JAMES C. MAHAN, District Judge.
Presently before the court is defendant Dennis Prince's ("Prince") special motion to dismiss pursuant to Nevada Revised Statute ("NRS") § 41.660. (ECF No. 37). Prince had previously filed a special motion to dismiss (ECF No. 17) but was ordered to refile the motion within the court's page limitation on December 13, 2016.
Plaintiff Century Surety Company ("Century") filed a response to the special motion to dismiss (ECF No. 44), to which Prince replied (ECF No. 57).
Defendant George Ranalli ("Ranalli") joined Prince's original special motion to dismiss (ECF No. 25) and filed an errata with the court to join the refiled special motion to dismiss on December 28, 2016. (ECF No. 43). Ranalli also filed his own motion to dismiss. (ECF No. 26). Century responded in January 2017 (ECF No. 46), and Ranalli replied (ECF No. 53).
Defendant Sylvia Esparza ("Esparza") also joined in the special motion to dismiss on December 20, 2016. (ECF No. 40). Also before the court is Esparza's motion to dismiss. (ECF No. 18). Century responded by incorporating and adopting by reference its response to Prince's motion. (ECF No. 45). Esparza replied to Century's response to Prince's special motion to dismiss, but not specifically in favor of her own motion. (ECF No. 56).
Furthermore, Prince moved to stay the proceedings. (ECF No. 55). Ranalli and Esparza both joined in the motion to stay. (ECF Nos. 59, 60). A hearing was held on March 7, 2017, regarding that motion. (ECF No. 69). Magistrate Judge Leen issued an order which granted Prince's motion. (Id.). Century filed objections to the order and asked the court to reverse the magistrate judge's order. (ECF No. 71). Prince responded to Century's objections (ECF No. 72), and all other defendants joined in Prince's response (ECF Nos. 73, 74).
The present case concerns an alleged scheme to fraudulently procure a multi-million dollar judgment against Century as a result of a catastrophic vehicle accident. (ECF No. 1). Century brings two claims. (Id.). Century's first claim is brought under the Nevada Racketeer Influenced and Corrupt Organizations Act ("RICO") per NRS 207.470. (Id. at 12-18). Century brings a second claim for civil conspiracy, alleging that defendants Prince, Ranalli, and Esparza engaged in a "bad faith insurance `setup.'" (Id. at 2, 18-19).
Michael Vasquez ("Vasquez") is the sole owner and manager of Blue Streak Auto Detailing, LLC ("Blue Streak"). (ECF No. 1 at 3). On January 12, 2009, Vasquez was driving his Ford F-150 truck on St. Rose Parkway when he struck Ryan Pretner ("Pretner"), who was riding his bicycle on the shoulder of the road. (ECF Nos. 1 at 3, 37 at 3). Pretner was "violently thrown from his bicycle resulting in a catastrophic brain injury and over $2,000,000 in medical expenses." (ECF No. 37 at 3). Vasquez was allegedly "`off work' and running `personal errands' at the time of the [a]ccident." (ECF No. 1 at 6).
At that time, Vasquez had a personal automobile liability insurance policy ("personal policy") from Progressive. (Id. at 3). Blue Streak, a mobile detailing business owned and operated by Vasquez, was covered by a commercial liability garage coverage policy ("garage policy") from Century. (ECF Nos. 1 at 3, 37 at 3). The personal policy had a $100,000 policy limit whereas the garage policy had a $1,000,000 policy limit. (ECF No. 37 at 3).
Pretner was initially represented by Esparza. (ECF No. 1 at 7). Progressive offered Esparza the personal policy limit—$100,000—immediately following the accident. (ECF No. 37 at 4). Due to the severity of Pretner's injuries, "Esparza could not provide a release until all possible insurance coverage was exhausted." (Id. at 4). Esparza made a demand on Century for its policy limit. (Id.). Century denied the demand, taking the position that coverage did not exist under its policy because Vasquez was not acting in the scope or course of business at the time of the accident. (Id.). Next, Esparza requested a copy of Century's garage policy. (Id.). However, Century refused to provide Esparza with a copy of the garage policy. (Id.).
Prince was retained by Pretner roughly three weeks prior to the applicable statute of limitations deadline. (Id. at 17). At that time, Esparza's involvement in the case ceased. (ECF No. 18 at 3). Prince filed a complaint against Vasquez and Blue Streak "[o]n January 7, 2011, five days before the statute of limitations expired." (ECF No. 37 at 5).
Century alleges "Prince informed Progressive that he planned to represent [p]laintiffs before filing suit against Vasquez and Blue Streak, but assured Progressive that he planned to set up [p]laintiff Century Surety for a subsequent bad faith claim and that he would not pursue Vasquez personally." (ECF No. 1 at 4). Century further alleges "[t]here was no evidence to support [that Vasquez was in the course and scope of his business at the time of the accident] and all of the evidence available and known to [Prince, Esparza, and Ranalli], expressly contradicted material allegations in the complaint." (Id.).
Prince, on the other hand, argues that "[t]he claims against Blue Streak were based upon allegations that Vasquez was in the course and scope of his employment at the time of the collision." (ECF No. 37 at 5). Moreover, Prince argues that the allegations in the state complaint were supported by case law, the nature of the business, and a potential witness. (Id.).
Century was informed that Prince represented Pretner, that there were allegations that there may be coverage under Century's garage policy, and was provided a copy of the complaint. (ECF Nos. 1 at 8, 37 at 5). Century's response was merely to provide Prince with a copy of the garage policy. (ECF No. 37 at 6). Century elected to neither indemnify nor defend Vasquez or Blue Streak, believing that coverage did not exist under its policy and "that Progressive was defending the action." (ECF No. 1 at 8); see also (ECF No. 37 at 6).
Defaults were entered against Vasquez and Blue Streak on June 27, 2011. (ECF Nos. 1 at 8, 37 at 6). Prince sent copies of the defaults to Century. (ECF No. 37 at 6). Century replied that it had "no coverage for this matter" and that Progressive was handling the case. (Id.).
Thereafter, Progressive and Prince negotiated a settlement agreement, and Progressive retained Ranalli to "represent Vasquez and Blue Streak in connection with the covenant and settlement negotiations." (Id. at 7). "Progressive informed [d]efendant Ranalli that Prince `has agreed to give us a [c]ovenant [n]ot to [e]xecute in exchange for the payment of our policy limit' and instructed [d]efendant Ranalli to work with Prince to draft a settlement agreement." (ECF No. 1 at 9).
(Id.). Vasquez was allegedly "reluctant to sign" the settlement agreement "because he did not believe Century Surety had any responsibility for the accident," and executed the agreement only due to "pressure from Defendant Ranalli." (Id. at 9-10).
"On February 15, 2012, Prince filed an [a]pplication for [e]ntry of [d]efault [j]udgment requesting judicial determination of damages" and, after a hearing, a default judgment in the amount of $18,050,185.45 was entered in plaintiffs' favor. (ECF No. 37 at 7); see also (ECF No. 38-16). Subsequently, Prince, as a result of the assignment of rights and the covenant not to execute, filed Andrew v. Century Sur. Co. in state court, and Century removed the case to federal court. See No. 2:12-CV-00978-APG-PAL, 2014 WL 1764740 (D. Nev. Apr. 29, 2014); (ECF No. 26 at 3). Prince, on behalf of his client, sought to collect "damages related to the default judgment and Century's bad faith." (ECF No. 37 at 7-8); see also (ECF No. 1 at 11).
Century filed an answer in the Andrew case on June 15, 2012, arguing "[p]laintiffs' alleged right to seek damages against Century was obtained through fraud, misrepresentation, and/or collusion." (ECF No. 37 at 7). Century first tried, in October 2012, to intervene in the state court action, but its motion to intervene was denied in its entirety. (Id. at 7-8). Century never filed any counterclaims in the Andrew case and has been denied the opportunity to reopen discovery to investigate its fraud and collusion defense "because Century had `raised that issue from the outset.'" (Id. at 8).
II. Legal Standard
A. Motion to dismiss
The court may dismiss a plaintiff's complaint for "failure to state a claim upon which relief can be granted." Fed. R. Civ. P. 12(b)(6). A properly pled complaint must provide "[a] short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). Although rule 8 does not require detailed factual allegations, it does require more than labels and conclusions. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). Furthermore, a formulaic recitation of the elements of a cause of action will not suffice. Ashcroft v. Iqbal, 556 U.S. 662, 677 (2009) (citation omitted). Rule 8 does not unlock the doors of discovery for a plaintiff armed with nothing more than conclusions. Id. at 678-79.
To survive a motion to dismiss, a complaint must contain sufficient factual matter to "state a claim to relief that is plausible on its face." Id. A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. Id. When a complaint pleads facts that are merely consistent with a defendant's liability, and shows only a mere possibility of entitlement, the complaint does not meet the requirements to show plausibility of entitlement to relief. Id.
In Iqbal, the Supreme Court clarified the two-step approach district courts are to apply when considering a motion to dismiss. Id. First, the court must accept as true all of the allegations contained in a complaint. However, this requirement is inapplicable to legal conclusions. Id. Second, only a complaint that states a plausible claim for relief survives a motion to dismiss. Id. at 678. Where the complaint does not permit the court to infer more than the mere possibility of misconduct, the complaint has "alleged — but not shown — that the pleader is entitled to relief." Id. at 679. When the allegations in a complaint have not crossed the line from conceivable to plausible, plaintiff's claim must be dismissed. Twombly, 550 U.S. at 570.
The Ninth Circuit addressed post-Iqbal pleading standards in Starr v. Baca, 652 F.3d 1202, 1216 (9th Cir. 2011). The Starr court held:
B. Special motion to dismiss
The court will first consider Prince's special motion to dismiss pursuant to NRS § 41.660, which protects "good faith communication in furtherance of the right to petition or the right to free speech in direct connection with an issue of public concern." Nev. Rev. Stat. § 41.660; (ECF No. 37). Prince argues that Century's complaint is a strategic lawsuit against public participation ("SLAPP") complaint. (ECF No. 37). Prince contends that the complaint was brought against the three attorney defendants personally for "improper and retaliatory" purposes. (Id. at 3). Moreover, Prince emphasizes that the complaint directly targets the defendants' First Amendment right to petition the court system by seeking to "effectively chill Prince and other attorneys from vigorously advocating for injured clients by forcing attorneys to defend themselves against claims for personal liability for purely strategic litigation decisions." (Id. at 2).
Nevada's "anti-SLAPP" statute governs how the court must adjudicate the instant motion; the court is to:
Nev. Rev. Stat. § 41.660(3).
A. Anti-SLAPP analysis
1. Protected activity
First, the court must determine if Century's complaint is based entirely on defendants' "[g]ood faith communication in furtherance of the right to petition or the right to free speech in direct connection with an issue of public concern." Nev. Rev. Stat. § 41.637. Prince argues, and Century does not contest, that the complaint is based on a "[w]ritten or oral statement made in direct connection with an issue under consideration by a legislative, executive or judicial body, or any other official proceeding authorized by law." Nev. Rev. Stat. § 41.637(3); see also (ECF No. 37 at 8-9).
Prince contends that "because both of Century's claims arise from the same conduct by Prince in furtherance of his pursuit of a lawsuit on behalf of his injured client," the activity is protected by Nevada's anti-SLAPP statute. (ECF No. 37 at 10). Century argues, however, that Prince, Ranalli, and Esparza fail on the "good faith" requirement of NRS 41.630. (ECF No. 44 at 11-15). In order for Prince's petition to the court to be in good faith, it must "[be] truthful or [be] made without knowledge of its falsehood." Nev. Rev. Stat. § 41.637.
Century claims that Prince knew Vasquez was not acting in the course or scope of employment at the time of the accident, so the claim against Blue Streak relied on knowingly false statements and, as a result, was done in bad faith. (ECF Nos. 1 at 4, 44 at 12-15). However, Prince asserts his good faith intention when filing the complaint; namely, that "[w]ith the statute of limitations expiring, Prince was obligated to protect his catastrophically injured client, and Prince had to name Blue Streak as a defendant in the complaint to preserve a $1,000,000 claim." (ECF No. 37 at 18) (emphasis removed). Furthermore, "Prince informed Century that he had legal research to support an allegation that Vasquez was in the course and scope of his business." (Id.).
Prince has shown "by a preponderance of the evidence, that the claim is based upon a good faith communication in furtherance of the right to petition or the right to free speech in direct connection with an issue of public concern." Nev. Rev. Stat. § 41.660(3)(a). Here, Century has not sufficiently disputed Prince's assertions to show that "the defendant[s] abused the privilege [to petition the court] by publishing the communication with malice in fact." Circus Circus Hotels, Inc. v. Witherspoon, 657 P.2d 101, 105 (Nev. 1983).
The heart of Century's argument is that Prince knew that the complaint he filed in the underlying state court action was not truthful, citing to conflicts between the allegations in the complaint and "known facts and evidence." (ECF No. 44 at 11-15). Century had, however, ample opportunity to contest those facts, yet elected not to. (ECF No. 37 at 5) ("Prince sent Century a letter of representation that included a courtesy copy of the Pretner complaint . . . Century's claim file acknowledges that Lisa Henderson, a licensed attorney assigned to the claim . . . knew about the [r]espondent [s]uperior allegations against Blue Streak.").
Furthermore, Prince argues that he had "a good faith legal basis to allege responde[a]t superior liability against Blue Streak—regardless of whether Vasquez's own lay opinions would have ultimately been found to be true or not." (ECF No. 57 at 5). Prince alerted Century to these allegations and gave them an opportunity to discuss the factual and legal basis for the respondeat superior claim.
(Id. at 6).
Similarly, Century had ample opportunity to inquire about and challenge Prince's legal conclusion. (ECF No. 37 at 5) ("Prince explained his position to Century, disclosed the policy limits offer by Progressive, and referred to `legal research' that `indicates coverage exists under your policy.'"). Century's decision not to dispute Prince's complaint does not constitute "malice in fact" on Prince's part when filing the complaint. Prince's intention when filing the complaint was to preserve a $1,000,000 claim for his client. (Id. at 18). Century, on the other hand, chose not to defend Blue Streak or even reply to Prince when he attempted to contact Century regarding the claim—despite Prince's allegation that Vasquez was, in fact, acting in the course and scope of his business. (Id. at 5).
Accordingly, the court finds that Prince has satisfied the first prong of the anti-SLAPP analysis, and Century's claims are based on Prince's good faith filing of a complaint with the state court.
2. Probability of prevailing on the claim
a. Legal standard
"Nevada courts have interpreted the state RICO statute consistently with the provisions of federal RICO." Steele v. Hosp. Corp. of Am., 36 F.3d 69, 71 (9th Cir. 1994) (citing Allum v. Valley Bank of Nev., 849 P.2d 297, 298 n.2 (Nev. 1993) ("Nevada's racketeering statutes . . . are patterned after the federal [RICO] statutes"), cert. denied, 510 U.S. 857 (1993)).
To plead a civil RICO claim, plaintiff must demonstrate: "(1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity (known as `predicate acts') (5) causing injury to plaintiff's `business or property.'" Living Designs, Inc. v. E.I. Dupont de Nemours & Co., 431 F.3d 353, 361 (9th Cir. 2005) (quoting Grimmett v. Brown, 75 F.3d 506, 510 (9th Cir. 1996)).
Further, because RICO claims involve underlying fraudulent acts, Federal Rule of Civil Procedure 9(b)'s heightened pleading standard applies. Edwards v. Marin Park, Inc., 356 F.3d 1058, 1065-66 (9th Cir. 2004); see also Fed. R. Civ. P. 9(b) ("In alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake."). Thus, to sufficiently plead its RICO claim, a plaintiff must specify the time, place, and content of the alleged underlying fraudulent acts and statements, as well as the parties involved and their individual participation. Edwards, 356 F.3d at 1066.
The standard for the special motion to dismiss requires that the court determine "whether the plaintiff has demonstrated with prima facie evidence a probability of prevailing on the claim." Nev. Rev. Stat. § 41.660(3). If the complaint is shown to be predicated on the defendants' "good faith communication in furtherance of the right to petition or the right to free speech in direct connection with an issue of public concern," then the plaintiff must show by clear and convincing evidence that they have a likelihood of prevailing on its claim. Shapiro v. Welt, 389 P.3d 262, 266 (Nev. 2017) ("After 2013 . . . the plaintiff's burden increased to clear and convincing evidence.").
b. Predicate acts
Here, Century pleaded three predicate acts stemming from Prince, Ranalli, and Esparza's conduct in relation to Pretner's state court claim: (1) alleging Vasquez was in the course and scope of his employment constituted offering false evidence and insurance fraud; (2) alleging that Blue Streak owned the Ford F-150 constituted offering false evidence and insurance fraud; and (3) acts related to the settlement agreement and obtaining Vasquez's signature on the covenant not to enforce constituted obtaining a signature by means of false pretenses, suborning perjury, offering false evidence, and insurance fraud. (ECF No. 1 at 13-17).
Century contends that "Prince was not interested in going after Vasquez personally because Progressive is one of his clients." (ECF No. 1 at 8). Prince, on the other hand, contends that he "made the strategic litigation decision to protect a potential $1,000,000 claim from being time barred by asserting claims against Blue Streak." (ECF No. 37 at 17). Indeed, Century admits that Prince went so far as to "inform [p]laintiff Century Surety that he represented Pretner and his co-legal guardians and provide a copy of the complaint to [p]laintiff Century Surety." (ECF No. 1 at 8).
Century alleges that Ranalli's actions while drafting and executing the settlement agreement constituted acts sufficient to sustain a RICO claim. (Id. at 15-18). These actions include "work[ing] with Prince to draft the settlement agreement, rather than defend Vasquez and Blue Streak" and "persuad[ing] Vasquez to sign the settlement agreement," which allegedly "contained misrepresentations." (Id. at 16).
The only allegation of Esparza's involvement is that she, having previously represented Pretner, "interviewed other attorneys and was involved in the decision to retain . . . Prince" and shared her case file with him. (Id. at 7). Century contends that, in the course of litigation representing Pretner, "Prince then orchestrated a settlement agreement along with the help of Defendant Ranalli." (Id. at 4). Century alleges that Esparza's previous representation of Pretner means that she "knew about and participated in the commission of these predicate acts." (Id. at 17).
c. Enterprise and pattern
Despite these allegations, Century fails to adequately plead—let alone show by clear and convincing evidence—the elements of a RICO claim. Shapiro, 389 P.3d at 266. In order to sufficiently allege the existence of an enterprise, Century would have to show that "the various associates function as a continuing unit." United States v. Turkette, 452 U.S. 576, 583 (1981). Indeed, Century fails to identify "an entity separate and apart from the pattern of activity in which it engages." Id. (defining "enterprise"). Instead, Century's allegations concern only an isolated court case wherein Prince, Ranalli, and Esparza interacted with one another regarding Pretner's claims against Vasquez and Blue Streak. (ECF No. 1).
Century's complaint also fails the "continuity requirement," which "focuses on whether the associates' behavior was `ongoing' rather than isolated activity." Odom v. Microsoft Corp., 486 F.3d 541, 553 (9th Cir. 2007). Prince's conduct during the course of the state court case does not "show that the racketeering predicates are related, and that they amount to or pose a threat of continued criminal activity." Sever v. Alaska Pulp Corp., 978 F.2d 1529, 1535 (9th Cir. 1992) (emphasis in original) (quoting H.J. Inc. v. Nw. Bell Tel. Co., 492 U.S. 229, 239 (1989)).
As a result, Prince's allegations in state court that Vasquez acted in the course and scope of his employment, the assertion that Blue Streak owned the Ford F-150, and the subsequent execution of a settlement all do not sufficiently show an "enterprise" or a pattern of racketeering activity. This conduct also does not indicate that Prince—because of the resolution in a single complaint in state court—"amount[s] to or pose[s] a threat of continued criminal activity." Sever, 978 F.2d at 1535.
Instead, the defendants' actions can, at best, be "characterized as a single episode with a single purpose which happened to involve more than one act taken to achieve that purpose," which is insufficient to sustain a RICO cause of action. Sever, 978 F.2d at 1535. Here, Century admits that there was single purpose, specifically the "bad faith" insurance scheme allegedly designed by Prince, Rinalli, and Esparza to obtain a multi-million dollar judgment against Century. (ECF No. 1). All other "predicate acts" are just steps taken to achieve that one purpose. Sever, 978 F.2d at 1535.
Moreover, because all of the alleged instances of insurance fraud referenced in Century's complaint are in furtherance of a purported single bad-faith insurance "set up," Century has not adequately alleged multiple instances of insurance fraud that would constitute the "predicate acts" required to support a RICO claim. Perelman v. State, 115 Nev. 190, 192 (Nev. 1999) ("Although NRS 686A.291 makes the filing of a false statement a crime, the overall intent of the statute is to address the filing of a false claim through the use of fraud, misrepresentations, or false statements. Thus,
In sum, Century has not sufficiently pleaded a pattern of activity or conduct. Without a pattern of predicate acts, Century cannot sustain a RICO claim. Living Designs, Inc., 431 F.3d at 361.
d. Racketeering activity
This court now considers whether Century's complaint sufficiently alleges "racketeering activity (known as `predicate acts')" to meet the third element of its RICO claim. Edwards, 356 F.3d at 1066. Prince's allegations in the state court complaint do not amount to offering false evidence or to insurance fraud under NRS § 207.360. Consequently, Century has not adequately demonstrated a pattern of racketeering activity.
First, Prince's complaint does not satisfy the statutory definition of "offering false evidence."
In addition, Century has not shown, by clear and convincing evidence, that Prince ever "knowingly and willfully" acted to defraud Century. Nev. Rev. Stat. § 686A.2815; Shapiro, 389 P.3d at 266. To the contrary, Prince argues he filed a good faith complaint, potentially preserving a million dollar claim for his client with the statute of limitations about to run, and he informed Century of that complaint. See (ECF Nos. 1 at 8, 37 at 17). Century alleges that insurance fraud is a predicate act arising from Prince's complaint in state court. (ECF No. 1 at 12-18). In this instance, however, negotiating a settlement agreement and covenant not to enforce and then "persuading" Vasquez to sign it does not meet the statutory definition of insurance fraud. See Nev. Rev. Stat. § 686A.2815.
Century does not allege that the settlement between Prince and Progressive concealed or omitted facts. (ECF No. 1). To the contrary, Century argues only that the complaint and settlement agreement contained patently false information. (ECF No. 44 at 11-14). To the extent any of the allegations in the complaint were false, Century had both notice of those claims and an opportunity to contest the factual and legal allegations in the underlying state court complaint. (ECF No. 37 at 5-6, 15-16). Century was the one that elected to neither defend Vasquez nor Blue Steak in the law suit, or otherwise appear at all. (Id.).
Moreover, Progressive's policy limit offer and request for a covenant not to execute predated Prince's involvement in the case:
(ECF No. 37 at 4) (footnote omitted).
Esparza had been handling the claim for the years prior to Prince's involvement, and Esparza had consistently been offered Progressive's policy limits. (Id. at 21). Progressive made the same policy limit offer to Prince. (Id.) ("Progressive proposed the covenant to Prince to finally be able to pay the policy limits it had been offering for years." (emphasis added)). Prince even disclosed Progressive's policy limit offer to Century. (Id. at 5) ("Prince sent Century a letter of representation that included a courtesy copy of the Pretner complaint . . . . In the attached cover letter, Prince . . . disclosed the policy limits offer by Progressive . . . ."). Thereafter, Progressive hired Ranalli to negotiate the covenant after Century had denied the claim. (Id.). Prince did not and could not "orchestrate" an offer that was made prior to his involvement in the case.
The execution of a settlement agreement does not constitute—as Century contends— perjury, subornation of perjury, or obtaining a signature by false pretenses. (ECF No. 1 at 17). Century fails to allege any "representation of some fact or circumstance which is not true and is calculated to mislead." See Hale, 764 P.2d at 868 (Nev. 1988). Instead, Century alleges simply that Ranalli "persuaded" Vasquez to sign the agreement. (ECF No. 1 at 16).
Consequently, Century has not adequately shown any racketeering activity to serve as the basis of a RICO claim. To the contrary, Judge Gordon, presiding over the Andrew case, expressly ruled that "Century breached its duty to defend" in the underlying case. Andrew, 2014 WL 1764740, at *6; see also (ECF No. 37 at 2) ("[Judge] Gordon ruled as a matter of law that Century breached its duty to defend its insureds, and was therefore bound by the state court judgment."). Indeed, Judge Herndon was explicit in Century's failure to act during the hearing regarding Century's motion for leave in the underlying state court case:
(ECF No. 38-26 at 34).
Accordingly, Prince did not and could not "orchestrate" Century's failure to defend. Instead, Prince contacted Century regarding Pretner's claims, and Century made a unilateral decision to deny coverage, refuse to defend Vasquez or Blue Streak, and to not appear in the state court litigation. (ECF No. 37).
Consistent with the foregoing, Century has failed to show that its injury "flow[s] from the defendant's violation of a predicate Nevada RICO act." Allum v. Valley Bank, 849 P.2d 297, 299 (Nev. 1993). Century admits that it "was aware of the underlying litigation" but chose not to appear in the litigation to defend its insured or contest Prince's allegations. (ECF No. 1 at 11). Instead, Century relied on "it[s] belie[f] that Progressive was defending the action." (Id.).
Despite relying on an unwarranted assumption that Progressive was litigating in its stead, Century contends that the default judgment was entered "as a result of the [d]efendants' actions." (Id. at 17-18). To the contrary, the injury stems from Century's failure to defend or appear. Century had notice of the litigation alleging coverage. (Id. at 11). In fact, Century does not dispute that "[a]s of June 27, 2011, Century had denied coverage, closed its file, and declined to defend Blue Streak or Vasquez." (ECF No. 37 at 6); see also (ECF No. 57 at 19). Thus, Century purposefully declined its opportunity to participate in the underlying state litigation.
As a result of Century's failure to sufficiently plead a RICO claim, the court does not need to address whether the absolute litigation privilege applies in this instance. Accordingly, the special motion to dismiss will be granted as to Century's RICO claim.
ii. Civil conspiracy
"In Nevada, an actionable civil conspiracy is defined as a combination of two or more persons, who by some concerted action, intend to accomplish some unlawful objective for the purpose of harming another which results in damage." Flowers v. Carville, 266 F.Supp.2d 1245, 1249 (D. Nev. 2003) (internal quotation marks and citation omitted); see also Cadle Co. v. Woods & Erickson, LLP, 345 P.3d 1049, 1052 (Nev. 2015) ("In Nevada, however, civil conspiracy liability may attach where two or more persons undertake some concerted action with the intent to commit an unlawful objective, not necessarily a tort.").
Here, Century's claim for civil conspiracy involves the "fraudulent" procurement of a default judgment against Century by Prince, which invokes the requirements of Federal Rule of Civil Procedure 9(b). When pleading a claim for civil conspiracy, a plaintiff must plead with particular specificity as to "the manner in which a defendant joined in the conspiracy and how he participated in it." Arroyo v. Wheat, 591 F.Supp. 141, 144 (D. Nev. 1984).
Century has not sufficiently pleaded either a "concerted action" or an "inten[t] to accomplish some unlawful objective." Flowers, 266 F. Supp. 2d at 1249.
First, Century has not shown by clear and convincing evidence that defendants Prince, Ranalli, and Esparza acted in concert with one another. Shapiro, 389 P.3d at 266. Here, Century's complaint alleges that Esparza joined and participated in the "conspiracy" by virtue of her involvement in the decision to retain Prince and giving Prince her case file on Pretner's accident. (ECF No. 1 at 7). Century alleges that Esparza's previous representation of Pretner means that she "knew about and participated in the commission of these predicate acts." (Id. at 17). This conclusory allegation is not enough to sustain a finding that Esparza engaged in a civil conspiracy.
The complaint admits that "instead of retaining counsel to defend Vasquez and Blue Streak, Progressive hired Defendant Ranalli to work with Prince to draft and execute the settlement agreement." (Id. at 9) (emphasis removed). As a result, "Ranalli was instructed to work on a settlement agreement as Prince had already agreed with Progressive regarding the assignment in exchange for a covenant not to execute after payment of Progressive's policy limits." (ECF No. 26 at 16). As stated above, these facts show that Ranalli did not act in concert with Prince, as the settlement agreement had already been agreed upon. Therefore, Century has failed to sufficiently allege—much less prove by clear and convincing evidence—a concerted action sufficient to maintain a cause of action for civil conspiracy. Shapiro, 389 P.3d at 266.
Second, Prince's settlement agreement with Progressive in this case is not tortious, and therefore cannot be the basis for an "unlawful objective" to sustain Century's conspiracy claim. As previously discussed, Century had ample opportunity to engage in the litigation to protect its own interests and those of Blue Streak, but it elected instead to rely on its belief that Progressive was litigating in its place. (ECF Nos. 1 at 11, 37 at 6). Progressive, having appeared in the litigation, had the duty to defend its insured—Vasquez—and the right to enter into a good-faith settlement agreement.
In re MGM Grand Hotel Fire Litigation, 570 F.Supp. 913, 927-928 (D. Nev. 1983).
In short, Century has not sufficiently shown that the settlement was in bad faith. Progressive's settlement with Prince was made at the outset of the claim and offered the policy limit. In re MGM Grand Hotel Fire Litigation, 570 F. Supp. at 927-928; (ECF No. 37 at 4, 6-7). Moreover, Century has not shown that the negotiated settlement went beyond permissible cooperation to constitute tortious "collusion." In re MGM Grand Hotel Fire Litigation, 570 F. Supp. at 927-928. Indeed, Century had the opportunity to pay out on the insurance claim for its policy limit. (ECF No. 37 at 4). Alternatively, Century could have appeared in the litigation to dispute the existence of coverage, rather than unilaterally closing its file. (ECF No. 37 at 5-7). As a result, Century has not shown by clear and convincing evidence that the aim of the negotiated settlement in the underlying case was to injure Century's interests.
Accordingly, the special motion to dismiss will also be granted as to the civil conspiracy claim.
In sum, Century's SLAPP complaint is barred by Nevada law. The special motion to dismiss satisfies the two-prong statutory test because Century's complaint is based on Prince's good faith petitioning of the court, and Century has not shown a likelihood of prevailing on either of its claims. Nev. Rev. Stat. § 41.660(1). As Ranalli and Esparza have joined in Prince's motion, the instant complaint is barred against all defendants. Thus, the complaint will be dismissed. Therefore, Century's objections to the order staying discovery are now moot.
IT IS HEREBY ORDERED, ADJUDGED, and DECREED that the special motion to dismiss pursuant to NRS 41.660 (ECF No. 37) be, and the same hereby is, GRANTED with prejudice, as to all defendants.
IT IS FURTHER ORDERED that Prince's first special motion to dismiss (ECF No. 17) be, and the same hereby is, DENIED as moot.
IT IS FURTHER ORDERED that Esparza's motion to dismiss (ECF No. 18) and Ranalli's motion to dismiss (ECF No. 26) be, and the same hereby are, DENIED as moot.
IT IS FURTHER ORDERED that Century's objections to the order staying discovery (ECF No. 71) be, and the same hereby are, DENIED as moot.
The clerk shall enter judgment accordingly and close the case.