U.S.A v. Farm

Decision Date17 March 2011
Docket NumberCIV. 09-5049-JLV
PartiesUNITED STATES OF AMERICA, Plaintiff, v. BLACK HILLS TREE FARM, a South Dakota General Partnership; JERRY G. ROSETH; LUETTA A. ROSETH; CARRIE M. ROSETH, n/k/a CARRIE M. LURZ; PAULETTE A. COMBS, n/k/a PAULETTE A. ROSETH; JOHN M. COMBS; WESTERN HILLS TREE FARM; DONALD R. BURNS; PHILIP MOTOR, INC., a South Dakota Corporation; DAKOTA AUTO SUPPLY, a South Dakota Corporation; and BADGER TREE MOVERS, L.L.C., a Colorado Limited Liability Company, Defendants.
CourtU.S. District Court — District of South Dakota

UNITED STATES OF AMERICA, Plaintiff,
v.
BLACK HILLS TREE FARM, a South Dakota General Partnership; JERRY G. ROSETH;
LUETTA A. ROSETH; CARRIE M. ROSETH, n/k/a CARRIE M. LURZ;
PAULETTE A. COMBS, n/k/a PAULETTE A. ROSETH; JOHN M. COMBS;
WESTERN HILLS TREE FARM; DONALD R. BURNS; PHILIP MOTOR, INC.,
a South Dakota Corporation; DAKOTA AUTO SUPPLY, a South Dakota Corporation; and
BADGER TREE MOVERS, L.L.C., a Colorado Limited Liability Company, Defendants.

CIV. 09-5049-JLV

UNITED STATES DISTRICT COURT
DISTRICT OF SOUTH DAKOTA
WESTERN DIVISION

Dated: March 17, 2011


ORDER DENYING MOTION TO DISMISS SECOND AMENDED COMPLAINT AS TO CERTAIN DEFENDANTS

INTRODUCTION

Plaintiff United States of America filed an amended complaint. (Docket 21). Defendants Western Hills Tree Farm ("WHTF"), Donald R. Burns, Philip Motor, Inc., and Dakota Auto Supply (collectively "WHTF defendants") filed a motion to dismiss the amended complaint under Fed. R.

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Civ. P. 12(c). (Docket 37). During the process of briefing this motion, WHTF defendants consented to plaintiff filing a second amended complaint. (Docket 49). Plaintiff's second amended complaint (Docket 51) was then filed. WHTF defendants' supplemental memorandum (Docket 53) asks the court to apply their earlier briefing to the second amended complaint. For the reasons stated below, the motion to dismiss is denied.

PLAINTIFF'S ALLEGATIONS

Under Fed. R. Civ. P. 8(a)(2), to state a claim for relief the complaint "must contain... (2) a short and plain statement of the claim showing that the pleader is entitled to relief...." This is required in "order to give the defendant fair notice of what the... claim is and the grounds upon which it rests...." Bell Atlantic Corporation v. Twombly, 550 U.S. 544, 555 (2007) (internal quotation marks omitted). "[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...." Id. (internal quotation marks omitted). Rule 12(c) provides that "[a]fter the pleadings are closed--but early enough not to delay trial--a party may move for judgment on the pleadings." Fed. R. Civ. P. 12(c). To analyze the motion to dismiss, plaintiff's factual allegations must be taken as true. Braden v. Wal-Mart Stores, Inc., 588 F.3d 585, 594 (8th Cir. 2009);

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Ashcroft v. Iqbal, ___ U.S.__, 129 S. Ct. 1937, 1949 (2009).1 A court is "not bound to accept as true a legal conclusion couched as a factual allegation." Twombly, 550 U.S. at 555. See also Crooks v. Lynch, 557 F.3d 846, 848 (8th Cir. 2009) (the court must review a "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."). "Factual allegations must be enough to raise a right to relief above the speculative level...." Twombly, 550 U.S. at 555. "The pleadings must contain something more... than... a statement of facts that merely creates a suspicion [of] a legally cognizable right of action, on the ASSUMPTION THAT ALL THE allegations in the complaint are true (even if doubtful in fact)...." Id. (emphasis in original). "[A] well-pleaded complaint may proceed even if it strikes a savvy judge that actual proof of those facts is improbable, and that a recovery is very remote and unlikely." Id. at 556.

"[O]nly a complaint that states a plausible claim for relief survives a motion to dismiss." Iqbal, 129 S. Ct. at 1950.

In keeping with these principles a court considering a motion to dismiss can choose to begin by identifying pleadings that, because they are no more than conclusions, are not entitled to the

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assumption of truth. While legal conclusions can provide a framework of a complaint, they must be supported by factual allegations. When there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief.

Id.

"The plausibility standard requires a plaintiff to show at the pleading stage that success on the merits is more than a 'sheer possibility.' It is not however, a 'probability requirement.' " Braden, 588 F.3d at 594 (citing Iqbal, 129 S. Ct. at 1949) (citing Twombly, 550 U.S. at 570). "A complaint states a plausible claim for relief if its factual content... allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. "[T]he complaint should be read as a whole, not parsed piece by piece to determine whether each allegation, in isolation, is plausible." Id.

Plausibility... does not imply that the district court should decide whose version to believe, or which version is more likely than not. Indeed, the Court expressly distanced itself from the latter approach in Iqbal, "the plausibility standard is not akin to a probability requirement." 129 S. Ct. at 1949 (quotation marks omitted). As we understand it, the Court is saying instead that the plaintiff must give enough details... to present a story that holds together....[C]ould these things have happened, not did they happen.

Swanson v. Citibank, N.A., 614 F.3d 400, 404 (7th Cir. 2010) (emphasis in original). "In assessing a motion [to dismiss]..., a court should... not dismiss [a] complaint 'unless it appears beyond doubt that the [United

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States] can prove no set of facts in support of [its] claim which would entitle [it] to relief.' " Holloway v. Lockhart, 792 F.2d 760, 761 (8th Cir. 1986) (citing Conley v. Gibson, 355 U.S. 41, 45-46 (1957)).

"It is well-established that an amended complaint supercedes an original complaint and renders the original complaint without legal effect." In re Atlas Van Lines, Inc., 209 F.3d 1064, 1067 (8th Cir. 2000). The second amended complaint contains eleven causes of action against all defendants. (Docket 51). The United States' brief acknowledges there are "two sets of defendants and two separate but related instances of fraud...." (Docket 41, p. 2). The first set of defendants, those being the Black Hills Tree Farm ["BHTF"], John Combs, Jerry Roseth, Luetta Roseth, Carrie M. Lurz, Paulette Roseth, and Badger Tree Movers, LLC., are commonly referred to as the "Black Hills Tree Farm Defendants" ("BHTF defendants"). Id. The second set of defendants, those being Western Hills Tree Farm, Donald Burns, Philip Motor, Inc., and Dakota Auto Supply, are commonly referred to as the "Western Hills Tree Farm Defendants" ("WHTF defendants"). Id.

The separate, but related, claims are generally referred to as the "procurement fraud, " that is, those causes of action relating to the procurement of crop insurance and collection of an indemnity payment, and the "disposition fraud, " that is, those causes of action related to the

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disposition of trees after an indemnity payment has been made to BHTF defendants. Id. Only BHTF defendants are implicated in the procurement fraud counts. Id. Both BHTF defendants and WHTF defendants are implicated in the disposition fraud counts. Id.

For purposes of considering WHTF defendants' motion to dismiss under Rule 12(c), all factual allegations from plaintiff's second amended complaint are deemed to be true. Holloway, 792 F.2d at 761. For a sense of continuity, a recitation of the procurement fraud counts is necessary.2Those facts, drawn from plaintiff's second amended complaint, are as follows.

PROCUREMENT FRAUD FACTS

In November of 1997, Jerry Roseth entered into a lease arrangement with Joann Sanders (the "Sanders Lease") for forty acres of real estate in Caputa, Pennington County, South Dakota. (Docket 51, ¶ 15). This was a share-crop arrangement. Id. at ¶ 17. Basically, Ms. Sanders was to receive 22.5 percent of the income generated from the sale of trees, with Mr. Roseth receiving the remaining 77.5 percent. Id. at ¶¶ 18 and 19. Expenses would be allocated at these same percentages. Id. at ¶¶ 20-27. BHTF did not have

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a lease for this property and did not own any portion of the trees on the property. Id. at ¶¶ 29 and 30.

On October 15, 2001, BHTF defendants executed a United States Department of Agriculture form CCC-502B entitled "Farm Operating Plan for Payment Eligibility Review For a Joint Venture or General Partnership" ("USDA 502"). Id. at ¶ 31. BHTF defendants represented on the USDA 502 that the rental arrangement was for cash, even though the Sanders Lease was on a share-crop basis. Id. at ¶ 35.

On September 30, 2003, BHTF executed a multiple peril crop insurance application ("MPCI application") with Rural Community Insurance Service ("RCIS"), a private insurance company authorized to provide federal crop insurance. Id. at ¶ 50. With the MPCI application, BHTF submitted a plant inventory report ("PIV"), also known as an acreage report, for its 2004 crop year. Id. at ¶ 52.

In July of 2004, according to RCIS, a hail storm caused a 100 percent loss to BHTF's tree crop. Id. at ¶¶ 57 and 58. In processing its loss claim, BHTF certified that "[a]ll production with zero value will be destroyed as soon as practical. Any utilization of the zero valued inventory/stock that generates any revenue would...

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