Opinion
No. 4:01-CV-794-A
January 2, 2003
MEMORANDUM OPINION and ORDER
Came on for consideration the motion of defendant Richard Bruce Appleoff ("Appleoff") for summary judgment. Having reviewed the motion, plaintiffs' response, and applicable authorities, the court concludes that the motion should be granted.
I. Plaintiffs' Complaint
Plaintiffs allege in their second amended complaint that: Appleoff, along with the other defendants, orchestrated "a series of raids, seizures, robberies, extortions, thefts, fraud and other unlawful conduct against the Plaintiffs' `Cash Today' deferred deposit cash advance and car title loan businesses in Texas and Florida." Appleoff researched plaintiffs' businesses, assembled materials, and instructed the other defendants on how to carry out the raids under the false pretense of bankruptcy authority. Accordingly, plaintiffs assert thirteen causes of action against Appleoff, including violations of the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1961-1968 ("RICO"), fraud, abuse of process, civil conspiracy, and libel.
II. Appleoff's Motion for Summary Judgment
In effect, Appleoff maintains in his motion that there is no evidence that would support any of plaintiffs' theories of liability against him.
III. General Summary Judgment Principles
A party is entitled to summary judgment on all or any part of a claim as to which there is no genuine issue of material fact and as to which the moving party is entitled to judgment as a matter of law. FED. R. CIV. P. 56(c); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247 (1986). The moving party has the initial burden of showing that there is no genuine issue of material fact. Anderson, 477 U.S. at 256. The movant may discharge this burden by pointing out the absence of evidence to support one or more essential elements of the non-moving party's claim "since a complete failure of proof concerning an essential element of the nonmoving party's case necessarily renders all other facts immaterial."Celotex Corp. v. Catrett, 477 U.S. 317, 323-25 (1986). Once the moving party has carried its burden under Rule 56(c), the non-moving party must do more than merely show that there is some metaphysical doubt as to the material facts. Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). The party opposing the motion may not rest on mere allegations or denials of pleading, but must set forth specific facts showing a genuine issue for trial. Anderson, 477 U.S. at 248, 256. To meet this burden, the nonmovant must "identify specific evidence in the record and articulate the precise manner in which that evidence support[s] [its] claim [s]." Forsyth v. Barr, 19 F.3d 1527, 1537 (5th Cir. 1994) An issue is material only if its resolution could affect the outcome of the action. Anderson, 477 U.S. at 248. Unsupported allegations, conclusory in nature, are insufficient to defeat a proper motion for summary judgment. Simmons v. Lyons, 746 F.2d 265, 269 (5th Cir. 1984)
The standard for granting a summary judgment is the same as the standard for a directed verdict. Celotex Corp., 477 U.S. at 323. If the record taken as a whole could not lead a rational trier of fact to find for the non-moving party, there is no genuine issue for trial. Matsushita, 475 U.S. at 597.
IV. Analysis
A. Plaintiffs' RICO Claims Against Appleoff
The first nine causes of action of plaintiffs' second amended complaint are for alleged RICO violations, pursuant to 18 U.S.C. § 1962(c) and (d), against certain of the defendants, including Appleoff. Section 1962(c) imposes liability on a rather discrete group of individuals:
It shall be unlawful for any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise's affairs through a pattern of racketeering activity or collection of unlawful debt.18 U.S.C. § 1962(c). In Reves v. Ernst Young, the Supreme Court clarified who can be a liable party under section 1962(c): "[W]e hold that `to conduct or participate, directly or indirectly, in the conduct of such enterprise's affairs,' § 1962(c), one must participate in the operation or management of the enterprise itself." 507 U.S. 170, 185 (1993). The court explained that "RICO liability is not limited to those with a formal position in the enterprise, but some part in directing the enterprise's affairs is required." Id. at 179 (internal citations omitted, emphasis in original). Accordingly, liability can extend to low-level participants under upper management's direction, and to outsiders who "are `associated with' an enterprise and participate in the conduct of its affairs." Id. at 184-85 (emphasis in original)
The summary judgment evidence makes clear that Appleoff was an outsider to Greenberg's Easy Money enterprise, and played an overall minor role in the April 27, 2000, raids. Greenberg contacted Appleoff in early April 2000, and informed him that he was experiencing problems with Craft. Appleoff Dep. at 149-50; Appleoff Aff. at 7. Appleoff indicated that these problems were similar to ones that he had previously experienced with Craft in Las Vegas, and that he had filed for bankruptcy on behalf of City Wide Funding, Inc., to protect his stores' assets and business. Appleoff Aff. at 7; Appleoff Dep. at 150. He suggested that Greenberg hire a "motorcycle gang" to carry out the proposed raids because, although he never hired one, "they have to be more dependable than security guards." Appleoff Dep. at 150-51.
The court is assuming for purposes of this memorandum opinion and order only that the Easy Money defendants constituted an "enterprise," as contemplated by section 1962(c).
Defendants explain in their response to Appleoff's motion for summary judgment that they did not obtain a transcript from Appleoff's December 3, 2002, deposition in time to incorporate it into their response. Pls.' Br. at 4 n. 1. Accordingly, they have cited to Appleoff's March 19, 2002, deposition, which was taken for Craft v. Appleoff, et al., 4:01-CV-869-A.
Greenberg asked that Appleoff prepare a written notice to assist with Greenberg's intended bankruptcy action and to ensure that his assets were protected. Appleoff Aff. at 7-8. After receiving an "endored/filed copy of the Bankruptcy Petition filed by the Loan Alternative," Appleoff prepared some fifty or sixty seven- to eight-page "takeover packets," in "an attempt to save the records and assets of the company and prevent the employees from being threatened and frightened by Noble Craft." Id. at 8; Appleoff App. at 101-03; Pls.' Br. at 5. Appleoff furnished draft copies of the packets to Greenberg, and after making at least one change, he sent Greenberg the finalized packets via Federal Express. Appleoff Dep. at 183-84.
In addition, Appleoff researched Craft's businesses and, on April 4, 2000, faxed his research to Greenberg. Pls.' App. at 46-120. In all, it is evident Appeoff had several conversations with Greenberg related to the takeover packets and research. Greenberg characterized Appleoff's involvement as follows: "He had the same problem with the same people in Las Vegas, and he put together these documents [the takeover packets] for us. That's it." Greenberg Dep. at 63. Appleoff did not receive any remuneration for his efforts. Appleoff Dep. at 183.
It may be the case, as plaintiffs summarily assert, that Appleoff had the objective of harming Craft. Pls.' Br. at 7. However, there is no evidence that Appleoff was associated with the Easy Money enterprise, or that he participated in the conduct of its affairs.
The Loan Alternative filed for bankruptcy on April 21, 2000. Greenberg Dep. at 60. Over a year later, on July 11, 2001, the Honorable Stephen C. St. John, of the United States Bankruptcy Court for the Eastern District of Virginia, dismissed the bankruptcy with prejudice. Pls.' App. at 132-36. Appleoff prepared the takeover packets based on the April 21, 2000, petition, which, at the time, he assumed was "legal and proper," and that he "had no knowledge otherwise." Appleoff Aff. at 8. There is no reason for the court to believe that Appleoff was familiar with the Loan Alternative's actual financial position, or that he was in a position to know:
As of April 27, 2000, I have had no involvement in any business of Jerome Greenberg other that [sic] this one incident. Prior to the April 2000 incident, I knew nothing of Nobel Craft's or Jerome Greenberg's business involvement. I had no involvement or knowledge of the business dealings between Noble Craft and Jerome Greenberg, specifically the Florida car title business, the Texas/Colorado Deferred Cash Advance business, or the Interim Management Agreement and Proposed Merger as alleged in Plaintiffs' Second Amended Complaint.
Appleoff Aff. at 8. Further, there is no summary judgment evidence that Appleoff's packets would be improper if the bankruptcy filing had been valid.
The court concludes that Appleoff's limited involvement in the events that sparked this action are insufficient to give rise to section 1962(c) RICO liability. See, e.g., In re Mastercard Int'l, Inc., 132 F. Supp.2d 468, 488-90 (E.D. La. 2001), aff'd, ___ F.3d ___, No. 01-30389, 2002 WL 31627004, (5th Cir. Nov. 20, 2002); Goren v. New Vision Int'l, Inc., 156 F.3d 721, 728 (7th Cir. 1998) (stating, "simply performing services for an enterprise, even with knowledge of the enterprise's illicit nature, is not enough to subject an individual to RICO liability under § 1962(c); instead, the individual must have participated in the operation and management of the enterprise itself");Amsterdam Tobacco. Inc., v. Philip Morris, Inc., 107 F. Supp.2d 210, 217 (S.D.N.Y. 2000) (stating, "[p]roviding important services to a racketeering enterprise is not the same as directing the affairs of an enterprise") (internal citations omitted)
Because the court has concluded that Appleoff should not be liable under section 1962(c), it likewise concludes that he should not be liable under section 1962(d) for conspiring to violate section 1962(c). Accordingly, summary judgment should be granted as to all of plaintiffs' RICO claims against Appleoff.
B. Plaintiffs' Fraud Claim
Plaintiffs assert a fraud claim in their second amended complaint against Appleoff and several of the other defendants. This claim relates to the takeover packets: "[d]efendants . . . have committed fraud by having made a material representation that an official authority, i.e. a Bankruptcy Court, had authorized and ordered the raids and seizures of the Plaintiffs' property when, in fact, no such authority or order existed." Second Am. Compl. ¶ 173. A fraud cause of action requires plaintiff to prove "a material misrepresentation, which was false, and which was either known to be false when made or was asserted without knowledge of its truth, which was intended to be acted upon, which was relied upon, and which caused injury." Formosa Plastics Corp. USA v. Presidio Eng'rs Contractors., Inc., 960 S.W.2d 41, 47-48 (Tex. 1998) (citing Sears, Roebuck Co. v. Meadows, 877 S.W.2d 281, 282 (Tex. 1994)).
As discussed above in relation to plaintiffs' RICO claims, there is no summary judgment evidence that Appleoff was aware of any falsity with the bankruptcy filing, which formed the basis for the takeover packets that he prepared. Appleoff Aff. at 8. Appleoff assumed that the filing was "legal and proper." Id. The summary judgment record contains no suggestion that Appleoff knew or should have known more, or that he should have suspected the bankruptcy filing to be improper. Thus, Appleoff neither made representations that he knew to be false, nor made them recklessly without knowledge of the truth. See, e.g., Prudential Ins. Co. of Am. v. Jefferson Assocs., Ltd., 896 S.W.2d 156, 163 (Tex. 1995) (citing DeSantis v. Wackenhut Corp., 793 S.W.2d 670, 688 (Tex. 1990)). Accordingly, summary judgment should be granted as to plaintiffs' fraud claim against Appleoff.
C. Plaintiffs' Abuse of Process Claim
Plaintiffs bring an abuse of process claim against several of the defendants, including Appleoff. Second Am. Compl. ¶¶ 196-200. As to Appleoff, this claim pertains to his "perverted use of the bankruptcy process by preparing fake bankruptcy notices indicating that the court had given authority to the Defendants to conduct the raids, robberies, and seizures when the Court had not done so." Pls.' Br. at 22. To assert an abuse of process claim, plaintiffs must show:
(1) the defendant made an illegal, improper or perverted use of the process, a use neither warranted nor authorized by the process; (2) the defendant had an ulterior motive or purpose in exercising such illegal, perverted or improper use of the process; and (3) damage to the plaintiff as a result of such illegal act.RRR Farms, Ltd. v. Am. Horse Prot. Ass'n, Inc., 957 S.W.2d 121, 133 (Tex.App.-Houston [14th Dist.] 1997, writ denied) (citing Bossin v. Towber, 894 S.W.2d 25, 33 (Tex.App.-Houston [14th Dist.] 1994, writ denied)).
Plaintiffs seem to base this claim on Appleoff's preparation of the takeover packets. That is not a sound predicate for the claim. The bankruptcy petition was filed on April 21, 2000, see Greenberg Dep. at 60, and Appleoff finalized the packets after that date, based on the petition, see Appleoff Aff. at 8. In any event, as detailed above with regard to plaintiffs' RICO and fraud claims, Appleoff was not aware of any falsity with the bankruptcy filing, which formed the basis for the takeover packets that he prepared. Appleoff Aff. at 8.
To the extent plaintiffs tie their claim to the filing of the bankruptcy petition, there is no evidence that Appleoff filed it, or even suggested that Greenberg do so on behalf of the Loan Alternative. He only expressed to Greenberg that he had filed for bankruptcy on behalf of City Wide Funding, Inc. Appleoff Dep. at 150. Accordingly, summary judgment should be granted as to plaintiffs' abuse of process claim against Appleoff.
D. Plaintiffs' Civil Conspiracy Claim
Plaintiffs allege in their second amended complaint that Appleoff, in conjunction with the other defendants, conspired to carry out the unlawful raids and seizures. Second Am. Compl. ¶¶ 210-15. Under Texas law, a civil conspiracy requires:
(1) a combination of two or more persons; (2) an object to be accomplished (an unlawful purpose or a lawful purpose by unlawful means) (3) a meeting of minds on the object or course of action; (4) one or more unlawful, overt acts; and (5) damages as the proximate result.Ins. Co. of N. Am. v. Morris, 981 S.W.2d 667, 675 (Tex. 1998) Without Appleoff's participation in an underlying tort, as discussed above, the court concludes that summary judgment as to plaintiffs' civil conspiracy claim is proper. See, e.g., Tilton v. Marshall, 925 S.W.2d 672, 681 (Tex. 1996) (explaining that "a defendant's liability for conspiracy depends on participation in some underlying tort for which the plaintiff seeks to hold at least one of the named defendants liable")
E. Plaintiffs' Libel Claim
By order and final judgment signed December 9, 2002, the court dismissed without prejudice plaintiffs' libel claim.
V. ORDER
For the reasons discussed,
The court ORDERS that defendant's motion for summary judgment be, and is hereby, granted.
The court further ORDERS that all of plaintiffs' claims and causes of action against Appleoff be, and are hereby, dismissed with prejudice.
The court determines that there is no just reason for delay in, and hereby directs, entry of final judgment as to the dismissal of plaintiffs' claims against Appleoff.