Opinion
A1203855
04-18-2013
THE FIRST BANK AND TRUST CO. Plaintiff v. FIFTH THIRD BANK, et al. Defendants
Charles J. Faruki, Esq., Daniel J. Donnellon, Esq., Stephen A. Weigand, Esq. Glenn V. Whitaker, Esq. Kent A. Britt, Esq. Eric W. Richardson, Esq. David F. Hine, Esq.
Charles J. Faruki, Esq., Daniel J. Donnellon, Esq., Stephen A. Weigand, Esq.
Glenn V. Whitaker, Esq. Kent A. Britt, Esq. Eric W. Richardson, Esq. David F. Hine, Esq.
DECISION
Beth A. Myers, Judge.
This case is before the Court on Defendants' Motion for Partial Judgment on the Pleadings. For the reasons discussed below, the motion is granted in part and denied in part.
I. STANDARD
Rule 12(C) of the Ohio Rules of Civil Procedure provides that "[a]fter the pleadings are closed but within such time as not to delay trial, any party may move for judgment on the pleadings." Judgment under R. Civ. P. 12(C) is appropriate if, after construing all reasonable inferences in favor of the nonmoving defendants, the Court determines that no material factual issues exist and that the movant is entitled to judgment as a matter of law. State ex rel. Midwest Pride IV, Inc. v. Pontious, 75 Ohio St.3d 565, 570 (1996). Stated alternatively, a court properly dismisses a complaint for failure to state a claim if it appears "beyond doubt that a plaintiff can prove no set of facts warranting a recovery." Mitchell v. Lawson Milk Co., 40 Ohio St.3d 190, 192 (1988) (citation omitted). A motion for judgment on the pleadings is subject to the same standard applicable to motions under Civil Rule 12(B)(6) and should be granted only when it is apparent that the plaintiff "can prove no set of facts warranting relief." Slone v. Aerospace Design & Fabrication, Inc., 111 Ohio App.3d 725, 730 (8 Dist. 1996).
Dist. 2011):
The Court must limit its determination of a motion for judgment on the pleadings solely to the allegations contained in the pleadings. Drozeck v. Lawyer Title Insurance Corporation, 140 Ohio App.3d 816, 820 (8 Dist. 2000). However, documents attached to the pleadings as exhibits are considered incorporated therein and are to be considered when ruling on a dispositive motion. Id., citing Peterson v. Teodosio, 34 Ohio St.2d 187 (1973); R. Civ. P. 10(C) ("A copy of any written instrument attached to a pleading is part of the pleading for all purposes.")
Dist. 2006) (granting summary judgment for lack of evidence of a malicious combination).
II. DISCUSSION
Defendants (collectively referred to as "Fifth Third") seek judgment on the pleadings on Plaintiffs claims for: 1) aiding and abetting fraud; 2) Ohio civil RICO; and 3) civil conspiracy. Plaintiff agrees that in light of DeVries Dairy, LLC v. White Eagle Cooperative Association, 132 Ohio St.3d 516 (2012), it has no claim for aiding and abetting fraud. Therefore, the Court will address only the other two claims.
A. Ohio Civil RICO ("OCAA")
R.C. 2923.32(A)(1) provides:
(A)(1) No person employed by, or associated with, any enterprise shall conduct or participate in, directly or indirectly, the affairs of the enterprise through a pattern of corrupt activity or the collection of an unlawful debt.
The OCAA defines "enterprise" in R.C. 2923.31(C) as:
(C) "Enterprise" includes any individual, sole proprietorship, partnership, limited partnership, corporation, trust, union, government agency, or other legal entity, or any organization, association, or group of persons associated in fact although not a legal entity. "Enterprise" includes illicit as well as licit enterprises.
And "pattern of corrupt activity" is defined as:
(E) "Pattern of corrupt activity" means two or more incidents of corrupt activity, whether or not there has been a prior conviction, that are related to the affairs of the same enterprise, are not isolated, and are not so closely related to each other and connected in time and place that they constitute a single event.
The OCAA lists many activities which are "corrupt activities" under the Act, including such things as bank fraud, theft and mail fraud.
To state a civil claim under the Ohio RICO statute, a Plaintiff must establish: (1) that conduct of the Defendant involves two or more specifically prohibited state or federal criminal offenses; (2) that the prohibited criminal conduct of the Defendant constitutes a pattern; and (3) that the Defendant has participated in the affairs of an enterprise or has acquired and maintained an interest or control in an enterprise. Morrow v. Reminger & Reminger Company L.P.A., (Ohio App. 10 Dist. 2009), 2009-Ohio-2665, ¶27.
Fifth Third argues that Plaintiff has failed to allege a "pattern of corrupt activity" and the existence of an "enterprise."
1. Pattern of Corrupt Activity
To establish a pattern of corrupt activity, more than a single scheme must be alleged. Morrow, supra. The Morrow Court adopted a test set forth by the Sixth Circuit in Columbia Natural Resources v. Tatum, 58 F.2d 1101 (6 Cir. 1995):
Dist. 2009) (granting summary judgment because of absence of evidence of underlying tort and of a conspiracy). See also, Slyman v. Ship/nan, Dixon & Livingston, Co., 2009 Ohio 4126 (2
[T]o state the inquiry simply, a pattern is the sum of various factors including: the length of time the racketeering activity existed; the number of different schemes (the more the better); the number of predicate acts within each scheme (the more the better); the variety of species of predicate acts (the more the better); the distinct types of injury (the more the better); the number of victims (the more the better); and the number of perpetrators (the less the better).Morrow summarized by stating: "Where there is only one purpose, one result, one set of participants, one victim, and one method of commission, there is no continuity and therefore no pattern [of corrupt activity]. Morrow, supra, (citation omitted).
In Herakovic v. Catholic Diocese of Cleveland, 2005-Ohio-5985 (8 Dist. 2005), the Court affirmed dismissal of an OCAA claim based in part on lack of a pattern of corrupt activity. The case involved a claim against a church and others for concealing the wrongdoings of sexual abusers. The Court found that although there were many acts by Defendants (intimidation of a Plaintiff, failure to report cases, money laundering), they emanated from a single event - the attempt to conceal the child abuse. The Court stated:
Dist. 2009) (because court granted summary judgment on tortious interference claim, civil conspiracy claim failed as a matter of law).
Here, the single event alleged by appellants is the concealment. All of the other alleged acts make up their claim for concealment. A single event cannot establish a pattern regardless of the number of criminal acts emanating therefrom.
Fifth Third argues that Plaintiff has alleged only one scheme - Fifth Third's attempt to "exit" from its relationship from Eastern Livestock by running up the accounts, then freezing the accounts and taking the proceeds. Plaintiff argues that it has alleged a pattern - knowledge of and assistance in numerous acts of check kiting to continue to earn fees, cover up by some of Fifth Third's employees, and ultimate freezing of the accounts. It argues that Fifth Third focuses on only one part of the pattern - the freezing of the account - and ignores the involvement in the earlier check kiting.
Taking the allegations of the Complaint as true, the Court finds that Plaintiff has set forth a "pattern" sufficient to withstand the motion. Plaintiff has alleged knowledge of and aiding in check kiting over a period of years, concealing this activity and ultimate freezing of the account.
2. Enterprise
The United State Supreme Court addressed the "enterprise" element in United States v. Boyle, , 556 U.S. 938 (2009). In Boyle, the Supreme Court clarified its ruling in United States v. Turkette, 42 U.S. 576 (1981) which required a showing of a structure separate and distinct from the pattern of corrupt activity in order to establish an enterprise. As analyzed by the Court in State v. Dodson, 2011- Ohio-6222 (12
However, the United States Supreme Court clarified its ruling in Turkette in Boyle v. United States (2009), 556 U.S. 938, 129 S.Ct. 2237. Boyle states that in order to have an association-in-fact enterprise, which is utilized in the R.C. 2923.31(C) definition of "enterprise, " there must be: "a purpose, relationships among those associated with the enterprise, and longevity sufficient to permit these associates to pursue the enterprise's purpose." Id. at 938. Boyle further explains that an association-in-fact enterprise does not need a hierarchical structure or regular meetings. Id. Different members may play different roles at various times. Id. "While the group must function as a continuing unit and remain in existence long enough to pursue a course of conduct, nothing in RICO [Racketeer Influenced and Corrupt Organizations Act] exempts an enterprise whose associates engage in spurts of activity punctuated by periods of quiescence." Id.
Another Ohio Appellate Court recently examined "enterprise" post-Boyle. The Court in State v. Franklin, 201 l-Ohio-6802 (2d Dist. 2011) stated:
The Supreme Court separated its inquiry into three parts - whether the association must have a structure; whether the structure must be "ascertainable"; and whether the structure must go beyond what is inherent in the pattern of racketeering activity in which its members engage. Id. at 2244. The Court first concluded that an association must have at least three structural features: "a purpose, relationships among those associated with the enterprise, and longevity sufficient to permit these associates to pursue the enterprise's purposes." Id. Next, the Court held that the word "ascertainable" was redundant and potentially misleading, because each element of any crime must be "ascertainable" in order for the jury to find that the element has been proven beyond a reasonable doubt. Id.
Regarding the last part of the inquiry, the Supreme Court reiterated its holding in Turkette that "the existence of an enterprise is a separate element that must be proved." Id. The Court stressed, as it had in Turkette, that "the existence of an enterprise is an element distinct from the pattern of racketeering activity and 'proof of one does not necessarily establish the other."' Id. at 2245, quoting Turkette, 452 U.S. at 583.
The Court did reject the petitioner's argument that an association-in-fact enterprise must have structural attributes like a structural hierarchy, chain of command, membership dues, an internal discipline mechanism, and so forth.
The Courts in Herakovic, supra, and Morrow, supra concluded that courts require one of the following be specifically pled to establish an "association in fact" enterprise: 1) an ongoing organization with a commonality of purpose or a guiding mechanism to direct the organization; 2) a continuing unit with an ascertainable structure; or 3) an organization structure distinct from the pattern of predicate acts.
The Court finds that Plaintiff has failed to allege an "enterprise." Taking the allegations of the Complaint as true, there is no common purpose. Nor is there sufficient allegation of structure. Thus, Plaintiffs OCAA claim fails.
B, Civil Conspiracy
"To establish a claim for civil conspiracy, a plaintiff must prove (1) a malicious combination (2) involving two or more persons, (3) causing injury to person or property, and (4) the existence of an unlawful act independent from the conspiracy itself." James v. Bob Ross Buick, Inc., 167 Ohio App.3d 338, 345 (2
In addition, '"[a] civil conspiracy claim requires an underlying tortious act that causes an injury. Thus, if there is no underlying tortious act, there is no actionable civil conspiracy claim.'" Doane v. Givaudan Flavors Corp., 184 Ohio App.3d 26, 37 (1
Taking the allegations of the Complaint as true, Plaintiff has stated a claim for civil conspiracy. It has alleged a malicious combination between Fifth Third employees and Eastern Livestock to permit check kiting to injure a third person. It has set forth facts as to each element.
III. CONCLUSION
Fifth Third's motion is granted in part and Plaintiffs Ohio civil RICO claim is dismissed. The motion is denied as to the civil conspiracy claim.