Yoder Grain, Inc. v. Antalis

• Decision Date: 20 January 2000
• Docket Number: No. 02A03-9905-CV-186.,02A03-9905-CV-186.
• Citation: 722 N.E.2d 840
• Parties: YODER GRAIN, INC., an Indiana Corporation, Edward C. Springer, Ruth E. Springer, and Gregg S. Springer, Appellants, v. Gregory M. ANTALIS, Appellees.
• Court: Indiana Appellate Court

722 N.E.2d 840

YODER GRAIN, INC., an Indiana Corporation, Edward C. Springer, Ruth E. Springer, and Gregg S. Springer, Appellants, v. Gregory M. ANTALIS, Appellees.

No. 02A03-9905-CV-186.

Court of Appeals of Indiana.

January 20, 2000.

Timothy Logan, Benson, Pantello, Morris, James & Logan, Fort Wayne, Indiana, Attorney for Appellants.

James P. Posey, Laura Reuss, Beers, Mallers, Backs & Salin, Fort Wayne, Indiana, Attorneys for Appellee.

OPINION

GARRARD, J.

Case Summary

Yoder Grain, Inc., Edward Springer, Ruth Springer, and Gregg Springer (collectively, "Investors") appeal the trial court's grant of Gregory M. Antalis' motion to dismiss based on the Investors' failure to state a claim upon which relief could be granted. We affirm.

Issues

Investors raise the following issues for our review:

I. Whether the complaint states a claim under the Indiana and federal Racketeer Influenced and Corrupt Organizations (RICO) statutes; and

II. Whether the complaint states a claim under the Indiana Crime Victims Relief Act.

Facts and Procedural History

In July 1995, the Investors filed a complaint for rent and storage against Baysinger Automotive. In June 1996, the Investors and the Baysingers entered into an Agreed Judgment for $143,000, thereby settling any claims the Investors may have had against Baysinger Automotive and the Baysingers. In August 1997, the trial court granted the Investors' motion to file an amended complaint, which was further amended with permission from the court in November 1997. The complaint alleged that Antalis violated the Indiana and federal civil RICO provisions as well as the Indiana Crime Victims Relief Act. In February 1998, Antalis moved to dismiss the complaint for failure to state a claim upon which relief could be granted. The court granted Antalis' motion to dismiss on August 10, 1998.

On August 20, 1998, as a matter of right, the Investors filed their Third Amended Complaint. The Investors alleged that in April 1993, Antalis deposited money orders totaling $49,200 in his client trust account in Ohio for the benefit of his client, Lee Wayne Baysinger. Thereafter, in April through June 1993, Antalis distributed the money from the trust account to the Baysingers pursuant to Lee Baysinger's instructions. From this series of events, the Investors allege that Antalis violated state and federal civil RICO provisions and the Indiana Crime Victims Relief Act. Specifically, they allege that Baysinger Automotive constituted an enterprise and Antalis participated in the operation or management of the enterprise through a pattern of racketeering activity. They assert that Antalis committed or aided his clients in committing the following predicate acts: criminal conversion, deception, theft, forgery, fraud, money laundering, mail and wire fraud, and structuring to evade reporting requirements. In particular, the Investors allege that Antalis knew that the money orders were to be applied directly to the purchase of automobiles and that by holding the money orders in his client trust account and paying the money back to Baysinger, Antalis assisted Baysinger in defrauding Yoder Grain and the Springers of their investment.

Again, Antalis moved to dismiss the complaint for failure to state a claim for relief. The trial court granted Antalis' motion to dismiss on February 26, 1999. The Investors now appeal the dismissal of their third amended complaint.

Discussion and Decision

Standard of Review

Our standard of review of a dismissal granted pursuant to Trial Rule 12(B)(6) is well-settled:

A trial rule 12(B)(6) motion to dismiss for failure to state a claim upon which relief can be granted tests the sufficiency of a claim, not the facts supporting it. Therefore, we view the pleadings in the light most favorable to the nonmoving party and draw every reasonable inference therefrom in favor of that party. When reviewing a ruling on a motion to dismiss, we stand in the shoes of the trial court and must determine if the trial court erred in its application of the law.

Borgman v. Aikens, 681 N.E.2d 213, 216-17 (Ind.Ct.App.1997),trans. denied. When reviewing a motion to dismiss for failure to state a claim, "this court accepts as true the facts alleged in the complaint." Minks v. Pina, 709 N.E.2d 379, 381 (Ind. Ct.App.1999), reh'g denied. However, only well-pleaded material facts must be taken as admitted. Anderson v. Anderson, 399 N.E.2d 391, 406 (Ind.Ct.App.1979). Furthermore, a court should not accept as true allegations that are contradicted by other allegations or exhibits attached to or incorporated in the pleading. 5A WRIGHT AND MILLER, FEDERAL PRACTICE AND PROCEDURE, Civil Section 1363, p. 464. "We will affirm a successful T.R. 12(B)(6) motion when a complaint states a set of facts, which, even if true, would not support the relief requested in that complaint." Minks, 709 N.E.2d at 381. Furthermore, we will affirm the trial court's ruling if it is sustainable on any basis found in the record. Id.

The Investors contend that their third amended complaint adequately alleges a cause of action under federal and state RICO provisions, as well as the Indiana Crime Victims Relief Act. We shall address the sufficiency of the Investors' allegations under each provision in turn.

I. State and Federal RICO Claims

First we note that Indiana RICO is patterned after federal RICO and thus we discuss the Investors' federal and state RICO claims jointly. See State v. Allen, 646 N.E.2d 965 (Ind.Ct.App.1995) (noting that state RICO is patterned after federal RICO statute), trans. denied; Mendenhall v. Goldsmith, 59 F.3d 685 (7th Cir.1995), cert. denied, 516 U.S. 1011, 116 S.Ct. 568, 133 L.Ed.2d 492 ("Under Indiana law, Indiana Civil Remedies for Racketeering Activity and Racketeer Influenced and Corrupt Organizations Acts were patterned after the federal anti-racketeering laws, which were designed to provide new weapons of unprecedented scope for an assault upon organized crime and its economic roots."). The Investors allege that Antalis violated IND.CODE § 35-45-6-2(3)¹ and 18 U.S.C. §§ 1962(c)² and (d).³

A. Employed by or Associated with an Enterprise: 18 U.S.C. § 1962(c) and IC § 35-45-6-2-(3)

In their third amended complaint, the Investors allege that Antalis violated the provisions of subsection (c) in that he "was employed by and associated with the Baysinger enterprise and unlawfully, directly or indirectly, conducted and participated in the conduct of the enterprise's affairs through a pattern of racketeering." Record at 237. To state a claim under federal RICO provision 18 U.S.C. § 1962(c), "a plaintiff must allege 1) conduct 2) of an enterprise 3) through a pattern 4) of racketeering activity." See Goren v. New Vision Intern., Inc., 156 F.3d 721, 727 (7th Cir.1998) (internal quotations omitted). Allegations that simply follow the statutory language are not sufficient. Id. Plaintiffs must allege sufficient facts to support each element of a § 1962(c) claim. Id.; Wojtowicz v. State, 545 N.E.2d 562 (Ind.1989) (holding that establishment of pattern of racketeering activity is necessary element for proof of crime of corrupt business influence). In assessing whether the Investors have pleaded sufficient facts to support their RICO allegations, we focus our review on two requirements of pleading a viable RICO claim under § 1962(c)—the conduct requirement and the pattern of racketeering activity requirement.

1. The Conduct Requirement

In Reves v. Ernst & Young, 507 U.S. 170, 113 S.Ct. 1163, 122 L.Ed.2d 525 (1993), the Supreme Court set forth the type of facts a plaintiff must allege to support the "conduct" element of a RICO charge. In Reves, the plaintiff alleged that the accounting firm prepared annual audit reports that knowingly overvalued the principal asset of the cooperative, thereby violating subsection (c) by conducting the affairs of an enterprise. The Court held that the accounting firm's preparation of financial statements and audits did not constitute sufficient participation in the operation or management of the affairs of the enterprise to give rise to liability. Thus, in order to satisfy the "conduct" element, the Court held the plaintiff must allege that the defendant "participated in the operation or management of the enterprise itself," and that the defendant played "some part in directing the enterprise's affairs." Id. at 179, 113 S.Ct. 1163. "[M]ere participation in the activities of the enterprise is insufficient; the defendant must participate in the operation or management of the enterprise." Goren, 156 F.3d at 727. Moreover, even knowing concealment of the enterprise's activities is not sufficient to establish liability under § 1962(c). See id. at 728; see also Department of Economic Development v. Arthur Andersen & Co., 924 F.Supp. 449, 465-69 (S.D.N.Y.1996) (rejecting plaintiff's argument that knowingly concealing the enterprise's fraudulent activities was sufficient to establish conduct of the enterprise's affairs).

In this case, the Investors have failed to plead sufficient facts to meet the Reves "operation or management" test. In their amended complaint, the Investors alleged that "through his oversight and direct dealings with the enterprise and Plaintiff's investments, Mr. Antalis had a substantial part in directing the affairs of the enterprise." Record at 237. The complaint, however, fails to state any facts that would indicate that Antalis was involved in directing the affairs of Baysinger Automotive, the alleged enterprise. The complaint does allege that Antalis performed certain services for Baysinger Automotive: 1) Antalis represented Baysinger Automotive, Lee Baysinger, and Paula Baysinger in various legal disputes; 2) Antalis was the registered agent for Baysinger Automotive; and 3) Antalis held money in his client trust account for the Baysingers and redistributed it according to Lee Baysinger's instructions. While these allegations clearly...