Harpole Architects, P.C. v. Barlow
| Decision Date | 09 November 2009 |
| Docket Number | Civil Action No. 09-1598 (ESH). |
| Parties | HARPOLE ARCHITECTS, P.C., et al., Plaintiffs, v. Laura G. BARLOW, Defendant. |
| Court | U.S. District Court — District of Columbia |
Bruce V. Spiva, Kathleen Roberta Hartnett, Spiva & Hartnett, LLP, Washington, DC, for Plaintiffs.
Deborah E. Sanders Kane, Hartel, Kane, Desantis, MacDonald & Howie, L.L.P., Beltsville, MD, for Defendant.
Plaintiffs Harpole Architects, P.C. ("HAPC") and Jerry Harpole, Jr. have sued Laura Barlow, HAPC's former bookkeeper and administrative assistant, for common law fraud, intentional misrepresentation and conversion, breach of a fiduciary duty, and violations of the D.C. Merchant's Civil Recovery For Criminal Conduct Act, D.C.Code §§ 27-101 to 27-106 (the "Merchant's Act") and the federal Racketeer Influenced and Corrupt Organizations Act ("RICO"). 18 U.S.C. §§ 1961-1968. Defendant now moves to dismiss plaintiffs' claims under RICO and the Merchant's Act, Harpole's claims, and plaintiffs' requests for attorneys' fees. For the reasons stated, the Court will dismiss plaintiffs' RICO claims and Harpole's claims for conversion, violation of the Merchant's Act, and breach of defendant's fiduciary duty. However, the Court will deny defendant's motion to dismiss Harpole's fraud and intentional misrepresentation claims and will deny without prejudice defendant's motion to dismiss plaintiffs' claims for attorneys' fees.
Harpole, a D.C. resident, is the founder and sole shareholder of HAPC, a professional corporation that provides architectural and interior design services. (Compl. ¶¶ 3-4, 6.) HAPC is incorporated in and has its principal place of business in the District. (Id. ¶¶ 3, 6.)
Barlow, a current resident of Utah, became HAPC's bookkeeper and administrative assistant on July 12, 2004. (Id. ¶¶ 5, 7.) She oversaw HAPC's finances, ordered office supplies, secured goods and services that the firm needed, "maintain[ed] the firm's day-to-day bookkeeping," wrote checks, and balanced the company books. Defendant also "ensure[d] that the firm's financial matters were properly accounted for and that HAPC only incurred necessary and appropriate business expenses." (Id. ¶ 8.)
Plaintiffs allege that defendant "abused her position of trust" to steal tens of thousands of dollars from HAPC. (Id. ¶ 22.) First, defendant wrote checks to herself, her mother, and to "cash" on the firm's bank account. On November 12, 2004, defendant cashed a check for $4,881.14, supposedly to pay the company's payroll tax. Although she used some of the money to pay the tax, she kept $3,755.16 for herself. (Id. ¶ 23(f).) In December 2005, defendant deposited $9,000 worth of HAPC checks into her own bank account and concealed her act by destroying the cancelled checks and check stubs. (Id. ¶ 23(d).) On October 30, 2006, defendant used HAPC funds to write a check to her mother for $1,640. (Id. ¶ 23(m).) Though her mother was owed some amount by HAPC, plaintiffs allege that the check "far exceeded the value of the services she had performed." (Id.)
Second, plaintiffs allege that Barlow secretly used HAPC's accounts at various retailers and service providers for personal gain. Defendant shipped personal packages using the company's Federal Express shipping account, incurring $1,145.65 in shipping charges. (Id. ¶ 23(e).) Further, she entered into a contract with LexisNexis without plaintiffs' knowledge, incurring $13,856.38 in expenses. (Id. ¶ 23(g).) She used the account to conduct searches "concerning the property and income of her friends, her relatives, and her husband's ex-girlfriend." (Id.) Defendant also stole more than $19,000 by buying a series of items, using the corporate account at Staples and returning the items for store credit, and by using firm funds to buy personal items at a variety of retailers. (Id. ¶ 23(h).) She obtained more than $2,000 in reimbursements for various fraudulent claims for business-related meals. (See id. ¶ 23(i).) Plaintiffs also allege that defendant paid for other "personal expenses" on firm credit, although they do not detail the extent of her fraud. (Id. ¶ 23(l).)
Third, plaintiffs allege defendant obtained additional compensation from HAPC's payroll service company. (Id. ¶ 51(b).) On August 24, 2006, Barlow submitted fraudulent payroll records requesting an extra $10,000 from payroll services and deleted the references to the transaction on the payroll report that was filed with the office. (See id. ¶ 23(a).) On September 28, 2006, Barlow received another $2,500 from the payroll service company after she again altered HAPC's payroll records. (Id. ¶ 23(b).) On November 28, 2006, Barlow submitted a third fraudulent record to the payroll service company and obtained $2,556.25. (Id. ¶ 23(c).)
In April 2007, Harpole discovered that defendant had been stealing money from the company payroll fund and confronted her. (Id. ¶ 9.) Defendant "admitted that she had committed payroll fraud," and Harpole terminated her. (Id.) That same day, defendant repaid the stolen payroll funds. (Id.) On May 4, 2007, defendant sent Harpole an email stating that she was "prepared to pay back the company money as soon as possible." Five days later, defendant went to a Staples store, returned goods she had originally purchased using HAPC funds, obtained credit on a gift card, and kept the card for her personal use. (Id. ¶ 16.) Harpole and HAPC employees personally conducted an investigation into defendant's conduct, spending "hundreds of hours" exploring the "breadth of Barlow's fraud," which "reduced time spent on income-producing work." (Id. ¶¶ 11-12.) Although Harpole and Barlow agreed Harpole would not take "immediate legal action" in exchange for her promise to repay them through a series of regular payments, Barlow has not made any restitution since the summer of 2008. (Id.)
Plaintiffs allege that Barlow stole almost $80,000 and that HAPC employees have spent more than $75,000 in time and expenses investigating her conduct. (Id. ¶¶ 12-13.) Harpole also alleges that he suffered financially from defendant's fraud because she "misrepresented to [him] that the firm was short of cash ... in furtherance of her scheme." (Id. ¶ 23(a).) Because of these misrepresentations, Harpole did not draw a salary in August, September, and November of 2006. (Id. ¶¶ 23(a)-(c).) Harpole also alleges that he was damaged by the costs of his investigation into Barlow's fraud. (Id. ¶¶ 10-13.)
Plaintiffs filed this action on August 21, 2009. They allege that defendant committed common law fraud, intentional misrepresentation (Count I) and conversion (Count II) and that she violated the Merchant's Act (Count III), her fiduciary duties (Count IV) and RICO (Count V). Plaintiffs seek to recover the monies that defendant stole, compensation for the money and time spent investigating the theft, lost income, attorneys' fees and compensatory damages for Harpole's emotional distress. (Compl. ¶¶ 24, 32, 42, 47, 52.) Plaintiffs also seek treble damages under the Merchant's Act and RICO. (Id. ¶¶ 42, 52.) Defendant now moves under Fed. R.Civ.P. 12(b)(6) for dismissal of Counts III and V, all claims by Harpole in his individual capacity on the grounds that he lacks standing, and plaintiffs' claim for attorneys' fees.
"In determining whether a complaint fails to state a claim, [courts] may consider only the facts alleged in the complaint, any documents either attached to or incorporated in the complaint[,] ... matters of which [courts] may take judicial notice," E.E.O.C. v. St. Francis Xavier Parochial Sch., 117 F.3d 621, 624 (D.C.Cir.1997), including "public records," and documents "appended to [a] motion to dismiss and whose authenticity is not disputed" if they are "referred to in the complaint and are integral" to plaintiff's claim. Kaempe v. Myers, 367 F.3d 958, 965 (D.C.Cir.2004).
When ruling on a Rule 12(b)(6) motion to dismiss, courts may employ a "two-pronged approach." Ashcroft v. Iqbal, ___ U.S. ___, 129 S.Ct. 1937, 1950, 173 L.Ed.2d 868 (2009). Courts must first assume the veracity of all "well-pleaded factual allegations" in the complaint. Id. Courts need not accept as true "`naked assertion[s]' devoid of `further factual enhancement,'" id. at 1949 (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 557, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)), or "legal conclusions cast in the form of factual allegations." Kowal v. MCI Commc'ns Corp., 16 F.3d 1271, 1276 (D.C.Cir.1994). A pleading must offer more than "`labels and conclusions' or `a formulaic recitation of the elements of a cause of action'...." Iqbal, 129 S.Ct. at 1949 (quoting Twombly, 550 U.S. at 555, 127 S.Ct. 1955).
Once the court has determined that there are well-pleaded factual allegations, it must determine whether the allegations "plausibly give rise to an entitlement to relief" by presenting "sufficient factual matter, accepted as true, to `state a claim to relief that is plausible on its face,'" such that "the court [can] draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. at 1949-50 (quoting Twombly, 550 U.S. at 570, 127 S.Ct. 1955). Merely pleading facts "consistent with a defendant's liability ... stops short of the line between possibility and plausibility of entitlement to relief." Id. at 1949.
Plaintiffs seek damages under RICO, which creates a cause of action for "any person injured in his business or property by reason of a violation of section 1962." 18 U.S.C. § 1964(c). They allege defendant violated 18 U.S.C. § 1962(c), which makes it "unlawful for any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise's affairs through a...
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