976 F. Supp. 2d 721
E.D.N.C.2013Background
- This action involves multiple defendants including E&D entities and Arnold Defendants in a complex civil action arising from a debt-elimination/credit-repair scheme allegedly operated by CCDN and related entities.
- Plaintiffs allege CCDN and marketers solicited payments, forwarded to marketers, and used funds to further unlawful activities, with various attorneys and firms allegedly involved in litigation strategies.
- Plaintiffs claim E&D Defendants, through their management and supervision, knew or should have known about the alleged scheme and engaged in racketeering and money-laundering activities.
- Plaintiffs assert RICO and NC RICO violations, CROA violations, fraud, unjust enrichment, and other claims against E&D and Arnold Defendants, and seek a receiver and class certification.
- The court addresses motions: E&D to dismiss, Arnold to dismiss, Manger to dismiss, motion to appoint receiver, and motion to certify class; issues include abstention, RICO, and state-law claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Do Colorado River abstention principles apply here? | Plaintiffs contend parallel state actions justify staying federal proceedings. | E&D argues parallelism and exceptional-circumstances support abstention. | Colorado River abstention denied; state actions concluded and parallelism not warranted. |
| Does Younger abstention apply to alleged disciplinary-like claims against the attorneys? | Plaintiffs frame claims as ongoing state proceedings against defense counsel. | Defendants urge Younger abstention to stay federal relief. | Younger abstention denied; court will not abstain. |
| Do RICO §1962(c) claims against E&D Defendants survive for CCDN enterprise? | Plaintiffs allege E&D conducted or participated in CCDN’s affairs through racketeering. | E&D asserts no injury and that services were ordinary legal work; claims fail. | Dismissed; E&D did not participate in the CCDN enterprise to the degree required by §1962(c). |
| Do RICO conspiracy claims under §1962(d) survive against E&D Defendants? | Plaintiffs allege an illegal agreement to continue CCDN’s scheme. | Allegations are conclusory and fail to show a plausible conspiracy. | Dismissed; no plausible §1962(d) conspiracy alleged. |
| Are NC RICO and related claims barred or limited by res judicata or state-law analysis? | NC RICO and other claims should proceed; some relate to the same core facts. | State court rulings preclude NC RICO; CROA and other state-law claims fail. | NC RICO claim against certain defendants barred by res judicata; other state-law claims dismissed. |
Key Cases Cited
- Colorado River Water Conservation Dist. v. United States, 424 U.S. 800 (1976) (abstention based on parallel state and federal proceedings)
- Great American Ins. Co. v. Gross, 468 F.3d 199 (4th Cir.2006) (parallelism factors and exceptional circumstances in Colorado River disputes)
- Chase Brexton Health Servs., Inc. v. Maryland, 411 F.3d 457 (4th Cir.2005) (six-factor test for exceptional circumstances in Colorado River abstention)
- Reves v. Ernst & Young, 507 U.S. 170 (1993) (outside professionals may be liable under §1962(c) if they participate in core enterprise activities)
- Handeen v. Lemaire, 112 F.3d 1339 (8th Cir.1997) (outside professionals may be liable if they strike at the heart of the enterprise)