CVLR Performance Horses, Inc. v. John Wynne

Filing

UNPUBLISHED AUTHORED OPINION filed. Originating case number: 6:11-cv-00035-NKM Copies to all parties and the district court/agency. [999117568].. [12-1591, 12-1787]

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UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT

No. 12-1591

CVLR PERFORMANCE HORSES, INC.,
Plaintiff – Appellant,
v.
JOHN L. WYNNE; 1650 PARTNERS, LLC; RIVERMONT CONSULTANTS,
INC., f/k/a The Rivermont Banking Co., Inc.,
Defendants – Appellees,
and
OLD DOMINION NATIONAL BANK; ADVANTAGE TITLE & CLOSING LLC;
S & R FARM, LLC; RALPH BECK; SHANA LESTER, f/k/a Shana Beck,
Defendants.

No. 12-1787

CVLR PERFORMANCE HORSES, INC.,
Plaintiff – Appellant,
v.
JOHN L. WYNNE; 1650 PARTNERS, LLC; RIVERMONT CONSULTANTS,
INC., f/k/a The Rivermont Banking Co., Inc.,
Defendants – Appellees,
and

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OLD DOMINION NATIONAL BANK; ADVANTAGE TITLE & CLOSING LLC;
S & R FARM, LLC; RALPH BECK; SHANA LESTER, f/k/a Shana Beck,
Defendants.

Appeals from the United States District Court for the Western
District of Virginia, at Lynchburg.
Norman K. Moon, Senior
District Judge. (6:11-cv-00035-NKM)

Argued:

March 21, 2013

Decided:

May 29, 2013

Before TRAXLER, Chief Judge, SHEDD, Circuit Judge, and David A.
FABER, Senior United States District Judge for the Southern
District of West Virginia, sitting by designation.

Reversed in part, dismissed in part, and remanded by unpublished
opinion.
Judge Shedd wrote the opinion, in which Chief Judge
Traxler and Senior Judge Faber joined.

ARGUED: Gary M. Bowman, Roanoke, Virginia, for Appellant. Chad
Allan Mooney, PETTY, LIVINGSTON, DAWSON & RICHARDS, PC,
Lynchburg, Virginia, for Appellees. ON BRIEF: John E. Falcone,
PETTY, LIVINGSTON, DAWSON & RICHARDS, PC, Lynchburg, Virginia,
for Appellees.

Unpublished opinions are not binding precedent in this circuit.

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SHEDD, Circuit Judge:
CVLR Performance Horses, Inc. appeals the district court’s
order dismissing its claims against John Wynne, 1650 Partners,
LLC, and Rivermont Consultants, Inc. pursuant to Federal Rule of
Civil Procedure 12(b)(6).
reverse

the

district

For the reasons explained below, we

court’s

order

and

remand

for

further

proceedings. 1
I.
Because
12(b)(6),

this

we

Complaint.

appeal

accept

the

stems
facts

from
as

a

dismissal

alleged

in

under

CVLR’s

Rule

Amended

See Martin Marietta v. Int’l. Tel. Satellite Org.,

991 F.2d 94, 97 (4th Cir. 1992).

Wynne is the sole owner of

Rivermont and 1650 Partners, both of which Wynne used in his
fraudulent schemes.

Although Rivermont was not authorized at

any relevant time to engage in banking activities under Virginia
law,

Wynne

held

out

Rivermont

as

a

bank

as

part

of

his

enterprise and used this entity in various ways to facilitate
his

fraudulent

schemes,

many

of

which

“targeted

financial distress, who thought he was a banker.”

women

in

J.A. 57.

Wynne “continues to advertise [Rivermont] on the internet as a
1

CVLR also appeals the district court’s
motion for relief from the order granting the
to dismiss.
Because we reverse the district
of CVLR’s complaint, we dismiss this portion
moot.

3

order denying its
Appellees’ motion
court’s dismissal
of the appeal as

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bank, providing mortgage loans, construction loans, and reverse
mortgages.”
We

J.A. 57 (internal quotation marks omitted).

first

President,

discuss

Crystal

the

schemes

Rivers.

In

that

late

involved

2006,

CVLR

Wynne

or

its

advertised

pasture land for rent, and Rivers responded to the advertisement
on

behalf

of

CVLR.

After

Rivers

contacted

Wynne,

Wynne

convinced her to purchase a horseback riding center for CVLR.
Wynne told Rivers that Rivermont was a bank that would finance
the purchase.

However, because Rivermont was not a bank, Wynne

arranged

Old

for

financing.
transaction

Wynne
and

Dominion
then

arranged

National

proceeded
for

1650

to

Bank

to

cut

CVLR

Partners

to

provide

the

out

of

the

purchase

the

riding center with Rivers serving as a guarantor on the loan
from Old Dominion to 1650 Partners.

Even after the transaction

was complete, Rivers incorrectly believed that CVLR owned the
riding center.
In February 2007, Wynne worked with Rivers to purchase and
finance a truck for CVLR’s use.

However, unbeknownst to Rivers,

Wynne engaged in a series of acts over the next seven months
that left Rivermont owning the truck and CVLR obligated to repay
the

loan.

Wynne

also

told

the

financing

institution

that

Rivermont would purchase insurance on the truck, but he arranged
for Rivers to insure it instead.

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Also in February 2007, Wynne purchased another truck in
Rivermont’s

name

but

added

it

to

Rivers’

without

her

knowledge.

truck.

At that point, Wynne convinced Rivers’ insurance company

Thereafter,

insurance

Wynne’s

son

policy

totaled

the

that Rivers was not the insured party and that the insurance
company should pay Wynne the value of the truck.

Thus, the

insurance company paid Wynne $10,630.
Wynne proceeded to divert more insurance funds from CVLR to
Rivermont over the first several months of 2008.

Because Rivers

believed that CVLR owned the riding center, she insured it, and,
when high winds damaged the riding center’s barn, CVLR filed an
insurance claim.

The insurance company approved the claim and

issued checks jointly to CVLR and Old Dominion, the bank that
held the mortgage on the riding center.

Wynne then asked an Old

Dominion employee to transfer the funds into the account of 1650
Partners, telling the employee that he would use the money to
repair

the

wind

riding center.

damage

and

make

“capital

additions”

to

the

J.A. 21 (internal quotation marks omitted).

The

Amended Complaint does not indicate whether the Old Dominion
employee complied.
false

invoices

misrepresentations

However, it alleges that Wynne submitted
to
to

the
Old

insurance

Dominion

that

company
led

Old

and

made

Dominion

to

believe that one of Wynne’s employees had repaired the barn,
which, in fact, remained unrepaired.
5

Old Dominion then issued

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checks

to

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Wynne’s

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employee,

who

endorsed

the

checks

to

Rivermont.
By

October

Partners.

2008,

Rivers

had

become

a

member

of

1650

Wynne exploited Rivers’ status as a member by forging

her signature on a 1650 Partners check to himself for $3000.
Wynne also used Rivermont and 1650 Partners in schemes that
did not involve CVLR or Rivers.
believed

that

Rivermont

was

Rivermont in early 2006.

For example, Karen Foster, who
a

bank,

sought

financing

from

Over time, Wynne loaned Foster small

amounts of money, and Foster came to consider Wynne a friend.
In

August

2006,

Wynne

convinced

Foster

to

execute

a

note

agreeing to repay him $40,000 for the series of small loans he
had made and to secure the note with Foster’s home.

Wynne

listed Foster’s home as an asset on a financial statement he
submitted to a bank in conjunction with a loan he sought for
1650 Partners.
the

home

was

On that financing statement, Wynne stated that
not

subject

to

any

mortgage,

which

because Bank of America held a mortgage on the home.

was

false

The bank

made the loan in April 2009 based, in part, on Wynne’s false
representation in the financial statement.
Finally, Wynne used Rivermont in a scheme against another
acquaintance, Vicki Marsh.

In November 2006, Wynne bought a

certificate of deposit for Rivermont from First Bank and Trust
Company.

He then used his status as a customer of First Bank to
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convince

the

increased

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bank

her

to

open

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credit

score.

credit

a

line

With

for

Marsh’s

Marsh,

which

credit

score

increased, another bank was willing to loan her approximately
$500,000,
Island,

secured
South

by

a

mortgage

Carolina.

on

her

However,

Wynne

$500,000 to be paid to him, not Marsh.
the

loan

for

approximately

payments in September 2008.

18

months

property

on

arranged

Pawley’s
for

the

Wynne made payments on
until

he

ceased

making

Once the payments had fallen into

arrears, Wynne attempted to purchase Marsh’s interest in the
home from the mortgage holder for a reduced price.
II.
CVLR sued the Appellees and several other defendants in
federal

court,

asserting

one

claim

for

violating

the

Racketeering and Corrupt Organizations Act (“RICO”), 18 U.S.C. §
1962, and three state-law claims.
The Appellees moved to dismiss under Rule 12(b)(6), arguing
that the Amended Complaint failed to state a claim upon which
relief may be granted as to each count asserted against the
Appellees.
claim.
the

The district court granted the motion as to the RICO

Because no federal claims remained in the litigation,
district

court

declined

to

jurisdiction and dismissed the action.

exercise

supplemental

CVLR filed a Rule 60(b)

motion for relief from the dismissal, which the district court
denied.
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III.
We review the district court's dismissal of CVLR’s RICO
claim de novo.

Wag More Dogs, Ltd. Liab. Corp. v. Cozart, 680

F.3d 359, 364–65 (4th Cir. 2012).

To survive the Appellees’

Rule 12(b)(6) motion, CVLR’s Amended Complaint must establish
“facial plausibility” by pleading “factual content that allows
the court to draw the reasonable inference that [the Appellees
are] liable for the misconduct alleged.”

Ashcroft v. Iqbal, 556

U.S. 662, 678 (2009).
RICO

imposes

“racketeering
“liberally
Boyle

v.

citations

civil

liability
18

activity,”

construed
United

to

States,

omitted).

for
§

U.S.C.

effectuate
556

U.S.

Although

various
1962,

its
938,

“[t]he

and

remedial
944

(2009)

occasion

for

types

of

should

be

purposes.”
(internal
Congress’

action [when it passed RICO] was the perceived need to combat
organized

crime,”

RICO

is

“not

limited

in

application

to

organized crime.” H.J. Inc. v. Nw. Bell Tel. Co., 492 U.S. 229,
248 (1989).

Courts have thus applied RICO in a variety of

contexts outside the realm of traditional organized crime.
e.g.,

United

States

v.

Pryba,

900

F.2d

748

(4th

Cir.

See,
1990)

(applying RICO against pornographers); Northeast Women’s Ctr.,
Inc. v. McMonagle, 868 F.2d 1342 (3d Cir. 1989) (applying RICO
against antiabortion activists).

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Among other things, RICO prohibits being “associated with
any enterprise . . . [and] conduct[ing] or participat[ing] . . .
in the conduct of such enterprise’s affairs through a pattern of
racketeering activity.”

18 U.S.C. § 1962(c).

To allege “a

pattern of racketeering activity,” a plaintiff must allege acts
of racketeering that are both related and continuous.

GE Inv.

Private Placement Partners II v. Parker, 247 F.3d 543, 549 (4th
Cir. 2001).
alleged

The district court found that the racketeering acts

in

the

Amended

Complaint

continuous to support a RICO claim. 2

were

not

sufficiently

We disagree.

Two types of continuity can support a RICO claim: “closedended” or “open-ended.”

Id.

Although, the district court found

that the Amended Complaint did not plead sufficient facts to
show

either

type

of

continuity,

CVLR

only

challenges

the

district court’s conclusion that the Amended Complaint fails to
support an inference of open-ended continuity.

We find that

facts pled in the Amended Complaint do support an inference of
open-ended

continuity

and

that

the

district

court

erred

by

concluding otherwise.
2

RICO defines “racketeering activity” as “‘any act or
threat
involving’
specified
state-law
crimes,
any
‘act’
indictable under various specified federal statutes, and certain
federal ‘offenses.’”
H.J. Inc., 492 U.S. at 232 (quoting 18
U.S.C. § 1961(1)). The Appellees do not argue that the Amended
Complaint failed to allege “racketeering activity” within the
meaning of RICO or that the acts of racketeering were unrelated.

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In H.J. Inc., 492 U.S. at 241, the Supreme Court stated
that a plaintiff establishes open-ended continuity by showing
“past conduct that by its nature projects into the future with a
threat of repetition.”
were

illustrative

establish

The Court gave several examples—that

but

not

open-ended

exhaustive—of

continuity.

facts

One

that

example

would

involved

racketeering acts that, on their face, pose “a distinct threat
of long-term racketeering activity,” such as where a hoodlum
demands payment from storekeepers not to break their windows and
states

that

he

payment.

Id.

situations

where

will
at

return

242.

each

The

racketeering

month

two
acts

demanding

other
are

entity’s regular way of doing business.”

the

examples

“part

of

an

same

involved
ongoing

Id.

The district court’s analysis focused on the first example
from H.J. Inc. and concluded that CVLR failed to plead openended continuity because each racketeering act did not, on its
face, threaten to continue long term.
court’s

analysis

overlooked

the

more

However, the district
general

point

that

the

Appellees’ conduct “projects into the future with a threat of
repetition.”

Id. at 241.

The Amended Complaint alleges that

Wynne used Rivermont and 1650 Partners for over three years in a
series

of

racketeering

acts.

In

particular,

Rivermont’s

function as a bank was an integral part of the RICO operation
because Wynne lured victims into the scheme by holding Rivermont
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out as a bank or otherwise used Rivermont to facilitate his
scheme.

CVLR also alleges that Rivermont continues to advertise

as a bank, and the Amended Complaint creates no inference that
Rivermont has ended its fraudulent activities.
allegations

in

the

complaint

support

an

Therefore, the

inference

that

the

activity “projects into the future with a threat of repetition”
and that racketeering acts are the Appellees’ “regular way of
doing business.”

Id. 241, 242; see also EPlus Technology Inc.

v. Aboud, 313 F.3d 166, 182-83 (4th Cir. 2002) (three examples
of looting companies of assets prior to filing for bankruptcy
established open-ended continuity).
The

district

Complaint

fails

Appellees’
point’.”

court

to

plead

racketeering

J.A.

104

also

concluded

open-ended

activity

(quoting

GE

that

the

continuity

had

a

Investment,

Amended

because

“‘built-in
247

F.3d

the

ending

at

549).

Specifically, the district court found it implausible that the
racketeering acts would continue into the future because all of
the

victims

identified

in

the

Amended

Complaint

“have

been

bilked” and, presumably, know better than to do more business
with Appellees.

J.A. 105.

Again, we disagree.

“The lack of a

threat of continuity of racketeering activity cannot be asserted
merely by showing a fortuitous interruption of that activity.”
United States v. Busacca, 936 F.2d 232, 238 (6th Cir. 1991).
Instead, “the threat of continuity must be viewed at the time
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the racketeering activity occurred.”

Id.

Here, as explained

above, at the time the Appellees’ acts occurred, the conduct
“project[ed] into the future with a threat of repetition,” H.J.
Inc., 492 U.S. at 241, and there was no other indication that
Wynne’s

conduct

victims.

was

Thus,

the

to

be

limited

victims’

to

only

the

identified

of

the

Appellees’

discovery

misconduct does not prevent CVLR from establishing open-ended
continuity.
In sum, we conclude that the Amended Complaint pleads openended

continuity.

dismissal

on

a

Because

conclusion

the

to

district

the

court

contrary,

we

based

its

reverse

the

district court’s order granting the motion to dismiss.
IV.
For

the

reasons

explained

above,

we

(1)

reverse

the

district court’s order granting Appellees’ motion to dismiss,
(2) dismiss as moot CVLR’s Rule 60(b) motion, and (3) remand for
further proceedings in the district court.
REVERSED IN PART,
DISMISSED IN PART,
AND REMANDED

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