United States District Court, D. Nebraska
CUSTOM HAIR DESIGNS BY SANDY, LLC, on behalf of themselves and all others similarly situated; and SKIP'S PRECISION WELDING, LLC, on behalf of themselves and all others similarly situated; Plaintiffs,
CENTRAL PAYMENT CO., LLC, Defendant.
MEMORANDUM AND ORDER
F. Bataillon Senior United States District Judge
matter is before the Court on defendant Central Payment Co.,
LLC's (hereinafter CPAY) motion to dismiss Counts II and
III, Filing No. 54, of plaintiffs' first amended
complaint, Filing No. 46; defendant CPAY's motion to
strike improper evidence submitted in opposition to the
motion to dismiss, Filing No. 71; and the plaintiff's
objection, Filing No.77, to the magistrate's order,
Filing No. 76. Plaintiffs amended complaint alleges breach of
contract; violation of the Racketeer Influenced and Corrupt
Organizations Act, (hereinafter RICCO) 18 U.S.C. §§
1962(a), (c) & (d)); and fraudulent overbilling and
contend they are merchants that processed credit and debit
transactions through CPAY. CPAY processes over 65, 000
businesses and over $10 billion in credit sales annually.
Plaintiffs contracted with CPAY from November 2015 through
February 2017 for payment processing services. Plaintiffs
allege that CPAY charged fees for its payment processing
services that do not coincide with the terms of
plaintiffs' merchant agreements and Terms and Conditions.
Plaintiffs plead this case as a putative nationwide class
action and argue that CPAY is a multi-year, interstate,
multi-million-dollar scheme to defraud unsophisticated
merchants. Defendants argue that this is a simple
breach of contract case.
Motion to Dismiss under Fed.R.Civ.P. 12(b)(6)
the Federal Rules, 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); Bell
Atlantic Corp. v. Twombly, 550 U.S. 544, 556 n.3.
(2007); Braden v. Wal-Mart Stores, Inc., 588 F.3d
585, 594 (8th Cir. 2009). “Specific facts are not
necessary; the statement need only ‘give the defendant
fair notice of what the . . . claim is and the grounds upon
which it rests.'” Erickson v. Pardus, 551
U.S. 89, 93 (2007) (quoting Twombly, 550 U.S. at
555). In order to survive a motion to dismiss under
Fed.R.Civ.P. 12(b)(6), the plaintiff's obligation to
provide the grounds for his entitlement to relief
necessitates that the complaint contain “more than
labels and conclusions, and a formulaic recitation of the
elements of a cause of action will not do.”
Twombly, 550 U.S. at 555.
deciding a motion to dismiss under Rule 12(b)(6), a court
must accept the allegations contained in the complaint as
true and draw reasonable inferences in favor of the nonmoving
party. Cole v. Homier Dist. Co., Inc., 599 F.3d 856,
861 (8th Cir. 2010). Determining whether a complaint states a
plausible claim for relief is “a context-specific
task” that requires the court “to draw on its
judicial experience and common sense.” Ashcroft v.
Iqbal, 556 U.S. 662, 679 (2009).
follow a “two-pronged approach” to evaluate Rule
12(b)(6) challenges. Iqbal, 556 U.S. at 679. First,
a court divides the allegations between factual and legal
allegations; factual allegations should be accepted as true,
but legal allegations should be disregarded. Id.
Second, the factual allegations must be parsed for facial
plausibility. Id.“A claim has facial
plausibility when the plaintiff pleads factual content that
allows the court to draw the reasonable inference that the
defendant is liable for the misconduct alleged.”
Id. at 677. The Court should not “incorporate
some general and formal level of evidentiary proof into the
‘plausibility' requirement of Iqbal and
Twombly.” Whitney v. Guys, Inc., 700
F.3d 1118, 1128 (8th Cir. 2012). The question at this
preliminary stage is not whether a plaintiff might be able to
prove its claim, but whether it has “adequately
asserted facts (as contrasted with naked legal conclusions)
to support” those claims. Id. The court must
find “enough factual matter (taken as true) to
suggest” that “discovery will reveal
evidence” of the elements of the claim.
Twombly, 550 U.S. at 558, 556. When the allegations
in a complaint, however true, could not raise a claim of
entitlement to relief, the complaint should be dismissed for
failure to set a claim under Fed.R.Civ.P. 12(b)(6).
Twombly, 550 U.S. at 558; Iqbal, 556 U.S. at 679.
Dismissal under Rule 12(b)(6) is appropriate only if it is
clear that no relief can be granted under any set of facts
that could be proven consistent with the allegations.
O'Neal v. State Farm Fire & Cas. Co., 630
F.3d 1075, 1077 (8th Cir. 2011).
and Fed.R.Civ.P. 9(b)
addition, RICO and fraud claims must be pled with
particularity pursuant to Rule 9(b). See Crest Constr.
II, Inc. v. Doe, 660 F.3d 346, 353 (8th Cir.
2011) (citing Nitro Distrib., Inc. v. Alticor, Inc.,
565 F.3d 417, 428 (8th Cir. 2009)); Allison v. Sec.
Benefit Life Ins. Co., 980 F.2d 1213, 1216 (8th Cir.
1992) (explaining Rule 9(b) applies to the “critical
elements of fraud”). Under this heightened pleading
standard, the “circumstances” of the fraud that
must be pled with particularity include “such matters
as the time, place and contents of false representations, as
well as the identity of the person making the
misrepresentations and what was obtained or given up
thereby.” H & Q Props., Inc. v. Doll, 793
F.3d 853, 856 (8th Cir. 2015) (quoting Murr Plumbing,
Inc. v. Scherer Bros. Fin. Servs. Co., 48 F.3d 1066,
1069 (8th Cir. 1995)). In other words, Rule 9(b) requires
plaintiffs to plead “the who, what, when, where, and
how” of the fraud. Crest Constr. II, Inc., 660
F.3d at 353 (quoting Summerhill v. Terminix, Inc.,
637 F.3d 877, 880 (8th Cir. 2011)).
Motion to dismiss Counts II and III, Filing No. 54
moves to dismiss Counts II and III of plaintiffs' first
amended complaint. Counts II asserts claims in violation of
(RICO), 18 U.S.C. § 1962, and Claim III asserts
was passed to provide criminal and civil protections against
organized crime. H.J. Inc. v. Nw. Bell Tel. Co., 492
U.S. 229, 232-233 (1989); see18 U.S.C. §
1964(c). RICO “does not cover all instances of
wrongdoing” or “ordinary commercial fraud.”
See Crest Constr. II, Inc., 660 F.3d at 353
(citation omitted); Terry A. Lambert Plumbing, Inc. v. W.
Sec. Bank, 934 F.2d at 981-82; see also
Stonebridge Collection, Inc., 791 F.3d at 822.
“Acts and omissions such as a breach of contract . . .
are insufficient to establish RICO liability.”
Estate of Joyce Rosamond Petersen v. Boland, No.
8:16CV183, 2016 WL 6102339, at *6 (D. Neb. Oct. 19, 2016)
(citing Manion v. Freund, 967 F.2d 1183, 1186 (8th
Cir. 1992); McEvoy Travel Bureau, Inc. v. Heritage
Travel, Inc., 904 F.2d 786, 791 (1st Cir.
1990); see Wheatley v. Kirkland, No.
8:16CV148, 2016 WL 3661215, at *5 (D. Neb. July 5, 2016)
(citing and concluding the same). RICO prohibits activities
that are connected to a criminal enterprise via interstate
commerce. 18 U.S.C. § 1962. RICO prohibits receiving
“any income derived . . . from a pattern of
racketeering activity” or “us[ing] or invest[ing]
. . . any part of such income . . . in acquisition, ”
establishment, or operation of “any enterprise”
engaged in interstate commerce. 18 U.S.C. § 1962(a).
RICO makes it illegal for “any person employed by or
associated with any enterprise . . . to conduct or
participate, directly or indirectly, in the conduct of such
enterprise's affairs through a pattern of racketeering
activity . . . .” 18 U.S.C. § 1962(c). In
addition, a person cannot conspire to do either of these
actions. 18 U.S.C. § 1962(d). Plaintiffs, argues
defendant, did not allege an enterprise or the predicate acts
engaged in a pattern of racketeering activity, where in
plaintiffs suffered from a predicate act.
argue that to establish an enterprise plaintiffs must plead
“(1) a common purpose that animates the individuals
associated with it; (2) an ongoing organization with members
who function as a continuing unit; and (3) an ascertainable
structure distinct from the conduct of a pattern of
racketeering.” United States v. Lee, 374 F.3d
637, 647 (2004); see Asa-Brandt, Inc. v. ADM
Investor Servs., Inc., 344 F.3d 738, 752 (8th Cir. 2003)
(“The enterprise is not the pattern of racketeering
activity”). Further, “[P]laintiffs may not plead
the existence of a RICO enterprise between a corporate
defendant and its agents or employees acting within the scope
of their roles for the corporation because a corporation
necessarily acts through its agents and employees.”
Allen v. First Unum Life Insur. Co., 2019 WL 1359480
(M.D. Fla. 2019); Bachman v. Bear, Stearns &
Co., Inc., 178 F.3d 930, 932 (7th Cir. 1999) (concluding
a “firm and its employees, or a parent and its
subsidiaries, are not an enterprise separate from the firm
itself”). (“[Courts] must carefully distinguish
between [a business] conducting its own affairs” and
participating in a RICO enterprise. Dahlgren v. First
Nat. Bank of Holdredge, 533 F.3d 681, 690
(8th Cir. 2008)).
also contends that this is not the subject matter encompassed
under RICO. See, e.g.,Stonebridge Collection,
Inc. v. Carmichael, 791 F.3d 811, 822 (8th Cir. 2015);
Craig Outdoor Advert. Inc. v.Viscom Outdoor,
Inc., 528 F.3d 1001, 1029 (8th Cir. 2008); Terry A.
Lambert Plumbing, Inc. v. W. Sec. Bank, 934 F.2d 976,
981-82 (8th Cir. 1991); McEvoy Travel Bureau, Inc. v.
Heritage Travel, Inc., 904 F.2d 786, 791 (1st Cir.
1990). The Eighth ...