Indian Land Capital Co. v. Infrastructure Dev. Coop.

• Decision Date: 03 December 2021
• Docket Number: Civ. 21-5015-JLV
• Parties: INDIAN LAND CAPITAL COMPANY, LLC, Plaintiff, v. INFRASTRUCTURE DEVELOPMENT COOPERATIVE, LCA; HIGHLAND PARK MANAGEMENT, LLC; L. STEVEN HAYNES; and RAYCEN RAINES, Defendants, HIGHLAND PARK MANAGEMENT, LLC, and L. STEVEN HAYNES, Cross-Claim Plaintiffs, v. INFRASTRUCTURE DEVELOPMENT COOPERATIVE, LLC, Cross-Claim Defendant.
• Court: U.S. District Court — District of South Dakota

INDIAN LAND CAPITAL COMPANY, LLC, Plaintiff, v. INFRASTRUCTURE DEVELOPMENT COOPERATIVE, LCA; HIGHLAND PARK MANAGEMENT, LLC; L. STEVEN HAYNES; and RAYCEN RAINES, Defendants, HIGHLAND PARK MANAGEMENT, LLC, and L. STEVEN HAYNES, Cross-Claim Plaintiffs, v. INFRASTRUCTURE DEVELOPMENT COOPERATIVE, LLC, Cross-Claim Defendant.

Civ. No. 21-5015-JLV

United States District Court, D. South Dakota, Western Division

December 3, 2021

ORDER

JEFFREY L. VIKEN, UNITED STATES DISTRICT JUDGE.

INTRODUCTION

Indian Land Capital Company, LLC, filed a multi-count amended complaint against the defendants. (Docket 13). Defendant Raycen Raines filed a motion to dismiss counts four and five of the amended complaint pursuant to Fed.R.Civ.P. 12(b)(6) as those counts relate to Mr. Raines. (Docket 15). Plaintiff opposes Mr. Raines' motion. (Docket 19). Mr. Raines filed a reply brief and clarification together with an exhibit in support of his motion to dismiss. (Dockets 21, 22 &amp 22-1). For the reasons stated below, Mr. Raines' motion to dismiss is granted in part and denied in part.

ANALYSIS

1. FED R. CIV. P. 12(b)(6)

Rule 12(b)(6) provides for dismissal if the plaintiff fails to state a claim upon which relief can be granted. Fed.R.Civ.P. 12(b)(6). In evaluating the defendant's Rule 12(b)(6) motion, the court accepts as true all of the factual allegations contained in plaintiff's amended complaint and grants all reasonable inferences in favor of plaintiff as the nonmoving party. Braden v. Wal-Mart, 588 F.3d 585, 594 (8th Cir. 2009) (“a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.' ”) (citing Ashcroft v. Iqbal, 556 U.S. 662, 663 (2009)). See also Crooks v. Lynch, 557 F.3d 846, 848 (8th Cir. 2009) (the court must review “a Rule 12(b)(6) motion to dismiss for failure to state a claim, accepting the facts alleged in the complaint as true and granting all reasonable inferences in favor of the plaintiff, the nonmoving party.”) (brackets omitted). “While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the ‘grounds' of his ‘entitle[ment] to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do[.]” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) (citations omitted). “[O]nly a complaint that states a plausible claim for relief survives a motion to dismiss.” Iqbal, 556 U.S. at 679. At this point in the litigation, the court is “bound to accept as true, for purposes of [a Rule 12(b)(6)] motion, the facts alleged by the plaintiff.” Stephens v. Associated Dry Goods Corp., 805 F.2d 812, 814 (8th Cir. 1986).

2. THE AMENDED COMPLAINT

Plaintiff Indian Land Capital Company, LLC (“ILCC”) filed a five-count amended complaint. (Docket 13). For purposes of this order only, the “[b]ackground” alleged in the amended complaint and supporting plaintiff's claims is incorporated by reference. Id. ¶¶ 20-99. The counts are summarized as follows.

Count 1 alleges Infrastructure Development Cooperative (“IDC”) breached its contract with ILCC and failed to perform under a promissory note and loan agreement. Id. ¶¶ 123-25. ILCC alleges “[a]s of March 4, 2021, the amount due and owing is $1, 500, 000.00 in principal and $729, 750.00 in interest, a sum total of $2, 229, 750.” Id. ¶ 127. Default judgment was entered in favor of ILCC and against IDC on December 3, 2021. (Docket 31).

Count 2 alleges that by the loan agreement, IDC granted ILCC a security agreement in six titled vehicles. Id. ¶ 129. ILCC alleges it perfected its security interest in the vehicles. Id. ¶ 131. Because of IDC's breach of contract, ILCC alleges it is entitled “to immediate possession of the [v]ehicles.” Id. ¶ 132.

Count 3 alleges IDC sold the encumbered vehicles without ILCC's consent. Id. ¶ 136. By IDC allegedly converting the funds received from the sale of the vehicles, ILC claims to have suffered damages of “approximately $400, 000.” Id. ¶ 138.

Count 4 alleges fraud and deceit against all defendants, including Raycen Raines. Id. at p. 17. Incorporating all earlier allegations in the amended complaint, count 4 alleges “Haynes, Raines, Highland Park, and IDC made representations of fact, which Haynes, Raines, Highland Park, and IDC knew were false, or had reason to know were false, at the time they were made.” Id. ¶ 140. Plaintiff alleges Mr. Raines and the other defendants made these “misrepresentations with the intent of inducing ILCC's reliance on the representations.” Id. ¶ 141. The amended complaint alleges “ILCC reasonably relied on the misrepresentation by entering into the Loan Agreement and the Amendments.” Id. ¶ 142. ILCC alleges it “has been injured by the misrepresentations in an amount not less than the loan proceeds advanced to IDC, and accrued interest.” Id. ¶ 143. Plaintiff alleges Mr. Raines and the other three defendants “made the misrepresentations intentionally, knowingly, and maliciously, ” entitling ILCC “to punitive or exemplary damages.” Id. ¶ 144.

Count 5 alleges a RICO [Racketeer Influenced and Corrupt Organizations Act] violation against Mr. Raines and Mr. Haynes. Id. ¶¶ 145-52. Again incorporating all earlier allegations in the amended complaint, count 5 alleges Mr. Haynes and Mr. Raines “were members of an association of persons formed for the common purpose of engaging in a course of conduct to obtain bond proceeds through fraudulent means.” Id. ¶ 146. Plaintiff alleges the defendants “pursued the fraudulent bond scheme through, and by engaging in, a pattern of racketeering activity, including repeated acts of wire fraud to obtain access to loan proceeds advanced by ILCC under the Loan Agreement and additional extensions.” Id. ¶ 147. The amended complaint alleges the “pattern of racketeering activity and the fraudulent bond scheme were conducted through means of interstate commerce, including interstate wire communication, and affected interstate commerce.” Id. ¶ 148. According to the amended complaint, defendants “used the Loan Proceeds for their personal use and to further the fraudulent bond scheme in an attempt to defraud potential investors in the fraudulent bond scheme.” Id. ¶ 149. The amended complaint alleges the two defendants “conspired to support the enterprise engaged in interstate commerce through repeated acts of wire and mail fraud.” Id. ¶ 150. The amended complaint alleges as a result of their “racketeering activities, ILCC's business interests were injured . . . in an amount not less than the Loan Proceeds fraudulently obtained through [the alleged] racketeering activities.” Id. ¶ 151. Based on the defendants' RICO activities, ILCC alleges it “is entitled to treble damages and an award of reasonable attorneys' fees under 18 U.S.C. § 1964.” Id. ¶ 152.

The allegations of the amended complaint will be referenced where necessary to resolve Mr. Raines' motion to dismiss.

3. DEFENDANT RAINES' MOTION TO DISMISS

Mr. Raines argues:

Instead of simply filing a breach of contract action against IDC, ILCC has also named Highland Park Management, LLC, L. Steven Haynes and Raines as Defendants. With respect to Raines, the Amended Complaint asserts a fraud and deceit claim (Count Four) and a civil RICO claim (Count Five) that arise out of IDC's alleged breach of the Loan Agreement. Yet, Raines is not a party to the Loan Agreement or either of the extensions of that Agreement. Put simply, there is no legitimate reason for Raines to be named in this case.

(Docket 16 at p. 2).

Mr. Raines submits the amended complaint fails to plead in both counts 4 and 5 “with the particularity” the conduct required by Fed.R.Civ.P. 9(b). Id. Specifically, defendant asserts the amended complaint fails to articulate “the particular misrepresentation . . . made” or that ILCC reasonably relied on his statement in deciding whether to contract with IDC. Id. “With respect to the RICO claim, ” Mr. Raines alleges the amended complaint “fails to adequately plead an enterprise separate and apart from the persons involved in the alleged enterprise, fails to plead a sufficient pattern of racketeering conduct, and fails to plead with particularity the predicate acts of either mail or wire fraud against Raines.” Id.

A. COUNT 4

Mr. Raines submits count 4 fails to comply with the particularity provision of Rule 9(b). Id. at p. 6 (referencing Fed.R.Civ.P. 9(b)). As part of this argument, he asserts the amended complaint fails to articulate “allegations supporting the essential elements of a fraud claim.” Id. at p. 7 (referencing Stene v. State Farm Mutual Automobile Ins. Co., 583 N.W.2d 399, 404 (S.D. 1998); Brookings Municipal Utilities, Inc., v. Amoco Chemical Co., 103 F.Supp.2d 1169, 1177 n.10 (D.S.D. 2000)).

1. Execution of the Loan Agreement

Mr. Raines contends the amended complaint, while alleging the details of the loan financing, does not mention him. (Docket 16 at p. 9) (referencing Docket 13 ¶¶ 53-69). The amended complaint alleges that “[i]n late 2015 and early 2016 Haynes, in pursuit of the bond scheme, contacted ILCC to obtain ‘bridge financing' ostensibly to begin funding the Project while the bonding . . . was being finalized.” (Docket 13 ¶ 53). Bridge financing was consummated by the execution of the loan agreement by ILCC and IDC on February 2, 2016. (Docket 13 ¶ 79). Under the agreement, ILCC advanced $1, 500, 000 to IDC in exchange for its promise to repay the loan principal and interest. Id. ¶ 80.

Mr Raines points out the amended complaint alleges ILCC “in reasonable reliance on the representations made by Haynes on behalf of Highland Park and IDC” entered into the loan agreement. (Docket 16 at p. 7) (citing Docket 13...