Judge denies motion to dismiss investor's suit alleging fraud regarding casino project

By Charmaine Little | Oct 17, 2018

SAN FRANCISCO – The U.S. District Court for the Northern District of California recently denied motions to dismiss an investment group's lawsuit alleging fraud and breach of contract regarding a Pinoleville Pomo Nation casino project.

U.S. District Judge William H. Orrick, in his Oct. 5 decision, denied the requests by the Pinoleville Pomo Nation and the Canales Group in the lawsuit filed by JW Gaming LLC, which claimed it invested $5.38 million in the Pinoleville casino project under the impression it was matching an investment in the same amount from the Canales Group based on a previous agreement. 

JW Gaming accused the Pinoleville Pomo Nation and the Canales Group of a fraud scheme that tricked JW Gaming into investing while the defendants allegedly used the money for their own personal uses. JW Gaming sued for breach of contract, fraud and violation of the Racketeer Influenced and Corrupt Organizations (RICO) Act.

The suit also named the Pinoleville Gaming Commission, the Pinoleville Business Board and Pinoleville Economic Development LLC as defendants.  

The court first pointed out the tribal defendants are not covered under sovereign immunity. Even though tribal officers that are sued in an official capacity are given that immunity, the ones sued in the individual capacity, such as in this case, are not. 

The court also found that JW Gaming does have sanding, despite the defendants stating it failed to prove their alleged activity caused injury. “Here, JW Gaming properly alleged proximate cause between its injury and the racketeering activity,” the court decision said. It added that there was proof the defendants falsified their investments, which caused injury to JW Gaming under RICO.

While the tribal defendants said the court didn’t have subject matter because it could interfere with the tribe’s ability to govern itself, the court disagreed. It said this goes beyond a simple internal disagreement and now reaches possible criminal activity like fraud from someone who isn’t considered a member of the tribe.

The court also decided JW Gaming met the requirements of Rule 9(b) in his lawsuit as it included details like the names of those involved, including those accused of falsifying account reports.

While JW Gaming wanted the court to declare any appeal from the defendants as frivolous, the court declined. While JW Gaming has a legit case, the court said it isn’t such an open-and-shut case that an appeal would be out of the question. Still, the court denied the defendants’ motion to dismiss.

The legal issues date back in July 2008 when there were emails between JW Gaming and the Canales Group in which the latter agreed to make the $5 million investment in the project. James Winner (JW Gaming) said he would match the amount. It was also given a copy of a promissory note that was intended to serve as proof of the Canales Group’s investment. 

JW Gaming later discovered the Canales Group never made the investment into the project. Instead, it used its payments for personal endeavors like transferring a romantic partner and moving $400,000 to an organization that two of the defendants oversee, court filings said. Another $1 million was transferred to other defendants. 

After JW Gaming raised its concerns, it was given a promissory note to repay the more than $5 million it invested. JW Gaming then sued in March 2018 after it found out about the alleged fraud. 

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