Lobster 207 LLC v. Pettegrow
| Decision Date | 22 November 2021 |
| Docket Number | 1:19-CV-00552-LEW |
| Parties | LOBSTER 207, LLC, Plaintiff and Counterclaim Defendant, v. WARREN B. PETTEGROW, ANTHONY D. PETTEGROW, JOSETTE G. PETTEGROW, STEPHEN M. PEABODY, POSEIDON CHARTERS INC., and TRENTON BRIDGE LOBSTER POUND, INC., Defendants and Counterclaim Plaintiffs, v. INTERNATIONAL ASSOCIATION OF MACHINISTS AND AEROSPACE WORKERS, MAINE LOBSTERING UNION, AND DAVID SULLIVAN, Counterclaim Defendants. |
| Court | U.S. District Court — District of Maine |
ORDER ON DEFENDANTS' MOTIONS TO DISMISS PLAINTIFF'S FIRST AMENDED COMPLAINT
Previously I issued a Memorandum of Decision and Order (“June Decision and Order” - ECF 72) and Memorandum of Decision on Plaintiff's Motion for Reconsideration (ECF 109), which together dismissed Lobster 207's RICO claims against the Pettegrow Defendants and Stephen Peabody with the solitary exception of an alleged “tubed-lobster” RICO scheme that was not dismissed against, specifically, the individual Pettegrow Defendants and Trenton Bridge Lobster Pound.
On May 3, 2021, Lobster 207 filed its First Amended Complaint (“FAC” - ECF 184), in which it expands its RICO allegations against Defendants to attempt to overcome deficiencies identified in the earlier orders. Primarily this attempt involves new pleadings about call logs that according to Lobster 207, could support a particularized finding that the individual defendants communicated with each other by wire on a near-daily basis, allegedly in order to carry out schemes against Lobster 207.
The matter is now before the Court on Stephen M. Peabody's Motion to Dismiss First Amended Complaint (ECF 219), inclusive of all claims asserted against him, and the Pettegrow Defendants[1] Renewed and Partial Motion to Dismiss Counts I and II of the Amended Complaint (ECF 220), targeting Plaintiff's RICO and RICO-conspiracy claims.
For purposes of a motion to dismiss, the Court accepts as true all non-conclusory factual allegations in a complaint to determine whether the allegations and the reasonable, non-speculative inferences that could be drawn from them provide a plausible basis to think the defendant could be found liable to the plaintiff on the claims asserted. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007); Ocasio-Hernandez v. Fortuno-Burset, 640 F.3d 1, 12 (1st Cir. 2011); Sepúlveda-Villarini v. Dep't of Educ. of P.R., 628 F.3d 25, 29 (1st Cir. 2010).
Ordinarily, this requires a plaintiff to provide no more than “a short and plain statement of the claim showing [it] is entitled to relief.” Fed.R.Civ.P. 8(a)(2). But to the extent the claims under consideration here are RICO claims, 18 U.S.C. §§ 1962(c), 1964(c), based on alleged “wire fraud, ” id. § 1343, Plaintiff also “must state with particularity the circumstances constituting fraud.” Fed.R.Civ.P. 9(b).
Plaintiff Lobster 207, identifies eleven different “schemes” in the FAC, each of which, in its view, plausibly depicts a pattern of racketeering activity on the part of an enterprise. Plaintiff identifies the enterprise as the “Pettegrow Lobster Enterprise, ” by which it means Warren Peabody, as CEO of Lobster 207 and owner/operator of Poseidon Charters; Josette and Anthony Peabody, as owners/operators of the Trenton Bridge Lobster Pound; and Stephen Peabody, as manager of the Beals-Jonesport Co-op, Lobster 207's primary supplier.
Lobster 207 alleges that the individuals involved in the Pettegrow Lobster Enterprise all took advantage of Warren Pettegrow's position as CEO of Lobster 207 to defraud, embezzle, and steal from Lobster 207. Lobster 207 claims special vulnerability in this regard not only because Warren was its CEO, but because its decisions to hire Warren as its CEO, to contract as it did with Trenton Bridge, and to proceed without a direct purchase-supply relationship with the Beals-Jonesport Co-op, effectively made Trenton Bridge and Poseidon Charters (i.e., the Pettegrows) middlemen in every (or nearly every) lobster purchase made by Lobster 207 during the relevant period.
Concerning Stephen Peabody, Lobster 207's allegations are in part designed to blame Peabody for this contractual scenario - even though neither Peabody nor his employer were party to any contract with Lobster 207 - because, as alleged, Peabody represented to Lobster 207's agents, prior to Lobster 207's acquisition of Trenton Bridge's wholesale business, that the Beals-Jonesport Co-op preferred to continue delivering its wholesale lobster supply and invoices directly to Trenton Bridge, with which it had a longstanding relationship. Additionally, prior to Lobster 207's acquisition of Trenton Bridge's wholesale business, Peabody and Warren, as alleged, represented to these same agents that Trenton Bridge historically paid a 20-cent per pound premium on lobster sourced from the Beals-Jonesport Co-op, when, in fact, Trenton Bridge had only ever paid a 10-cent per pound premium to the Co-op. Lobster 207's agents accepted this representation and purchased Trenton Bridge's wholesale operation understanding that Lobster 207 would pay a 20-cent per pound premium for lobster sourced from the Co-op, knowing the Co-op would be its primary (albeit indirect) supplier.
The schemes alleged by Lobster 207 are as follows:
1. The in which the Pettegrow Lobster Enterprise charged Lobster 207 the 20-cent premium described to Lobster 207's officers before the acquisition. FAC ¶¶ 13(a), 66-77
2. The “Phantom Lobster Scheme, ” in which the Pettegrow Lobster Enterprise submitted a false invoice for roughly 12, 000 pounds of lobster to procure a roughly $55, 000 payment from Lobster 207. The purpose behind the false invoice was to fund a shortfall in the Co-op's payment of an end-of-the-year, $1.40 per pound “holdback bonus” to lobstermen who had brought their catch to the Co-op that year (2017). The Coop's resources only enabled it to pay a $1.37 per pound bonus, and Warren had agreed to fund any shortfall because he supported the bonus to secure the business of the fishermen who delivered their catches to the Co-op and to “set the mark” for other docks and buying stations. FAC ¶ 79.
As alleged, Warren presented the invoice to Lobster 207's bookkeeper for payment and told her the invoice was for lobster that would be delivered by year's end. The bookkeeper made a notation on the invoice to that effect, and the payment issued. However, the bookkeeper also informed David Sullivan, an IAMAW representative, about the arrangement. Sullivan confronted Warren about the matter and Warren explained that the intent was to subsidize the bonus for the Co-op's fishermen and not to purchase any lobster. Sullivan objected to the payment and told Warren to recover the funds. Trenton Bridge paid the money back to Lobster 207 in January 2018. FAC ¶¶ 13(b), 78-95.
3. The “Recoupment Scheme, ” in which Trenton Bridge, starting in January, 2018, adjusted its invoices on Co-op lobster upward by an additional 10 cents per pound to gradually “recover” the $55, 000 paid back to Lobster 207. In July, 2018, having secured additional net payments of slightly more than $55, 000 through this method, Trenton Bridge stopped adjusting Co-op invoices in this fashion. FAC ¶¶ 13(c), 96-106.
4. The “Customer Data Scheme, ” in which the Pettegrows misrepresented the existence and/or value of Trenton Bridge's wholesale customer list before Lobster 207 acquired Trenton Bridge's wholesale business. Specifically, Lobster 207 alleges that most of the customers on the list were not actually wholesale customers but brokered customers. FAC ¶¶ 13(d), 107-116.
5. The “Crate Scheme, ” in which the Pettegrows misrepresented Trenton Bridge's inventory of lobster crates. Because Trenton Bridge did not have as many crates as the Pettegrows represented, Lobster 207 incurred the expense of leasing crates. FAC ¶¶ 13(e), 117-126.
6. The “Inventory Scheme, ” in which Trenton Bridge failed to deliver wholesale lobster inventory existing on the date of the sale of its wholesale business. As alleged, Trenton Bridge gradually “sold” that inventory - some to Lobster 207 and some to other purchasers - and retained the proceeds of the sales. FAC ¶¶ 13(f), 127-136.
7. The “Poseidon Scheme, ” in which the Pettegrows took advantage of an exception in Warren's non-competition agreement that allowed Warren to operate an independent smack boat provided that he sell his catch to Lobster 207 at the standard offer dock price. As alleged, the Pettegrows would purchase lobsters from MDI fishermen either directly or through the Poseidon and then misstate the origin and price to upcharge Lobster 207 for lobsters that Warren should have delivered to Lobster 207 at the dock price. As alleged, Warren also would allow Trenton Bridge to invoice Lobster 207 for certain transportation costs (as though the lobster had been delivered by a third party) even though the lobsters were transported using Lobster 207's trucks. Lobster 207 also alleges that Warren would allow the choicest lobsters to be diverted to Trenton Bridge's retail operation and to another lobster pound on MDI and would not permit workers at Lobster 207's Seal Point Facility to weigh these incoming shipments, insisting that there was no need because Trenton Bridge had already weighed them. FAC ¶¶ 13(g), 137-162.
Although the alleged scheme sounds like one limited to the Pettegrow Defendants, Lobster 207 alleges that Stephen Peabody facilitated the Poseidon Scheme because he communicated with the Pettegrows by phone on relevant dates concerning the volume of incoming Co-op deliveries so that the Pettegrows could “disguise the BJ Co-op lobster as ‘Poseidon' lobster and charge additional and...
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