155 F. Supp. 3d 1344
S.D. Fla.2015Background
- In 2013–2015 Jarnagin and several related companies (Viridis, LCTI, Beckford, Ideal, C&I, SEP, WKMS) borrowed from TCA; Press (CEO) and Silverman (MD) negotiated credit lines, loan documents, and multiple amendments. Lock‑box controls, advisory/fee notes ($4.1M), stock issuances, and repeated closing costs were imposed.
- Plaintiffs allege TCA represented it would fund $10M lines but could not because of corporate charter limits; Press and Silverman allegedly induced plaintiffs to accept loans and then refused further funding, withheld lock‑box cash, issued sham default letters, and forced rollups into a fee note — causing business losses (including Ideal’s alleged $25M contract loss) and alleged unlawful debt collection/usury.
- Plaintiffs pleaded federal civil RICO claims (18 U.S.C. §§ 1962(c), (d)) based on predicate acts of wire/mail fraud and collection of an unlawful debt, plus multiple state‑law claims; defendants moved to dismiss under Rule 12(b)(6).
- The court found the RICO pleadings deficient: plaintiffs failed to plead standing/proximate cause/damages for many named plaintiffs, lumped defendants together (failed to plead individual participation), and did not adequately plead predicate fraud with Rule 9(b) specificity or open‑ended continuity.
- Counts I–II (RICO) were dismissed without prejudice; plaintiffs were granted leave to amend. State law claims (Counts III–X) were dismissed without prejudice as the court declined supplemental jurisdiction.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing / proximate cause for RICO injuries | Plaintiffs: defendants’ misrepresentations and lock‑box manipulation directly caused business losses and attorney fees; injuries flowed from predicate acts | Defendants: plaintiffs fail to connect alleged mail/wire fraud to direct injuries; many plaintiffs lack any concrete injury from defendants’ conduct | Court: plaintiffs failed to allege direct, proximate injuries for most named plaintiffs; standing/proximate cause insufficient; RICO counts dismissed without prejudice |
| Person vs. enterprise distinctiveness under §1962(c) | Plaintiffs: Press and Silverman can be liable individually while TCA is the enterprise (citing Cedric Kushner) | Defendants: allegations show only corporate‑capacity acts; cannot treat officers and corporation as distinct persons/enterprise | Court: plaintiffs conflated roles (called Press/Silverman both "members" of enterprise and the liable "persons"); pleadings fail to satisfy separate‑and‑distinct requirement |
| Predicate acts (mail/wire fraud) and Rule 9(b) specificity | Plaintiffs: alleged multiple specific fraudulent communications and sham default letters over ~2 years; satisfies 9(b) | Defendants: allegations lump together defendants, fail to identify who made what false statements when and how; 9(b) not met | Court: time/place/manner alleged but plaintiffs improperly lumped defendants and failed to identify each defendant’s particular misrepresentations; fraud pleading inadequate |
| Pattern/continuity and RICO conspiracy (§1962(d)) | Plaintiffs: alleged closed‑period predicate acts (multiple acts over two years) and asserted TCA’s business model shows ongoing practice; conspiracy alleged via roles in scheme | Defendants: acts are isolated; no ongoing pattern or agreement to violate RICO | Court: closed‑ended continuity adequately alleged (pattern over two years) but open‑ended continuity and enterprise‑wide scheme allegations were conclusory; because §1962(c) claims failed, conspiracy claim also failed for lack of pleaded agreement |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (plausibility pleading standard)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (plausibility and pleading requirements)
- Williams v. Mohawk Indus., Inc., 465 F.3d 1277 (11th Cir. 2006) (elements and standing for civil RICO)
- Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479 (1985) (RICO injury must flow from predicate acts)
- Anza v. Ideal Steel Supply Corp., 547 U.S. 451 (2006) (proximate cause in RICO requires direct relation)
- Holmes v. Sec. Investor Prot. Corp., 503 U.S. 258 (1992) (factors for proximate causation in RICO)
- H.J., Inc. v. Northwestern Bell Tel. Co., 492 U.S. 229 (1989) (closed‑ and open‑ended continuity for RICO pattern)
- Cedric Kushner Promotions, Ltd. v. King, 533 U.S. 158 (2001) (individual can be RICO "person" separate from corporate enterprise)
- Jackson v. BellSouth Telecomms., 372 F.3d 1250 (11th Cir. 2004) (RICO "pattern" and continuity requirements)
- Brooks v. Blue Cross & Blue Shield of Fla., 116 F.3d 1364 (11th Cir. 1997) (Rule 9(b) particularity for fraud; individuate defendants)