Ray v. Memphis Bonding Co.

• Decision Date: 21 March 2019
• Docket Number: No. 18-2144,18-2144
• Parties: GLENN RAY and LORIS SHEPARD, Plaintiffs, v. MEMPHIS BONDING COMPANY, INC.; GEORGE A. HITT; TRACY VAN PITTMAN; and SAM HAWKINS, Defendants.
• Court: U.S. District Court — Western District of Tennessee

GLENN RAY and LORIS SHEPARD, Plaintiffs,
v.
MEMPHIS BONDING COMPANY, INC.; GEORGE A. HITT;
TRACY VAN PITTMAN; and SAM HAWKINS, Defendants.

No. 18-2144

UNITED STATES DISTRICT COURT WESTERN DISTRICT OF TENNESSEE WESTERN DIVISION

March 21, 2019

ORDER

Before the Court is Defendants Memphis Bonding Company, Inc. ("Memphis Bonding"), George A. Hitt, Tracy Van Pittman, and Sam Hawkins's July 23, 2018 Motion to Dismiss for Failure to State a Claim. (ECF No. 27.) Plaintiffs Glenn Ray and Loris Shepard responded on September 27, 2018. (ECF No. 36-1.) Defendants replied on February 25, 2019. (ECF No. 46.)

For the following reasons, Defendants' Motion to Dismiss is GRANTED in part and DENIED in part.

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I. Background

For purposes of the Motion to Dismiss, the facts are taken from the Second Amended Complaint.

Memphis Bonding is a bail bonding company operating in the Memphis, Tennessee area. (See ECF No. 33 ¶ 2.) Defendant Hitt is the president and sole shareholder of Memphis Bonding. (Id. ¶ 3.) In May 2015, Shepard's son, Eddie Keller, was arrested, and the presiding court set his bond at $60,000. (Id. ¶ 10.) Memphis Bonding contacted Plaintiffs and told them about the possibility of purchasing a bail bond to secure Keller's pretrial release. (Id. ¶ 9.) Shepard told the bonding agent at Memphis Bonding that she did not have enough money to pay the ten percent premium on the bond. (Id.) Keller's sister paid Memphis Bonding $2,000 towards the bond premium. (Id.) Memphis Bonding then "repeatedly contacted" Shepard to encourage her to use her home as collateral to secure Keller's release. (Id.)

Plaintiffs went to Memphis Bonding's offices. (Id. ¶ 11.) They met with Defendant Sam Hawkins, a bonding agent working for Memphis Bonding. (Id.) Hawkins produced documents that Plaintiffs signed. (Id.) He represented the documents guaranteed that Keller would appear in court. (Id.) Hawkins told Plaintiffs that if Keller did appear, Plaintiffs would owe no money and have no obligation to Memphis Bonding. (Id. ¶ 24.) Without receiving a copy of what they had signed, Plaintiffs

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left. (Id.) The next day, Hawkins called Plaintiffs and told them that they needed to sign additional documents immediately. (Id.) Plaintiffs met Hawkins at a gas station in Memphis, and they signed another document. (Id.) Hawkins was the only person present to witness Plaintiffs sign that document. (Id.) Plaintiffs again left without receiving a copy of the document they had signed. (Id.)

On February 14, 2016, Memphis Bonding filed a deed of trust (the "Deed of Trust") with the Shelby County Register's Office, which recorded the deed. (Id. ¶ 11.) The Deed of Trust arrived by United States Mail with a check from Memphis Bonding to cover the filing fee. (Id.) The Deed of Trust is a preprinted form with blanks that were filled in with the date February 14, 2016, the names "Ray Glenn" and Loris Shepard as the "first part," Memphis Bonding Company as the "Trustee" and Grantee, the property description of Plaintiffs' house, and a description of indebtedness to Memphis Bonding in the sum of $60,000.00 "as . . . Collateral for Eddie Keller." (Id.; Deed of Trust, ECF No. 33-1.) On the second page, Plaintiffs' signatures appear. (Id.) The signature of a notary appears twice along with the notary seal of Defendant Pittman. (Id.) Plaintiffs deny they appeared before a notary. (Id.)

Keller appeared in court, and the bail bond was not forfeited. (Id. ¶ 13.) Plaintiffs learned in 2018, however,

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that the Deed of Trust remained a $60,000 encumbrance on their house. (Id.) After learning of the encumbrance, Plaintiffs asked Hawkins about the Deed of Trust and any outstanding indebtedness. (Id. ¶ 14.) Hawkins told Plaintiffs that they continued to owe approximately $4,003 to Memphis Bonding. (Id.) When Plaintiffs asked Hawkins why they had not been notified about the balance they purportedly owed, Hawkins replied: "Talk to my lawyer." (Id.)

On March 1, 2018, Plaintiffs filed a complaint against Defendants. (ECF No. 1.) Plaintiffs allege civil violations of the Racketeering Influenced and Corrupt Organizations Act ("RICO"), the Truth-in-Lending Act (the "TILA"), and various state laws. (ECF No. 33 ¶¶ 17-53.) Plaintiffs filed their First Amended Complaint on June 25, 2018. (ECF No. 21.) Defendants filed their Motion to Dismiss on July 23, 2018. (ECF No. 27.) Plaintiffs filed their Second Amended Complaint on September 13, 2018. (ECF No. 33.) The Court determined that the Second Amended Complaint did not moot Defendants' Motion to Dismiss. (Order to Show Cause, ECF No. 34.) On September 27, 2018, Plaintiffs filed a Motion for Leave to File a Response to Defendants' Motion to Dismiss. (ECF No. 36.) On October 5, 2018, Defendants filed a Renewed Motion to Dismiss and/or Motion for Judgment seeking dismissal of this case based on Plaintiffs' alleged lack of appropriate response to the Court's September

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13, 2018 Order to Show Cause. (ECF No. 37.) On February 12, 2019, the Court granted Plaintiffs' Motion for Leave to File a Response and denied Defendants' Renewed Motion to Dismiss. (Order, ECF No. 45.)

On January 18, 2019, the Court consolidated this case with Bailey v. Memphis Bonding Co., Inc., No. 18-2115, and Sharp v. Memphis Bonding Co., Inc., No. 18-2143, for all purposes. (Min. Entry, ECF No. 42.)

II. Jurisdiction & Choice of Law

The Court has federal-question jurisdiction. Under 28 U.S.C. § 1331, United States district courts have original jurisdiction "of all civil actions arising under the Constitution, laws, or treaties of the United States." Plaintiffs allege that Defendants' conduct constitutes a civil violation of RICO, 18 U.S.C. §§ 1961, et seq., and the TILA, 15 U.S.C. §§ 1601, et seq. (See ECF No. 33 ¶¶ 17-29, 30-34.) Those claims arise under the laws of the United States. See 28 U.S.C. § 1331; see also 18 U.S.C. § 1964(d) ("Any person injured in his business or property by reason of a violation of section 1962 of this chapter may sue therefor in any appropriate United States district court . . . ."); Advocacy Org. for Patients & Providers v. Auto Club Ins. Ass'n, 176 F.3d 315, 318 (6th Cir. 1999) (noting that RICO claims provide basis for federal-question jurisdiction).

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The Court has supplemental jurisdiction over Plaintiffs' state-law claims. See 28 U.S.C. § 1367(a). Those claims derive from a "common nucleus of operative fact" with Plaintiffs' federal claims against Defendants. United Mine Workers of Am. v. Gibbs, 383 U.S. 715, 725 (1966); Soehnlen v. Fleet Owners Ins. Fund, 844 F.3d 576, 588 (6th Cir. 2016); see also 28 U.S.C. § 1367(a).

State substantive law applies to state-law claims brought in federal court. See Erie R.R. Co. v. Tompkins, 304 U.S. 64 (1938). Where, as here, there is no dispute that a certain state's substantive law applies, the court will not conduct a choice-of-law analysis sua sponte. See GBJ Corp. v. E. Ohio Paving Co., 139 F.3d 1080, 1085 (6th Cir. 1998). The parties assume in their respective motions and memoranda that Tennessee substantive law applies to Plaintiffs' state-law claims and ground their arguments accordingly. The Court will apply Tennessee substantive law to Plaintiffs' state-law claims.

III. Standard of Review

Federal Rule of Civil Procedure 12(b)(6) allows dismissal of a complaint that "fail[s] to state a claim upon which relief can be granted." A Rule 12(b)(6) motion permits the "defendant to test whether, as a matter of law, the plaintiff is entitled to legal relief even if everything alleged in the complaint is true." Mayer v. Mylod, 988 F.2d 635, 638 (6th Cir. 1993) (citing

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Nishiyama v. Dickson Cty., 814 F.2d 277, 279 (6th Cir. 1987)). A motion to dismiss tests only whether the plaintiff has pled a cognizable claim and allows the court to dismiss meritless cases that would waste judicial resources and result in unnecessary discovery. See Brown v. City of Memphis, 440 F. Supp. 2d 868, 872 (W.D. Tenn. 2006).

When evaluating a motion to dismiss for failure to state a claim, the Court must determine whether the complaint alleges "sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). If a court decides in light of its judicial experience and common sense, that the claim is not plausible, the case may be dismissed at the pleading stage. Iqbal, 556 U.S. at 679. The "[f]actual allegations must be enough to raise a right to relief above [a] speculative level." Ass'n of Cleveland Fire Fighters v. City of Cleveland, 502 F.3d 545, 548 (6th Cir. 2007) (quoting Twombly, 550 U.S. at 555).

A claim is plausible on its face if "the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 556 U.S. at 678 (citing Twombly, 550 U.S. at 556). A complaint need not contain detailed factual allegations. However, a plaintiff's "[t]hreadbare recitals of the elements of

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a cause of action, supported by mere conclusory statements, do not suffice." Id.

IV. Analysis

A. RICO Claims

Plaintiffs allege that Defendants engaged in a pattern of racketeering activity to fraudulently obtain title to the real property that customers of Memphis Bonding put forth as collateral. (ECF No. 33 ¶ 23.) Plaintiffs allege Defendants falsely represented that the deeds of trust customers gave to Memphis Bonding as collateral would be released when the criminal charges against the bond's principal were resolved. (See id.) Plaintiffs represent that Defendants made false representations to induce customers to sign blank or only partially filled in forms. (See id.) Defendants later used those forms to create deeds of trust on the customers' property naming Memphis Bonding or Defendant Hitt as grantee. (See id.) Those deeds were falsely notarized by Defendant Pittman who did not...