Purpose Of Defrauding A Single Victim,
                                                                          17                                Continuity Cannot Be Established.”...............................................28
                                                                          18                         (3)    Plaintiff‟s Allegations Do Not Establish “Closed-Ended
                                                                          19                                Continuity”. .......................................................................................28
                                                                          20                   b)    Plaintiff‟s “Enterprise” Allegations Are Fatally Flawed; The
                                                                          21                         “Enterprise” Lacks Sufficient Separateness From The
                                                                          22                         Persons Charged. ............................................................................... 29
                                                                          23             5.    Plaintiff’s RICO Conspiracy Claim Is Defective. ..................................... 30
                                                                          24        C.   Plaintiff Fails To State A Claim For Fraud. ...................................................... 30
                                                                          25             1.    The Particularity Required Pursuant To Rule 9(B) Is Absent. ............... 31
                                                                          26             2.    Plaintiff Has Failed To Allege Any Factual Basis For His
                                                                          27                   Conclusory Allegations Concerning The Reliance Element. .................. 31
                                                                          28             3.    There is no legally recognizable relationship between Mr.


                                                                                                                                         4

                                                                               Case No.: C 98 20718 JW (PVT)             ANCILLARY DEFENDANTS’ MOTIONS TO DISMISS, ETC.
                                                                                                                         RE FIRST AMENDED ANCILLARY COMPLAINT
                                                                                                                                                                      CHAMBER’S COPY

                                                                           1                      Kremen and the Defendants to support a fraud claim. .......................... 32
                                                                           2   IV. IN AN ACTION ALLEGING BREACH OF CONTRACT, A REQUEST FOR
                                                                           3        EXEMPLARY DAMAGES IS IMPROPER AND SHOULD BE STRICKEN. .......... 33
                                                                           4   V.   CONCLUSION ............................................................................................................ 34
                                                                           5
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STANBURY FISHELMAN & WISNER, INC.




                                                                          12
                                    9200 SUNSET BOULEVARD, PENTHOUSE 30




                                                                          13
                                       WEST HOLLYWOOD, CA 90069-3601




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                                                                               Case No.: C 98 20718 JW (PVT)                 ANCILLARY DEFENDANTS’ MOTIONS TO DISMISS, ETC.
                                                                                                                             RE FIRST AMENDED ANCILLARY COMPLAINT
                                                                                                                                                                              CHAMBER’S COPY

                                                                           1                                                TABLE OF AUTHORITIES
                                                                           2
                                                                           3   FEDERAL CITATIONS
                                                                           4   Alvarado-Morales v. Digital Equipment Corp., 843 F.2d 613 (1st Cir. 1988) ...................... 33
                                                                           5   Bender v. Williamsport Area School Dist., 475 U.S. 534 (1986) ........................................... 18
                                                                           6   Berry v. McLemore, 795 F.2d 452 (5th Cir. 1986) ............................................................... 13
                                                                           7   Blake v. Dierdorff, 856 F.2d 1365 (9th Cir. 1988) ................................................................ 22
                                                                           8   Bonin v. Calderon, 59 F.3d 815 (9th Cir. 1995) ................................................................... 33
                                                                           9   Brady v. Brown, 51 F.3d 810 (9th Cir. 1995) ....................................................................... 18
                                                                          10   Burke v. Ernest W. Hahn, Inc., 592 F.2d 542 (9th Cir. 1979) .........................................13, 14
                                                                          11   Collins v. Nagle, 892 F.2d 489 (6th Cir. 1989) .................................................................... 21
STANBURY FISHELMAN & WISNER, INC.




                                                                          12   Columbia Pictures Ind., Inc. v. Prof. Real Estate Inv., Inc.,
                                    9200 SUNSET BOULEVARD, PENTHOUSE 30




                                                                          13     944 F.2d 1525, 1533 (9th Cir. 1991) ................................................................................ 16
                                       WEST HOLLYWOOD, CA 90069-3601




                                                                          14   CTS Printex, Inc. v. American Motorists Ins Co., 639 F.Supp. 1272 (N.D.Cal. 1986) ....... 19
                                                                          15   Curry v. Del Priore, 941 F.2d 730 (9th Cir. 1991) ............................................................... 12
                                                                          16   Danner v. Himmelfarb, 858 F.2d 515 (9th Cir. 1988), cert. denied, 490 U.S. 1067
                                                                          17     (1989) ...........................................................................................................................10, 16
                                                                          18   Dempsey v. Sanders, 132 F.Supp.2d 222 (S.D.N.Y. 2001) .................................................. 28
                                                                          19   Durning v. Citibank, Int’l, 990 F.2d 1133 (9th Cir. 1993) .................................................. 28
                                                                          20   F.D.I.C. v. Loube, 134 F.R.D. 270 (N.D.Cal. 1991) ............................................................. 11
                                                                          21   Fifty Associates v. Prudential Ins. Co. of America, 446 F. 2d 1187 (9th Cir. 1970) ............. 19
                                                                          22   Finley v. United States, 490 U.S. 545 (1989) ....................................................................... 17
                                                                          23   Frank v. United Airlines, Inc., 216 F.3d 845 (9th Cir. 2000) ............................................... 23
                                                                          24   Garter-Bare Co. v. Munsingwear, Inc., 650 F.2d 975 (9th Cir. 1980) ................................. 19
                                                                          25   GICC Capital Corp. v. Technology Finance Group, Inc., 67 F.3d 463 (2nd Cir 1995) ......... 28
                                                                          26   Gray v. First Winthrop Corp., 776 F. Supp. 504 (N.D. Cal. 1991) ..................................... 17
                                                                          27   H.J. Inc. v. Northwestern Bell Telephone Co., 492 U.S. 229 (1989) ...................................... 27
                                                                          28   Hajek v. Burlington Northern R.R. Co., 186 F.3d 1105 (9th Cir. 1999) .............................. 18


                                                                                                                                                  6

                                                                               Case No.: C 98 20718 JW (PVT)                      ANCILLARY DEFENDANTS’ MOTIONS TO DISMISS, ETC.
                                                                                                                                  RE FIRST AMENDED ANCILLARY COMPLAINT
                                                                                                                                                                              CHAMBER’S COPY

                                                                           1   Hockey v. Medhekar, 30 F. Supp. 2d 1209 (N.D.Cal. 1998) ................................................ 24
                                                                           2   Howard v. America Online, Inc., 208 F.3d 741 (9th Cir. 2000) ......................................23, 27
                                                                           3   In re Glenfed, Inc. Securities Litigation, 42 F.3d 1541 (9th Cir. 1994) ................................ 24
                                                                           4   Jenkins v. Weinshienk, 670 F.2d 915 (10th Cir. 1982) ......................................................... 12
                                                                           5   Kokkonen v. Guardian Life Ins. Co. of America, 511 U.S. 375 (1994)................................... 17
                                                                           6   Lublin v. Turnbull, 1992 U.S. Dist. LEXIS 3,255 (E.D.Pa. Mar. 11, 1992) ........................ 29
                                                                           7   Mack v. South Bay Beer Distributors, Inc., 798 F.2d 1279 (9th Cir. 1986) ......................... 21
                                                                           8   Medallion Television Enterprises v. SelecTV of California, Inc., 833 F.2d 1360 (9th
                                                                           9     Cir. 1987) .......................................................................................................................... 28
                                                                          10   Melanson v. United States Airlines, Inc., 931 F. 2d 558 (1991) ........................................... 32
                                                                          11   Moore v. Kayport Package Express, Inc., 885 F.2d 531 (9th Cir. 1989) ............................... 25
STANBURY FISHELMAN & WISNER, INC.




                                                                          12   Moss v. Morgan Stanley, Inc., 719 F.2d 5 (2nd Cir. 1983),
                                    9200 SUNSET BOULEVARD, PENTHOUSE 30




                                                                          13     cert.denied, 465 U.S. 1025 (1984) ..................................................................................... 26
                                       WEST HOLLYWOOD, CA 90069-3601




                                                                          14   Mullis v. United States Bank, 828 F.2d 1385 (9th Cir. 1987) .............................................. 21
                                                                          15   Neubronner v. Milken, 6 F.2d 666 (9th Cir. 1990) .............................................................. 25
                                                                          16   Newman-Green, Inc. v. Alfonzo-Larrain et al., 490 U.S. 826 (1989) ...............................11, 18
                                                                          17   Notrica v. Board of Supervisor, 925 F.2d 1211 (9th Cir. 1991) ............................................ 16
                                                                          18   Ortolf v. Silver Bar Mines, 111 F.3d 85 (9th Cir. 1997) .................................................11, 12
                                                                          19   Payne v. United Pacific Ins. Co., 472 F.2d 792 (9th Cir. 1973) ......................................14, 15
                                                                          20   Peacock v. Thomas, 516 U.S. 349 (1996)..........................................................................12, 22
                                                                          21   Pedrina v. Chun, 97 F.3d 1296 (9th Cir. 1996) .................................................................. 23
                                                                          22   R.E. Davis Chem. Corp. v. Nalco Chem. Co., 757 F.Supp. 1499 (N.D.Ill. 1990) ................. 29
                                                                          23   Rae v. Union Bank, 725 F.2d 478 (9th Cir. 1984) ................................................................ 29
                                                                          24   Redding Ford v. California State Bd. of Equalization,
                                                                          25     722 F.2d 496 (9th Cir. 1983), cert denied, 469 U.S. 817 (1984) ....................................... 13
                                                                          26   Religious Technology Center v. Wollersheim, 971 F.2d 364 (9th Cir. 1992) ........................ 29
                                                                          27   Schlaifer Nance & Co. v. Estate of Warhol, 119 F.3d 91 (2nd Cir. 1997) ............................ 28
                                                                          28   Schreiber Distrib. Co. v. Serv-Well Furniture Co., 806 F.2d 1393 (9th Cir. 1986) .............. 28


                                                                                                                                                  7

                                                                               Case No.: C 98 20718 JW (PVT)                      ANCILLARY DEFENDANTS’ MOTIONS TO DISMISS, ETC.
                                                                                                                                  RE FIRST AMENDED ANCILLARY COMPLAINT
                                                                                                                                                                            CHAMBER’S COPY

                                                                           1   Sederquist v. Court, 861 F.2d 554 (9th Cir. 1988) ............................................................... 13
                                                                           2   Sedima, S.P.R.L. v. Imrex Co., Inc., 473 U.S. 479 (1985) ..................................................... 26
                                                                           3   Semegen v. Weidner, 780 F.2d 727 (9th Cir. 1985) .............................................................. 25
                                                                           4   Sever v. Alaska Pulp Corp., 978 F.2d 1529 (9th Cir. 1992) ................................................. 28
                                                                           5   Skadegaard v. Farrell, 578 F.Supp. 1209 (D.N.J. 1984) ....................................................... 33
                                                                           6   State of Cal. ex rel. State Lands Commission v. U.S., 512 F.Supp. 36 (C.D.Cal. 1981) ....... 33
                                                                           7   U.S. Concord, Inc. v. Harris Graphics Corp., 757 F.Supp. 1053 (N.D. Cal. 1991).............. 30
                                                                           8   United Mine Workers of America v. Gibbs, 383 U.S. 715 (1966) .......................................... 16
                                                                           9   United States v. Ford, 650 F.2d 1141 (9th Cir. 1981),
                                                                          10      cert denied, 455 U.S. 942 (1982) ....................................................................................... 12
                                                                          11   United States v. Smithkline Beecham Clinical Labs., 245 F.3d 1048 (9th Cir. 2001) ........... 25
STANBURY FISHELMAN & WISNER, INC.




                                                                          12   Valerio v. Boise Cascade Corp., 645 F.2d 699 (9th Cir. 1981) (per curiam), cert
                                    9200 SUNSET BOULEVARD, PENTHOUSE 30




                                                                          13      denied, 454 U.S. 1126 (1981) ............................................................................................ 13
                                       WEST HOLLYWOOD, CA 90069-3601




                                                                          14   Wanetick v. Mel’s of Modesto, Inc., 811 F.Supp. 1402 (N.D.Cal. 1992) ............................. 27
                                                                          15   Wenger v. Lumisys, Inc., 2 F.Supp.2d 1231 (N.D.Cal. 1998) ........................................25, 26
                                                                          16   Wool v. Tandem Computers Inc., 818 F.2d 1433 (9th Cir. 1987) ......................................... 25
                                                                          17
                                                                          18   CALIFORNIA CITATIONS
                                                                          19   Dugar v. Happy Tiger Records, Inc., 41 Cal.App.3d 811 (1974) ......................................... 33
                                                                          20   French v. Orange County Inv. Corp., 125 Cal.App. 587 (1932) .......................................... 33
                                                                          21   Murphy v. Allstate Ins. Co., 17 Cal. 3d 937 (1976) ............................................................. 33
                                                                          22   People v. Superior Court, 9 Cal.3d 283 (1973) ..................................................................... 33
                                                                          23   Reichert v. General Ins. Co., 68 Cal.2d 822 (1968) .............................................................. 33
                                                                          24   Tarmann v. State Farm Mut. Auto. Ins. Co., 2 Cal.App.4th 153 (1991) ............................. 31
                                                                          25
                                                                          26   FEDERAL STATUTES
                                                                          27   18 U.S.C. § 1962(d) ............................................................................................................... 30
                                                                          28   28 U.S.C. § 1332.................................................................................................................... 11


                                                                                                                                                 8

                                                                               Case No.: C 98 20718 JW (PVT)                     ANCILLARY DEFENDANTS’ MOTIONS TO DISMISS, ETC.
                                                                                                                                 RE FIRST AMENDED ANCILLARY COMPLAINT
                                                                                                                                                                            CHAMBER’S COPY

                                                                           1   28 U.S.C. § 1367(a) ......................................................................................................... 10, 12
                                                                           2   28 U.S.C. § 1441.................................................................................................................... 19
                                                                           3
                                                                           4   STATUTES
                                                                           5   Cal Civ. Code § 1572 ........................................................................................................... 18
                                                                           6   Cal. Civ. Code § 1709 .......................................................................................................... 19
                                                                           7   Cal. Civ. Code § 3294(a) ...................................................................................................... 20
                                                                           8   Cal. Civ. Code §§ 1710 ........................................................................................................ 19
                                                                           9
                                                                          10   RULES
                                                                          11   Fed. R. Civ. P. 12(f) .............................................................................................................. 34
STANBURY FISHELMAN & WISNER, INC.




                                                                          12   Fed. R. Civ. P. 19 ............................................................................................................ 20, 21
                                    9200 SUNSET BOULEVARD, PENTHOUSE 30




                                                                          13   Fed. R. Civ. P. 9(b) ............................................................................................................... 24
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                                                                          14   Fed. Rule Civ. Proc. 12(b)(1) ............................................................................................... 16
                                                                          15   Fed. Rule Civ. Proc. 12(b)(6) ............................................................................................... 21
                                                                          16
                                                                          17   TREATISES
                                                                          18   1 A. Mathews, A. Weissman, & J. Sturc, Civil Rico Litigation, (2d ed. 1992) .......... 26, 29
                                                                          19   7 Cal.Jur.3d, Assignments, § 5 ............................................................................................ 33
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                                                                                                                                                 9

                                                                               Case No.: C 98 20718 JW (PVT)                     ANCILLARY DEFENDANTS’ MOTIONS TO DISMISS, ETC.
                                                                                                                                 RE FIRST AMENDED ANCILLARY COMPLAINT
                                                                                                                                                 CHAMBER’S COPY

                                                                           1                      MEMORANDUM OF POINTS AND AUTHORITIES
                                                                           2
                                                                           3                                      I.      INTRODUCTION
                                                                           4          Acknowledging the absence of jurisdiction and the conclusory nature of his
                                                                           5   original complaint, Ancillary Plaintiff (“Plaintiff”) now attempts to acquire
                                                                           6   jurisdiction by tacking on a defective racketeering claim amidst a scattershot
                                                                           7   collection of improper and inflammatory allegations all of which relate to garden
                                                                           8   variety state court breach of contract claims. Trying to coerce an economic
                                                                           9   settlement, Plaintiff attempts to force Ancillary Defendants to travel from Florida to
                                                                          10   California to defend themselves, even though Plaintiff has no personal knowledge of
                                                                          11   the contracts or their performance, and relies on speculations rather than facts to state
STANBURY FISHELMAN & WISNER, INC.




                                                                          12   his claims. As a jewelers loupe exposes impurities in a stone, a careful look at the
                                    9200 SUNSET BOULEVARD, PENTHOUSE 30




                                                                          13   Kremen v. Cohen action in comparison to this “ancillary” action, reveals that proper
                                       WEST HOLLYWOOD, CA 90069-3601




                                                                          14   jurisdiction does not exist and the First Amended Ancillary Complaint (“FAAC”)
                                                                          15   should be dismissed.
                                                                          16
                                                                          17       II.       THIS COURT DOES NOT HAVE JURISDICTION, ANCILLARY OR
                                                                          18                                             OTHERWISE.
                                                                          19          A. Ancillary Jurisdiction Has Been Subsumed By Supplemental Jurisdiction.
                                                                          20          “Ancillary” and “pendant” jurisdiction are now codified as “supplemental
                                                                          21   jurisdiction” which extends to claims brought by defendants as well as claims
                                                                          22   brought by any properly joined third parties. 28 U.S.C. § 1367(a); Danner v.
                                                                          23   Himmelfarb, 858 F.2d 515, 522 (9th Cir. 1988), cert. denied, 490 U.S. 1067 (1989).
                                                                          24             “‟Ancillary jurisdiction‟ refers to claims by the defendant or third parties in
                                                                          25   either diversity or federal question cases. „Pendent jurisdiction‟ refers to related,
                                                                          26   nonfederal claims asserted by the original plaintiff against the original defendant or
                                                                          27   new parties in federal question cases. See W. Schwarzer, A. Tashima, & J. Wagstaffe,
                                                                          28   California Practice Guide: Federal Civil Procedure Before Trial, para. 2:510 at 2C-51


                                                                                                                               10

                                                                               Case No.: C 98 20718 JW (PVT)           ANCILLARY DEFENDANTS’ MOTIONS TO DISMISS, ETC.
                                                                                                                       RE FIRST AMENDED ANCILLARY COMPLAINT
                                                                                                                                              CHAMBER’S COPY

                                                                           1   (1989).” F.D.I.C. v. Loube, 134 F.R.D. 270, 274, fn. 2 (N.D.Cal. 1991) (emphasis in
                                                                           2   original). Here, ancillary jurisdiction is not proper because the claim is not being
                                                                           3   made by a defendant or a third-party. Likewise, pendent jurisdiction is not proper
                                                                           4   since the claim is not being asserted by the original plaintiff in connection with the
                                                                           5   original complaint. Mr. Kremen, by naming himself an ancillary plaintiff,
                                                                           6   underscores the fact that this claim could only have been brought as part of the
                                                                           7   original action (Kremen v. Cohen), whether at the start or through amendment.
                                                                           8   Because his claim has been litigated to a conclusion, Mr. Kremen is not entitled to file
                                                                           9   pendent issues, and he is not, nor was he ever, entitled to file ancillary actions.
                                                                          10
                                                                          11          B. Diversity Jurisdiction Is Not Present.
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                                                                          12          The FAAC alleges, in part, that: (1) Kremen resides in California, (2) the
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                                                                          13   Kremen v. Cohen complaint is “incorporated” by reference, (3) Defendants reside or
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                                                                          14   are incorporated in Florida, and (4) the court has “supplemental” and “diversity”
                                                                          15   jurisdiction by virtue of the Judgment in Kremen v. Cohen. [FAAC ¶¶ 2-5]. Under
                                                                          16   these alleged facts, there is currently no diversity because at the time of the filing of
                                                                          17   the FAAC, Stephen M. Cohen was a U.S. citizen who permanently lived in Tijuana,
                                                                          18   Baja California. As a result, Mr. Cohen is not an alien for purposes of 28 U.S.C. §
                                                                          19   1332(a)(2) and he is “stateless” for purposes of § 1332(a)(3). Mr. Cohen‟s “stateless”
                                                                          20   status destroys complete diversity. Newman-Green, Inc. v. Alfonzo-Larrain et al., 490
                                                                          21   U.S. 826 (1989).
                                                                          22
                                                                          23          C. Plaintiff’s Claims Are Not Properly Supplemental Claims.
                                                                          24          “Supplemental jurisdiction must be exercised in the same action that furnishes
                                                                          25   the basis for exercise of supplemental jurisdiction.” Ortolf v. Silver Bar Mines, 111
                                                                          26   F.3d 85, 86 (9th Cir. 1997) (emphasis added). The power of federal courts to exercise
                                                                          27   supplemental jurisdiction extends only to “all other claims that are so related to
                                                                          28   claims in the action” when a district court has original jurisdiction “in any civil


                                                                                                                           11

                                                                               Case No.: C 98 20718 JW (PVT)     ANCILLARY DEFENDANTS’ MOTIONS TO DISMISS, ETC.
                                                                                                                 RE FIRST AMENDED ANCILLARY COMPLAINT
                                                                                                                                               CHAMBER’S COPY

                                                                           1   action.” 28 U.S.C. § 1367(a). But, the phrases “in any civil action” and “in the action”
                                                                           2   require supplemental jurisdiction to be exercised in the same case, not a separate or
                                                                           3   subsequent case. Ortolf, supra, at 86-87. “In a subsequent lawsuit involving claims
                                                                           4   with no independent basis for jurisdiction, a federal court lacks the threshold
                                                                           5   jurisdictional power that exists when ancillary claims are asserted in the same
                                                                           6   proceeding as the claims conferring federal jurisdiction.” Peacock v. Thomas, 516 U.S.
                                                                           7   349, 355 (1996); Ortolf, supra, at 87. 1 In this matter, the independent basis for federal
                                                                           8   jurisdiction is lacking, and Plaintiff‟s Ancillary Complaint must be dismissed.
                                                                           9
                                                                          10                 1. Ancillary jurisdiction does not exist here.
                                                                          11          “Ancillary jurisdiction rests on the premise that a federal court acquires
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                                                                          12   jurisdiction of a case or controversy in its entirety.” Jenkins v. Weinshienk, 670 F.2d
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                                                                          13   915, 918 (10th Cir. 1982), cited by Curry v. Del Priore, 941 F.2d 730, 731 (9th Cir. 1991).
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                                                                          14   “Ancillary jurisdiction permits courts to adjudicate matters that arise during the
                                                                          15   course of an action and affect the court‟s ability to either render an efficacious
                                                                          16   judgment or to control the litigation before it.” Curry, supra. In this case, the
                                                                          17   litigation of the complaint ended with the filing of the Judgment on or about April 3,
                                                                          18   2001. The instant ancillary complaint now before this Court was filed on October 1,
                                                                          19   2001. Since the original complaint was resolved prior to the filing of the instant
                                                                          20   action, Plaintiff is barred from proceeding on an ancillary jurisdiction theory.
                                                                          21          An illustration of this principle is found in cases concerning the award of
                                                                          22   attorneys‟ fees. These claims have been held to be ancillary proceedings, see United
                                                                          23   States v. Ford, 650 F.2d 1141, 1143-44 (9th Cir. 1981), cert denied, 455 U.S. 942 (1982);
                                                                          24   Valerio v. Boise Cascade Corp., 645 F.2d 699, 700 (9th Cir. 1981) (per curiam), cert denied,
                                                                          25   454 U.S. 1126 (1981), but not when brought post-judgment as a separate action
                                                                          26
                                                                               1 For example, in concluded litigation, the enforcement of a settlement agreement is
                                                                          27   inadequate to confer ancillary jurisdiction upon the original federal court when the
                                                                               court‟s order does not explicitly state that the court will retain jurisdiction to
                                                                          28   supervise the settlement. Ortolf, supra, at 87.

                                                                                                                            12

                                                                               Case No.: C 98 20718 JW (PVT)      ANCILLARY DEFENDANTS’ MOTIONS TO DISMISS, ETC.
                                                                                                                  RE FIRST AMENDED ANCILLARY COMPLAINT
                                                                                                                                                CHAMBER’S COPY

                                                                           1   against different defendants, Sederquist v. Court, 861 F.2d 554, 558 (9th Cir. 1988). In
                                                                           2   Sederquist, attorneys sought to bring an action for attorneys‟ fees after the conclusion
                                                                           3   of the underlying litigation. The Ninth Circuit held that ancillary jurisdiction did not
                                                                           4   attach from the prior action. Ibid., citing Redding Ford v. California State Bd. of
                                                                           5   Equalization, 722 F.2d 496, 498 (9th Cir. 1983), cert denied, 469 U.S. 817 (1984). 2
                                                                           6          A comparison of cases in which ancillary jurisdiction was upheld, with cases in
                                                                           7   which it was rejected clarifies the fact that this Court lacks ancillary jurisdiction over
                                                                           8   Mr. Kremen‟s “Ancillary Complaint.” In Burke v. Ernest W. Hahn, Inc., 592 F.2d 542
                                                                           9   (9th Cir. 1979), ancillary jurisdiction was upheld by the court, stating:
                                                                          10                 We have stated that where, as here, jurisdiction over a third-party
                                                                          11          claim is in question, the proper inquiry is whether ancillary jurisdiction
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                                                                          12          exists, that is, whether “the claims arise out of the subject matter of the
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                                                                          13          original action and involve the same persons and issues . . . or if they
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                                                                          14          (arise) out of the same „transaction or occurrence.‟” (Citation.) Hahn‟s
                                                                          15          third-party complaint alleged that “if plaintiffs are entitled to any
                                                                          16          recovery as against the defendant, then defendant in turn is entitled to
                                                                          17          have recovery over and against third-party defendants to the extent of
                                                                          18          defendant‟s contributions to third-party defendants‟ for Travers‟ work
                                                                          19          during the period in question.”
                                                                          20                 Hahn‟s theory of recovery from the carpenters‟ trustees is based
                                                                          21          upon Hahn‟s possible liability to the engineers‟ trustees. Hahn‟s third-
                                                                          22          party complaint seeks recovery of payments made for the same work
                                                                          23          that forms the basis for the engineers‟ trustees‟ complaint in the event
                                                                          24          that the engineers‟ trustees are successful. We think ancillary
                                                                          25          jurisdiction exists in this case.
                                                                          26
                                                                          27
                                                                               2See also, Berry v. McLemore, 795 F.2d 452, 455-56 (5th Cir. 1986) (ancillary jurisdiction
                                                                               did not extend to subsequent garnishment proceeding brought to collect judgment
                                                                          28   entered in federal court).


                                                                                                                            13

                                                                               Case No.: C 98 20718 JW (PVT)      ANCILLARY DEFENDANTS’ MOTIONS TO DISMISS, ETC.
                                                                                                                  RE FIRST AMENDED ANCILLARY COMPLAINT
                                                                                                                                              CHAMBER’S COPY

                                                                           1   Burke, supra, at 545-546. The distinctions between Burke and the instant matter are
                                                                           2   palpable: (1) in Burke, the defendant filed a third-party complaint, whereas here the
                                                                           3   plaintiff is trying to do so post-judgment; (2) in Burke, the ancillary complaint
                                                                           4   concerned the very same transaction that was the basis of the original complaint,
                                                                           5   whereas here the ancillary complaint attempts to draw in a completely different
                                                                           6   transaction that is unrelated to the complaint, which concerned the ownership of the
                                                                           7   sex.com website. The only relationship of the ancillary complaint to the original
                                                                           8   complaint is the fact that Mr. Kremen is the named plaintiff in both actions. The
                                                                           9   ownership of the sex.com website was concluded prior to the filing of this action and
                                                                          10   even theoretical ancillary jurisdiction over this breach of contract action terminated
                                                                          11   with the entry of that Judgment. Further, a breach of contract action could have been
STANBURY FISHELMAN & WISNER, INC.




                                                                          12   brought regardless of the outcome of the original complaint, making this matter
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                                                                          13   entirely severable and unrelated thereto. 3
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                                                                          14          Contrasting with Burke are the facts of Payne v. United Pacific Ins. Co., 472 F.2d
                                                                          15   792 (9th Cir. 1973). Describing the procedural milieu of Payne, the court said:
                                                                          16          Payne‟s original claim was within federal jurisdiction because it arose
                                                                          17          under a federal statute. But the third-party claim was neither based on a
                                                                          18          federal statute nor asserted between citizens of different states.
                                                                          19          Independently considered, it was not within federal jurisdiction.
                                                                          20          However, the district court ruled that the third-party claim was
                                                                          21          “ancillary” to the original action and so no further jurisdictional basis
                                                                          22          was required to support it. The correctness of that ruling is the main
                                                                          23          issue on this appeal.
                                                                          24   Id, at 793. The court then held dismissal for lack of jurisdiction was proper:
                                                                          25
                                                                          26
                                                                               3In other words, Cohen could have asserted these claims (incomprehensible though
                                                                               they may be) either before or during the Kremen v. Cohen action. Which also
                                                                          27   underscores why ancillary jurisdiction is a misnomer here: Cohen, as the Defendant,
                                                                               could have asserted claims against Jordan Levinson and AIS America, Inc., effectively
                                                                          28   seeking indemnity from them, had he believed that he was owed money by them.


                                                                                                                             14

                                                                               Case No.: C 98 20718 JW (PVT)     ANCILLARY DEFENDANTS’ MOTIONS TO DISMISS, ETC.
                                                                                                                 RE FIRST AMENDED ANCILLARY COMPLAINT
                                                                                                                                              CHAMBER’S COPY

                                                                           1          Decisions discussing the concept of ancillary jurisdiction have applied a
                                                                           2          number of tests in delineating the concept. This court has stated that
                                                                           3          ancillary means auxiliary, accessorial or subordinate, and that third-
                                                                           4          party claims are ancillary if the claims arise out of the subject matter of
                                                                           5          the original action and involve the same persons or issues, or if they
                                                                           6          arose out of the same “transaction or occurrence.”
                                                                           7   Payne, supra, at 794 (citations omitted).
                                                                           8          Under these tests the district court properly asserted jurisdiction over
                                                                           9          United‟s claim for indemnification as to Payne‟s claim. Both claims
                                                                          10          involved the same core of facts and both arose out of the same
                                                                          11          transaction. United‟s claim only sought a transference of its liability to
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                                                                          12          Payne.
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                                                                          13   Ibid. The court concluded its analysis, stating:
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                                                                          14          Payne‟s claim was for work done on the Mona Project, United‟s third-
                                                                          15          party claim was based on an indemnity agreement and damages arising
                                                                          16          from four separate bonds covering two projects (on one of which Payne
                                                                          17          never worked). The third-party claim, seventy-two times greater than
                                                                          18          Payne‟s, cannot without much straining be described as auxiliary or
                                                                          19          subordinate. Rather than simplifying the issues and avoiding a
                                                                          20          duplication of the evidence, the third-party claim complicated and
                                                                          21          prolonged the original suit. Regardless of the success or failure of
                                                                          22          Payne‟s suit, United‟s claim against Discount and the Noreliuses would
                                                                          23          persist entirely independently. The fact that the third-party claim arose
                                                                          24          from the same general background does not suffice as a nexus.”
                                                                          25   Ibid. (emphasis added). As in Payne, any claims arising between Cohen and the
                                                                          26   Ancillary Defendants here would persist independently from the outcome of the
                                                                          27   Kremen v. Cohen matter. Plaintiff‟s complaint complicates and prolongs the original
                                                                          28   suit, asserts claims that are entirely independent of the underlying action, involves


                                                                                                                           15

                                                                               Case No.: C 98 20718 JW (PVT)     ANCILLARY DEFENDANTS’ MOTIONS TO DISMISS, ETC.
                                                                                                                 RE FIRST AMENDED ANCILLARY COMPLAINT
                                                                                                                                                CHAMBER’S COPY

                                                                           1   different facts and parties, arises out of different transactions, and, with asserted
                                                                           2   damages of $771,000.00, allegations of RICO violations requiring treble damages, and
                                                                           3   other requests for punitive damages, is hardly “auxiliary or subordinate.” This Court
                                                                           4   lacks ancillary jurisdiction over Plaintiff‟s claims and must dismiss this action,
                                                                           5   pursuant to FED. R ULE CIV. PROC. 12(b)(1).
                                                                           6
                                                                           7                  2. Pendant jurisdiction does not exist here.
                                                                           8            “Federal courts are empowered by the Constitution to hear pendent state
                                                                           9   claims if „the state and federal claims . . . derive from a common nucleus of operative
                                                                          10   fact.‟” Notrica v. Board of Supervisor, 925 F.2d 1211, 1215 (9th Cir. 1991), citing United
                                                                          11   Mine Workers of America v. Gibbs, 383 U.S. 715, 725 (1966) (“Gibbs”). “However, this
STANBURY FISHELMAN & WISNER, INC.




                                                                          12   power should be exercised in a discretionary fashion, limited by „considerations of
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                                                                          13   judicial economy, convenience and fairness to litigants.‟” Notrica, supra, at 1215,
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                                                                          14   citing Gibbs, supra, at 726.
                                                                          15            The practice in the Ninth circuit is to dismiss the pendant state law claims if all
                                                                          16   the federal claims are dismissed before trial. Danner v. Himmelfarb, 858 F.2d 515, 523
                                                                          17   (9th Cir. 1988), cert. denied, 490 U.S. 1067 (1989). Delay occasioned by re-filing in state
                                                                          18   court has been rejected as an argument against dismissal of pendant claims:
                                                                          19            The delay involved in re-filing in state court does not constitute a
                                                                          20            sufficient basis for finding that the district court abused its discretion in
                                                                          21            dismissing state law counterclaims despite the argument that “the
                                                                          22            counterclaims have been pending in district court for six years and the
                                                                          23            court is familiar with the claims.” This is because California law
                                                                          24            equitably tolls the statute of limitations during the time a suit is pending
                                                                          25            in federal court.
                                                                          26   Columbia Pictures Ind., Inc. v. Prof. Real Estate Inv., Inc., 944 F.2d 1525, 1533 (9th Cir.
                                                                          27   1991).
                                                                          28            Precisely applicable to this action, one Northern District Court, discussing its


                                                                                                                              16

                                                                               Case No.: C 98 20718 JW (PVT)       ANCILLARY DEFENDANTS’ MOTIONS TO DISMISS, ETC.
                                                                                                                   RE FIRST AMENDED ANCILLARY COMPLAINT
                                                                                                                                              CHAMBER’S COPY

                                                                           1   dismissal of pendant claims, said:
                                                                           2          In the instant case, dismissal of the pendent claims is appropriate. The
                                                                           3          case is still quite young – it was filed approximately one year ago. Even
                                                                           4          in cases where the federal court exercised jurisdiction over the state
                                                                           5          claims for a much longer period than we have here, dismissal of pendent
                                                                           6          claims has been found proper.
                                                                           7   Gray v. First Winthrop Corp., 776 F. Supp. 504, 509 (N.D. Cal. 1991). And that court
                                                                           8   went on to observe:
                                                                           9          Furthermore, the state claims here involve undecided issues of state law
                                                                          10          that are better left to the state courts to decide. For example, Cali fornia
                                                                          11          law is unsettled as to the duties of an independent accountant to third
STANBURY FISHELMAN & WISNER, INC.




                                                                          12          parties such as the plaintiff. Where the pendent claims embrace
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                                                                          13          unsettled questions of state law, the proper exercise of discretion is
                                       WEST HOLLYWOOD, CA 90069-3601




                                                                          14          dismissal of the pendent law claims.
                                                                          15   Ibid. (citations omitted). Here, the questions of the duty of the ancillary defendants to
                                                                          16   the ancillary plaintiff, if any, are unsettled questions of state law. Even the extent of
                                                                          17   the duties of ancillary defendants to Mr. Cohen and his entities is an issue i n this case
                                                                          18   that involves unsettled state law. These determinations will turn on evidence and
                                                                          19   issues not before this court in the original action and are best litigated in state court.
                                                                          20
                                                                          21          D. By Filing An “Ancillary” Claim, Plaintiff Has Not Properly Invoked
                                                                          22          Either Diversity Or Federal Question Jurisdiction Before This Court.
                                                                          23          Federal courts are empowered to adjudicate only those cases which the
                                                                          24   Constitution and Congress authorize them to adjudicate. U.S. C ONST . art. III, § 2;
                                                                          25   Kokkonen v. Guardian Life Ins. Co. of America, 511 U.S. 375 (1994); Finley v. United States,
                                                                          26   490 U.S. 545 (1989). Federal courts are presumptively without jurisdiction over civil
                                                                          27   actions and the burden on establishing the contrary rests upon the party asserting
                                                                          28   jurisdiction. Kokkonen, supra, 511 U.S. at 377. Challenges to subject matter


                                                                                                                           17

                                                                               Case No.: C 98 20718 JW (PVT)     ANCILLARY DEFENDANTS’ MOTIONS TO DISMISS, ETC.
                                                                                                                 RE FIRST AMENDED ANCILLARY COMPLAINT
                                                                                                                                              CHAMBER’S COPY

                                                                           1   jurisdiction are never waived. Further, parties to a federal civil action cannot create
                                                                           2   subject matter jurisdiction where none exists; if diversity is absent, stipulations will
                                                                           3   not create jurisdiction. Bender v. Williamsport Area School Dist., 475 U.S. 534, 541
                                                                           4   (1986). And failure to challenge jurisdiction does not act as an estoppel. Hajek v.
                                                                           5   Burlington Northern R.R. Co., 186 F.3d 1105, 1108 (9th Cir. 1999).
                                                                           6
                                                                           7                 1. The Absence Of Proper Supplemental Jurisdiction Defeats All
                                                                           8                 Other Jurisdictional Bases.
                                                                           9          While Plaintiff alleges that this Court has both Diversity and Federal Question
                                                                          10   jurisdiction over this matter, FAAC at ¶ 5, Plaintiff‟s FAAC on its face reveals that
                                                                          11   such jurisdiction was not properly invoked. Plaintiff‟s action was filed with this
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                                                                          12   Court on the theory that Plaintiff‟s action is “ancillary” to the Kremen v. Cohen action.
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                                                                          13   However, Plaintiff‟s claims are not properly the subject of supplemental
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                                                                          14   (encompassing ancillary) jurisdiction. See discussion supra Part II.C. Since Plaintiff
                                                                          15   has not properly filed this action before this Court, Diversity and Federal Question
                                                                          16   jurisdiction are both absent. To invoke such jurisdiction of this district‟s federal
                                                                          17   courts, if any there is, Plaintiff must file a new complaint with the clerk‟s office,
                                                                          18   accepting such judicial assignment as the clerk‟s office regularly provides.
                                                                          19
                                                                          20                 2. Cohen’s “Stateless” Status Destroys Diversity.
                                                                          21          Further, Plaintiff cannot assert diversity jurisdiction because Cohen is not a
                                                                          22   resident of any state for diversity purposes. See, PLAINTIFF‟S FOURTH AMENDED
                                                                          23   COMPLAINT, Kremen v. Cohen, at ¶ 2; Newman-Green, Inc. v. Alfonzo-Larrain, 490 U.S.
                                                                          24   826, 828 (1989); Brady v. Brown, 51 F.3d 810, 815 (9th Cir. 1995) (a resident of another
                                                                          25   country is a “stateless” individual for diversity purposes). Plaintiff‟s FAAC alleges,
                                                                          26   at paragraph 5, that Plaintiff proceeds on the basis of a September 17, 2001 Order of
                                                                          27   this Court purportedly permitting Plaintiff to pursue assets held in constructive trust
                                                                          28


                                                                                                                           18

                                                                               Case No.: C 98 20718 JW (PVT)     ANCILLARY DEFENDANTS’ MOTIONS TO DISMISS, ETC.
                                                                                                                 RE FIRST AMENDED ANCILLARY COMPLAINT
                                                                                                                                               CHAMBER’S COPY

                                                                           1   by Cohen.4 Because Plaintiff proceeds only to the extent that Cohen can assert
                                                                           2   ownership of an asset, Plaintiff‟s claim of diversity jurisdiction is fatally flawed
                                                                           3   because Cohen‟s claim of diversity would be fatally flawed. Cohen is a “stateless”
                                                                           4   person for diversity purposes. It would be erroneous to grant Kremen a
                                                                           5   jurisdictional reach greater than that held by Cohen were he to proceed with claims
                                                                           6   against Ancillary Defendants. The jurisdiction of federal courts is limited; if Cohen
                                                                           7   cannot invoke diversity jurisdiction for himself, a proxy (Kremen) cannot do so.
                                                                           8
                                                                           9                 3. “Doe” Defendants Defeat Diversity.
                                                                          10          The Ninth Circuit and the Northern District have determined that Doe
                                                                          11   defendants are improper when seeking to invoke diversity jurisdiction. Fifty
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                                                                          12   Associates v. Prudential Ins. Co. of America, 446 F. 2d 1187 (9th Cir. 1970); Garter-Bare
                                    9200 SUNSET BOULEVARD, PENTHOUSE 30




                                                                          13   Co. v. Munsingwear, Inc., 650 F.2d 975, 981 (9th Cir. 1980); CTS Printex, Inc. v. American
                                       WEST HOLLYWOOD, CA 90069-3601




                                                                          14   Motorists Ins Co., 639 F.Supp. 1272, 1277 (N.D.Cal. 1986).5 Because the identity and
                                                                          15   citizenship of all defendants must be determined at commencement of the action, a
                                                                          16
                                                                          17   4Ancillary Defendants are unaware of a September 17, 2001 Order of this Court. No
                                                                               such Order was attached to the FAAC.
                                                                          18   5In 1988, 28 U.S.C. § 1441(a) was amended to insert the following: “For purposes of
                                                                          19   removal under this chapter, the citizenship of defendants sued under fictitious names
                                                                               shall be disregarded.” Thus, in the limited instance of removal jurisdiction only, the
                                                                          20   Ninth Circuit‟s bright-line rule that Doe defendants destroy diversity jurisdiction was
                                                                               overruled. See, Bryant v. Ford Motor Co., 832 F. 2d 1080, *10 (9th Cir. 1987), which
                                                                          21   said, “We now hold that the presence of Doe defendants under California Doe
                                                                               defendant law destroys diversity . . . . We overrule all of our cases creating
                                                                          22   exceptions to this general rule.” And the commentary on the 1988 revisions
                                                                               contained in the annotated text states, in pertinent part:
                                                                          23
                                                                                      “Plaintiff controls the decision of whom to join as defendants, and when
                                                                          24          depending on diversity must show that it exists. If, because of unknown
                                                                                      defendants designated fictitiously and with citizenships equally
                                                                          25          unknown, the plaintiff can‟t satisfy the diversity showing, the plaintiff
                                                                                      fails the test and there is nothing in the 1988 amendment to change the
                                                                          26          result.”

                                                                          27   28 U.S.C.A. § 1441, DAVID D. SIEGEL, Commentary on 1988 and 1990 Revisions of Section
                                                                               1441. To the extent that jurisdiction over Plaintiff Kremen‟s claims depends upon
                                                                          28   diversity, Plaintiff cannot show that diversity exists.


                                                                                                                            19

                                                                               Case No.: C 98 20718 JW (PVT)      ANCILLARY DEFENDANTS’ MOTIONS TO DISMISS, ETC.
                                                                                                                  RE FIRST AMENDED ANCILLARY COMPLAINT
                                                                                                                                              CHAMBER’S COPY

                                                                           1   Doe defendant is inconsistent with such an obligation in diversity-based actions.
                                                                           2   Here, Plaintiff alleges ROES 1 through 1000 are also responsible for harm to Plaintiff.
                                                                           3   FAAC, at ¶ 1. This allegation defeats any claim of diversity.
                                                                           4
                                                                           5          E. Cohen Is An Indispensable Party Subject To Compulsory Joinder.
                                                                           6          FED. R. CIV. P. 19 governs instances in which a person must be joined as a party
                                                                           7   to an action. Under Rule 19, three questions are considered when analyzing
                                                                           8   compulsory joinder: (1) the reason for joinder, FED. R. CIV. P. 19(a); (2) the feasibility
                                                                           9   of joinder, FED. R. CIV. P. 19(a); and, (3) the fairness of proceeding without joinder.
                                                                          10
                                                                          11                 1. As An Alleged RICO Co-Conspirator, Good Reason Exists For
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                                                                          12                 Joinder.
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                                                                          13          Plaintiff has alleged that Ancillary Defendants conspired with Cohen to
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                                                                          14   defraud Plaintiff and enrich themselves at his expense. See, e.g., FAAC 36-42, 44; see
                                                                          15   also, PLAINTIFF‟S FOURTH AMENDED COMPLAINT, Kremen v. Cohen, at ¶¶ 22-26,
                                                                          16   incorporated into FAAC, at ¶ 2, then incorporated in the RICO Cause of Action at ¶
                                                                          17   32. Because Cohen and the Ancillary Defendants are inseparably intertwined by
                                                                          18   Plaintiff‟s allegations, good reason exists to join Cohen in the RICO Cause of Action.
                                                                          19
                                                                          20                 2. Joinder Of Cohen Is Not Feasible Under Present Circumstances.
                                                                          21          It is alleged by Plaintiff that Cohen is a resident of Mexico. See, FAAC, at ¶ 2,
                                                                          22   incorporating PLAINTIFF‟S FOURTH AMENDED COMPLAINT, Kremen v. Cohen, at ¶ 2.
                                                                          23   Further, Ancillary Defendants‟ counsel was informed by Plaintiff‟s counsel that Mr.
                                                                          24   Cohen is restricted in his travels. Based thereon, joinder does not appear feasible.
                                                                          25
                                                                          26                 3. As An Indispensable Party, “In Equity And Good Conscience” It
                                                                          27                 Would Be Unfair To Proceed Without Cohen.
                                                                          28          Where it is not feasible to join an absent party, if “in equity and good


                                                                                                                           20

                                                                               Case No.: C 98 20718 JW (PVT)     ANCILLARY DEFENDANTS’ MOTIONS TO DISMISS, ETC.
                                                                                                                 RE FIRST AMENDED ANCILLARY COMPLAINT
                                                                                                                                              CHAMBER’S COPY

                                                                           1   conscience” the action cannot proceed in the absence of that party, or must be
                                                                           2   dismissed, the absent party is “thus regarded as indispensable.” FED. R. CIV. P. 19(b).
                                                                           3   Cohen has been identified as the central figure in a RICO conspiracy. His presence is
                                                                           4   wholly essential to the full and adequate litigation of those allegations. 6 And Plaintiff
                                                                           5   has the available remedy that, to the extent Plaintiff can state any legitimate RICO
                                                                           6   claim, he may do so in state court.
                                                                           7
                                                                           8       III.   ANCILLARY PLAINTIFF’S CLAIMS ARE LEGALLY INSUFFICIENT AND
                                                                           9                                    SHOULD BE DISMISSED
                                                                          10              The purpose of Rule 12 Motions is to eliminate unnecessary pleadings so as to
                                                                          11   efficiently streamline the pending litigation. FED. RULE CIV. PROC . 12(b)(6) permits
STANBURY FISHELMAN & WISNER, INC.




                                                                          12   dismissal of claims when it is established beyond doubt that plaintiff cannot prove
                                    9200 SUNSET BOULEVARD, PENTHOUSE 30




                                                                          13   any set of facts consistent with allegations that would entitle such plaintiff to relief.
                                       WEST HOLLYWOOD, CA 90069-3601




                                                                          14   Collins v. Nagle, 892 F.2d 489 (6th Cir. 1989).
                                                                          15              In ruling on Ancillary Defendants‟ Motion to Dismiss, this Court may properly
                                                                          16   consider matters that may be judicially noticed by this Court. Mullis v. United States
                                                                          17   Bank, 828 F.2d 1385, 1388 (9th Cir. 1987). For example, this Court may properly
                                                                          18   consider matters of public record, including other pleadings on file in the instant and
                                                                          19   related actions. Mack v. South Bay Beer Distributors, Inc., 798 F.2d 1279, 1282 (9th Cir.
                                                                          20   1986). Under the holding in Mullis, this Court may consider the evidentiary materials
                                                                          21   developed in the Kremen v. Cohen matter to which Plaintiff attempts an improper
                                                                          22   linkage. Because no set of facts exists that would entitle Plaintiff to relief, the FAAC
                                                                          23   should be dismissed pursuant to FED. R ULE CIV. PROC. 12(b)(6).
                                                                          24
                                                                          25
                                                                          26
                                                                               6As set forth, infra, at III.B.1, Plaintiff is barred from asserting a RICO claim against
                                                                               Cohen for failure to assert that claim in the prior proceedings against Cohen. In other
                                                                          27   words, the theoretical claim, as alleged, requires Cohen as an indispensable party, but
                                                                               the RICO claim must then be dismissed under the claim preclusion doctrine as well
                                                                          28   as for the many technical defects in Plaintiff‟s RICO pleading.


                                                                                                                             21

                                                                               Case No.: C 98 20718 JW (PVT)       ANCILLARY DEFENDANTS’ MOTIONS TO DISMISS, ETC.
                                                                                                                   RE FIRST AMENDED ANCILLARY COMPLAINT
                                                                                                                                                CHAMBER’S COPY

                                                                           1          A. Plaintiff Does Not Have Standing.
                                                                           2          This Court has granted Plaintiff the right “to pursue all legally authorized
                                                                           3   collection and enforcement activities” against Mr. Cohen and his companies. ORDER
                                                                           4   MODIFYING, at 1:24-26. Presumably, this right was granted to protect and aid Mr.
                                                                           5   Kremen in the collection of his federal judgment against Mr. Cohen. However, the
                                                                           6   right to collect and to enforce his judgment does not confer unfettered ancillary
                                                                           7   jurisdiction. As stated by our Supreme Court in Peacock v. Thomas, 516 U.S. 349
                                                                           8   (1996), “We have never authorized the exercise of ancillary jurisdiction in a
                                                                           9   subsequent lawsuit to impose an obligation to pay an existing federal judgment on a
                                                                          10   person not already liable for the judgment.” Id., at 357. Plaintiff asserts jurisdiction
                                                                          11   based upon the allegation that “Defendant Cohen is subject to and has already
STANBURY FISHELMAN & WISNER, INC.




                                                                          12   submitted to the jurisdiction of this Court”. FAAC ¶ 6. But Plaintiff‟s claims in this
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                                                                          13   FAAC involve radically new theories of liability that did not exist in the original
                                       WEST HOLLYWOOD, CA 90069-3601




                                                                          14   complaint made against Ancillary Defendants who were not parties to the original
                                                                          15   lawsuit and who are not now liable for any portion of Mr. Kremen‟s Judgment.
                                                                          16
                                                                          17          B. Plaintiff Fails To State A Claim Under Any Section Of RICO.
                                                                          18
                                                                          19                 1. Plaintiff’s Own Allegations Defeat The Essential “Intent” Element
                                                                          20                 Necessary To Each Predicate Act.
                                                                          21          In Plaintiff‟s RICO claim, Plaintiff alleges that “Levinson and AIS and ROES 1 -
                                                                          22   100 acted recklessly, or with reckless indifference as to the truth of the allegations of the
                                                                          23   primary wrongdoing.” FAAC, at ¶ 41 (emphasis added). This allegation alone
                                                                          24   undermines Plaintiff‟s entire RICO claim. Reckless indifference is insufficient to
                                                                          25   establish specific intent to defraud. Further, allegations of specific intent must be
                                                                          26   alleged with respect to each predicate offense. See, e.g., Blake v. Dierdorff, 856 F.2d
                                                                          27   1365, 1370 (9th Cir. 1988). Here, Plaintiff concedes that Ancillary Defendants were, at
                                                                          28   worst, oblivious to Kremen‟s rights. Lack of care does not rise to the level of a


                                                                                                                             22

                                                                               Case No.: C 98 20718 JW (PVT)      ANCILLARY DEFENDANTS’ MOTIONS TO DISMISS, ETC.
                                                                                                                  RE FIRST AMENDED ANCILLARY COMPLAINT
                                                                                                                                               CHAMBER’S COPY

                                                                           1   criminal predicate offense.
                                                                           2
                                                                           3                 2. Plaintiff Is Precluded From Asserting A Claim That Could Have
                                                                           4                 Been Brought In The Prior Proceeding.
                                                                           5          In the underlying action of Kremen v. Cohen, upon which Plaintiff now
                                                                           6   improperly rests his claim of Ancillary jurisdiction, Plaintiff asserted similar
                                                                           7   allegations against Cohen. In particular, Plaintiff alleged that “Kremen has been
                                                                           8   proximately damaged by loss of possession of the domain name, and has suffered
                                                                           9   economic damage, including but not limited to loss of rent, income or profits he
                                                                          10   would have earned if his possession had not been interfered with. . . .” See,
                                                                          11   PLAINTIFF‟S FOURTH A MENDED C OMPLAINT, Kremen v. Cohen, at ¶ 49. Comparing the
STANBURY FISHELMAN & WISNER, INC.




                                                                          12   underlying Fourth Amended Complaint with the instant FAAC, it is clear that
                                    9200 SUNSET BOULEVARD, PENTHOUSE 30




                                                                          13   Kremen could have asserted identical RICO allegations against Cohen and Ancillary
                                       WEST HOLLYWOOD, CA 90069-3601




                                                                          14   Defendants previously. Failure to assert all available claims when first actionable
                                                                          15   bars subsequent assertion. Frank v. United Airlines, Inc., 216 F.3d 845, 850 (9th Cir.
                                                                          16   2000); see also, Howard v. America Online, Inc., 208 F.3d 741, 748 (9th Cir. 2000), citing
                                                                          17   Pedrina v. Chun, 97 F.3d 1296, 1301 (9th Cir. 1996) (applying claim preclusion because
                                                                          18   predicate acts could have been raised in earlier state court action). Claim preclusion
                                                                          19   applies when there is (1) an identity of claims in two actions, (2) a final judgment on
                                                                          20   the merits in the first, and (3) identity or privity between the parties in both actions.
                                                                          21   “‟Claim preclusion‟ refers to the preclusive effect of a judgment in foreclosing
                                                                          22   relitigation of claims that were raised or should have been raised in earlier litigation . .
                                                                          23   . .” Frank, supra, at 850 (emphasis added). Here, claim preclusion bar‟s Plaintiff‟s
                                                                          24   attempt to relitigate stale claims that should have been brought in Kremen v. Cohen.
                                                                          25
                                                                          26                        a) Identity Of Claims.
                                                                          27          Plaintiff‟s claims against Ancillary Defendants include substantially identical
                                                                          28   allegations, and concern identical subject matter, as did Plaintiff‟s claims against


                                                                                                                            23

                                                                               Case No.: C 98 20718 JW (PVT)     ANCILLARY DEFENDANTS’ MOTIONS TO DISMISS, ETC.
                                                                                                                 RE FIRST AMENDED ANCILLARY COMPLAINT
                                                                                                                                              CHAMBER’S COPY

                                                                           1   Cohen in Kremen v. Cohen. Compare, PLAINTIFF‟S FOURTH AMENDED COMPLAINT,
                                                                           2   Kremen v. Cohen, with, FAAC.
                                                                           3
                                                                           4                        b) Final Judgment On The Merits.
                                                                           5          It is undisputed that Kremen v. Cohen resulted in the entry of a judgment on or
                                                                           6   about April 3, 2001. FAAC, at ¶ 15. 7
                                                                           7
                                                                           8                        c) Privity Between Necessary Parties.
                                                                           9          Plaintiff alleges that contracts existed between Ancillary Defendants and
                                                                          10   entities represented by Cohen and found to be alter-egos of Cohen. FAAC, at ¶ 7.
                                                                          11   Privity therefore exists between Cohen (or his alter-ego entities) and Ancillary
STANBURY FISHELMAN & WISNER, INC.




                                                                          12   Defendants. Plaintiff is precluded from relitigating claims against parties in privity
                                    9200 SUNSET BOULEVARD, PENTHOUSE 30




                                                                          13   with Cohen, in particular where those parties should have been joined in the
                                       WEST HOLLYWOOD, CA 90069-3601




                                                                          14   underlying action of Kremen v. Cohen.
                                                                          15
                                                                          16                 3. The Particularity Required Pursuant To Rule 9(B) Is Absent.
                                                                          17          Rule 9(b) of the Federal Rules of Civil Procedure requires that: “[T]he
                                                                          18   circumstances constituting fraud shall be stated with particularity . . . .” FED. R. CIV.
                                                                          19   P. 9(b). In applying Rule 9(b), the Ninth Circuit holds “that „Rule 9(b) requires
                                                                          20   particularized allegations of the circumstances constituting fraud.‟” Hockey v.
                                                                          21   Medhekar, 30 F. Supp. 2d 1209, 1213 (N.D.Cal. 1998), citing In re Glenfed, Inc. Securities
                                                                          22   Litigation, 42 F.3d 1541, 1547 (9th Cir. 1994). To avoid dismissal, a plaintiff must at
                                                                          23   least plead the “times, dates, places, benefits received, and other details of the alleged
                                                                          24   fraudulent activity.” Neubronner v. Milken, 6 F.2d 666, 672 (9th Cir. 1990); Wenger v.
                                                                          25
                                                                               7While Ancillary Defendants agree that a judgment was entered on or about that
                                                                          26   date, Ancillary Defendants do not concede that diversity jurisdiction existed over
                                                                               Cohen. To the extent that Cohen may have finally waived his right to challenge an
                                                                          27   improper basis for diversity jurisdiction, Ancillary Defendants herein have not
                                                                               waived their right to collaterally challenge the legitimacy of that judgment to the
                                                                          28   extent it impacts any party other than Cohen.

                                                                                                                           24

                                                                               Case No.: C 98 20718 JW (PVT)     ANCILLARY DEFENDANTS’ MOTIONS TO DISMISS, ETC.
                                                                                                                 RE FIRST AMENDED ANCILLARY COMPLAINT
                                                                                                                                               CHAMBER’S COPY

                                                                           1   Lumisys, Inc., 2 F.Supp.2d 1231, 1239 (N.D.Cal. 1998).
                                                                           2          Plaintiff‟s FAAC does not contain the specificity required by Rule 9(b). To
                                                                           3   begin with, the allegations are made upon information and belief which “usually do
                                                                           4   not satisfy the degree of particularity required under Rule 9(b).” Wool v. Tandem
                                                                           5   Computers Inc., 818 F.2d 1433, 1439 (9th Cir. 1987). Indeed, the complaint does not
                                                                           6   provide any factual basis for Plaintiff‟s stated information and belief. Significantly
                                                                           7   absent is any allegation that Plaintiff is a party to the contract, or participated in any
                                                                           8   of the duties, responsibilities or activities related to the contract.
                                                                           9          Even more disturbing are the conclusory allegations such as the existence of a
                                                                          10   “confidential relationship”, “reckless indifference [by Levinson] as to Cohen‟s
                                                                          11   motivation” and the perpetration of a “fraudulent concealment” when the FAAC
STANBURY FISHELMAN & WISNER, INC.




                                                                          12   alleges that the first contract between Cohen and Levinson was made on May 28,
                                    9200 SUNSET BOULEVARD, PENTHOUSE 30




                                                                          13   1996, more than two years before Kremen filed his complaint against Cohen. “Mere
                                       WEST HOLLYWOOD, CA 90069-3601




                                                                          14   conclusory allegations of fraud are insufficient.” United States v. Smithkline Beecham
                                                                          15   Clinical Labs., 245 F.3d 1048, 1052 (9th Cir. 2001), citing Moore v. Kayport Package
                                                                          16   Express, Inc., 885 F.2d 531, 540 (9th Cir. 1989). Insufficient facts are provided to show
                                                                          17   why a contract for “advertising services” becomes a confidential relationship.
                                                                          18          When alleging a fraudulent scheme, Rule 9(b) requires specific statements of
                                                                          19   the time, place and manner of commission, Wool, supra, citing Semegen v. Weidner, 780
                                                                          20   F.2d 727, 734-35 (9th Cir. 1985), or “a statement of the facts on which the belief is
                                                                          21   founded,” Wool, supra, at 1439, and “the misrepresentations themselves with
                                                                          22   particularity and, where possible, the roles of the individual defendants in the
                                                                          23   misrepresentations”, Moore, supra, citing Wool, supra, at 1439. Here, Plaintiff‟s FAAC
                                                                          24   is devoid of such requisite allegations. Plaintiff does not allege what information he
                                                                          25   obtained about the scheme, or when and from whom it was obtained. Plaintiff never
                                                                          26   addresses the specific conduct of Mr. Cohen, Mr. Levinson or AIS in the alleged
                                                                          27
                                                                          28


                                                                                                                            25

                                                                               Case No.: C 98 20718 JW (PVT)      ANCILLARY DEFENDANTS’ MOTIONS TO DISMISS, ETC.
                                                                                                                  RE FIRST AMENDED ANCILLARY COMPLAINT
                                                                                                                                               CHAMBER’S COPY

                                                                           1   misrepresentations. 8 In fact, Rule 9(b) mandates that Plaintiff‟s allegations provide
                                                                           2   sufficient information to allow Ancillary Defendants‟ to affirmatively defend against
                                                                           3   the charge, not just deny it. Wenger v. Lumisys, Inc., 2 F.Supp.2d 1231, 1239 (N.D.Cal.
                                                                           4   1998). As pleaded, the fraud claim is not sufficient under Rule 9(b). 9
                                                                           5
                                                                           6                 4. Plaintiff Has Failed To Properly Plead A Cause Of Action For
                                                                           7                 Violation Of 18 U.S.C. § 1962(c).
                                                                           8          Four elements are required to establish of a cause of action under 18 U.S.C. §
                                                                           9   1962(c). Those elements are the (1) conduct (2) of an enterprise (3) through a pattern
                                                                          10   (4) of racketeering activity. Sedima, S.P.R.L. v. Imrex Co., Inc., 473 U.S. 479, 496 (1985).
                                                                          11   And Moss v. Morgan Stanley, Inc., 719 F.2d 5, 17 (2nd Cir. 1983), cert.denied, 465 U.S.
STANBURY FISHELMAN & WISNER, INC.




                                                                          12   1025 (1984), sets forth an oft-quoted paraphrase of the elements of the RICO statute
                                    9200 SUNSET BOULEVARD, PENTHOUSE 30




                                                                          13   generally:
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                                                                          14          (1) that the defendant (2) through the commission of two or more acts (3)
                                                                          15          constituting a “pattern” (4) of “racketeering activity” (5) directly or
                                                                          16          indirectly invests in, or maintains an interest in, or participates in (6) an
                                                                          17          “enterprise” (7) the activities of which affect interstate or foreign
                                                                          18          commerce.
                                                                          19   1 A. MATHEWS, A. WEISSMAN, & J. STURC, CIVIL RICO LITIGATION , Chapter 1, at 15 n.21
                                                                          20   (2d ed. 1992). In the instant matter, Plaintiffs have failed to properly plead the
                                                                          21   elements of a RICO violation, and therefore the Fourth Cause of Action must be
                                                                          22   dismissed pursuant to FED. R. CIV. P. 12(b)(6).
                                                                          23
                                                                          24
                                                                               8The pleadings provide neither Mr. Levinson nor AIS with a clue as to the specific
                                                                          25   representations each purportedly made, who the misrepresentations were made to,
                                                                               whether they were relied on, etc.
                                                                          26
                                                                               9Aside from the failure to meet the particularity requirements set forth in Rule 9(b),
                                                                          27   Plaintiff‟s fraud allegations are also deficient under California law, which requires
                                                                               more than mere notice pleading for allegations of fraud. Tarmann v. State Farm Mut.
                                                                          28   Auto. Ins. Co., 2 Cal.App.4th 153, 157 (1991).

                                                                                                                            26

                                                                               Case No.: C 98 20718 JW (PVT)      ANCILLARY DEFENDANTS’ MOTIONS TO DISMISS, ETC.
                                                                                                                  RE FIRST AMENDED ANCILLARY COMPLAINT
                                                                                                                                               CHAMBER’S COPY

                                                                           1                        a) Plaintiff Has Failed To Allege A “Pattern” Of Activity.
                                                                           2          RICO requires a “pattern” of racketeering activity. The failure to plead one is
                                                                           3   fatal to a RICO claim. 18 U.S.C. § 1962(c); H.J. Inc. v. Northwestern Bell Telephone Co.,
                                                                           4   492 U.S. 229, 237 (1989). To allege a pattern of racketeering activity under RICO,
                                                                           5   Plaintiff must demonstrate that (1) the predicate acts are “related,” and (2) the
                                                                           6   predicate acts “amount to, or threaten the likelihood of, continued criminal activity.”
                                                                           7   H.J. Inc., supra, 492 U.S. at 229; accord, Wanetick v. Mel’s of Modesto, Inc., 811 F.Supp.
                                                                           8   1402, 1407 (N.D.Cal. 1992); see also, Howard v. America Online, Inc., 208 F.3d 741, 750
                                                                           9   (9th Cir. 2000) (“Demonstrating a pattern „requires the showing of a relationship
                                                                          10   between the predicates and of the threat of continuing activity.‟”) citing H.J. Inc.
                                                                          11          The threat of continued criminal activity identified by H.J. Inc. has come to be
STANBURY FISHELMAN & WISNER, INC.




                                                                          12   known as the “continuity” requirement under RICO. To satisfy the continuity
                                    9200 SUNSET BOULEVARD, PENTHOUSE 30




                                                                          13   requirement, Plaintiffs must prove either a series of related predicates extending over
                                       WEST HOLLYWOOD, CA 90069-3601




                                                                          14   a substantial period of time [i.e., “closed-ended continuity”], or past conduct that by
                                                                          15   its nature projects into the future with a threat of repetition [i.e., “open-ended
                                                                          16   continuity”]. Howard, supra, 208 F.3d at 750; citing H.J. Inc., supra, 492 U.S. at 241-42.
                                                                          17   In this case, Plaintiff cannot allege “open-ended continuity” and has not alleged
                                                                          18   “closed-ended continuity.”
                                                                          19
                                                                          20                               (1)    Plaintiff’s Allegations Do Not Establish “Open-
                                                                          21                               Ended Continuity”.
                                                                          22          At the outset, we note that Plaintiff makes no claim of past conduct that by its
                                                                          23   nature projects into the future. Plaintiff is in possession of “sex.com”, the ownership
                                                                          24   of which was restored to him by this Court. Plaintiff controls whatever advertising
                                                                          25   revenue he opts to and is able to collect from his commercial use of that domain.
                                                                          26   “Ancillary” Defendants have no continuing relationship with Plaintiff, nor with Mr.
                                                                          27   Cohen. Because Plaintiff cannot establish “open-ended continuity”, he must establish
                                                                          28   a “closed” series of misconduct that has sufficient relatedness, scope and duration to


                                                                                                                            27

                                                                               Case No.: C 98 20718 JW (PVT)      ANCILLARY DEFENDANTS’ MOTIONS TO DISMISS, ETC.
                                                                                                                  RE FIRST AMENDED ANCILLARY COMPLAINT
                                                                                                                                                CHAMBER’S COPY

                                                                           1   form a RICO pattern. As demonstrated infra, Plaintiff cannot make the requisite
                                                                           2   showing, and his RICO claims should be dismissed.
                                                                           3
                                                                           4                               (2)    “Where A Plaintiff Alleges A Single Scheme
                                                                           5                               Promulgated For The Purpose Of Defrauding A Single
                                                                           6                               Victim, Continuity Cannot Be Established.”10
                                                                           7          The Ninth Circuit precludes RICO actions that consist of a single event,
                                                                           8   episode or activity. See, e.g., Durning v. Citibank, Int’l, 990 F.2d 1133, 1139 (9th Cir.
                                                                           9   1993); Sever v. Alaska Pulp Corp., 978 F.2d 1529, 1533 (9th Cir. 1992); Medallion
                                                                          10   Television Enterprises v. SelecTV of California, Inc., 833 F.2d 1360, 1365 (9th Cir. 1987);
                                                                          11   and Schreiber Distrib. Co. v. Serv-Well Furniture Co., 806 F.2d 1393, 1398-99 (9th Cir.
STANBURY FISHELMAN & WISNER, INC.




                                                                          12   1986). Numerous predicate acts, if arising from a single, allegedly fraudulent event,
                                    9200 SUNSET BOULEVARD, PENTHOUSE 30




                                                                          13   do not form a pattern. Durning, supra, at 1139. Here, Plaintiff has alleged a single
                                       WEST HOLLYWOOD, CA 90069-3601




                                                                          14   episode, to wit, the exploitation of “sex.com” (FAAC, at ¶¶ 40-41) for the solitary
                                                                          15   alleged purpose of victimizing Plaintiff (FAAC, at ¶¶ 36, 40-41, 43-45). Plaintiff has
                                                                          16   failed to establish the necessary “closed-ended continuity” required under RICO.
                                                                          17
                                                                          18                               (3)    Plaintiff’s Allegations Do Not Establish “Closed-
                                                                          19                               Ended Continuity”.
                                                                          20          Courts look to the period of alleged deceptive conduct and not to the period
                                                                          21   during which the scheme was consummated when evaluating whether “closed-ended
                                                                          22   continuity” has been established. For example, if a party is induced to purchase
                                                                          23   goods in a deceptive transaction completed in one month, but pays in installments
                                                                          24
                                                                          25
                                                                               10Dempsey v. Sanders, 132 F.Supp.2d 222, 228 (S.D.N.Y. 2001), citing Schlaifer Nance &
                                                                               Co. v. Estate of Warhol, 119 F.3d 91, 97 (2nd Cir. 1997) (“Courts must take care to
                                                                          26   ensure that the plaintiff is not artificially fragmenting a singular act into multiple acts
                                                                               simply to invoke RICO.”), GICC Capital Corp. v. Technology Finance Group, Inc., 67 F.3d
                                                                          27   463, 466 (2nd Cir 1995) (finding that single-victim acts by a handful of participants
                                                                               was not "multi-faceted scheme" sufficient to meet continuity requirement) and other
                                                                          28   authorities.


                                                                                                                            28

                                                                               Case No.: C 98 20718 JW (PVT)      ANCILLARY DEFENDANTS’ MOTIONS TO DISMISS, ETC.
                                                                                                                  RE FIRST AMENDED ANCILLARY COMPLAINT
                                                                                                                                             CHAMBER’S COPY

                                                                           1   over two years, courts define the relevant period as one month for “continuity” and
                                                                           2   pattern analysis. 1 A. MATHEWS, A. WEISSMAN , & J. STURC, CIVIL RICO LITIGATION ,
                                                                           3   Chapter 4, at 90 (2d ed. 1992). In other words, long-term consequences of short-term
                                                                           4   conduct do not satisfy the continuity aspect of pattern. See, e.g., Lublin v. Turnbull,
                                                                           5   1992 U.S. Dist. LEXIS 3,255 (E.D.Pa. Mar. 11, 1992) (alleged fraudulent sale of
                                                                           6   condominium units was accomplished in one month, the operative period, not the six
                                                                           7   years in which payments were made); R.E. Davis Chem. Corp. v. Nalco Chem. Co., 757
                                                                           8   F.Supp. 1499 (N.D.Ill. 1990). Here, Stephen Cohen completed the scheme to
                                                                           9   disadvantage Plaintiff when he took control of ”sex.com” and then contracted with
                                                                          10   “Ancillary” Defendants, unaware of the deception, to collect the revenues resulting
                                                                          11   from Mr. Cohen‟s deception. The Ninth Circuit has noted that “we have found no
STANBURY FISHELMAN & WISNER, INC.




                                                                          12   case in which a court has held the requirement to be satisfied by a pattern of activity
                                    9200 SUNSET BOULEVARD, PENTHOUSE 30




                                                                          13   lasting less than a year.” Religious Technology Center v. Wollersheim, 971 F.2d 364, 366-
                                       WEST HOLLYWOOD, CA 90069-3601




                                                                          14   67 (9th Cir. 1992). On the alleged facts here, and the facts accepted by the Court in
                                                                          15   Kremen v. Cohen, the operative period herein was de minimis and “closed-ended
                                                                          16   continuity” cannot be established.
                                                                          17
                                                                          18                        b) Plaintiff’s “Enterprise” Allegations Are Fatally Flawed; The
                                                                          19                        “Enterprise” Lacks Sufficient Separateness From The Persons
                                                                          20                        Charged.
                                                                          21          Under 18 U.S.C. § 1962(c), where it cannot be said that the alleged “association-
                                                                          22   in-fact” forming the “enterprise” is distinct from the “persons” comprising the
                                                                          23   “enterprise”, the “enterprise” allegation collapses for failure to separate the
                                                                          24   “persons” from the “enterprise”. Rae v. Union Bank, 725 F.2d 478, 481 (9th Cir. 1984).
                                                                          25   Plaintiff‟s RICO claims define the “enterprise” as an association-in-fact of Ancillary
                                                                          26   Defendants LEVINSON and AIS AMERICA, INC. 11 FAAC, at ¶ 40. But the RICO
                                                                          27
                                                                          28    Ancillary Defendants do not imply, by the arguments concerning “enterprise”, that
                                                                               11
                                                                               Cohen is not an indispensable party. On the contrary, the poor efforts of Plaintiff to

                                                                                                                           29

                                                                               Case No.: C 98 20718 JW (PVT)     ANCILLARY DEFENDANTS’ MOTIONS TO DISMISS, ETC.
                                                                                                                 RE FIRST AMENDED ANCILLARY COMPLAINT
                                                                                                                                               CHAMBER’S COPY

                                                                           1   Defendants are also Ancillary Defendants. Distinctness between the “persons” and
                                                                           2   the “enterprise” is lacking. Plaintiff‟s dilemma is even greater here, since Ancillary
                                                                           3   Defendant AIS AMERICA, INC. is Ancillary Defendant LEVINSON‟s corporation for
                                                                           4   the purpose of conducting business affairs. There is complete identity between the
                                                                           5   “enterprise” and the alleged violating “persons” under RICO.
                                                                           6
                                                                           7                 5. Plaintiff’s RICO Conspiracy Claim Is Defective.
                                                                           8          Similar in nature to the defects in Plaintiff‟s “enterprise” allegations, Plaintiff‟s
                                                                           9   RICO Conspiracy claim, 18 U.S.C. § 1962(d) is also defeated by the relationship
                                                                          10   between the Ancillary Defendants. In U.S. Concord, Inc. v. Harris Graphics Corp., 757
                                                                          11   F.Supp. 1053, 1056-61 (N.D. Cal. 1991), it was held that a corporation cannot conspire
STANBURY FISHELMAN & WISNER, INC.




                                                                          12   with its employees. Similarly, as here, a corporation cannot conspire with its
                                    9200 SUNSET BOULEVARD, PENTHOUSE 30




                                                                          13   controlling owner.
                                       WEST HOLLYWOOD, CA 90069-3601




                                                                          14
                                                                          15          C. Plaintiff Fails To State A Claim For Fraud.
                                                                          16          Plaintiff is not a party to any contract referred to in the FAAC and has no
                                                                          17   personal knowledge of any actions, communications, or modifications regarding the
                                                                          18   contract. Nonetheless, Mr. Kremen cavalierly asserts in his first claim for re lief that
                                                                          19   defendants unlawfully secreted away money owed to the Cohen Parties. Plaintiff
                                                                          20   alleges that “on average” Ancillary Defendants collected between “$35,000 - $40,000
                                                                          21   per month.” No specific facts are alleged identifying from whom this money came,
                                                                          22   how such a broad “average” was calculated, how this alleged money was provided to
                                                                          23   Ancillary Defendants, or why the separate, oral contract governing Ancillary
                                                                          24   Defendants‟ rights to the exit console is inapplicable. The terms of the oral contract
                                                                          25   between Stephen Cohen and the defendants governing the exit console are not set
                                                                          26   forth. We do not know when that contract began. Stephen Cohen is not named as a
                                                                          27
                                                                               plead around the essential RICO requirements help to establish why Cohen is
                                                                          28   indispensable.

                                                                                                                            30

                                                                               Case No.: C 98 20718 JW (PVT)      ANCILLARY DEFENDANTS’ MOTIONS TO DISMISS, ETC.
                                                                                                                  RE FIRST AMENDED ANCILLARY COMPLAINT
                                                                                                                                              CHAMBER’S COPY

                                                                           1   party. Without the participation or knowledge of Stephen Cohen, Plaintiff pleads a
                                                                           2   conclusion – that a “confidential relationship” existed between defendants and
                                                                           3   “Stephen Cohen and his companies” which enabled defendants to accomplish their
                                                                           4   “fraud”. Plaintiff concludes this fiction with the unsupported allegation that the
                                                                           5   “fraudulent activities” of defendants were concealed, not from Mr. Kremen, but from
                                                                           6   Mr. “Cohen and the Cohen Parties.” FAAC ¶ 26.
                                                                           7          Plaintiff‟s fraud claim is defective because:
                                                                           8                It lacks the particularity required by Rule 9(b) of the Federal Rules of
                                                                           9                 Civil Procedure and California case authority, Tarmann v. State Farm
                                                                          10                 Mut. Auto. Ins. Co., 2 Cal.App.4th 153, 157 (1991);
                                                                          11                Plaintiff has failed to identify any factual basis for his conclusory
STANBURY FISHELMAN & WISNER, INC.




                                                                          12                 allegations of reliance; and,
                                    9200 SUNSET BOULEVARD, PENTHOUSE 30




                                                                          13             
                                       WEST HOLLYWOOD, CA 90069-3601




                                                                                             There is no recognized relationship between Mr. Kremen and Ancillary
                                                                          14                 Defendants.
                                                                          15   As set forth fully, infra, Plaintiff‟s fraud claim is deficient and must be dismissed.
                                                                          16
                                                                          17                 1. The Particularity Required Pursuant To Rule 9(B) Is Absent.
                                                                          18          As discussed at III.C.1, supra, Plaintiff‟s Fraud claim fails to identify alleged
                                                                          19   fraudulent activities. The time and place of allegedly fraudulent financial
                                                                          20   transactions is not set forth. The time, place and content of alleged agreements to
                                                                          21   defraud Mr. Kremen are not identified with even passing specificity. Allegations of
                                                                          22   false intent and money received are not particularized pleading under Rule 9(b).
                                                                          23
                                                                          24                 2. Plaintiff Has Failed To Allege Any Factual Basis For His
                                                                          25                 Conclusory Allegations Concerning The Reliance Element.
                                                                          26          To properly plead a fraud claim, Plaintiff must allege that defendants acted
                                                                          27   with an intent to deceive a person unaware of the concealed fact and that the person
                                                                          28   “would not have acted had he known of the fact.” Melanson v. United States Airlines,


                                                                                                                             31

                                                                               Case No.: C 98 20718 JW (PVT)     ANCILLARY DEFENDANTS’ MOTIONS TO DISMISS, ETC.
                                                                                                                 RE FIRST AMENDED ANCILLARY COMPLAINT
                                                                                                                                             CHAMBER’S COPY

                                                                           1   Inc., 931 F. 2d 558, 565 (1991); C AL. CIV. CODE §§ 1709, 1710. However, what is absent
                                                                           2   from Plaintiff‟s fraud (and RICO) allegations are facts showing how Plaintiff, a third -
                                                                           3   party vis-à-vis the alleged contracts between Cohen and Ancillary Defendants, has
                                                                           4   any actual, personal knowledge of their agreements, their intentions, their beliefs, or
                                                                           5   what their actions would have been in hypothetical instances. Conclusory
                                                                           6   allegations, without a factual basis, are improper, and are particularly defective
                                                                           7   under the Rule 9(b) standard governing fraud allegations.
                                                                           8          Further, Plaintiff pleads inconsistently. On the one hand, Plaintiff‟s claims
                                                                           9   depend upon the proposition that Mr. Cohen was deceived by Ancillary Defendants.
                                                                          10   On the other, Plaintiff‟s claims depend upon the proposition that Mr. Cohen and
                                                                          11   Ancillary Defendants schemed to defraud Mr. Kremen. 12 Based upon Plaintiff‟s
STANBURY FISHELMAN & WISNER, INC.




                                                                          12   FAAC, it is impossible to identify any clear allegations of reliance, or the factual basis
                                    9200 SUNSET BOULEVARD, PENTHOUSE 30




                                                                          13   for such an allegation if it were identified within the FAAC.
                                       WEST HOLLYWOOD, CA 90069-3601




                                                                          14
                                                                          15                 3. There is no legally recognizable relationship between Mr. Kremen
                                                                          16                 and the Defendants to support a fraud claim.
                                                                          17          Plaintiff lacks standing to assert a fraud claim because: (1) A fraud claim is a
                                                                          18   personal claim, like a personal injury, and it cannot be asserted by another, (2) Stev en
                                                                          19   Cohen is an indispensable party who has not been named; (3) the fraud claim is not a
                                                                          20   “revenue or account receivable” and therefore Mr. Kremen was not transferred the
                                                                          21   right to sue for fraud, ORDER MODIFYING, at 2:13-16; and (4) the Judgment only
                                                                          22   imposed a constructive trust “upon the monies and properties of the Defendants”
                                                                          23   (Cohen and his entities) and a fraud claim is not “money or property” of Stephen
                                                                          24
                                                                               12Plaintiff‟s FAAC is so factually inconsistent that it is difficult to identify what
                                                                          25   Plaintiff alleges to have occurred. For example, in Plaintiff‟s RICO count, Mr.
                                                                               Levinson is alleged to have acted in reckless disregard of the truth of Mr. Kremen‟s
                                                                          26   ownership rights of sex.com when he learned of Mr. Kremen‟s suit in 2000 (FAAC, at
                                                                               ¶ 41), but he is also alleged to have conspired to defraud Mr. Kremen in 1996 (FAAC,
                                                                          27   at ¶ 40). Apparently, according to Plaintiff, Mr. Levinson was conspiring to defraud
                                                                               Mr. Kremen before he allegedly learned of Mr. Kremen‟s asserted right of ownership
                                                                          28   over the sex.com domain name.

                                                                                                                           32

                                                                               Case No.: C 98 20718 JW (PVT)     ANCILLARY DEFENDANTS’ MOTIONS TO DISMISS, ETC.
                                                                                                                 RE FIRST AMENDED ANCILLARY COMPLAINT
                                                                                                                                               CHAMBER’S COPY

                                                                           1   Cohen and/or his entities.
                                                                           2          Plaintiff‟s fraud claims should be dismissed with prejudice. In light of the
                                                                           3   allegations set forth in Plaintiff‟s FAAC regarding a contractual relationship between
                                                                           4   Cohen and Ancillary Defendants, and the scope of Mr. Kremen‟s right to recover
                                                                           5   “revenue or account receivable”, there are no other allegations that can cure this fatal
                                                                           6   defect in Plaintiff‟s FAAC. “Futility of amendment can, by itself, justify the denial of
                                                                           7   a motion for leave to amend.” Bonin v. Calderon, 59 F.3d 815, 845 (9th Cir. 1995).
                                                                           8
                                                                           9    IV.    IN AN ACTION ALLEGING BREACH OF CONTRACT, A REQUEST FOR
                                                                          10          EXEMPLARY DAMAGES IS IMPROPER AND SHOULD BE STRICKEN.
                                                                          11          Where a motion to strike will streamline the ultimate resolution of an action,
STANBURY FISHELMAN & WISNER, INC.




                                                                          12   the motion is well taken. State of Cal. ex rel. State Lands Commission v. U.S., 512
                                    9200 SUNSET BOULEVARD, PENTHOUSE 30




                                                                          13   F.Supp. 36 (C.D.Cal. 1981). Scandalous allegations may be stricken where they cast a
                                       WEST HOLLYWOOD, CA 90069-3601




                                                                          14   “cruelly” derogatory light on a party. Skadegaard v. Farrell, 578 F.Supp. 1209 (D.N.J.
                                                                          15   1984); Alvarado-Morales v. Digital Equipment Corp., 843 F.2d 613 (1st Cir. 1988).
                                                                          16          It is the general rule in California that, in the absence of a statute, punitive
                                                                          17   damages are allowed only to the immediate person injured. (Dugar v. Happy Tiger
                                                                          18   Records, Inc., 41 Cal.App.3d 811, 819 (1974), citing People v. Superior Court, 9 Cal.3d
                                                                          19   283, 287 (1973) and French v. Orange County Inv. Corp., 125 Cal.App. 587, 591 (1932). A
                                                                          20   plaintiff is barred from proceeding on an assigned punitive damage claim. French,
                                                                          21   supra, at 591. More generally, California prohibits the assignment of a purely
                                                                          22   personal tort cause of action. (Murphy v. Allstate Ins. Co., 17 Cal. 3d 937, 942 (1976),
                                                                          23   citing Reichert v. General Ins. Co., 68 Cal.2d 822, 834 (1968) and 7 Cal.Jur.3d,
                                                                          24   Assignments, § 5 at pp. 12-13.)
                                                                          25          Plaintiff alleges that Levinson and/or AIS “were under contract” to Stephen
                                                                          26   Michael Cohen and the “Cohen Parties”. FAAC, at ¶¶ 8-11. It is later alleged that
                                                                          27   while defendants were under a “contractual relationship” to the Cohen Parties they
                                                                          28   “fraudulently” withheld monies owed to the Cohen Parties. FAAC ¶¶ 23-29. Since


                                                                                                                            33

                                                                               Case No.: C 98 20718 JW (PVT)      ANCILLARY DEFENDANTS’ MOTIONS TO DISMISS, ETC.
                                                                                                                  RE FIRST AMENDED ANCILLARY COMPLAINT
                                                                                                                                              CHAMBER’S COPY

                                                                           1   the alleged fraud arises from the contractual relationship between Stephen Cohen
                                                                           2   and the defendants, exemplary damages are not allowed. C AL. C IV. CODE § 3294(a).
                                                                           3   Plaintiff is bound by his own allegations. Furthermore, Plaintiff cannot obtain
                                                                           4   punitive damages arising from any of Cohen‟s claims assigned to Plaintiff by this
                                                                           5   Court. All references to exemplary damages should be stricken from the FAAC
                                                                           6   pursuant to FED. R. CIV. P. 12(f).
                                                                           7
                                                                           8                                        V.   CONCLUSION
                                                                           9          Based upon the foregoing, Ancillary Defendants request an Order dismissing
                                                                          10   this action for lack of jurisdiction. In the alternative, Ancillary Defendants requ est an
                                                                          11   Order dismissing the action on the ground of claim preclusion, dismissing the action
STANBURY FISHELMAN & WISNER, INC.




                                                                          12   for failure to join and indispensable party, dismissing the RICO and fraud causes of
                                    9200 SUNSET BOULEVARD, PENTHOUSE 30




                                                                          13   action for failure to state claims and striking all references to exemplary dam ages.
                                       WEST HOLLYWOOD, CA 90069-3601




                                                                          14   Dated this 19 th day of February 2002.          Respectfully submitted,
                                                                          15                                                   STANBURY FISHELMAN & WISNER
                                                                                                                               9200 Sunset Boulevard, Penthouse 30
                                                                          16                                                   West Hollywood, CA 90069-3601
                                                                          17
                                                                          18                                             By:
                                                                                                                               George Stanbury
                                                                          19                                                   Attorneys for Ancillary Defendants
                                                                          20
                                                                          21
                                                                          22
                                                                          23
                                                                          24
                                                                          25
                                                                          26
                                                                          27
                                                                          28


                                                                                                                            34

                                                                               Case No.: C 98 20718 JW (PVT)        ANCILLARY DEFENDANTS’ MOTIONS TO DISMISS, ETC.
                                                                                                                    RE FIRST AMENDED ANCILLARY COMPLAINT

				
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