Free Brief - District Court of California - California

Case 3:07-cv-04946-JSW

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CHRISTOPHER COOKE, CA Bar #142342 STEPHEN S. WU, CA Bar # 205091 COOKE KOBRICK & WU LLP 177 Bovet Road, Suite 600 San Mateo, CA 94402 Email: [email protected] [email protected] Tel: (650) 638-2370 Fax: (650) 341-1395 Attorneys for Plaintiffs

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA SAN FRANCISCO DIVISION MEI-FANG LISA ZHANG, BAY AREA AFFORDABLE HOUSING, LLC, XUEHUAN GAO, YANG-CHUN ZHANG, CAROL JIAN DENG, and HAO LIANG, Plaintiffs, vs. WEI-MAN RAYMOND TSE, RUN PING ZHOU a.k.a. FLORA ZHOU, THERESA WONG, JAMES YU, BILL SHU WAI MA, MOLLY LAU, VICTOR SO, JIAN XIAO, CHRIST INVESTMENT SERVICE INC., CIS SERVICE, INC., PACIFIC BEST GROUP LTD. a.k.a. PACIFIC BEST COMPANY LTD., and SOUTH CHINA INVESTMENT INC., Defendants. ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) Case No.: C-07-04946 JSW (Related to C-05-02641 JSW) PLAINTIFFS' MEMORANDUM AND POINTS AND AUTHORITIES SUPPORTING MOTION TO DISMISS COUNTERCLAIM OF DEFENDANT RUN PING ZHOU FOR FAILURE TO STATE A CLAIM UPON WHICH RELIEF CAN BE GRANTED (FED. R. CIV. P. 12(b)(6)) Date: August 8, 2008 Time: 9:00 a.m. Courtroom: 2, 17th Floor

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TABLE OF AUTHORITIES Page 5

Sheldon Appel Co. v. Albert & Oliker, 47 Cal. 3d 863, 871, 765 P.2d 498, 501 (1989).

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I.

SUMMARY OF ARGUMENT

Plaintiffs' Complaint states that Defendant RUN PING ZHOU was part of a RICO enterprise, whose purpose is to defraud and steal money from investors by accepting investments for foreign currency futures trading and misappropriating the amounts invested. In her pro se Answer, Ms. Zhou denies the allegations in the Complaint, and she further asserts a Counterclaim with claims against all Plaintiffs. She indignantly denies all liability and, in her Counterclaim, she essentially says that Plaintiffs' Complaint constitutes malicious prosecution. She cannot maintain a malicious prosecution claim as a matter of law, however, because this action has not been legally terminated in her favor. Given that her Counterclaim is legally deficient, the Court should dismiss it under Fed. R. Civ. P. 12(b)(6) without leave to amend. II. FACTS

This is an action, both in law and in equity, brought by victims of commodities fraud under the Racketeer Influenced Corrupt Organization Act ("RICO") and the Commodity Exchange Act ("CEA"). Plaintiffs are individuals and a small business in the San Francisco Area and in particular are members of the San Francisco Chinese community. Defendants are individuals and the businesses they operated in San Francisco, which purported to conduct foreign currency futures trading on behalf of clients for investment purposes. Plaintiffs invested large sums of money with Defendants for foreign currency futures trading in response to personal solicitations and advertisements in Chinese language newspapers. Defendants' businesses, however, were wholly fraudulent. Defendants opened an office, used telephone trading telephone lines in Hong Kong, created computerized records, faxed and emailed written reports of accounts to customers, provided receipts for funds received, and in some cases returned modest amounts of investor moneys, all for the purpose of creating the appearance of a legitimate foreign currency futures trading business. Defendants, however, never actually conducted any foreign currency futures trading, and simply stole the funds that investors transferred to them for their personal use. Plaintiffs filed their Complaint on September 24, 2008. Ms. Zhou filed an Answer on May 27, 2008. In her Answer, she denies any liability. For instance, she states, as to Counts I -3PLAINTIFFS' MPA SUPPORTING MOTION TO DIMSISS COUNTERCLAIM OF DEFENDANT RUN PING ZHOU Case No.: C-07-04946 JSW

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and II, "I deny Plaintiffs have the right to require me to pay compensatory damages of $321,149 and for that matter, any amount against me." (Answer and Counterclaim at 18.) She denies liability as to the remaining counts as well. Ms. Zhou then asserts a Counterclaim against all Plaintiffs. (Id. at 20-27.) In the factual allegations supporting the Counterclaim, she continues to deny the claims in the Complaint and accuses Plaintiffs of lying. (E.g., id. at 20-21.) Specifically, she accuses Plaintiff MEI-FANG LISA ZHANG of lying, saying "She knew the truth that I did not work any more after I left NICI, she still tried to frame a new case against me." (Id. ¶ 222, at 23.) She also says, "Zhang also is misleading her lawyer in believing that she is a fraud victim by her untold truth of her illegal trading of foreign currency futures, which she hopes allows her to sue for more money." (Id. ¶ 224, at 23.) She concludes her counterclaim against Plaintiff Zhang by saying "Zhang has no reason to bring a false charge against me." (Id. ¶ 225, at 24.) Similarly, she accuses Plaintiff BAY AREA AFFORDABLE HOUSING and its member JIMMY JEN of bringing "a false charge against" her in her counterclaim against them. (Id. ¶ 231, at 24.) Likewise, she also asserts a similar counterclaim against the remaining Plaintiffs XUE-HUAN GAO, YANG-CHUN ZHANG, CAROL JIAN DENG, and HAO LIANG. Ms. Zhou says that the case against her is "unfair" and therefore, "They deserve a punishment! They should show me all of their invoices from their attorney for this case, then pay me the same price. The price is let them learn a lesson." (Id. ¶ 237, at 25.) She continues her denials and defenses in a counterclaim entitled "Other Counterclaim Against All the Plaintiffs." (Id. at 2627.) In sum, all of the seven claims in her Counterclaim are Ms. Zhou's position that she stands unfairly accused of wrongful conduct by Plaintiffs, Plaintiffs' Complaint contains lies, Plaintiffs are framing her, and Plaintiffs therefore deserve punishment. In other words, the essence of her Counterclaim is that Plaintiffs' action constitutes malicious prosecution. III. ARGUMENT

Defendant RUN PING ZHOU's Counterclaim fails as a matter of law. She asserts Plaintiffs are maliciously prosecuting her, but she has not won the underlying case, and -4PLAINTIFFS' MPA SUPPORTING MOTION TO DIMSISS COUNTERCLAIM OF DEFENDANT RUN PING ZHOU Case No.: C-07-04946 JSW

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prevailing in the underlying case is an essential element of a malicious prosecution claim. Accordingly, her Counterclaim is legally deficient. The tort of malicious prosecution applies to maliciously instituted criminal charges or civil cases. Sheldon Appel Co. v. Albert & Oliker, 47 Cal. 3d 863, 871, 765 P.2d 498, 501 (1989). "Under governing authorities, in order to establish a cause of action for malicious prosecution of either a criminal or civil proceeding, a plaintiff must demonstrate `that the prior action (1) was commenced by or at the direction of the defendant and was pursued to a legal termination in his, plaintiff's, favor [citations]; (2) was brought without probable cause [citations]; and (3) was initiated with malice [citations].'" Id. (quoting Bertero v. National General Corp., 3 Cal.3d 43, 50, 529 P.2d 608; Rest. 2d Torts, §§ 653-681B.) (emphasis added). In other words, Defendant must win the prior action before asserting a malicious prosecution claim. The California Supreme Court emphasized that malicious prosecution "has traditionally been regarded as a disfavored cause of action." Id. at 872, 765 P.2d at 502. "[T]he elements of the tort have historically been carefully circumscribed so that litigants with potentially valid claims will not be deterred from bringing their claims to court by a prospect of a subsequent malicious prosecution claim." Id. The Court rejected any attempt to "abandon or relax the traditional limitations on malicious prosecution recover." Id. at 874, 765 P.2d at 503. Here, the case against Defendant Zhou is still underway. Consequently, the case has not been terminated legally in her favor. Therefore, she cannot meet the first essential element of a malicious prosecution claim and thus her Counterclaim fails. The Court should not permit her to proceed with this "disfavored" claim, in the words of the California Supreme Court. Moreover, Defendant Zhou can plead no facts at this time that would permit her to state a claim for malicious prosecution. No matter what she could say, she has not won the case against her. Therefore, she should not be granted leave to amend her Counterclaim.

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IV.

CONCLUSION

For the reasons set forth above, Plaintiffs respectfully request that the Court dismiss the Counterclaim of Defendant RUN PING ZHOU against the Plaintiffs for failure to state a claim upon which relief can be granted without leave to amend.

Respectfully Submitted, COOKE, KOBRICK, & WU LLP Dated: June 16, 2008 /s/ By: CHRISTOPHER C. COOKE Attorneys for Plaintiffs

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