Case 2:23-cv-05551-MCS-JPR Document 34 Filed 12/22/23 Page 1 of 28 Page ID #:328
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`GLUCK LAW FIRM
`Jeffrey S. Gluck (SBN 304555)
` Jeff@Gluckip.com
`16950 Via De Santa Fe
`Rancho Santa Fe, CA 92067
`Telephone: 310-776-7413
`
`ERIKSON LAW GROUP
`David Alden Erikson (SBN 189838)
` david@daviderikson.com
`Antoinette Waller (SBN 152895)
` antoinette@daviderikson.com
`S. Ryan Patterson (SBN 279474)
` ryan@daviderikson.com
`200 North Larchmont Boulevard
`Los Angeles, California 90004
`Telephone: 323-465-3100
`Facsimile: 323-465-3177
`
`GRELL FEIST PLC
`Jeffrey E. Grell (admitted pro hac vice)
` jgrell@grellfeist.com
`825 Nicollet Mall, Suite 625
`Minneapolis, MN 55402
`Telephone: 612-353-5530
`Facsimile: 612-354-7230
`
`Attorneys for Plaintiffs
`
`
`UNITED STATES DISTRICT COURT
`
`CENTRAL DISTRICT OF CALIFORNIA, WESTERN DIVISION
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`KRISTA PERRY, an individual;
`LARISSA MARTINEZ an individual;
`JAY BARON an individual; RACHEL
`PFEFFER, an individual; DIRT BIKE
`KIDZ, Inc., a California corporation;
`ESTELLEJOYLYNN, LLC, a New
`Jersey limited liability company;
`JESSICA LOUISE THOMPSON
`SMITH, an individual; LIV LEE, an
`individual;
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`Plaintiffs,
`
`v.
`
`
`
`SHEIN DISTRIBUTION
`CORPORATION, a Delaware
`corporation; SHEIN FASHION
`
`
`
` Case No. 2:23-cv-05551-MCS-JPR
`Hon. Mark C. Scarsi
`
`
`PLAINTIFFS’ OPPOSITION TO
`DEFENDANTS’ MOTION TO
`DISMISS
`
`
`
`
`
`DATE: JANUARY 22, 2024
`TIME: 9:00 A.M.
`PLACE: COURTROOM 7C
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`

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`Case 2:23-cv-05551-MCS-JPR Document 34 Filed 12/22/23 Page 2 of 28 Page ID #:329
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`GROUP, INC.; ROADGET BUSINESS
`PTE. LTD; ZOETOP BUSINESS
`COMPANY, LIMITED; CHRIS XU;
`and DOES 1-10 inclusive.
`
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`Defendants.
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`OPPOSITION TO MOTION TO DISMISS
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`Case 2:23-cv-05551-MCS-JPR Document 34 Filed 12/22/23 Page 3 of 28 Page ID #:330
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`I.
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`II.
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`TABLE OF CONTENTS
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`
`INTRODUCTION ............................................................................................ 1
`
`RELEVANT FACTUAL ALLEGATIONS ..................................................... 1
`
`III. LEGAL STANDARD ....................................................................................... 2
`
`IV. PLAINTIFFS HAVE STATED A RICO CLAIM ........................................... 2
`
`A.
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`Plaintiffs’ criminal copyright infringement claims are properly
`pleaded. ................................................................................................... 3
`
`B.
`
`Plaintiffs have pleaded wire fraud. ......................................................... 5
`
`1.
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`Plaintiffs have pleaded a scheme to defraud. ............................... 6
`
`a)
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`b)
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`c)
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`A scheme to defraud does not require allegations of
`affirmatively false statements. ........................................... 6
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`Regardless, Plaintiffs allege a scheme to defraud
`that involves affirmative misrepresentations. .................... 7
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`A scheme to defraud can involve copyright
`infringement. ...................................................................... 8
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`2.
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`Plaintiffs’ wire fraud allegations comply with Rule 9(b). ............ 9
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`a)
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`b)
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`Plaintiffs have provided Shein with sufficient
`information to prepare an adequate answer. .................... 10
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`Plaintiffs sufficiently describe each Defendant’s
`uses of the wires. .............................................................. 11
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`C.
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`D.
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`Plaintiffs have alleged injury “by reason of” Shein’s acts of
`racketeering. ......................................................................................... 13
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`Plaintiffs allege Defendants’ participation in the conduct of a
`RICO enterprise. ................................................................................... 15
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`V.
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`BARON HAS ADEQUATELY PLED A CLAIM FOR COPYRIGHT
`INFRINGEMENT OF AN ORIGINAL WORK ............................................ 17
`
`VI. THE SUPPOSEDLY IMPROPER ALLEGATIONS SHOULD NOT
`BE STRUCK ................................................................................................... 20
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`VII. CONCLUSION ............................................................................................... 21
`
`L.R. 11-6.1 CERTIFICATION ................................................................................. 22
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`OPPOSITION TO MOTION TO DISMISS
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`Case 2:23-cv-05551-MCS-JPR Document 34 Filed 12/22/23 Page 4 of 28 Page ID #:331
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`
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`CASES
`
`Anza v. Ideal Steel Corp., 547 U.S. 451, 457-458 (2006) ......................................... 16
`
`Bianchi v. St. Farm Fire and Cas. Co., 120 F. Supp. 2d 837, 841 (N.D. Cal. 2000) 24
`
`Boyle v. United States, 556 U.S. 938, 946 (2009) ..................................................... 21
`
`Boyman v. Disney Enters., Inc., 2018 WL 5094902 (C.D. Cal. June 1, 2018) ....... 4, 5
`
`Bradshaw v. City of Los Angeles, 2023 WL 3400634, *8 (C.D. Cal. March 10, 2023)
` .......................................................................................................................... 6
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`Bryant v. Mattel, Inc., 573 F.Supp.2d 1254, 1268 (C.D. Cal. 2007) .......................... 3
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`Campolo v. Duel, 2023 WL 2558562, *4 (C.D. Cal. Jan. 11, 2023) ........................ 12
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`Cedric Kushner Promotions, Ltd. v. King, 533 U.S. 158, 163 (2001) ...................... 19
`
`Cooper v. United States, 639 F. Supp. 176 (M.D. Fla. 1986) ............................. 10, 11
`
`Cuyuma SA v. Corona Seeds, Inc., 2019 WL 1878353, at *1 (C.D. Cal. Feb. 20,
`2019) ............................................................................................................... 24
`
`Feist Publications, Inc. v. Rural Tel. Serv. Co., 499 U.S. 340, 3451 (1991) ............ 23
`
`Hemi Grp., LLC v. City of New York, 559 U.S. 1, 11 (2010).................................... 16
`
`Holmes v. Sec. Inv. Prot. Corp., 503 U.S. 258 (1992) .................................. 15, 16, 18
`
`In re 2TheMart.com Secs. Litig., 114 F.Supp.2d 955, 965 (C.D. Cal. 2000)............ 25
`
`In re All Terrain Vehicle Litig., 771 F. Supp. 1057, 1062 (C.D. Cal. 1991) .............. 7
`
`In re Volkswagen “Clean Diesel” Mktg., Sales Pracs., & Prods. Liab. Litig., 2017
`WL 4890594 at *11 (N.D. Cal. Oct. 30, 2017)................................................. 8
`
`Jepson, Inc. v. Makita Corp., 34 F.3d 1321, 1329 (7th Cir. 1994) ........................... 14
`
`Kevin Barry Fine Art Assocs. v. Ken Gangbar Studio, Inc., 391 F. Supp. 3d 959
`(N.D. Cal. 2019) ........................................................................................... 3, 4
`
`Living Designs, Inc. v. E.I. Dupont de Nemours and Co., 431 F.3d 353 (9th Cir.
`2005) ......................................................................................................... 19, 20
`
`Los Angeles Waterkeeper v. SSA Terminals, LLC, 2023 WL 7960773, *6 (C.D. Cal.
`Nov 14, 2023) ................................................................................................... 2
`
`Lustiger v. United States, 386 F.2d 132, 138 (9th Cir. 1967) ..................................... 8
`
`Metcalf v. Bochco, 294 F.3d 1069, 1074 (9th Cir. 2002) .......................................... 23
`
`Moore v. Kayport Package Express, Inc., 885 F.2d 531, 541 (9th Cir. 1989).......... 14
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`Neerman v. Cates, 2022 WL 18278377, *6 (C.D. Cal. Dec. 28, 2022) .................... 20
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`Case 2:23-cv-05551-MCS-JPR Document 34 Filed 12/22/23 Page 5 of 28 Page ID #:332
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`Nova Stylings, Inc. v. Ladd, 695 F.2d 1179, 1181 (9th Cir. 1983) ........................... 22
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`Odom v. Microsoft Corp., 486 F.3d 541, 547 (9th Cir. 2007) .................................... 4
`
`Optima Tax Relief LLC v. Channel Clarity, Inc., 2015 WL12765016, *3 (C.D. Cal.
`Aug. 26, 2015) ................................................................................................ 24
`
`Painters and Allied Trades Dist. Council 82 Health Care Fund v. Takeda Pharm.
`Co. Ltd., 520 F. Supp.3d 1258, 1266 (C.D. Cal. 2021) .................................... 7
`
`Pereira v. United States, 347 U.S. 1, 8 (1954).......................................................... 13
`
`Ramirez v. Bank of America, N.A., 634 F. Supp.3d 733, 740 (N.D. Cal. 2022) ....... 13
`
`Reves v. Ernst & Young, 507 U.S. 170, 185 (1993) .................................................. 21
`
`River City Markets, Inc. v. Fleming Foods West, Inc., 960 F.2d 1458, 1461 (9th Cir.
`1992) ............................................................................................................... 19
`
`Schreiber Dist. Co. v. Serv-Well Furniture Co., Inc., 806 F.3d 1393, 1401 (9th Cir.
`1986) ............................................................................................................... 15
`
`Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 498 (1985) .......................................... 6
`
`Skidmore v. Led Zeppelin, 952 F.3d 1051, 1075 (9th Cir. 2020) .............................. 23
`
`Stewart v. Wachowski, 2005 WL 6184235, at *6 (C.D. Cal. June 14, 2005) ............. 4
`
`Sussex Fin. Enter., Inc. v. Bayerische Hypo-und Vereinsbank AG, 2010 WL 94272,
`*3 (N.D. Cal. Jan. 6, 2010) ............................................................................. 14
`
`Swirsky v. Carey, 376 F.3d 841, 848 (9th Cir. 2004) ................................................ 23
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`Sybersound Records, Inc. v. UAV Corp., 517 F.3d 1137 (9th Cir. 2008) ........... 17, 18
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`teamLab Inc. v. Museum of Dream Space, LLC, 650 F. Supp.3d 934, 955 (C.D. Cal.
`2023) ............................................................................................................... 18
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`UAB "Planner5D" v. Facebook, Inc., 534 F. Supp. 3d 1126, 1135 (N.D. Cal. 2021)
` ........................................................................................................................ 22
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`United States ex rel. Lee v. SmithKline Beecham, Inc., 245 F3d 1048, 1052 (9th Cir.
`2001) ............................................................................................................... 11
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`United States ex rel. Lusby v. Rolls-Royce Corp., 570 F.3d 849, 854 (7th Cir 2009) 11
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`United States v. Allen, 155 F.3d 35, 42 (2d Cir. 1998) ............................................. 21
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`United States v. Beecroft, 608 F.2d 753, 757 (9th Cir. 1979) ..................................... 8
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`United States v. Benny, 786 F.2d 1410 (9th Cir. 1986) .............................................. 8
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`United States v. Bohonus, 628 F.2d 1167, 1171 (9th Cir. 1980) ................................ 7
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`United States v. Green, 592 F.3d 1057, 1064 (9th Cir. 2010) .................................... 8
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`OPPOSITION TO MOTION TO DISMISS
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`Case 2:23-cv-05551-MCS-JPR Document 34 Filed 12/22/23 Page 6 of 28 Page ID #:333
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`United States v. Hamilton, 583 F.2d 448, 451 (9th Cir. 1978) ................................. 24
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`United States v. Hussain, 972 F.3d 1138, 1143 (9th Cir. 2020) ................................. 6
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`United States v. MyLife.com, Inc., 499 F. Supp.3d 757, 761 (C.D. 2020) ................ 12
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`United States v. Stapleton, 293 F.3d 1111, 1117 (9th Cir. 2002) ............................. 14
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`United States v. Turkette, 452 U.S. 576, 592 (1981) .................................................. 1
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`Virden v. Graphics One, 623 F. Supp. 1417, 1422 (C.D. Cal. 1985) ......................... 6
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`Watts v. Allstate Indem. Co., 2009 WL 19055047, *6 (E.D. Cal. July 1, 2009)....... 21
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`Whittlestone, Inc. v. Handi-Craft Co., 618 F.3d 970, 973 (9th Cir. 2010) ............... 25
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`STATUTES
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`17 U.S.C. § 506 ........................................................................................................... 3
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`18 U.S.C. § 1343 ......................................................................................................... 7
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`18 U.S.C. § 1964(a)................................................................................................... 18
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`18 U.S.C. § 2319 ......................................................................................................... 3
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`18 U.S.C. §§ 1962(c)................................................................................................... 3
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`1964(c) ............................................................................................................ 3, 15, 18
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`OPPOSITION TO MOTION TO DISMISS
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`Case 2:23-cv-05551-MCS-JPR Document 34 Filed 12/22/23 Page 7 of 28 Page ID #:334
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`I.
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`INTRODUCTION
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`Plaintiffs are independent artists whose intellectual property has been
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`hijacked, infringed, and exploited by an international, multibillion-dollar
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`conglomerate that hides in an ever-changing maze of mirrors. Plaintiffs are very real
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`people, but this conglomerate is a cyber-entity that exists only in the ether of the
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`internet, where it can change its name, its location, its face in a nanosecond.
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`Although someone, somewhere created this entity, it appears to be governed
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`primarily—if not exclusively—by artificial intelligence. The entity’s mission,
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`however, is clear: make money for the creator by any means necessary—rob, steal,
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`cheat, manipulate, misappropriate—make money for the creator. Based on these
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`facts alone, anyone would call the creator a criminal mastermind, but the creator’s
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`real genius is that this entity, this cyber-criminal, leaves no fingerprints or DNA at
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`the scene of its crimes, enabling the creator to repeatedly feign ignorance or to shirk
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`responsibility, while reaping all the profit from the crimes committed on its behalf.
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`When the Racketeer Influenced and Corrupt Organizations (“RICO”) Act was
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`passed by Congress in 1970, RICO was intended to address the serious threat posed
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`by organized crime to the Nation’s economy and to attack the source of organized
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`crime’s “economic power itself, and the attack must take place on all fronts.” United
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`States v. Turkette, 452 U.S. 576, 592 (1981). When it passed RICO, Congress could
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`not have foreseen the internet, artificial intelligence, or autonomous algorithms, but
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`today, this is where the battle against organized crime is being fought, and Plaintiffs
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`have brought that battle to this Court. Although the nature of organized crime has
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`changed since 1970, the Court should deny Defendants’ motion to dismiss and
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`affirm that RICO remains an effective weapon in this battle, no matter how
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`organized crime evolves or what form it tries to take.
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`II. RELEVANT FACTUAL ALLEGATIONS
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`Plaintiffs each allege what Shein likes to cavalierly call “garden variety
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`copyright infringement.” One thing that makes the infringements something more
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`OPPOSITION TO MOTION TO DISMISS
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`Case 2:23-cv-05551-MCS-JPR Document 34 Filed 12/22/23 Page 8 of 28 Page ID #:335
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`than garden-variety is that each infringement has been specifically designed to
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`greatly harm its victims. In fact, Plaintiffs allege that Defendants developed genius
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`level intelligence and technology to accomplish their wrongdoing--finding the most
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`damaging way to steal works.
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`But another way the alleged infringements rise far above the level of the
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`ordinary is that they are part of a systematic mechanism to misappropriate the most
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`valuable designs the world has to offer, specifically gems from smaller time
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`vulnerable artists and designers. Shein developed the highest technology to facilitate
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`such deeds. And somehow Shein has developed a tolerance to bad press, and as a
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`result can get away with these acts.
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`III. LEGAL STANDARD
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` “Establishing the plausibility of a complaint’s allegations is a two-step
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`process that is ‘context specific’ and ‘requires the reviewing court to draw on its
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`judicial experience and common sense.’” Los Angeles Waterkeeper v. SSA
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`Terminals, LLC, 2023 WL 7960773, *6 (C.D. Cal. Nov 14, 2023) (quoting Eclectic
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`Props. E., LLC v. Marcus & Millichap Co., 751 F.3d 990, 995-996 (9th Cir. 2014)).
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`First, the complaint must give fair notice and enable the opposing party to defend
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`itself effectively. Id. Second, the factual allegations taken as true must plausibly
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`suggest an entitlement to relief. Id. Generally, when a plaintiff alleges facts
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`consistent with both the plaintiff’s and the defendant’s explanation, and both
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`explanations are plausible, the plaintiff survives a motion to dismiss. Id. Because
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`Shein’s motion does no more than present an opposing explanation of Shein’s
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`conduct that is as plausible as the explanation presented by Plaintiffs, Shein’s
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`motion must fail.
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`IV. PLAINTIFFS HAVE STATED A RICO CLAIM
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`Plaintiffs have stated a claim for relief under the RICO Act, 18 U.S.C.
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`§§ 1962(c), 1964(c). Contrary to Shein’s assertions, Plaintiffs have pled both
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`criminal copyright infringement, and wire fraud. Plaintiffs have also pled an
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`OPPOSITION TO MOTION TO DISMISS
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`Case 2:23-cv-05551-MCS-JPR Document 34 Filed 12/22/23 Page 9 of 28 Page ID #:336
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`actionable enterprise and injury “by reason of” the RICO violation.
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`A.
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`Plaintiffs’ criminal copyright infringement claims are properly pleaded.
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`The elements of criminal copyright infringement “are easily gleaned from the
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`straightforward statutory language” of 18 U.S.C. § 2319—1) infringement of a
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`copyright; 2) done willfully; 3) for purposes of commercial advantage or private
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`financial gain. 17 U.S.C. § 506, 18 U.S.C. § 2319; see also, Bryant v. Mattel, Inc.,
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`573 F.Supp.2d 1254, 1268 (C.D. Cal. 2007)). A RICO claim may be predicated on a
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`violation of 18 U.S.C. § 2319. See 18 U.S.C. 1961(1). In Kevin Barry Fine Art
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`Assocs. v. Ken Gangbar Studio, Inc., 391 F. Supp. 3d 959 (N.D. Cal. 2019), the
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`court held that copyright infringement can support a RICO claim regardless of
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`whether the infringement constitutes counterfeiting or piracy, which are mostly
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`trademark concepts. Id. at 971.
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`Shein attempts to obscure this clear statutory standard by citing various
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`unreported cases and arguing that “garden-variety” copyright infringement claims
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`(whatever that means) are somehow excluded. (ECF 32-1 at 7-10.) Far from
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`creating a bright-line limitation on the types of copyright infringement that may
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`serve as predicate RICO acts, the decisions in each of the cited cases were limited to
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`the specific allegations at issue; all of which are distinguishable from the present
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`case.
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`For example, Shein asserts that “garden-variety copyright infringement claims
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`‘cannot serve as predicate acts to establish a RICO violation.’” (Id. at 7 quoting
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`Stewart v. Wachowski, 2005 WL 6184235, at *6 (C.D. Cal. June 14, 2005).) Shein’s
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`“quotation” is misleading—the actual quote is: “the court finds that the acts of
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`copyright infringement alleged in this action cannot serve as predicate acts to
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`establish a RICO violation.” Id. (emphasis added). Moreover, Shein fails to mention
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`that Stewart “is no longer tenable.” Kevin Barry Fine Art Assocs., 391 F.Supp.3d at
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`971. The Ninth Circuit has explicitly rejected Stewart’s narrow approach. Id.
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`(analyzing Odom v. Microsoft Corp., 486 F.3d 541, 547 (9th Cir. 2007)). In short,
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`OPPOSITION TO MOTION TO DISMISS
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`Case 2:23-cv-05551-MCS-JPR Document 34 Filed 12/22/23 Page 10 of 28 Page ID #:337
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`Stewart is not good law—and has not been for over a decade.
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`Further, the Stewart decision was likely motivated by the meritless nature of
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`the copyright claims at issue. Stewart involved “idea theft,” i.e., defendants stole the
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`plaintiff’s ideas to make the Terminator and Matrix movies. Stewart, 2005 WL
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`6184235 at *1, 2.
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`Similarly, in Boyman v. Disney Enters., Inc., 2018 WL 5094902 (C.D. Cal.
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`June 1, 2018), a pro se plaintiff brought outlandish copyright-based RICO claims.
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`Again, the court did not hold that RICO could never be predicated on copyright
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`infringement; it simply held that the claims—as alleged—were not RICO predicate
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`acts. Id. at *5. Moreover, the plaintiff alleged only one act of infringement. As the
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`court noted, “a single predicate act cannot establish a pattern of racketeering” under
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`RICO. Id.
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`Unlike the copyright cases cited by Shein, Plaintiffs allege the precise type of
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`infringement that Congress intended to prohibit—the intentional large-scale
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`reproduction of copyrighted works for commercial gain. (ECF 23 at ¶¶ 4-6
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`(describing Shein’s infringing activities as “part and parcel of Shein’s ‘design’
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`process and organizational DNA;” and Defendants’ business model as “a pattern of
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`systematic criminal intellectual property infringement… baked in from the very
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`beginning”).)
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`Indeed, Shein concedes that such allegations are properly considered
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`predicate acts under RICO. (ECF 32-1 at 23-28.) Nonetheless, it argues that its
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`alleged infringement falls short because it does not rise to the level of “large-scale”
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`piracy or counterfeiting. Notably, it provides no citation for the “large-scale”
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`wording it offers. Shein, further, does not bother to explain what “piracy” or
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`“counterfeiting” means or how those terms differ from other forms of infringement.
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`Rather, Shein argues that its infringement was “small-scale,” citing Plaintiffs’
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`allegations that a modest amount of goods was sold at highly discounted prices. This
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`argument is too clever by half.
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`OPPOSITION TO MOTION TO DISMISS
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`Case 2:23-cv-05551-MCS-JPR Document 34 Filed 12/22/23 Page 11 of 28 Page ID #:338
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`Plaintiffs allege that Shein employs a cutting-edge technological process that
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`uses artificial intelligence to identify and copy popular designs. (ECF 23 at ¶¶ 5, 24,
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`29, 36.) Shein’s claim that such allegations are not actionable because it constitutes
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`de minimis infringement—small numbers of infringing units produced and sold at
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`rock-bottom prices—cannot be taken seriously.1 Otherwise, Shein would be able to
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`escape liability by simply carefully monitoring its production numbers and price
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`points.
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`RICO should “be liberally construed to effectuate its remedial purposes.”
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`Odom, 486 F.3d at 547 (citing Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 498
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`(1985) (internal citations omitted)). Shein’s failure to cite any post-Odom Ninth
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`Circuit case to support their proposition that only “large-scale” infringement may be
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`a predicate act under RICO is understandable—no such precedent exists. Even if it
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`did, Shein’s argument falls flat because Plaintiffs clearly allege that the core of
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`Shein’s business is a high-tech copyright infringement robot, supercharged by
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`artificial intelligence and a proprietary algorithm.
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`B.
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`Plaintiffs have pleaded wire fraud.
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`To establish wire fraud, the plaintiff must allege three elements: (1) a scheme
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`to defraud, (2) use of the wires in furtherance of the scheme, and (3) a specific intent
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`to deceive or defraud. United States v. Hussain, 972 F.3d 1138, 1143 (9th Cir.
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`2020). 2 Shein argues that Plaintiffs’ wire fraud allegations are insufficient because
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`they have not pled a scheme to defraud or each defendants’ use of the wires in
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`furtherance of the scheme. (ECF 32-1 at 11-15.) Shein’s arguments are misplaced.
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`1 See Bradshaw v. City of Los Angeles, 2023 WL 3400634, *8 (C.D. Cal. March 10,
`2023) (denying a motion to dismiss a RICO claim where the complaint alleged some
`“economic injury” and holding that even if the plaintiff could not prove a specific
`amount of damage, it “may nevertheless be entitled to nominal damages”).
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`2 The mail and wire fraud statutes “are considered of equal scope and are construed
`with reference to each other.” Virden v. Graphics One, 623 F. Supp. 1417, 1422
`(C.D. Cal. 1985).
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`OPPOSITION TO MOTION TO DISMISS
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`Case 2:23-cv-05551-MCS-JPR Document 34 Filed 12/22/23 Page 12 of 28 Page ID #:339
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`1.
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`Plaintiffs have pleaded a scheme to defraud.
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`When the federal wire fraud statute (18 U.S.C. § 1343) refers to a “scheme to
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`defraud,” it refers to far more than common law fraud. The nature of a “scheme to
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`defraud” is measured by a non-technical standard. United States v. Bohonus, 628
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`F.2d 1167, 1171 (9th Cir. 1980). The wire fraud statute condemns any scheme that
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`is “contrary to public policy or which fail[s] to measure up to the reflection of moral
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`uprightness, of fundamental honesty, fair play and right dealing in the general and
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`business life of members of society.” Id.
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`a)
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`A scheme to defraud does not require allegations of
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`affirmatively false statements.
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`The Ninth Circuit has specifically held that “[t]he fraudulent scheme need not
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`be one that includes an affirmative misrepresentation of fact, … it is only necessary
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`for the [plaintiff] to prove that the scheme was calculated to deceive persons of
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`ordinary prudence.” Bohonus, 628 F.2d at 1172. The wire fraud statute is violated
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`by “the telling of a half-truth, independent of any responsibilities arising from a trust
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`relationship.”3 Painters and Allied Trades Dist. Council 82 Health Care Fund v.
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`Takeda Pharm. Co. Ltd., 520 F. Supp.3d 1258, 1266 (C.D. Cal. 2021). One may
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`also engage in a scheme to defraud by acting “with reckless indifference to whether
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`a representation is true or false.” United States v. Beecroft, 608 F.2d 753, 757 (9th
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`Cir. 1979). Moreover, “deception need not be premised upon verbalized words
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`alone.” Lustiger v. United States, 386 F.2d 132, 138 (9th Cir. 1967). “The
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`arrangement of the words, or the circumstances in which they are used may convey
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`the false and deceptive appearance.” Id. Accordingly, a scheme to defraud may
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`involve affirmative misrepresentations, but a scheme to defraud does not require an
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`27
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`3 Compare with In re All Terrain Vehicle Litig., 771 F. Supp. 1057, 1062 (C.D. Cal.
`1991) (stating that “absent an independent duty, such as a fiduciary duty or explicit
`statutory duty, failure to disclose cannot be the basis of a fraudulent scheme”).
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`OPPOSITION TO MOTION TO DISMISS
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`Case 2:23-cv-05551-MCS-JPR Document 34 Filed 12/22/23 Page 13 of 28 Page ID #:340
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`affirmative, material misrepresentation. (ECF 32-1 at 12.)4
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`b) Regardless, Plaintiffs allege a scheme to defraud that
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`involves affirmative misrepresentations.
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`Shein’s brief also ignores the fact that Plaintiffs allege many affirmative
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`misrepresentations. For example, Plaintiffs describe how Shein’s “byzantine
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`structure” allows it to falsely “blame[] unnamed third part[ies] for any misconduct,
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`and report[] (but not always accurately [i.e., falsely]) that sales were shockingly
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`low.” (Id. at ¶ 44, 57.) Plaintiffs repeatedly allege that, in its ordinary course of
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`business, Shein makes the false claim that any transgression of intellectual property
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`rights is “not Shein’s fault” (id. at ¶ 44), “was committed by another company” (id.
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`at ¶ 45), or was not committed by the entity that the victim contacted (id. at ¶¶ 61,
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`62). Plaintiffs also allege that Shein repeatedly and affirmatively misrepresents that
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`it is a “unitary” company with 10,000 employees in 150 countries, when in fact
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`“there is no one company employing 10,000 people.” (Id. at ¶¶ 51-53.) Plaintiffs
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`further allege that Shein misrepresents that its manufacturers and designers are
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`“outside and independent,” when in fact they are not. (Id. at ¶ 52.) Shein also
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`allegedly makes the false claim that it “does not have access to information held by
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`the company responsible for the design.” (Id. at ¶ 72.) Finally, when caught
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`infringing, Shein falsely represents that it will remove all infringing products. (Id. at
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`¶ 73.) Considering the plethora of affirmatively false statements that are part of
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`4 Shein cites In re Volkswagen “Clean Diesel” Mktg., Sales Pracs., & Prods. Liab.
`Litig., 2017 WL 4890594 at *11 (N.D. Cal. Oct. 30, 2017), which in turn relied
`upon United States v. Green, 592 F.3d 1057, 1064 (9th Cir. 2010). In both of these
`cases, the schemes clearly involved affirmatively false representations and did not
`examine other violative schemes. See id. at 1067-68; Volkswagen, 2017 WL
`4890594 at *15. Green further relied on United States v. Benny, 786 F.2d 1410 (9th
`Cir. 1986). Benny did not hold that a scheme to defraud required an affirmative
`misrepresentation. Benny simply states that “[p]roof of an affirmative, material
`misrepresentation supports a conviction of mail fraud without any additional proof
`of a fiduciary duty.” Id. at 1418.
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`OPPOSITION TO MOTION TO DISMISS
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`Case 2:23-cv-05551-MCS-JPR Document 34 Filed 12/22/23 Page 14 of 28 Page ID #:341
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`Shein’s alleged scheme to defraud, Shein’s argument that Plaintiffs have not alleged
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`any affirmatively false statements is, frankly, bizarre.
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`3
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`Plaintiffs have sufficiently alleged that Shein’s conduct is contrary to public
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`policy, fails to measure up to the reflection of moral uprightness, fundamental
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`honesty, fair play, and right dealing in the general and business life of members of
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`society. (See ECF 23 at ¶ 168 (paraphrasing Bohonus, 628 F.2d at 1171).
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`Accordingly, Plaintiffs have pled a scheme to defraud, and Shein’s motion to
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`dismiss must be denied.
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`c)
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`A scheme to defraud can involve copyright infringement.
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`Shein also argues that a defendant’s copyright infringement somehow
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`immunizes them from any claim of wire fraud. (ECF 32-1 at 11-12.) First, Plaintiffs
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`do not simply restyle their copyright infringement claim as wire fraud. As set forth
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`above, Shein’s scheme to defraud involves much more than mere copyright
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`infringement. It also involves an intentionally ambiguous and byzantine corporate
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`structure that makes it nearly impossible for a plaintiff to identity who can be sued
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`and where. (ECF 23 at ¶ 57.) If a potentially responsible party is identified, Shein
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`will further lie and blame other parties, either within or without its corporate
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`structure. Shein will misrepresent that the sales of the product were very low or that
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`it cannot find documents relating to the claim. (Id. at ¶ 44, 72.)
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`To be actionable, “it is only necessary for the [plaintiff] to prove that the
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`scheme was calculated to deceive persons of ordinary prudence.” Bohonus, 628 F.2d
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`at 1172. All the false statements alleged by Plaintiffs are calculated to deceive
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`victims, the public, the courts, and regulators about Shein’s structure, who is
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`responsible for any particular act committed by “Shein,” the integrated or
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`disintegrated relationship among Shein entities, whether and where Shein is subject
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`to jurisdiction, and whether any human is responsible for its wrongful conduct
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`27
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`versus a rogue robot. In light of the non-copyright related statements, Plaintiffs’
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`wire fraud claims are adequately pled.
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` 8
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`OPPOSITION TO MOTION TO DISMISS
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`

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`Case 2:23-cv-05551-MCS-JPR Document 34