Stephen Ouwinga v. Benistar 419 Plan Services
694 F.3d 783
| 6th Cir. | 2012Background
- Ouwingas allege a scheme to promote a Benistar 419 Plan as a tax shelter, leading to IRS challenges and back taxes.
- Plan marketed through Benistar entities and John Hancock insurers; defendants provided documents and legal opinions touting deductibility.
- Ouwingas contributed substantial funds in 2001; later IRS ruled the plan non-deductible, disallowing deductions in 2008.
- Amended complaint asserts RICO claims and several state-law claims against multiple parties (planning, law, and agent defendants).
- District court dismissed all claims on Rule 12(b)(6) grounds, including PSLRA-based bar and reliance on disclaimers.
- Appeal reversed and remanded; court held pleading adequate to proceed on RICO components and state-law claims when disclaimers questioned in context.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether PSLRA bars RICO claims here | Ouwingas contend predicates are tax not securities; PSLRA not applicable. | Defendants argue securities-based fraud triggers PSLRA bar. | PSLRA does not bar because fraud was tax-based, not securities fraud. |
| Whether there is a valid 'conduct' element under §1962(c) | Defendants knowingly carried out enterprise directions in promoting plan. | Agents merely marketed plan; not involved in enterprise-level management. | Allegations plausibly show conduct of enterprise and not mere personal affairs. |
| Whether there is a valid 'enterprise' under §1962(c) | Ouwingas allege a continuing association-in-fact with structure and longevity. | District court found lack of distinct enterprise separate from pattern of racketeering. | Amended complaint plausibly alleges an association-in-fact enterprise with five-year operation. |
| Whether there is a valid 'pattern of racketeering' under §1962(c) | Predicate acts of mail/wire, related by common purpose and continuity over years. | Acts may not be sufficiently interrelated or continuous. | Relationship and continuity prongs satisfied for Agent/Hancock; closer for Lawyer defendants but plausible. |
| Whether conspiracy under §1962(d) is adequately pled | Incorporated allegations show agreement to commit predicate acts. | Conspiracy claims were conclusory. | Allegations, when incorporated with prior facts, state a plausible conspiracy claim. |
| Whether the district court erred in dismissing state-law claims based on disclaimers | Disclaimers must be evaluated in full context; dismissals improper at 12(b)(6). | Disclaimers foreclose reliance and negate misrepresentation claims. | Dismissal reversed; context shows potential reliance and actionable misrepresentation against Lawyer Defendants. |
Key Cases Cited
- Reves v. Ernst & Young, 507 U.S. 170 (1993) (participation in enterprise requires operation or management)
- Moon v. Harrison Piping Supply, 465 F.3d 719 (6th Cir. 2006) (definition of RICO conduct and enterprise participation)
- H.J. Inc. v. Northwestern Bell Tel. Co., 492 U.S. 229 (1989) (relationship plus continuity in pattern of racketeering)
- Boyle v. United States, 556 U.S. 938 (2009) (association-in-fact enterprise requires structure and longevity)
- Hofstetter v. Fletcher, 905 F.2d 897 (6th Cir. 1988) (enterprise and pattern may be proven by overlapping evidence)
- Dan[a] Corp. v. Blue Cross & Blue Shield Mut. of N. Ohio, 900 F.2d 882 (6th Cir. 1990) (enterprise relationships may be proven with common purpose evidence)
- Stone v. Kirk, 8 F.3d 1079 (6th Cir. 1993) (marketing alone not sufficient participation in enterprise)
- Rezner v. Bayerische Hypo-Und Vereinsbank AG, 630 F.3d 866 (9th Cir. 2010) (tax-shelter RICO claims not automatically barred by PSLRA)