Palantir Technologies v. Abramowitz, 2021 WL 2400779 (N.D. Cal., June 11, 2021)
The court granted Defendant’s motion to dismiss the civil RICO claim finding that plaintiff did not adequately plead RICO “continuity.”
In this case for years between 2012 and 2014, a consultant named Abramowitz engaged in discussions with Palantir’s employees regarding certain technologies and gained access to Palantir’s confidential and proprietary information regarding its Healthcare, Cyber, and Natural Resources Technologies. This conduct continued through year 2018 in which Abramowitz filed 14 domestic and international patent applications based on this confidential and proprietary information, falsely claiming on each application to be the sole inventor, Palantir alleges that it was harmed by Defendants’ actions because it spent millions of dollars developing its Healthcare, Cyber, and Natural Resources Technologies; lost value from its trade secrets by Defendants’ unauthorized publication of the trade secrets in patent applications; spent significant funds and resources investigating Defendants’ misconduct; initiated proceedings before the U.S. Patent and Trademark Office (“USPTO”) and before German courts to establish that Palantir is the true inventor of the patent applications at issue; lost substantial financial gain; and lost valuable business opportunities.
Closed Ended Continuity
The Parties are in agreement that the alleged predicate acts are wire fraud based on alleged affirmative misrepresentations and omissions. The court discussed that “The continuity requirement reflects Congress ‘concern[ ] in RICO with long-term criminal conduct.’ ” *6 citing Mocha Mill, Inc. v. Port of Mokha, Inc., No. 18-CV-02539-HSG, 2019 WL 1048252, at *10 (N.D. Cal. Mar. 5, 2019) (quoting H.J., 492 U.S. 229, 240 (1989)). “[C]ontinuity is both a closed- and open-ended concept, referring either to a closed period of repeated conduct or to past conduct that by its nature projects into the future with a threat of repetition.” Mocha Mill, 2019 WL 1048252, at *10 (internal quotation marks omitted).
Closed-ended continuity is established by showing that related predicate acts occurred over a substantial period of time.” Id. (internal quotation marks omitted). “[T]he Ninth Circuit has explained that activity spanning only a matter of months, involving a single victim, with a singular goal, cannot sustain a RICO claim.” Mocha Mill, 2019 WL 1048252, at *10 (citing Medallion Television Enterprises, Inc. v. SelecTV of California, Inc., 833 F.2d 1360, 1363 (9th Cir. 1987)). A “single episode,” containing multiple predicate acts, “having the singular purpose of impoverishing [the plaintiff],” with “no suggestion that these defendants…ever intended anyone but [plaintiff] any harm” also cannot sustain a RICO claim. Mocha Mill, 2019 WL 1048252, at *10 (quoting Sever v. Alaska Pulp Corp., 978 F.2d 1529, 1535 (9th Cir. 1992)).
Defendants argued that, since this alleged scheme only has a single fraud—establishing competing businesses based on Palantir’s own technology to benefit the Abramowitz enterprise— and a single victim—Palantir—there can be no closed-ended continuity under Ninth Circuit law. Palantir argues that the multiyear length of the alleged scheme is sufficient to allege closed-ended continuity and suggests, for the first time, that the USPTO is also a victim of the scheme. Opp’n 18-20.
“RICO’s continuity requirement is not satisfied if plaintiffs have merely alleged a single fraud perpetrated on a single victim.” United Energy Owners Comm., Inc. v. U.S. Energy Mgmt. Sys., Inc., 837 F.2d 356, 360 (9th Cir. 1988) (internal quotation marks omitted); accord Shwurong Lee v. Bank of New York Mellon, No. 16-CV-05094-JST, 2016 WL 8729924, at *9 (N.D. Cal. Dec. 9, 2016). The Court also previously noted that the second factor, the number of victims, is more determinative as the Ninth Circuit rarely upholds a finding of continuity where there is only a single victim. See Sever, 978 F.2d at 1535.*7.
The Court agrees with Defendants that “longevity is only one piece of the puzzle.”*8. Palantir’s allegations regarding the victim of the scheme (Palantir) and the single goal of the scheme (“establishing competing businesses based on Palantir’s own technology to benefit himself, KT4, and the Trust”) have not changed since the Court previously found them deficient. The court relied on
Ninth Circuit’s decisions in Sever and Medallion to compel this Court’s decision in this case, i.e., that “although Sever alleges a number of ‘acts,’ APC’s collective conduct is in a sense a single episode having the singular purpose of impoverishing Sever, rather than a series of separate, related acts.” Id. at 1535. The Ninth Circuit found that these allegations do not satisfy the continuity requirement established by the Supreme Court in H.J. v. Northwestern Bell. Sever, 978 F.2d at 1535. Analogizing to Medallion, the Ninth Circuit found that predicate acts designed to bring about a single event did not pose a threat of continuity. Id. at 1535-36. Single-victim cases with a single episode—regardless of the alleged number of actual acts—and a single purpose do not meet the continuity requirement. See id. at 1535.
The court found that since there is a single victim (Palantir) and acts that can properly be characterized as a single episode (stealing Palantir’s confidential and proprietary information) for a single purpose (establishing competing businesses based on Palantir’s own technology, these “[are] in a sense a single episode,” Sever, 978 F.2d at 1535, and that does not satisfy the continuity requirement stating-
The situation in this case is analogous [to Medallion]: a single alleged fraud—theft of Palantir’s trade secrets in order to establish competing businesses to benefit the Abramowitz enterprise—was committed against a single alleged victim—Palantir. *9.
The court also discussed that Mocha Mill, a recent decision from this district, follows Sever and Medallion. Mocha Mill, 2019 WL 1048252. In Mocha Mill, the plaintiffs alleged conspiratorial conduct lasting over two years “with a singular goal of stealing Mocha Mill’s business” had not established closed-ended continuity. *8. The court concluded that since Palantir has only pled a singular goal with a single alleged episode constituting a single fraud against a single victim, it has not sufficiently pled closed-ended continuity, after multiple revisions of the Complaints, Palantir’s RICO claim based on closed-ended continuity is DISMISSED WITHOUT LEAVE TO AMEND.
The court discussed that only predicate acts can form the basis of an open-ended continuity allegation. Ticor Title Ins. Co. v. Florida, 937 F.2d 447, 450 (9th Cir. 1991) (“To satisfy the continuity prong of the test, one need only show that the predicates pose a threat of continued criminal activity, such as when the illegal conduct is “a regular way of conducting [a] defendant’s ongoing legitimate business.”) (emphasis added) (quoting H.J., 492 U.S. 229, 243 (1989)).
Because Palantir’s allegations regarding open-ended continuity rely on alleged fraud regarding patent applications—conduct that does not constitute mail or wire fraud—Palantir has not sufficiently pled open-ended continuity. See Fleet Credit Corp. v. Sion, 893 F.2d 441, 448 (1st Cir. 1990) (“A threat of continued criminal activity for purposes of RICO is not established merely by demonstrating that the Sions’ acts of common law fraud were a regular way of conducting their ongoing businesses. Rather, Fleet must demonstrate that the predicate acts—here the acts of mail fraud—were a regular way of conducting the ongoing businesses.”) (emphasis in original). The alleged predicate acts in this case, i.e., the misrepresentations by Abramowitz to induce the sharing of confidential information and material omissions concerning fraudulent plans, had ceased by the time this lawsuit was filed.
Since Palantir has repeatedly failed to cure the deficiencies with its open-ended continuity theories by amendment, Palantir’s RICO claim based on open-ended continuity was dismissed without leave to amend.