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Cox v. Sherman Capital LLC

United States District Court, S.D. Indiana, Indianapolis Division

June 3, 2015

ANDREW COX, LUCINDA COX, STEPHANIE SNYDER Individually and on behalf of others similarly situated, and ROBERT GOODALL, Plaintiffs,
v.
SHERMAN CAPITAL LLC, SHERMAN FINANCIAL GROUP LLC, LVNV FUNDING LLC, RESURGENT CAPITAL SERVICES LP, JOHN DOES 1-50, SHERMAN ORIGINATOR LLC, HUGER STREET LLC, MOULTRIE STREET LLC, WOOLFE STREET LLC, FULTON STREET LLC, JASPER STREET LLC, CONCORD STREET LLC, HAGOOD STREET LLC, CHARLOTTE STREET LLC, ARCHDALE STREET LLC, JACOBS ALLEY LLC, PEACHTREE STREET LLC, GREENHILL STREET LLC, CHALMERS STREET LLC, PRINCESS STREET LLC, and UNKNOWN S CORPORATION, Defendants.

ENTRY ON PARTIAL MOTION TO DISMISS

TANYA WALTON PRATT, District Judge.

This matter is before the Court on a Partial Motion to Dismiss filed by Defendants (Filing No. 338) seeking to dismiss three counts of the Amended Complaint filed by Plaintiffs, Andrew Cox, Lucinda Cox, Stephanie Snyder (on behalf of herself and others similarly situated), and Robert Goodall (Filing No. 303). Defendants seek to dismiss Plaintiffs' claims brought under the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1962 et seq. ("RICO") (Counts II and III), and common law fraud (Count IV) that the Court previously dismissed due to pleading defects and which Plaintiffs were granted leave to re-file. (Filing No. 237.) Defendants also seek to dismiss an additional claim in the Amended Complaint for constructive fraud (Count V). For the reasons set forth below, Defendants' motion is GRANTED in part and DENIED in part.

I. BACKGROUND

The facts of this case are set forth in detail in the Magistrate Judge's Report and Recommendation on Defendants' first motion to dismiss (Filing No. 151) and will thus only be summarized in this Entry. Plaintiffs allege violations of the Fair Debt Collection Practices Act ("FDCPA"), unjust enrichment, restitution, common law fraud, constructive fraud, and violations of RICO. Specifically, Plaintiffs allege the Defendants unlawfully sought to collect on consumer debts that they did not own by utilizing a group of banks, collection agencies, and law firms to pursue debts that had already been "charged off" by the original creditors.

Defendants filed a motion to dismiss the Plaintiffs' original complaint, which the Court granted in part and denied in part, and Plaintiffs were granted leave to file an amended complaint. (Filing No. 237; Filing No. 297.) The Court dismissed Plaintiffs' FDCPA claims with prejudice, and dismissed the RICO and common law fraud claims without prejudice, finding that they did not meet the heightened pleading standards required by Federal Rule of Civil Procedure 9(b). Plaintiffs filed an Amended Complaint, adding additional defendants and re-alleging the claims under RICO and common law fraud, as well as claims for constructive fraud, restitution, unjust enrichment and the remaining FDCPA claim. (Filing No. 303.) Defendants once again seek to dismiss Plaintiffs' RICO, common law fraud, and constructive fraud claims for failure to state a claim upon which relief may be granted.

II. STANDARD OF REVIEW

When reviewing a 12(b)(6) motion, the Court takes all well-pleaded allegations in the complaint as true and draws all inferences in favor of the plaintiff. Bielanski v. Cnty. of Kane, 550 F.3d 632, 633 (7th Cir. 2008) (citations omitted). However, the allegations must "give the defendant fair notice of what the... claim is and the grounds upon which it rests" and the "[f]actual allegations must be enough to raise a right to relief above the speculative level." Pisciotta v. Old Nat'l Bancorp, 499 F.3d 629, 633 (7th Cir. 2007) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). Stated differently, the complaint must include "enough facts to state a claim to relief that is plausible on its face." Hecker v. Deere & Co., 556 F.3d 575, 580 (7th Cir. 2009) (citations omitted). To be facially plausible, the complaint must allow "the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citation omitted).

III. DISCUSSION

Defendants argue that Plaintiffs' Amended Complaint does not cure the defects identified by the Court in its previous entry on Defendants' objection to the Magistrate Judge's Report and Recommendation with respect to their RICO and common law fraud claims. Additionally, Defendants argue that the newly added claim for constructive fraud does not meet the heightened pleading requirements as well. Specifically, Defendants argue that the Amended Complaint does not meet the requirements under Federal Rule of Civil Procedure 9(b) for pleading fraud and RICO claims with particularity. The Magistrate Judge, in his order on the Plaintiffs' Motion for Leave to Amend the Complaint (Filing No. 297), found in a separate, but similar, inquiry that the proposed amended complaint met the heightened pleading standard of Rule 9(b) in his analysis determining whether the amendment to the RICO and fraud claims would be futile and thus should not be allowed. The determination as to whether an amendment to a complaint would be futile utilizes the same standard as that of a 12(b)(6) motion to dismiss. See Gen. Elec. Capital Corp. v. Lease Resolution Corp., 128 F.3d 1074, 1085 (7th Cir. 1997) ("The opportunity to amend a complaint is futile if the complaint, as amended, would fail to state a claim upon which relief could be granted.") (internal quotations omitted). For the reasons discussed below, the Court agrees with the Magistrate Judge's analysis and finds that the Amended Complaint sufficiently alleges the RICO and actual fraud claims Defendants again seek to dismiss.

A. RICO Claims

Count II of Plaintiffs' Amended Complaint asserts a civil RICO claim, alleging that Defendants Sherman Capital LLC ("Sherman"), Sherman Financial Group LLC ("SFG"), Sherman Originator LLC ("SO"), LVNV Funding LLC ("LVNV"), and Resurgent Capital Services LP ("Resurgent") (collectively, the "RICO Defendants") engaged in a pattern of racketeering activity within the meaning of 18 U.S.C. § 1962(c) for the purpose of defrauding the plaintiff class members of money and property. In the alternative, Count III asserts a RICO conspiracy claim, alleging that the RICO Defendants are liable as conspirators under 18 U.S.C. 1962(d).

In order to state a claim under RICO, a plaintiff must allege "(1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity." Midwest Grinding Co. v. Spitz, 976 F.2d 1016, 1019 (7th Cir. 1992) (quoting Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 496 (1985)).

A pattern of racketeering activity consists of at least two predicate acts of racketeering committed within a ten-year period Predicate acts are acts indictable under a specified list of criminal laws... including mail fraud ...

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