Opinion
Case No. 02-24689, Adv. No. 05-06200.
September 15, 2006
MEMORANDUM OPINION AND ORDER GRANTING DEFENDANTS' MOTIONS TO DISMISS
Plaintiff/debtor Donald Kenton Kester appears on his own behalf. Defendants Larry R. Shouse, Walter Alan Morton, William K. Kester and Jeannie M. Bobrink appear by their attorney, James F. Freeman III, Kansas City, Missouri. Defendants Christopher J. Redmond and Robert D. Maher appear by their attorney, Kasey A. Rogg, Kansas City, Missouri.
This matter is before the Court on the defendants' Motions to Dismiss this adversary proceeding. The Court, having reviewed the relevant pleadings, finds cause to grant the defendants' motions.
Doc. Nos. 52, 53, 54, 55 and 56.
Background
The plaintiff, a pro se litigant and debtor in the underlying bankruptcy case, filed for bankruptcy relief on December 13, 2002. On March 28, 2005, debtor filed his "Complaint Alleging an Organized Conspiracy to Commit the Crimes of Extortion and Coercion, for Declaratory Judgement, Possession of Real Property, and Damages" seeking damages under the Racketeer Influenced and Corrupt Organizations Act ("RICO") in the United States District Court for the District of Kansas. On October 7, 2005, the District Court referred the case to this Court under 28 U.S.C. § 157(a).
18 U.S.C. § 1861, et seq.
See Kester v. Shouse, Case No. 05-CV-2121-KHV in the United States District Court for the District of Kansas, Doc. No. 49, October 7, 2005.
Plaintiff alleges that all six defendants conspired to seize his interest in a business called Kester Merchandising Display International ("KMDI") and thereafter conspired to deprive him of the benefits of his prior interest in KMDI. In 2004, this Court approved the sale of plaintiff's non-exempt and unencumbered stock in KMDI for $20,000 pursuant to 11 U.S.C. § 363 and Rule 6004. Liberally construed, plaintiff's Complaint challenges the sale and transfer of plaintiff's interest in KMDI previously approved by this Court.
The defendants move to dismiss this adversary proceeding pursuant Rule 7012(b) of the Federal Rules of Bankruptcy Procedure. The defendants contend res judicata bars the present Complaint. Defendant Bobrink further contends the Complaint is barred as to her by the doctrine of immunity because plaintiff's allegations against Bobrink are limited to her actions in providing legal representation to plaintiff's adversaries in prior legal proceedings.
Federal Rule of Civil Procedure 12(b) is made applicable to this proceeding.
See, e.g., Zhu v. Fisher, Cavanaugh, Smith Lemon, P.A., 151 F. Supp. 2d 1254, 1259 (D. Kan. 2001).
The present Complaint follows adverse rulings against debtor on several motions and two adversary proceedings related to the sale of KMDI. However, the Court need not take judicial notice of prior pleadings or consider matters outside the face of the Complaint because the Complaint fails to state a claim under RICO and shall be dismissed.
Analysis
In considering a motion to dismiss, the Court will accept all well-pleaded allegations of fact, as distinguished from conclusory allegations, as true and construe them in the light most favorable to the plaintiff. The Court must construe pro se pleadings liberally. To state a RICO claim, the plaintiff must allege a violation of 18 U.S.C. § 1962 by setting forth four elements: (1) conduct; (2) of an enterprise; (3) through a pattern; (4) of racketeering activity. A pattern of racketeering activity must include commission of at least two predicate acts. Also, a plaintiff has standing to bring a RICO claim only if he was injured in his business or property by reason of the defendant's violation of § 1962. Standing
Deck v. Engineered Laminates, 349 F.3d 1253, 1255 (10th Cir. 2003).
Id. at 1256.
Id. at 1257.
Id.
Plaintiff does not have standing to bring a RICO claim based upon what happened to his interest in KMDI because plaintiff filed for bankruptcy. When plaintiff filed for bankruptcy, all legal and equitable interests he had in KMDI became property of the bankruptcy estate. Causes of action plaintiff may have had pre-petition also became property of the bankruptcy estate. Plaintiff's cause of action is premised on an alleged takeover of KMDI in September 2002. Accordingly, KMDI and any cause of action for an alleged injury occurring in September 2002 became property of the estate. Plaintiff does not and cannot allege injury to his business or property based upon KMDI.
Id.; see In re Potter, 101 Fed. Appx. 770, 772 (10th Cir. 2004) (citing Jones v. Harrell, 858 F.2d 667, 669 (11th Cir. 1988) (noting that "[a] trustee in bankruptcy succeeds to all causes of action held by the debtor at the time the bankruptcy petition is filed.")).
Specificity of Pleading
Plaintiff fails to sufficiently and specifically plead the elements of a RICO cause of action. The predicate acts must be pled with sufficient specificity to establish probable cause that a crime has been committed. Merely alleging that defendants benefitted from racketeering activity is insufficient. Plaintiff makes only two factual allegations: (1) three of the defendants allegedly seized "by force of arms" KMDI from plaintiff in September 2002; and (2) plaintiff filed for bankruptcy. Although plaintiff concludes defendants acquired and maintained KMDI
Grant v. Union Bank, 629 F. Supp. 570, 575 (D. Utah 1986).
Lopez v. Dean Witter Reynolds, Inc., 591 F. Supp. 581, 586 (N.D. Cal. 1984).
. . . through a pattern of racketeering and collection of unlawful debts, including but not limited to, multiple instances of criminal usury, theft, forgery, alteration of and use of false documentation in federal legal proceedings, false oaths and declarations in a bankruptcy proceeding, actual bankruptcy fraud, mail fraud, possession and use of firearms, wiretapping, wire fraud, interference with prospective economic advantage, conversion, nuisance, trespass, abuse of process, malicious institution of civil proceedings, negligent misrepresentation, bribery, and compounding a crime[,]
plaintiff does not allege any of the acts with particularity as to time, place, identity of defendant, contents of the misrepresentations, or any other element of the long list of alleged misconduct — several of which are not even RICO predicate acts.
Switzer v. Coan, 261 F.3d 985, 992 (10th Cir. 2001).
Additionally, plaintiff fails to adequately plead a RICO enterprise. An enterprise is an ongoing organization, formal or informal, in which the various associates function as a continuing unit. An enterprise is not simply a group of individual defendants accused of engaging in racketeering. A central element of an enterprise is structure, and a plaintiff must allege some sort of chain of command or hierarchy. Plaintiff's Complaint is devoid of any allegation that the defendants are united in a common enterprise. The closest allegation of an enterprise is a conclusory statement that KMDI is a "criminal enterprise and slush fund directed by [defendants Shouse and Morton]." Plaintiff fails to allege any structure involving the defendants and fails to allege defendants are united in a continuing pattern of racketeering. The Complaint's lack of allegations of a continuing scheme is a fatal defect. Liberally construed in favor of the plaintiff, the cause of action is based upon the disposition of KMDI. A complaint about one, discrete objective, i.e., "Defendants' acquisition and maintenance of Plaintiff's interests in [KMDI]" does not create a RICO cause of action because the scheme ends when the purpose is accomplished. The facts alleged describe a single scheme with one victim. RICO does not apply. Thus, because the Complaint is devoid of the requisite elements of a RICO cause of action, and because the plaintiff lacks standing, the Complaint shall be dismissed. Conclusion
United States v. Turkette, 452 U.S. 576, 583, 101 S. Ct. 2524, 69 L. Ed. 2d 246 (1981).
Switzer, 261 F.3d at 992.
VanDenBroeck v. CommonPoint Mortg. Co., 210 F.3d 696, 700 (6th Cir. 2000).
Garbade v. Great Divide Mining and Milling Corp., 831 F.2d 212, 214 (10th Cir. 1987).
Complaint at ¶ 1.
Garbade, 831 F.2d at 214 (citing Torwest DBC, Inc. v. Dick, 810 F.2d 925 (10th Cir. 1987).
Torwest DBC, Inc., 810 F.2d at 929; see also Religious Technology Center v. Wollersheim, 971 F.2d 364 (9th Cir. 1992).
For the reasons outlined above, the defendants' Motions to Dismiss are GRANTED.
The relief described hereinbelow is SO ORDERED.