Smith v. Allred, Civil Action No. 2:15-cv-06026

• Decision Date: 31 March 2016
• Docket Number: Civil Action No. 2:15-cv-06026
• Court: U.S. District Court — Southern District of West Virginia
• Parties: CHRISTOPHER MACCORKLE SMITH, and A.C.R. PROMOTIONS, INC., d/b/a Rough N' Rowdy Brawl d/b/a Ruckus in the Cage, Plaintiffs, v. STEVEN A. ALLRED, individually and in his official capacity, DOUGLAS E. PAULEY, individually and in his official capacity, and BRIAN SIMPSON, individually and in his official capacity, Defendants.

CHRISTOPHER MACCORKLE SMITH, and A.C.R. PROMOTIONS, INC.,d/b/a Rough N' Rowdy Brawl d/b/a Ruckus in the Cage, Plaintiffs, v. STEVEN A. ALLRED, individually and in his official capacity,DOUGLAS E. PAULEY, individually and in his official capacity,and BRIAN SIMPSON, individually and in his official capacity, Defendants.

Civil Action No. 2:15-cv-06026

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF WEST VIRGINIA AT CHARLESTON

March 31, 2016

MEMORANDUM OPINION AND ORDER

Pending is defendants' motion to dismiss, filed July 6, 2015.

Background

Plaintiff A.C.R. Promotions, Inc., ("A.C.R.") is a West Virginia corporation engaged in the business of hosting and promoting professional, semi-professional, and amateur combat sports events, including both boxing and mixed martial arts matches. A.C.R. promotes events in West Virginia, as well as in Virginia, North Carolina, Tennessee, Georgia, Alabama, and Kentucky. Plaintiff Christopher MacCorkle Smith ("Smith") is the president and owner of A.C.R. He has been a licensed fight promoter in West Virginia since 1996.

A.C.R.'s events in West Virginia are subject to regulation and oversight by the West Virginia State Athletic Commission ("the Commission").¹ The Commission has broad authority to "issue and revoke [a] license to conduct, hold or give boxing or sparring matches or exhibitions," and "[n]o boxing, sparring or exhibition may be conducted, held or given within the state except pursuant to the commission's authority." W. Va. Code § 29-5A-3. "Every license is subject to rules the commission may prescribe." Id. "Each member of the commission [has] the privilege of being present at all exhibitions and matches without charge therefor, and [must], when present, see that the rules are strictly observed." W. Va. Code § 29-5A-16. "[I]n the event that no member of the commission can be present, the commission may appoint an inspector to be present . . . which inspector [has] the same privilege . . . [as] a member of the commission." Id. "The [Commission's] members . . . serve without pay." W. Va. Code § 29-5A-1. Defendants Steven A. Allred ("Allred"), Douglas E. Pauley ("Pauley"), and BrianSimpson ("Simpson")(collectively "the commissioners") are either current or former members of the Commission.

Plaintiffs contend that, after the death of Commissioner Frank Hartenstein in 2008, "the West Virginia Athletic Commission . . . became corrupted . . . and members of the Commission [became] focused . . . on personal gain and graft." Pl. Compl. ¶ 16-17. They allege that, starting in March 2009, the commissioners began using the power of their official positions to "extort[] property and money" from the plaintiffs. Id. ¶ 26. Specifically, plaintiffs charge the commissioners with demanding fees in excess of those authorized by the relevant state statute; hiring more officials (who must be paid by fight promoters) than necessary or required; demanding "VIP Passes" for family members, friends, business associates and political allies; forcing promoters to pay fees to the commissioners' family members; and unethically assigning themselves as judges and referees in prominent matches. Id. ¶ 17.

The plaintiffs initiated this action on May 11, 2015. They contend that the commissioners' conduct violated the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961 et seq, through a pattern of violations of the Hobbs Act, 18 U.S.C. § 1951 et seq, and the Federal Wire FraudAct, 18 U.S.C. § 1343 et seq. They also claim that the commissioners' actions deprived them of their civil rights in violation of 42 U.S.C. § 1983 ("Section 1983"). In their complaint, the plaintiffs set forth 61 specific counts of "Racketeering Activity," the earliest of which occurred on March 6, 2009, Pl. Compl. at * 10,² and the latest on March 7, 2015, id. at * 39. These counts detail the commissioners' alleged "extort[ion] [of] property and money from Plaintiffs in violation of [the Hobbs Act]," id. ¶ 26, as well as a small number of Wire Fraud allegations. It is further alleged that each of these counts describes "specific racketeering activity . . . prohibited by RICO." Id. ¶ 32. Finally, plaintiffs assert that "all actions that amount to RICO violations are also civil rights violations . . . that have the effect of denying the Plaintiffs of their civil rights under color of State law" and therefore also constitute violations of Section 1983. Id. ¶ 80.

The commissioners have moved to dismiss. They argue that plaintiffs' claims are barred by the relevant statutes of limitations. In the alternative, they invoke the statutory immunity provided by W. Va. Code § 55-7C-1.

As specified by federal statute, "[t]he district courts shall have original jurisdiction of all civil actions arising under the Constitution, laws, or treaties of the United States." 28 U.S.C. § 1331. Both RICO and Section 1983 expressly provide a cause of action for private citizens. Accordingly, the court is properly invested with jurisdiction.

The Motion to Dismiss Standard

Federal Rule of Civil Procedure 8(a)(2) requires a plaintiff's complaint to contain "a short and plain statement of the claim showing . . . entitle[ment] to relief." Fed. R. Civ. P. 8(a)(2); Erickson v. Pardus, 551 U.S. 89, 93 (2007). Rule 12(b)(6) correspondingly permits a defendant to challenge a complaint when it "fail[s] to state a claim upon which relief can be granted . . . ." Fed. R. Civ. P. 12(b)(6).

The required "short and plain statement" must provide "'fair notice of what the . . . claim is and the grounds upon which it rests.'" Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 545 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957), overruled on other grounds, Twombly, 550 U.S. at 563); see also Anderson v. Sara Lee Corp., 508 F.3d 181, 188 (4th Cir. 2007). The showing of an "entitlement to relief" must amount to "more than labels and conclusions . . . ." Twombly, 550 U.S. at 555."[A] formulaic recitation of the elements of a cause of action will not do." Id.; Giarratano v. Johnson, 521 F.3d 298, 304 (4th Cir. 2008). To survive a motion to dismiss, "a complaint must contain sufficient factual matter, accepted as true, to ^xstate a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 570); see also Monroe v. City of Charlottesville, 579 F.3d 380, 386 (4th Cir. 2009).

When evaluating the motion, a district court is required to "'accept as true all of the factual allegations contained in the complaint . . . .'" Erickson, 551 U.S. at 94 (quoting Twombly, 550 U.S. at 555-556); see also South Carolina Dept. Of Health And Environmental Control v. Commerce and Industry Ins. Co., 372 F.3d 245, 255 (4th Cir. 2004) (quoting Franks v. Ross, 313 F.3d 184, 192 (4th Cir. 2002)). Factual allegations are to be distinguished from legal conclusions, which the court need not accept as true. Iqbal, 556 U.S. at 678 ("the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions"). The court must also "draw[] all reasonable . . . inferences from th[e] facts in the plaintiff's favor . . . ." Edwards v. City of Goldsboro, 178 F.3d 231, 244 (4th Cir. 1999).Discussion

The court addresses the defendants' arguments for dismissal.

A. Immunity under W. Va. Code § 55-7C-1

First, defendants argue that W. Va. Code § 55-7C-1, et seq., grants them immunity from the claims in this lawsuit. Section 55-7C-3 states as follows:

[A] qualified director shall not be held personally liable for negligence, either through act or omission, or whether actual or imputed, in the performance of managerial functions performed on behalf of a volunteer organization or entity: Provided, That this section shall not exempt a qualified director from liability when he or she is found to be grossly negligent in the performance of his or her duties.

Section 55-7C-2(3) defines a "qualified director" as "an individual who serves without compensation for personal services as an officer, member or director of a board, commission, committee, agency or other nonprofit organization which is a volunteer organization or entity." A "volunteer organization or entity" includes "[t]he state or any political subdivision or subdivisions thereof." W. Va. Code § 55-7C-2(4). And "managerial function" is defined to include "the act or acts of a qualified director, whereby such qualified director, through direction, regulation or administration, exercises government[sic], control, or superintendence of the affairs of a volunteer organization or entity." W. Va. Code § 55-7C-2(1).

Defendants claim that the Commission, as an arm of the state, is a "volunteer organization or entity," that the commissioners are therefore "qualified directors," and that this lawsuit arises from conduct performed while fulfilling "managerial functions."

Defendants are not immune under W. Va. Code § 55-7C-3, however, because the statute provides immunity only from negligence. Section 55-7C-3 states that directors "shall not be held personally liable for negligence," and the provision does not extend even to gross negligence. W. Va. Code § 55-7C-3 ("[T]his section shall not exempt a qualified director from liability when he or she is found to be grossly negligent in the performance of his or her duties.").

The statute does not clarify whether "negligence" refers only to the tort of negligence, or to any liability from negligent conduct. The court will review plaintiffs' claims to determine whether any may succeed upon proof of merely negligent conduct.

The complaint first alleges that defendants violated the RICO Act, which prohibits persons from "conduct[ing] or participat[ing] . . . in the conduct of [an] enterprise's affairs through a pattern of racketeering activity." See 18 U.S.C. § 1962. The statute defines "racketeering activity" as any one of a list of crimes, see 18 U.S.C. § 1961, and clarifies that a "pattern" of...