United States District Court, N.D. Indiana, Hammond Division
BARBARA V. PRINGLE, Independent Executor for the Estate of Arthur D. Pringle III, Plaintiff,
MARISA GARCIA, et al., Defendants.
OPINION AND ORDER
PHILIP P. SIMON, Chief District Judge.
This matter is before me on pro se Defendant Jaime Garcia's motion to dismiss the claims against him in Plaintiff's third amended complaint [DE 239]. Plaintiff Barbara Pringle, as executor of the estate of Arthur Pringle, has alleged that Garcia violated the federal and state Racketeer Influenced and Corrupt Organizations (RICO) Acts. Garcia argues that Pringle has failed to adequately plead these claims. For the reasons stated below, I agree with the Defendant, and his motion is therefore GRANTED.
Ordinarily I would not be considering a motion to dismiss five years into litigation, but this case has taken some odd twists and turns. Jaime Garcia was added as a defendant in Plaintiff's third amended complaint in February 2012 [DE 98]. But after that, then-Plaintiff Arthur Pringle neglected to file proof of service. So after a year of waiting for some indication that Jaime Garcia had been served, I finally dismissed him for failure to complete service pursuant to Rule 4 of the Federal Rules of Civil Procedure [DE 192]. It turned out, however, that Pringle had in fact served Garcia, but had filed the proof of service as an attachment to a motion to dismiss rather than filing it directly to the docket. So in July 2013, I entered an order vacating Garcia's dismissal [DE 224]. Jaime Garcia answered the complaint in August 2013 [DE 227] and filed this motion to dismiss in October [DE 239]. But then Mr. Pringle died, and the motion was held in abeyance until his wife and executor, Barbara Pringle, could be substituted as plaintiff [DE 246]. After that was all sorted out, the motion became ripe in January 2014 and is before me now.
Since this case has been going on awhile, I have had the opportunity to discuss Plaintiff's allegations thoroughly in past orders. But for this motion, I am only going to recount the facts and allegations that are relevant to Jaime Garcia. Anyone looking for a more complete account of the complaint, can refer to my February 2013 order denying the first set of motions to dismiss [DE 189].
According to the factual allegations in the complaint, which I must accept as true for present purposes, Jaime's brother Sergio Garcia ran a criminal enterprise whose purpose was to induce potential investors to invest with Sergio's bogus companies [DE 98 at 40-45]. The enterprise, which Plaintiff calls the "Garcia Family, " included Jaime, Sergio's wife Marisa, Sergio's daughter Elva, and Sergio's various companies. Id.
The late Arthur Pringle was a victim of the Garcia Family enterprise. He made a series of loans to two entities controlled by Sergio Garcia [DE 98 at 3-5]. One of the entities, Kerusso Konstruction Kompany, borrowed $2.47 million from Pringle. Id. at 5. The other entity, Rehab Lending Tree, borrowed $2.375 million. Id. These loans were never paid back.
Plaintiff alleges Sergio told Mr. Pringle that the Garcias would use his funds to acquire, "rehab, " and sell properties in Northwest Indiana. Id. at 30. But she contends that the Garcias didn't actually use the money to purchase and rehab properties. Instead, she claims, they used that money both for their own personal benefit and then to pay prior investors when they came looking for their money back [DE 98 at 30-34]. In other words, it was something of a Ponzi scheme. Plaintiff also asserts that the Garcias engaged in widespread bankruptcy fraud by transferring properties for inadequate consideration in the years and months before Sergio and his wife Marisa declared bankruptcy. Id. at 12-29.
According to the complaint, Jaime participated in the Garcia Family fraud scheme. In particular, the complaint alleges he played a role in inducing Arthur Pringle's investment in Rehab Lending Tree. In November 2007, after Pringle had already invested millions in Kerusso Konstruction Kompany, Sergio Garcia came to Pringle with another investment opportunity. Id. at 37. He represented that he had another, thriving, company - Rehab Lending Tree - that made loans to people so they could purchase the houses that Kerrusso Konstruction had fixed up. Id. at 37-38. According to the complaint, this was false, as Rehab had not made any loans and was not a separate, successful company. Id. at 38.
As part of the sales pitch, Sergio provided Arthur Pringle with a document, a sample borrower file, that Barbara Pringle now says was falsified. Id. at 45-47. She alleges Jaime Garcia created, or conspired with Sergio to create, the fraudulent document. Id. According to the complaint, Jaime convinced a friend from church, Darrell Audiss, to complete a loan application. Id. at 46. Once Audiss completed the application, Jaime and Sergio added Audiss's credit score and an appraisal of one of the Kerrusso houses to complete the file. Id. Sergio provided the file to Arthur Pringle representing that Audiss was a model borrower, when in fact, the Garcias had not lent Audiss any money. Id. at 47. Sergio then altered the company's books to show that a loan had been made to Audiss and that Audiss had paid it back. Id. As a result, Pringle was convinced that Rehab would be a good investment opportunity, and he ended up providing Sergio Garcia with $1.8 million dollars. Id. at 48-49.
The complaint alleges two claims against Jaime Garcia. Count VI alleges he is liable under the federal RICO statute, 18 U.S.C. § 1961 et seq. Id. at 40-89. And Count VII alleges Jaime Garcia is liable pursuant to the Indiana RICO statute, Ind. Code § 35-45-6-1 et seq. and Ind. Code § 35-24-2-6. Id. at 89-92. Jaime claims that Barbara Pringle has failed to state a claim against him and asks me to dismiss the claims against him pursuant to Federal Rule of Civil Procedure 12(b)(6) [DE 239]. However, because Jaime has already answered the complaint, I will construe his motion as a motion for judgment on the pleadings under Rule 12(c).
The same standards apply to a motion for judgment on the pleadings under Rule 12(c) of the Federal Rules of Civil Procedure as to dismissal motions under Rule 12(b)(6). Pisciotta v. Old Nat'l Bank, 499 F.3d 629, 633 (7th Cir. 2007). "A complaint must contain sufficient factual matter, accepted as true, to state a claim for relief that is plausible on its face." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (internal quoations omitted); accord Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). I must accept all factual allegations as true and draw all reasonable inferences in the complainant's favor, but I don't need to accept threadbare legal conclusions supported by purely conclusory statements. See Iqbal, 556 U.S. at 678-79.
RICO claims that involve fraud-based conduct are subject to the heightened pleading standard set forth in Federal Rule of Civil Procedure 9(b), which requires a plaintiff to plead all allegations of fraud with particularity. See Slaney v. The Int'l Athletic Fed'n, 244 F.3d 580, 597 (7th Cir. 2001); Kaye v. D'Amato, 357 Fed.Appx. 706, 710 (7th Cir. 2009). Pleading with particularity means specifying the time, place, and content of the ...