CIVIL ACTION NO. 3:00CV-430-S.
March 13, 2001.
This matter is before the court for consideration of several motions filed by the parties. The action arises out of the dissolution of the marriage between the plaintiff, Terrance L. White, Sr. ("Mr. White"), and one of the defendants, Terry Lynn Daniels ("Ms. Daniels"). According to Mr. White, the defendants obtained, "through the improper use and threat of use of criminal and civil sanction processes, . . . an unfair and disproportionate settlement of cash and property . . ." as a result of this divorce proceeding. See Second Am. Compl. at ¶ III (1). Specifically, Mr. White alleges that the defendants engaged, individually and as an enterprise, in a pattern of racketeering activity in violation of the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1961-1968 ("the RICO Act"). See id. at ¶ IV (A) (2). In addition to this federal statutory claim, Mr. White makes several state law claims which include: (1) abuse of process; (2) false light defamation; and (3) outrageous conduct. Mr. White seeks costs and damages, both compensatory and punitive.
The defendants are Ms. Daniels, Thomas Clay, the attorney who represented Ms. Daniels in the relevant divorce action, Lenisha White, Mr. White's daughter, Dana Kolter, John Harper, and Janice Stone.
I. Plaintiff's Second Amended Complaint
Mr. White seeks to file his Second Amended Complaint pursuant to Fed.R.Civ.P. 15(a) ("Rule 15(a)"). After a party has amended its pleading once, Rule 15(a) permits further amendment "only by leave of court or by written consent of the adverse party; and leave shall be freely given when justice so requires." Whether to permit further amendment of a plaintiff's complaint is within the broad discretion of the district court. See Frank v. D'Ambrosi, 4 F.3d 1378, 1386 (6th Cir. 1993). In order to "reinforce the principle that cases `should be tried on their merits rather than the technicalities of pleadings,'" we will permit Mr. White to file his Second Amended Complaint. See Greenberg v. Life Ins. Co. of Virginia, 177 F.3d 507, 522 (6th Cir. 1999).
II. Defendants' Motion to Dismiss
In response to Mr. White's motion to file a second amended complaint, the defendants have renewed their motions to dismiss the plaintiff's claims on several grounds. Because we find that Mr. White has failed to sufficiently allege the existence of an enterprise, as required by 18 U.S.C. § 1962, we find it unnecessary to address the defendants' other grounds for dismissal.
When considering a motion to dismiss, a court must determine whether a reasonable jury could find for the plaintiff under any set of facts. See Cheatham v. Paisano Publications, Inc., 891 F. Supp. 381, 384 (W.D.Ky. 1995). In making this determination, the court will construe the complaint in the light most favorable to the plaintiff. See Columbia Natural Resources, Inc. v. Tatum, 58 F.3d 1101, 1109 (6th Cir. 1995). Only when it appears beyond doubt that the plaintiff would be unable to recover under any set of facts that could be presented consistent with the allegations of the complaint will such a motion be granted. See Conley v. Gibson, 355 U.S. 41, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957).
An individual alleging a violation of the RICO Act must demonstrate that: "1) there were two or more predicate offenses; 2) the existence of an enterprise engaged in or affecting interstate or foreign commerce; 3) a nexus between the pattern of racketeering activity and the enterprise; and 4) an injury to his business or property by reason of the above." Frank v. D'Ambrosi, 4 F.3d 1378, 1385 (6th Cir. 1993) (citing Beneficial Standard Life Ins. Co. v. Madariaga, 851 F.2d 271, 274 n. 5 (9th Cir. 1988)). Under the RICO Act, "`enterprise' includes any individual, partnership, corporation, association, or other legal entity, and any union or group of individuals associated in fact although not a legal entity[.]" 18 U.S.C. § 1961 (4).
Mr. White does not allege that the defendants in this matter constitute a legal entity. Therefore, he must demonstrate that the defendants "combined to form an association-in-fact." D'Ambrosi, 4 F.3d at 1386. In D'Ambrosi, the Sixth Circuit held that "an association-in-fact must be an ongoing organization, its members must function as a continuing unit, and it must be separate from the pattern of racketeering activity in which it engages." See id. (citing United States v. Turkette, 452 U.S. 576, 583, 101 S.Ct. 2524, 69 L.Ed.2d 246 (1981)).
Construing the facts alleged by Mr. White's Second Amended Complaint in his favor, we find that he has failed to allege the existence of an enterprise, as that term is defined by the RICO Act. First, Mr. White's latest complaint contains no allegation that the defendants' organization is ongoing. Even assuming that the defendants acted in the manner alleged by Mr. White, the limited purpose of creating "an inflated, fraudulent and false economic (i.e., dissolution action property and cash settlement and child support/education contribution determination) debt on the part of the Plaintiff . . ." is insufficient to state a claim under the RICO Act. See Second Am. Compl. at ¶ IV (A)(2)(a). See also Manax v. McNamara, 842 F.2d 808, 811-12 (5th Cir. 1988) (finding that the "short-term goal" of destroying an individual's medical practice was insufficient to serve as the basis of that individual's RICO Act claim).
Second, conclusory statements such as those made throughout Mr. White's latest complaint are insufficient to state a claim under the RICO Act. See Begala v. PNC Bank, Ohio, Nat. Ass'n, 214 F.3d 776, 781-82 (6th Cir. 2000) (dismissing the plaintiff's complaint which merely listed "a string of entities allegedly comprising the enterprise" and "a string of supposed racketeering activities" because it did not "contain facts suggesting that the behavior of the listed entities [was] `coordinated' in such a way that they [functioned] as a `continuing unit' . . .").
Finally, the facts recited in Mr. White's latest complaint depict not an association of individuals engaged in a pattern of racketeering activity, but rather several individuals involved, either directly or indirectly, in the divorce proceeding of Mr. White and Ms. Daniels. See Second Am. Compl. at ¶ IV (A)(2)(c). The defendants' conduct occurred in the regular course of their business as attorneys and employees of attorneys involved as advocates in a divorce proceeding. This conduct is insufficient to form the basis of a RICO Act claim. See Broyles v. Wilson, 812 F. Supp. 651, 657 (M.D.La. 1993).
For these reasons, Mr. White's RICO Act claim against all defendants will be dismissed with prejudice. In light of our disposition of the federal claim in this action, we decline to address the plaintiff's state law claims. See United Mine Workers v. Gibbs, 383 U.S. 715 (1966); 28 U.S.C. § 1367(c)(3). Therefore, the remainder of Mr. White's Second Amended Complaint will be dismissed without prejudice for lack of subject matter jurisdiction.
III. Defendants' Motion for Sanctions
Certain defendants have asked that Mr. White and his attorney, Ramon McGee ("Mr. McGee"), be sanctioned pursuant to Fed.R.Civ.P. 11 ("Rule 11") for filing a frivolous complaint with the improper purpose of harassing them. See Fed.R.Civ.P. 11(b)(1). To determine whether the conduct of either Mr. White or Mr. McGee is sanctionable, we must consider the reasonableness of their conduct in initiating this suit against the defendants. See Apostolic Pentecostal Church v. Colbert, 169 F.3d 409, 417 (6th Cir. 1999). Factors to be considered in making this determination of reasonableness include:
the time available to the signor for investigation; whether the signor had to rely on a client for information as to the facts underlying the pleading, motion, or other paper; whether the pleading, motion, or other paper was based on a plausible view of the law; or whether the signor depended on forwarding counsel or another member of the bar.Century Products, Inc. v. Sutter, 837 F.2d 247, 250 (6th Cir. 1988).
Where a RICO Act claim is alleged, courts have relied upon additional factors in determining whether conduct is sanctionable. These factors include: (1) the filing of similar complaints in other courts; (2) the joinder of defendants with little or no apparent connection to the real controversy; (3) the failure to comply with a dismissal with prejudice; and (4) the failure to respond to a motion for sanctions. See Palmer v. Nationwide Mut. Ins. Co., 945 F.2d 1371, 1378 (6th Cir. 1991).
We believe that the defendants have sufficiently demonstrated that both Mr. White and Mr. McGee have engaged in sanctionable conduct. First, Palmer, supra, indicates that a factor to be considered in determining reasonableness is the filing of similar complaints in other forums. See id. at 1378. Here, the record indicates that Mr. White has attempted to utilize the judicial system as a weapon against these defendants in the past. See Defs.' Mem. in Supp. of Mot. for Sanctions at 2-4 (DN 9).
While the details of each specific instance may vary, the outcome of each has been uniform; that is, each has been dismissed based on Mr. White's inability to substantiate his claims. See id., Ex. A (criminal complaint filed against Ms. Daniels alleging the falsification of the birth certificate of Lanisha White, Mr. White's daughter and a defendant in this matter, which was dismissed); Ex. B (criminal complaint filed against Ms. Daniels alleging assault which was dismissed); Ex. C (civil complaint filed in Jefferson Circuit Court against Ms. Daniels, two Circuit Court judges, two County Attorneys, the Commonwealth of Kentucky, and Family Court which was dismissed); Ex. D (letter to the F.B.I. concerning the subject matter which served as the basis for the above civil lawsuit); Ex. E (civil complaint filed in Jefferson Circuit Court against Ms. Daniels and her employer which was dismissed); Ex. G (Kentucky Bar Association complaint filed against Thomas Clay, a defendant in this matter, which was dismissed); Ex. H (civil complaint filed in U.S. District Court against Ms. Daniels, Clay, and several other participants in Mr. White's divorce proceeding including several judges, assistant County Attorneys, and assistant Commonwealth Attorneys which was dismissed); and Ex. L (domestic violence petition filed against Ms. Daniels which was dismissed). Our conclusion that the present suit is merely the latest in a series of frivolous claims made by Mr. White against these and other individuals is further bolstered by the failure of either Mr. White or Mr. McGee to dispute the defendants' characterization of these prior claims as frivolous despite having the opportunity to do so. See Pl.'s Resp. to Mot. for Sanctions (DN 17).
Second, both Mr. White and Mr. McGee have had ample opportunity, since the commencement of this action, to investigate the allegations they have made against the defendants. See Burnette v. Godshall, 828 F. Supp. 1439, 1448-49 (N.D.Cal. 1993) (imposing sanctions for failure to investigate the propriety of filing a RICO Act claim). Indeed, the grounds upon which several motions to dismiss filed by the defendants were based should have put both Mr. White and Mr. McGee on notice that the claims against the defendants may be deficient. See DNs 3, 4, 5, 6, 15, and 18 (motions to dismiss each of the three versions of Mr. White's complaint, all of which were based on Mr. White's failure to allege facts which fail to state a RICO Act claim against the defendants). Nevertheless, the Second Amended Complaint, filed on September 7, 2000, contains conclusory legal allegations, unsupported by factual allegations, similar to those found in the original Complaint, filed on July 21, 2000. Compare Second Am. Compl. at ¶ IV (A)(2)(a) with Compl. at ¶ IV (A) (1)-(6). That Mr. White and Mr. McGee failed to take such notice is another factor which weighs against finding that they acted reasonably under the circumstances. See Textor v. Board of Regents of Northern Illinois University, 87 F.R.D. 751, 754 (N.D.Ill. 1980).
Another issue relevant to a determination of reasonableness is whether the plaintiff has named individuals with "little apparent connection with the real controversy" as defendants. Palmer, 945 F.2d at 1378. We believe Mr. White has named several individuals who fit this description. For example, according to Mr. White, the defendants John Harper and Janice Stone were merely employees of Mr. Clay at the time of the events alleged in his complaint. See Pl.'s Resp. (DN 13) at 3. Indeed, the sole justification given for naming Ms. Stone as a defendant was that "through the provision of secretarial and notary public attestation services . . ., [she] participated in the acts complained of in the Plaintiff's original and amended complaint." Id. Another defendant, Lanisha White, is alleged to have given false testimony during Mr. White's divorce proceeding. See id. Finally, Dana Kolter, an attorney, is alleged only to have acted as counsel to Clay and Ms. Daniels at some point. See id.
We believe that any reasonable attorney, after having consulted with Mr. White, would have realized that Mr. White was frustrated with how his divorce proceeding concluded. However, instead of counseling Mr. White regarding the proper means by which to address his concerns, Mr. McGee initiated a lawsuit in this court against his client's ex-wife, her divorce attorneys, and others, alleging violations of the RICO Act. Once stripped of inflammatory adjectives, the allegations made by Mr. White, through Mr. McGee, amount to claims that Ms. Daniels' divorce attorney and his staff acted as advocates on her behalf in a legal proceeding against Mr. White. Under the circumstances presented in this case, no reasonable attorney would attempt to state these claims against these defendants.
For these reasons, we find that the defendants have demonstrated that the RICO Act claim brought against them by Mr. White, through Mr. McGee, was presented for the improper purpose of harassing them in violation of Rule 11(b)(1). Also, the defendants have sufficiently demonstrated that the factual allegations and contentions made by Mr. White lack evidentiary support in violation of Rule 11(b)(3). Therefore, we are regrettably forced to conclude that the conduct of both Mr. White and Mr. McGee is sanctionable under Rule 11. See, e.g., Davis v. Hudgins, 896 F. Supp. 561, 573 (E.D.Va. 1995) (finding that the imposition of sanctions was warranted on facts similar to those presented by the record in this case).
Having determined that the conduct of both Mr. White and Mr. McGee is sanctionable, we must determine the nature and extent of sanctions to impose. This determination relies upon factors which include "ability to pay, the degree of bad faith or want of diligence, the amount of fees and costs resulting from the attorney's (or party's) inappropriate conduct, mitigating conduct, if any, and that amount necessary and effective to bring about deterrence under all the particular circumstances." Orlett v. Cincinnati Microwave, Inc., 954 F.2d 414, 419 (6th Cir. 1992). Other relevant factors include:
the nature of the violation committed, the circumstances in which it was committed, the circumstances (including the financial state) of the individual to be sanctioned, and those sanctioning measures that would suffice to deter that individual from similar violations in the future. The court should also consider the circumstances of the party or parties who may have been adversely affected by the violation.Id. at 420 (quoting American Judicature Society, Studies of the Justice System, Rule 11 in Transition: The Report of the Third Circuit Task Force on Federal Rule of Civil Procedure 11 , p. 40 (1989)).
We are presently unable, based on the record before us, to determine the nature and extent of sanctions to impose. Therefore, the defendants will be ordered to, within fourteen days of the date the attached order is entered, file with the court and serve upon both Mr. White and Mr. McGee, a bill of costs setting forth the reasonable costs and attorneys' fees claimed to be directly attributable to defending the plaintiff's RICO Act claim. This bill shall be supplemented with documentation relevant to this inquiry, including any time sheets and receipts. We stress that because we will dismiss Mr. White's state law claims for lack of subject matter jurisdiction, no part of the costs or attorneys' fees incurred in defending against them may be recovered by the defendants. Within fourteen days of the date of service of this documentation, Messrs. White and McGee will be ordered to file with the court, and serve upon the relevant defendants, any objections thereto. Upon receipt, the court will determine the nature and extent of sanctions to impose and whether a hearing is necessary to aid in that determination.
For the reasons set forth above, Mr. White's motion to file his Second Amended Complaint will be granted. The motions of the defendants to dismiss Mr. White's Second Amended Complaint will be granted with respect to Count A of Part IV, and that claim will be dismissed with prejudice. The remaining state law claims set forth in Counts B through E of Part IV of Mr. White's Second Amended Complaint will be dismissed without prejudice for lack of subject matter jurisdiction. Finally, the defendants will be ordered to, within fourteen days of the attached order, file with the court and serve upon both Mr. White and Mr. McGee, a bill of costs setting forth the reasonable costs and attorneys' fees claimed to be directly attributable to defending the plaintiff's RICO Act claim. This bill shall be supplemented with documentation relevant to this inquiry, including any time sheets and receipts. Within fourteen days of the date of service of this documentation, Messrs. White and McGee will be ordered to file with the court, and serve upon the relevant defendants, any objections thereto. A separate order will be entered this date in accordance with this opinion.
Motions having been made, and the court being otherwise sufficiently advised, and for the reasons set forth in the accompanying memorandum opinion, IT IS HEREBY ORDERED AND ADJUDGED that:
1. The motion of the plaintiff, Terrance L. White, Sr., to file his Second Amended Complaint is GRANTED;
2. The motions of the defendants, Thomas E. Clay, P.S.C., Thomas Clay, individually, Terry Daniels, Lenisha White, John Harper, Janice Stone, and Dana Kolter, to dismiss the plaintiff's Second Amended Complaint is GRANTED with respect to Count A of Part IV, and Count A of the plaintiff's Second Amended Complaint is DISMISSED WITH PREJUDICE;
3. The prior motions of the defendants to dismiss the plaintiff's First Amended Complaint are DENIED as moot;
4. The remaining state law claims set forth in Counts B through E of Part IV of the plaintiff's Second Amended Complaint are DISMISSED WITHOUT PREJUDICE FOR LACK OF SUBJECT MATTER JURISDICTION; and
5. The defendants shall, within fourteen days, file with the court, and serve upon both Mr. White and Mr. McGee, a bill of costs setting forth the reasonable costs and attorneys' fees claimed to be directly attributable to defending the plaintiff's RICO Act claim. This bill shall be supplemented with documentation relevant to this inquiry, including any time sheets and receipts. Within fourteen days of the date of service of this documentation, Messrs. White and McGee shall file with the court, and serve upon the relevant defendants, any objections thereto.IT IS SO ORDERED this ___ day of ___, 2001.