Aces High Coal Sales, Inc. v. Cmty. Bank & Trust of W. Ga.
| Decision Date | 03 November 2016 |
| Docket Number | No. 6:15-CV-161-DLB-HAI,6:15-CV-161-DLB-HAI |
| Parties | ACES HIGH COAL SALES, Inc., et al., Plaintiffs, v. COMMUNITY BANK & TRUST OF WEST GEORGIA, et al., Defendants. |
| Court | U.S. District Court — Eastern District of Kentucky |
After receiving a demand letter asserting a lien in some coal that Plaintiffs processed, Plaintiffs responded by filing this lawsuit. They assert civil RICO claims, a claim for declaratory relief, and various state tort claims. The Defendants, various coal companies, individuals, a bank and its counsel, have moved to dismiss. After fully reviewing the record, the Court finds dismissal is appropriate because the RICO claims are insufficiently pled and the Court declines to exercise jurisdiction over the remaining claims.
By agreement of the parties, certain motions to dismiss have been referred to the undersigned for final disposition. D.E. 160. Plaintiffs Aces High Coal Sales and Wendell Elza, sales manager for Aces High, initiated this lawsuit on September 11, 2015. D.E. 1. Plaintiffs have filed a Second Amended Complaint1 ("SAC") (D.E. 111) that is subject to four motions to dismiss. D.E. 117, 118, 119, 121. Intervening Plaintiffs Mike Trimble and Trimble Coal Salesfiled a complaint for a declaratory judgment on December 31, 2015. D.E. 62. That complaint is subject to three motions to dismiss. D.E. 124, 125, 128. Each of these seven motions to dismiss has been fully briefed. Plaintiffs and Intervening Plaintiffs have filed motions for the Court to entertain oral arguments. D.E. 155, 156. Plaintiffs have also moved to initiate limited discovery. D.E. 163.
Defendants fall into four groups, defined as follows throughout this Order:
The Intervening Plaintiffs are Mike Trimble and Trimble Coal Sales.
This lawsuit arose in response to a letter that attorney Michael Johnson of Troutman Sanders (on behalf of CB&T) sent to J.D. Johnson, attorney for Plaintiffs, in August 2015. D.E. 1-1 at 2-4. The letter asserted that the bank (CB&T) held a security interest in coal that was unlawfully taken from Taylor Rose by Elza without the bank's consent. The letter also claimed that Elza and Aces High were civilly and criminally liable for taking the coal, and demanded immediate payment of the fair market value of the coal, which was estimated to be $6,375,000. Otherwise, "the Bank [would] seek all available remedies." The letter ended by noting that itwas "written with a view towards the compromise of disputed claims," and asked for a response. Id.
Michael Johnson also sent letters to two of Aces High's downstream customers, one of which is in the record ("the Kolmar letter"). D.E. 1-2. The Kolmar letter asked Kolmar Americas to contact Troutman Sanders "and provide information about the purchase of cannel coal from Aces High." Id. It warned that the bank was "prepared and willing to pursue all options available to protect its rights." Id.
The SAC alleges ten counts. D.E. 111 at 47-59. The first count seeks a declaratory judgment that Plaintiffs' actions were legal, along with orders that (1) restrain Defendants from seeking to collect debts from Plaintiffs and from interfering with Plaintiffs' business relations, and (2) compel Defendants to retract their "false and libelous statements" found in the demand letters. Id. ¶¶ 233-250. Plaintiffs name all Defendants in this count.
The second count alleges racketeering under 18 U.S.C. § 1962(c). Id. ¶¶ 251-60. Peters Defendants and Tomlin Defendants are named in this count, although the SAC accuses the Bank Defendants and TS Defendants of joining the conspiracy. See, e.g., id. ¶ 268.
The third count alleges racketeering under 18 U.S.C. § 1962(b). Id. ¶¶ 261-64. It names Peters Defendants and Tomlin Defendants.
The fourth count alleges racketeering under 18 U.S.C. § 1962(d). Id. ¶¶ 265-69. This count names all Defendants.
The fifth count alleges libel per se. Id. ¶¶ 270-73. It is against the Bank Defendants and TS Defendants.
The sixth count alleges Tortious Interference with Prospective Economic Advantage. Id. ¶¶ 274-76. It is against CB&T and TS Defendants.
The seventh count alleges fraud against the Peters Defendants and Tomlin Defendants. Id. ¶¶ 277-80.
The eighth count alleges unjust enrichment against CB&T. Id. ¶¶ 281-88.
The ninth count names CB&T and seeks imposition of a constructive trust in favor of Aces High. Id. ¶¶ 289-91.
The tenth count alleges civil conspiracy against "all the defendants." Id. ¶¶ 292-94.
The intervening complaint seeks a declaratory judgment and an injunction against Defendants, plus costs. D.E. 62 at 20-23. It names all defendants. Id. at Wherefore Clause.
The following is a brief summary of the facts alleged in the SAC. The story begins "around the end of 2010 or early 2011," when Elza of Aces High was introduced to Peters of Bransen Energy and Taylor Rose through a mutual acquaintance, Mike Trimble of Trimble Coal Sales (the Intervening Plaintiffs). Peters had a contract to supply coal to an electric utility named Dominion. He hired Elza/Aces High to deliver the coal. The SAC alleges that Peters Defendants defrauded Dominion by mixing "Coke Breeze" into the coal. Dominion eventually sued Bransen Energy in another judicial district for breach of contract and won partial summary judgment.
The meat of the case in this Court revolves around a pile of low-quality "cannel coal" that Peters Defendants were storing in West Virginia. Peters wanted to sell the coal to Ireland as briquettes for home heating units, but the Irish government rejected the briquettes. According to the SAC, Peters then decided to sell the coal domestically. Aces High (in conjunction with Trimble) was to prepare, load, and ship the coal to buyers. In January 2015, Peters, who was in debt to Aces High, struck a deal whereby he could pay off his debt by hiring Aces High to work a series of cannel sales to Eagle Coal Sales. Eagle in turn sold the coal to Kolmar in WestVirginia and Noble Energy in Kentucky. Aces High worked on the Eagle deal at the West Virginia cannel coal site until April 16, 2015. The problem with these sales was that the coal pile was allegedly subject to a lien as collateral to a $9 million dollar loan that CB&T made to Taylor Rose in July 2014. On August 21, 2015, CB&T, through its attorney at Troutman Sanders, sent the three demand letters that instigated this case by demanding payment for the allegedly secured coal that was sold without the bank's authorization.
Rule 12(b)(6) allows a defendant to seek dismissal of a complaint which fails to state a claim upon with relief can be granted. Fed. R. Civ. P. 12(b)(6). In reviewing a Rule 12(b)(6) motion, the Court accepts all the plaintiff's factual allegations as true and construes the complaint in the light most favorable to the plaintiff. Hill v. Blue Cross & Blue Shield of Mich., 409 F.3d 710, 716 (6th Cir. 2005). For a claim to be viable, the complaint must go beyond labels and conclusions and formulaic recitations of the elements of a cause of action. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). "Factual allegations must be enough to raise a right to relief above the speculative level," id., and must "state a claim to relief that is plausible on its face," Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). In practice, a complaint must contain either direct or inferential allegations respecting all the material elements necessary to sustain a recovery under some viable legal theory. Car Carriers, Inc. v. Ford Motor Co., 745 F.2d 1101, 1106 (7th Cir. 1984).
Plaintiffs allege claims under the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. §§ 1961-1968. SAC ¶ 18. Under the "Civil RICO" statute, "Any person injured in his business or property by reason of a violation of section 1962 of this chapter maysue therefor in any appropriate United States district court and shall recover threefold the damages he sustains and the cost of the suit, including a reasonable attorney's fee[.]" 18 U.S.C. § 1964(b). Plaintiffs allege civil RICO violations under three subsections: § 1962(b) (); § 1962(c) (); and §1962(d) (). Id. ¶¶ 251-69.
Section 1962(c), the basis of Count Two, makes it "unlawful for any person employed by or associated with any enterprise engaged in . . . interstate or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise's affairs through a pattern of racketeering activity . . . ." See SAC ¶¶ 251-60. The elements are the (1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity. Wallace v. Midwest Fin. & Mortgage Servs., Inc., 714 F.3d 414, 422 (6th Cir. 2013) (quoting Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 496 (1985)). "[P]articipation in the conduct of an enterprise's affairs requires proof that the defendant participated in the 'operation or management' of the enterprise." Ouwinga v. Benistar 419 Plan Servs., Inc., 694 F.3d 783, 792 (6th Cir. 2012) (quoting Reves v. Ernst & Young, 507 U.S. 170, 183 (1993)).
Plaintiffs allege the existence of an enterprise. According to the SAC, "Defendants Peters, Bransen Energy, Taylor Rose, and the Tomlin Defendants (collectively the 'Peters Association') are an association-in-fact which, thus, constitutes an 'enterprise' which affected interstate commerce, within the meaning of 18 U.S.C. § 1961(4)." SAC ¶ 252. Plaintiff...
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