Federal District Court Opinions
UNION PACIFIC RAILROAD CO. v. PARAGON LABORATORIES,
(S.D.Fla. 12-14-2006) UNION PACIFIC RAILROAD CO.,
Plaintiff, v. PARAGON LABORATORIES, INC., et. al.,
Defendants. CASE NO. 06-60873-CIV-COHN. United States
District Court, S.D. Florida. December 14, 2006
ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS’
MOTIONS TO DISMISS
JAMES COHN, District Judge
THIS CAUSE is before the Court upon Defendants’ David
Rossner and Group Chemical Limited, Inc.’s Motion to
Dismiss Amended Complaint [DE 144], Defendants Goldstar
Products, Inc., T.D.R.S. Properties, Inc., Safety & Health
Municipal Supplies, Inc., Sachem Safety Products, Inc., and
Michael Sheehan’s Motion to Dismiss Counts 15 through 36 of
Amended Complaint [DE 155], Defendants Mark Zimmerman,
Industrial Chem Enterprise, Inc., Ronald Camillo and Ron
Camillo Corp.’s Notice of Joinder in Motion to Dismiss [DE
154], and Defendants Cyn-Lex, Inc. Cynthia Gentner and
Granite Industries, Inc.’s Notice of Joinder in Motion to
Dismiss [DE 151]. The Court has carefully considered the
motions, response and reply thereto, and is otherwise fully
advised in the premises.[fn1] The last motion became ripe on
November 20, 2006.
I. BACKGROUND
Plaintiff initially failed an 176 page complaint against
29 different defendants. In Page 2 response to the
initial complaint, several Defendants filed the motions
listed above. In general, these motions assert that the
initial complaint failed to allege fraud and RICO claims
with particularity, and sought to sever claims against the
various groups of companies as no nexus between all the
companies was alleged.
In response to these motions, Plaintiffs decided to file
an Amended Complaint. The Amended Complaint added
additional language to the second paragraph of each claim
regarding the particular acts alleged to have occurred that
support the particular claim. In addition, Plaintiff
attached Exhibit A to the Amended Complaint, which lists
the specific transactions that support its claims, with
dates, dollar amounts, and the identity of Plaintiff’s
employee that was contacted for each sale. The Court denied
the motions to dismiss the initial Complaint based upon
these additional allegations and the exhibit. The present
motions to dismiss the Amended Complaint followed.[fn2]
II. DISCUSSION
The Rossner Defendants assert in their motion to dismiss
Amended Complaint that: 1) Plaintiff has filed to plead the
fraud and RICO claims with the particularity required by
Rule 9(b) of the Federal Rules of Civil Procedure; 2) a
RICO conspiracy claim cannot be maintained due to the
intracorporate conspiracy doctrine, which states that a
corporate officer cannot conspire with the corporation; 3)
the statute of limitations for the RICO claims has run; and
4) an unjust enrichment claim cannot be maintained as the
complaint alleges wrongdoing by Defendants. The Goldstar
Defendants make Page 3 similar arguments, in addition to
the assertion that since certain transactions are alleged
to be for chemical products, and not retail office-cleaning
products, they are outside the scope of the Telemarketing
Act.
A. Motion to Dismiss Standard
In the motions to dismiss, Defendants assert that
Plaintiff’s claims should be dismissed for failure to state
a claim upon which relief may be granted. It is long
settled that “a complaint should not be dismissed for
failure to state a claim unless it appears beyond a doubt
that the plaintiff could prove no set of facts in support
of his claim which would entitle him to relief.” Conley v.
Gibson, 355 U.S. 41 (1957); Marsh v. Butler County, 268
F.3d 1014, 1022 (11th Cir. 2001). The allegations of the
claim must be taken as true and must be read to include any
theory on which the plaintiff may recover. Cramer v.
Florida, 117 F.3d 1258, 1262 n. 8 (11th Cir. 1997); see
also Marsh, 268 F.3d at 1023; Linder v. Portocarrero, 963
F.2d 332, 334-36 (11th Cir. 1992) (citing Robertson v.
Johnston, 376 F.2d 43 (5th Cir. 1967)).
B. Fraud Claims
Rule 9(b) of the Federal Rules of Civil Procedure provides
that “[i]n all averments of fraud . . . the circumstances
constituting fraud . . . shall be stated with
particularity.” Fed.R.Civ.P. 9(b). The particularity
requirement of Rule 9(b) serves an important purpose in
fraud actions by “alerting defendants to the precise
misconduct with which they are charged and protecting
spurious charges of immoral and fraudulent behavior.” Ziemba
v. Cascade Int’l, Inc., 256 F.3d 1194, 1202 (11th Cir.
2001) (internal quotation marks omitted). The application
of Rule 9(b), however, must not abrogate the concept of
notice pleading under the federal rules. Id.; Friedlander
v. Nims, 755 F.2d 810, 813 Page 4 n. 2 (11th Cir. 1985)
(“[A] court considering a motion to dismiss for failure to
plead fraud with particularity should always be careful to
harmonize the directives of rule 9(b) with the broader
policy of notice pleading.”).
The Eleventh Circuit stated in Ziemba that: “Rule 9(b) is
satisfied if the complaint sets forth (1) precisely what
statements were made in what documents or oral
representations or what omissions were made, and (2) the
time and place of each such statement and the person
responsible for making (or, in the case of omissions, not
making) same, and (3) the content of such statements and
the manner in which they misled the plaintiff, and (4) what
the defendants obtained as a consequence of the fraud.” 256
F.3d at 1202 (quotations and citations omitted); U. S. ex
rel. Clausen v. Laboratory Corp. of America, Inc., 290 F.3d
1301, 1310 (11th Cir. 2002). Allegations of date, time, or
place satisfy the requirement of Rule 9(b) that the
circumstances of the fraud be alleged with particularity,
but alternative means are also available to satisfy the
rule. Durham v. Business Management Associates, 847 F.2d
1505, 1512 (11th Cir. 1988).
Defendants argue that Plaintiff has completely failed to
identify which defendants made what statements and where
the particular “victims” were located. As previously
noted, Plaintiffs allege a variety of specific types of
sales pitches in the Amended Complaint. (Am. Compl.,
§§ 34-51). In addition, Exhibit A to the
Amended Complaint contains the precise dates, amounts and
names of the Plaintiff’s employees who were contacted on
those dates by the particular Defendant. Contrary to
Defendants’ contentions, Plaintiff did not admit that it had
no knowledge of the contents of the various Defendants’
statements, rather, Plaintiff has alleged the various types
of Page 5 particular sales pitches made, though not the
actual words used during each sale. These allegations,
combined with the information in Exhibit A provide
sufficient particularity of the range of content of the
sales pitches alleged to be actionable. The information
provided in Exhibit A in turn should allow Defendants to
review their own records or interview their own employees
to identify which of their employees made which calls
alleged in the Amended Complaint.
Rule 9(b) does not require a verbatim recital of the
alleged misrepresentation, nor the specific identity of the
speaker, where alternative means are also available to
satisfy the rule. This Court concludes that the Amended
Complaint provides sufficient particularity to survive a
motion to dismiss.
C. RICO Claims
Defendants make several RICO arguments, particularly that
the intracorporate conspiracy doctrine defeats the RICO
claims in the Amended Complaint, that Plaintiffs have
failed to allege sufficient structure and goals apart from
the fraud, and that certain claims are barred by the
statute of limitations. The intracorporate conspiracy
doctrine “holds that acts of corporate agents are
attributed to the corporation itself, thereby negating the
multiplicity of actors necessary for the formation of a
conspiracy. Simply put, under the doctrine, a corporation
cannot conspire with its employees, and its employees, when
acting in the scope of their employment, cannot conspire
among themselves.” McAndrew v. Lockheed Martin Corp., 206
F.3d 1031, 1036 (11th Cir. 2000). However, in McAndrew the
Court also held that the criminal conspiracy exception to
the intracorporate conspiracy doctrine applies to claims
under 42 U.S.C. Section 1985. In Kirwin v. Price
Communications Corp., 391 F.3d 1323, 1327 (11th Page 6
Cir. 2004), the Eleventh Circuit held that the
intracorporate conspiracy doctrine cannot be invoked to
defeat a RICO claim under § 1962(d). That decision
would appear to apply to this case, and therefore the
Defendant’s arguments to dismiss due to the inability to
conspire with one’s own corporation is rejected.
Defendants also argue that Plaintiff has failed to allege
all the elements of a RICO claim. In order to prove any
RICO violation, Plaintiff must prove the existence of an
“enterprise” and a “pattern of racketeering activity.” 18
U.S.C. § 1962; Beck v. Prupis, 162 F.3d 1090 (11th
Cir. 1998), aff’d, 529 U.S. 494 (2000). A “pattern of
racketeering activity” requires the plaintiff to establish
“at least two acts of racketeering activity.” 18 U.S.C.
§ 1961(5); Republic of Panama, 119 F.3d at 948. In
addition, “a pattern of racketeering activity requires
proof of something beyond the two predicate acts themselves.
That something is the threat of continuing racketeering
activity.” Jackson v. BellSouth Telecommunications, 372
F.3d 1250, 1265 (11th Cir. 2004) (quoting Jones v.
Childers, 18 F.3d 899, 912 (11th Cir. 1994)). When mail or
wire fraud are alleged as the predicate acts that are
indictable as racketeering activity, as in the instant
case, a plaintiff must allege facts sufficient to support
the element of intentional misrepresentation that is part
of a “scheme to defraud.” Beck, 162 F.3d at 1095.
Whether phrased as “structure and goals” or an
“enterprise,” this Court concludes that Plaintiff has plead
the existence of culpable persons in each count of the
Amended Complaint who committed more than two acts of mail
or wire fraud through an enterprise involved in interstate
commerce. Thus, the RICO claims are sufficient to survive a
motion to dismiss.
Defendants also move to dismiss parts of the he RICO
claims based upon the Page 7 statute of limitations. The
statute of limitations under RICO is four years from the
date the plaintiff knew they were injured. Pacific Harbor
Capital, Inc. v. Barnett Bank, N.A., 252 F.3d 1246, 1251
(11th Cir. 2001). Defendants point out that some of the
transactions in Exhibit A date back to October 6, 1998.
Plaintiffs argue that the Amended Complaint alleges that
Plaintiff did not become aware of the scheme until four
years prior to filing suit. The resolution of this issue is
a factual determination that cannot be resolved on a motion
to dismiss. After discovery, if challenged by a motion for
summary judgment, Plaintiff will need to present evidence
that it did not discover the scheme and the extent of the
transactions within the scheme until less than four years
from filing of the initial Complaint.
D. Unjust Enrichment
Defendants assert that an unjust enrichment claim cannot
be maintained as the complaint alleges wrongdoing by
Defendants. Unjust enrichment is an equitable claim
containing the following elements: “(1) plaintiff has
conferred benefit on the defendant, who has knowledge
thereof; (2) defendant voluntarily accepts and retains the
benefit conferred; and (3) the circumstances are such that
it would be inequitable for the defendant to retain the
benefit without paying for the value thereof to the
plaintiff.” Peoples National Bank of Commerce v. First
Union National Bank of Florida, N.A., 667 So.2d 876, 879
(Fla. 3rd DCA 1996). Defendants cite to State of Fla.,
Office of Atty. Gen., Dept. of Legal Affairs v. Tenet
Healthcare Corp., 420 F.Supp.2d 1288 (S.D.Fla. 2005), in
which the District Court dismissed an unjust enrichment
claim under similar circumstances. The Court stated that:
“[l]iability in unjust enrichment has in principle nothing
to do with fault. It has to do with wealth being in one
person’s hands when it Page 8 should be in another
person’s.” 420 F.Supp.2d at 1309 (citing Guyana Tel. & Tel.
Co. v. Melbourne Int’l Comms., Ltd., 329 F.3d 1241, 1245 n.
3 (11th Cir. 2003)).
In the present case, the Amended Complaint states within
each unjust enrichment claim that Defendants “wrongfully
accepted and retained the windfalls and benefits” from
their statements and representations that Defendants knew,
or should have known, were false. Am. Compl., Counts 1, 5,
9, 15, 20, 25, 30, 37, 42, 49, 54, 65, 69, 75, 83, 89, and
96. While the Court agrees with Plaintiff that pleading in
the alternative is an accepted practice, Plaintiff’s
attempt to distinguish Tenet fails as the Court in Tenet
did not appear to rest its decision on a failure to
separate the RICO claims from the unjust enrichment claims.
Even though the claims are pled separately, the manner in
which Plaintiff has pled its unjust enrichment claims for
wrongful action in this action render such claims invalid.
Therefore, the Court will dismiss the claims for unjust
enrichment in Counts 5, 15, 20, 25, 30, 37, 42, 75, and
83[fn3] for the same reasons discussed in Tenet.
III. CONCLUSION
The only remaining issue is the Goldstar Defendants
assertion that the counts alleging violations of the
Telemarketing Rule must be dismissed because the Amended
Complaint alleges that “chemical products” were included
among the products sold via telemarketing. E.g. Am. Compl.,
§ 216. The Goldstar Defendants assert that such
products are outside the scope of the Rule. In response,
Plaintiffs assert that the same Page 9 allegations include
“cleaning products and lubricants,” which do fall under the
Rule, and therefore the claims should not be dismissed in
their entirety.
The Court concludes that it will not dismiss the
Telemarketing Rule claims at this time. Whether upon
summary judgment or at trial in this action, ultimately
Plaintiff will have to prove that violations of the
Telemarketing Rule involved products covered under the
Rule, and will not receive recovery for those products
outside the Rule’s scope. At this time, however, it is
premature to grant a motion to dismiss as to those claims.
Accordingly, it is ORDERED AND ADJUDGED as follows:
1. Defendants’ David Rossner and Group Chemical Limited,
Inc.’s Motion to Dismiss Amended Complaint [DE 144] is
hereby GRANTED in part and DENIED in part;
2. Defendants Goldstar Products, Inc., T.D.R.S. Properties,
Inc., Safety & Health Municipal Supplies, Inc., Sachem
Safety Products, Inc., and Michael Sheehan’s Motion to
Dismiss Counts 15 through 36 of the Amended Complaint [DE
155] is GRANTED in part and DENIED in part;
3. Counts 5, 15, 20, 25, 30, 37, 42, 75, and 83 are hereby
DISMISSED;
4. The Defendants’ Answers shall be due by January 5, 2007.
DONE AND ORDERED in Chambers at Fort Lauderdale, Broward
County, Florida.
[fn1] The Goldstar Defendants filed a reply brief while the
Rossner Defendants did not.
[fn2] The Court separately ordered a response by Plaintiff
to the motion to sever. The Court denied the various
motions to sever on November 1, 2006 [DE 165]. To the
extent the motions to dismiss the Amended Complaint reargue
the severance/joinder issues, the Court incorporates by
reference its Order of November 1, 2006, and denies the
motions to dismiss on improper joinder grounds.
[fn3] The Court notes that Defendants in the other unjust
enrichment counts filed Answers, even though some later
joined in the motion to dismiss. See Count 1 (Paragon), 9
(Group Chemical Supply), 49 (University Research), 54
(Industrial Chem Enterprise), 65 (Suntrust Chemical Corp.),
69 (K.A.P.S. Chemicals), 89 (Ron Camillo Corp.) and 96
(A-Jem Industries). Page 1