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Wheatley v. Kirkland

United States District Court, D. Nebraska

July 5, 2016



          Laurie Smith Camp Chief United States District Judge

         This matter is before the Court on the Motion to Dismiss or, in the Alternative, Motion for a More Definite Statement (Filing No. 5) submitted by Defendant Richard Berkshire ("Berkshire"). For the reasons discussed below, the Motion to Dismiss will be granted in part; the Plaintiffs' First Cause of Action, alleging violations of the Racketeer Influenced and Corrupt Organizations ("RICO") Act, 18 U.S.C. §§ 1961, et seq., will be dismissed as to Berkshire, with prejudice; and Plaintiffs will be given leave to file an Amended Complaint pleading with particularity the facts constituting the alleged fraud asserted in Plaintiffs' Fourth Cause of Action, consistent with Fed.R.Civ.P. 9(b).


         For purposes of the pending Motion, all well-pled facts alleged in the Complaint (Filing No. 1) are presumed to be true, though the Court need not accept the Plaintiffs' conclusions of law. The following is a summary of those factual allegations.

         Defendant Free Power Company, Inc. ("Free Power") had certain contracts with the City of Columbia, Missouri, for the installation of arrays of equipment to generate electricity. Free Power designated Defendant Solar Product Solutions, LLC ("SPS") as its project coordinator to supervise procurement and construction services for the installation of the arrays. Defendant Victor Kirkland ("Kirkland") was the owner of SPS, and also controlled Free Power.

         In 2012, Plaintiffs Bryan Wheatley and Jana Wheatley (the "Wheatleys"), doing business as Team Green, entered into a Construction Services Agreement (the "Agreement") with SPS. The Wheatleys signed the Agreement, (Filing No. 1-1, Exhibit A to the Complaint[1]), on May 8, 2012, and the Agreement had an effective date of April 7, 2012. (Id. at 1.) Pursuant to the Agreement, the Wheatleys were "to provide all equipment, materials, supplies, tools, labor and services necessary to complete designated Arrays . . . except the equipment set forth in Exhibit A." (Id. at 2.) Exhibit A to the Agreement listed the equipment to be supplied by SPS: Solar modules, Inverters, Racking, and Wire. (Id. at 13.)

         After the Agreement was executed, Kirkland told the Wheatleys they must supply certain equipment for the construction project that the Wheatleys did not believe they were obligated to supply. The Wheatleys incurred substantial expense to procure and supply such equipment and to complete the construction project. After the project was complete, SPS, Kirkland, and Free Power declined to pay the Wheatleys for labor and equipment.

         The Wheatleys allege that Berkshire, an attorney practicing law in Omaha, Nebraska, represented them during the negotiation and performance of the Agreement, and that they enlisted Berkshire's services to obtain payment. They also allege Berkshire served as general counsel for SPS and Free Power, and represented Kirkland, but failed to disclose these alleged conflicts of interest to the Wheatleys.[2]

         The Wheatleys brought this action on April 7, 2016, asserting four causes of action: (1) Violation of the Racketeer Influenced and Corrupt Organizations ("RICO") Act, 18 U.S.C. § 1961, et seq., as to all Defendants; (2) Breach of Contract, referencing "Defendants" in general, but naming SPS and Kirkland, specifically; (3) Fraudulent Misrepresentation as to Kirkland, Free Power, and SPS; and (4) Fraudulent Misrepresentation as to Berkshire. It is the First and Fourth causes of action that are the subject of the pending Motion.


         Fed. R. Civ. P. 9(b)

         Rule 9(b) provides in pertinent part: "In alleging fraud . . . a party must state with particularity the circumstances constituting fraud . . . . Malice, intent, knowledge, and other conditions of a person's mind may be alleged generally." Fed.R.Civ.P. 9(b). "Rule 9(b)'s ‘particularity requirement demands a higher degree of notice than that required for other claims, ' and ‘is intended to enable the defendant to respond specifically and quickly to the potentially damaging allegations.'" United States ex rel. Joshi v. St. Luke's Hosp., Inc., 441 F.3d 552, 556 (8th Cir. 2006) (quoting United States ex rel. Costner v. URS Consultants, Inc., 317 F.3d 883, 888 (8th Cir. 2003)). A party must "must plead such facts as the time, place, and content of the defendant's false representations, as well as the details of the defendant's fraudulent acts, including when the acts occurred, who engaged in them, and what was obtained as a result" to satisfy Rule 9(b)'s particularity requirements. Id. (citing Corsello v. Lincare, Inc., 428 F.3d 1008, 1012 (11th Cir. 2005)). "Put another way, the complaint must identify the ‘who, what, where, when, and how' of the alleged fraud." Id. (citing Costner, 317 F.3d at 888). Rule 9(b) requires more than "conclusory and generalized allegations." Id. at 557 (citing Schaller Tel. Co. v. Golden Sky Sys., Inc., 298 F.3d 736, 746 (8th Cir. 2002)).

         "The particularity requirements of Rule 9(b) apply to allegations of . . . fraud . . . when used as predicate acts for a RICO claim." Murr Plumbing, Inc. v. Scherer Bros. Fin. Servs. Co., 48 F.3d 1066, 1069 (8th Cir. 1995) (citing Flowers v. Cont'l Grain Co., 775 F.2d 1051, 1054 (8th Cir.1985)). However, the particularity requirements of Rule 9(b) do not apply to allegations of the other elements of a RICO claim. See Abels v. Farmers Commodities Corp., 259 F.3d 910, 919 (8th Cir. 2001) (stating "[t]here are two issues here that should be kept distinct: whether the plaintiffs have sufficiently pleaded acts of racketeering, and whether those alleged acts can be said to form a pattern, " and that Rule 9(b) applies only to allegations of predicate acts involving fraud). Furthermore, "[w]here a plaintiff is not a party to a communication, particularity in pleading may become impracticable." Id. at 921. As a result, courts have relaxed the particularity requirement in those circumstances. Id. (citing Durham v. Bus. Mgmt. Assoc., 847 F.2d 1505, 1510 (11th Cir. 1988); New England Data Serv. v. Becher, 829 F.2d 286, 292 (1st Cir. 1987); Seville Indus. Machinery Corp v. Southmost Machinery Corp., 742 F.2d 786, 792 n.7 (3d Cir. 1984)).

         Fed. R. Civ. P. 12(b)(6)

         A complaint must contain "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed.R.Civ.P. 8(a)(2). "[A]lthough a complaint need not include detailed factual allegations, ‘a plaintiff's obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.'" C.N. v. Willmar Pub. Sch., Indep. Sch. Dist. No. 347, 591 F.3d 624, 629-30 (8th Cir. 2010) (quoting Twombly, 550 U.S. at 555). "Instead, the complaint must set forth ...

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