2 F. Supp. 2d 93
D. Mass.2014Background
- Plaintiff Suzanne M. Natale, administratrix of Richard Natale's Massachusetts estate, sues Espy Corporation and individual insiders (Smith, Potthast, Harris) for six common-law claims and two RICO counts.
- Richard Natale held 24% of Espy stock (300 shares) and helped develop Espy; the remaining stock was held by Defendants in Texas.
- Since Richard's death in 2006, Defendants allegedly diluted Natale's ownership by issuing new shares to themselves without distributing any to the estate.
- Defendants allegedly misrepresented the estate's ownership in IRS Schedule K-1 filings and failed to pay dividends, increasing salaries and bonuses instead.
- The case involves federal RICO counts (VII-VIII) and state-law claims arising from a Texas corporation with Massachusetts-related plaintiff and Massachusetts probate context.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| RICO claims viability | Natale asserts predicate acts (mail fraud/extortion) support a RICO pattern. | Smith/Potthast/Harris argue no valid predicate offenses or pattern. | RICO claims dismissed. |
| Breach of fiduciary duty and oppression/unjust enrichment | Majority-control conduct harmed minority (oppressive conduct; reduction of Natale's stake). | Issuance of shares/dividends/salaries within corporate powers; no explicit breach proven yet. | Counts I and II survive (oppression theory); unjust enrichment survives to discovery. |
| Conversion, Fraud, and Theft | Defendants converted funds (bonuses/salaries) to themselves. | Money cannot be converted as property; misrepresentations insufficient. | Counts III (conversion), V (fraud), and VI (theft) dismissed. |
| Civil conspiracy | Secret rump meeting and joint actions show conspiracy to freeze Natale out. | Plausible underlying tort supports conspiracy; need record for trial. | Count IV survives. |
| Transfer venue | Massachusetts forum appropriate; substantial connections to Massachusetts. | Texas ties and convenience favor transfer. | Motion to transfer denied. |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (U.S. 2009) (plausibility pleading standard applies to Rule 12(b)(6))
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (U.S. 2007) (plausibility standard for complaint sufficiency)
- Efron v. Embassy Suites (Puerto Rico), Inc., 223 F.3d 12 (1st Cir. 2000) (pattern requirement in RICO; multiple acts must show continued criminal activity)
- Feinstein v. Resolution Trust Corp., 942 F.2d 34 (1st Cir. 1991) (fraud-based RICO pleading heightened under Rule 9(b))
- N. Am. Catholic Educ. Programming Found., Inc. v. Cardinale, 567 F.3d 8 (1st Cir. 2009) (fraud pleading requirements for RICO; intent necessary)