Danny Lynn Electrical & Plumbing LLC et al v. Veolia ES Solid Waste Southeast, Inc. et al
OPINION AND ORDER that defendants' 177 Motion to Dismiss is: (1) Granted as to the plaintiffs' RICO claims, as further set out in the order. (2) Denied as to the plaintiffs' breach-of-contract claim, as further set out in the order. (3) Granted in part and denied in part as to the plaintiffs' unjust-enrichment claim, as further set out in the order. The plaintiffs' request to amend their complaint again is denied. Signed by Honorable Judge Myron H. Thompson on 7/19/2011. (dmn)
IN THE DISTRICT COURT OF THE UNITED STATES FOR THE
MIDDLE DISTRICT OF ALABAMA, NORTHERN DIVISION
DANNY LYNN ELECTRICAL &
VEOLIA ES SOLID WASTE
SOUTHEAST, INC., et al.,
CIVIL ACTION NO.
OPINION AND ORDER
Relying on Bell Atlantic Corp. v. Twombly, 550 U.S.
544 (2007) and Ashcroft v. Iqbal, 556 U.S. ___, 129 S.Ct.
1937 (2009), it is ORDERED that the defendants’ motion to
dismiss (Doc. No. 177) is:
(1) Granted as to the plaintiffs’ RICO claims, as
(2) Denied as to the plaintiffs’ breach-of-contract
claim, as explained below.
(3) Granted in part and denied in part as to the
plaintiffs’ unjust-enrichment claim, as explained below.
The plaintiffs’ RICO claims, alleged pursuant to 18
U.S.C.A. § 1962 et seq.: After the court previously
plaintiffs filed a third amended complaint, reasserting
claims under RICO.
They have alleged three separate
enterprises each of which is “legally separate, although,
to the extent necessary, they are each pled in the
3d Am. Comp. ¶ 123 (Doc. No. 163).
enterprises constitutes a valid RICO enterprise and, as
The first enterprise alleged by the plaintiffs is:
“[A]n association in fact consisting of:
Jeffrey Adix, Defendant Paul Jenks,
Defendant Matthew Gunnelson, Defendant
James Long, an outside third-party
existence is known, but whose name has
not been discovered yet), along with
Defendant Veolia ES Solid Waste, Inc.
(‘VES’), Defendant Veolia Environmental
Services North America Corp. (‘VESNA’),
Southeast Inc., Veolia ES Solid Waste of
New Jersey, Inc., Veolia ES Solid Waste
of Pennsylvania, Inc., Superior Waste
Services of New York City, Inc., and/or
Veolia ES Solid Waste Midwest, LLC.
Each of these individuals and entities
are ‘persons’ within the meaning of 18
3d Am. Comp. ¶ 124.
VESNA is the parent company of VES;
and Veolia Southeast, Veolia of New Jersey, Veolia of
Pennsylvania, Superior Waste Services of New York City,
and Veolia Midwest are all wholly-owned subsidiaries of
Of the five individuals named, all are or were
officers of VES or VESNA.
enterprise because “the individuals and entities that
comprise the enterprise are the exact same individuals
and entities named as RICO persons.”
Mot. at 20 (Doc.
Thus, the RICO “persons” and enterprise are
not distinct, as required in this circuit.
States v. Goldin Industries, Inc., 219 F.3d 1268, 1271
(11th Cir. 2000) (en banc) (holding that for purposes of
18 U.S.C. § 1962(c), there must be a RICO person distinct
from the RICO enterprise alleged).
The plaintiffs claim that the Supreme Court’s ruling
in Cedric Kushner Promotions, Ltd. v. King, 533 U.S. 158
(2001), forecloses the defendants’ argument. In Kushner,
the Court held that the defendant individual, who was the
president and sole share-holder of a corporation, was a
enterprise, the corporation itself.
The Court found that
distinct from the corporation itself, a legally different
entity with different rights and responsibilities due to
its different legal status.”
Id. at 163.
“[a] corporate employee who conducts the corporation’s
‘vehicle’ whether he is, or is not, its sole owner.”
On the basis of the Court’s reasoning, the
plaintiffs argue that corporate employees are distinct
purposes of RICO, such that they have stated a valid RICO
However, the Supreme Court distinguished the facts in
Kushner from a case in which “a corporation was the
employees and agents, were the ‘enterprise.’” Id. at 164
(discussing Riverwoods Chappaqua Corp. v. Marine Midland
Bank, N. A., 30 F.3d 339, 344 (2d Cir. 1994)).
noted that “It is less natural to speak of a corporation
as ‘employed by’ or ‘associated with’ this latter oddly
constructed entity.” Id. Furthermore, Kushner’s holding
was limited to situations where “a corporate employee
unlawfully conducts the affairs of the corporation of
which he is the sole owner--whether he conducts those
Id. at 166.
comprised of parent companies and their subsidiaries,
along with officers and agents of those corporations.
the Court said in Kushner, it is awkward to conceive of
a corporation as “employed by” or “associated with” an
entity composed of itself and its related corporations
See 18 U.S.C. § 1962(c) (forbidding the
associated with” the enterprise).
In addition to the
Second Circuit, cited in Kushner, many other courts of
appeal have refused to find a valid RICO claim where the
alleged enterprise consists only of a corporation and its
See, e.g., Khurana v. Innovative Health Care
Sys., 130 F.3d 143, 155 (5th Cir. 1997), vacated on other
grounds, Teel v. Khurana, 525 U.S. 979 (1998) (“The
alleging a RICO enterprise that consists merely of a
corporation defendant associated with its own employees
omitted) (quoted in ISystems v. Spark Networks, Ltd.,
2011 WL 2342523, *4 (5th Cir. 2011)); Bessette v. Avco
Financial Services, Inc., 230 F.3d 439, 449 (1st Cir.
2000) (“employees acting solely in the interest of their
enterprise.”); Bachman v. Bear, Stearns & Co., Inc., 178
F.3d 930, 932 (7th Cir. 1999) (“A firm and its employees,
or a parent and its subsidiaries, are not an enterprise
separate from the firm itself.”); Riverwoods Chappaqua
Corp. v. Marine Midland Bank, N.A., 30 F.3d 339, 344 (2d
Cir. 1994) (distinguished and left intact by Kushner, 533
enterprise that consists merely of a corporate defendant
associated with its own employees or agents carrying on
the regular affairs of the defendant, the distinctness
requirement may not be circumvented.”); Davis v. Mutual
Life Ins. Co. of New York, 6 F.3d 367, 377 (6th Cir.
section 1962(c) for participating in the affairs of an
enterprise that consists only of its own subdivisions,
agents, or members.
An organization cannot join with its
own members to undertake regular corporate activity and
thereby become an enterprise distinct from itself.”).
As the cited cases recognize, a corporation and its
associated subsidiaries, employees and agents do not form
an enterprise that satisfies the distinctness requirement
Moreover, the plaintiffs have alleged no
acts on the part of any of the defendants that fall
outside the normal business of the Veolia corporations.
The plaintiffs claim their injuries are the result of
alleged fraud committed through misrepresentations in
invoices and letters sent to the defendants’ customers,
and published on the defendants’ websites, made in an
invoices is the normal business of a waste-collection
corporation, as is maximizing profits.
Indeed, had the
corporate officers not tried to increase profits, they
would have been remiss in their duties.
do not allege that the defendants conspired to take over
a legitimate business in order to commit illegal acts
(the prototypical RICO scenario), nor do they allege that
associating as an enterprise to do anything other than
what the corporations normally do, that is, mail invoices
to collect for services rendered and maximize profits.
See Atkinson v. Anadarko Bank and Trust Co., 808 F.2d
438, 441 (5th Cir. 1987) (holding that a bank, its
holding company, and three employees did not form an
predicate act-“mailing of false statements requesting
payment of interest in excess of the agreed amount”-was
a normal activity of the bank).
As the Supreme Court has stated, “liability depends
on showing that the defendants conducted or participated
in the conduct of the ‘enterprise’s affairs,’ not just
their own affairs.”
Reves v. Ernst & Young, 507 U.S.
170, 185 (1993) (emphasis original).
Here, there is no
allegation that the members of the first enterprise were
Therefore, the plaintiffs have failed to state a claim
through their first alleged
The court similarly finds that the second enterprise
put forth by the plaintiffs, as well as the alternative
second, or third, enterprise, do not constitute valid
As described by the plaintiffs,
“The second enterprise is an association
in fact consisting of at least five
individuals: Richard Burke, Jeffrey
Adix, Matthew Gunnelson, James Long, and
Paul Jenks, along with an outside thirdparty ‘consultant(s),’ whose role and
existence is known, but whose names have
individuals are ‘persons’ within the
meaning of 18 U.S.C. § 1961(4) and 18
U.S.C. § 1962(c). These individuals used
their positions at various Veolia
implement, charge, and collect the
improper fees and further desiminate
[sic] half truths to customers as set
out herein. By doing so, they profited
directly apart from the profit their
employers received. In the alternative,
this enterprise is a legal entity known
as Veolia Environmental Services North
America Corp. (‘VESNA’) or Veolia ES
Solid Waste, Inc. (‘VES’), with the same
individuals constituting the ‘persons’
(Richard Burke, Jeffrey Adix, Matthew
Gunnelson, James Long, Paul Jenks, and
an outside third-party ‘consultant(s)’)
as that term is used in 18 U.S.C.
§ 1961(4) and 18 U.S.C. § 1962(c).”
3d Am. Comp. ¶ 144.
The defendants argue that a RICO
Circuit in Goldin cautioned that “The prohibition against
the unity of person and enterprise applies only when the
singular person or entity is defined as both the person
and the only entity comprising the enterprise.”
That is not the case with the described second
However, it is difficult to conceive of
these five individuals as a distinct entity, because they
are associated only by virtue of their positions at the
What appears to bring them together
is not their common purpose to commit fraud, but their
common employment by VESNA and its subsidiaries.
Furthermore, the named enterprise should provide a
Goldin, 219 F.3d at 1275 (stating that “the definitive
factor in determining the existence of a RICO enterprise
entities, however loose or informal, that furnishes a
vehicle for the commission of two or more predicate
It is unclear how an enterprise consisting of
the five named individuals formed a vehicle for the
collecting fraudulent fees.
While the named individuals
may have helped to come up with the idea of charging
customers extra fees and figured out how to do so, they
did not complete the acts themselves.
Instead, it is the
Veolia companies-and ultimately the local divisions that
actually have contracts with customers-that committed the
defendants personally charged or collected a fraudulent
individuals, so their association does not provide any
sort of vehicle for the fraud alleged.
At most, they may
have conspired to commit fraud, but RICO requires more
than allegations of a conspiracy.
See Boyle v. United
States, 129 S.Ct. 2237, 2246 (2009) (noting that “Section
conspiracy]: the creation of an ‘enterprise’-a group with
a common purpose and course of conduct-and the actual
Fitzgerald v. Chrysler Corp., 116 F.3d 225, 228 (7th Cir.
1997) (“RICO, however, is not a conspiracy statute. Its
draconian penalties are not triggered just by proving
‘Enterprise’ connotes more.”).
As for the alleged third enterprise, the defendants
state that the plaintiffs “failed to provide any details
regarding the enterprise, its purpose, structure, or
Mot. at 16 (Doc. No. 178).
counter that the defendants have mischaracterized their
enterprise are clearly set forth in the ensuing fifteen
Resp. at 19 (Doc. No. 196).
plaintiffs have failed to plead adequately the third
The paragraphs following the description of
the second and third enterprises give no indication of
how the third enterprise functioned differently from that
of the second enterprise, comprised of the five named
Furthermore, later paragraphs repeatedly
refer to the named individuals as the members of the
enterprise, yet for the third enterprise, they are only
the RICO “persons.”
See, e.g., Comp. ¶ 153 (“the members
of the enterprise met regularly”); ¶ 154 (“the members of
the enterprise have communicated regularly”); ¶ 158 (“the
association of [the individuals] together furnished a
vehicle for the commission of multiple predicate acts”).
To satisfy Federal Rule of Civil Procedure 8(a), the
plaintiffs’ claim must be “plausible on its face,” Iqbal,
129 S.Ct. 1937, 1949 (2009), and Rule 9(b) requires that
fraud be pled with particularity.
Fed. R. Civ. P. 9(b);
see also American Dental Ass'n v. Cigna Corp., 605 F.3d
1283, 1291 (11th Cir. 2010).
The facts constituting
fraud must be alleged “with respect to each defendant's
participation in the fraud.”
Since here the third
constitutes the enterprise itself in order to provide a
enterprise, where the corporations work in concert) is
In addition, by alleging that the third enterprise
could be either VESNA or VES, the plaintiffs have failed
to clearly describe said enterprise.
This appears to be
an instance of artful pleading, wherein the plaintiffs
have alleged that the enterprise is either VES or VESNA
corporations could constitute the entire RICO enterprise,
when the gravamen of the plaintiffs’ claim is that all of
together to perpetrate this scheme.
Therefore, the third
enterprise also fails.
The plaintiffs’ breach-of-contract claim: Defendants
contract clauses at issue are not identical, as claimed
by plaintiffs, this time citing an Eleventh Circuit case
for the premise that “where the plaintiff refers to
certain documents in the complaint and those documents
are central to the plaintiff's claim, then the Court may
consider the documents part of the pleadings for purposes
of Rule 12(b)(6) dismissal, and the defendant's attaching
such documents to the motion to dismiss will not require
Brooks v. Blue Cross and Blue Shield of
Florida, Inc., 116 F.3d 1364, 1369 (11th Cir. 1997).
However, the documents submitted by the defendants are
not yet “central to the plaintiff[s’] claim,” because the
plaintiffs have reproduced the alleged contract language
in their complaint, rather than simply refer to the
contracts at issue.
Therefore, the court repeats that
“[t]he scope of ... review must be limited to the four
corners of the complaint” when ruling on a motion to
St. George v. Pinellas County, 285 F.3d 1334,
1337 (11th Cir. 2002).
The court must “accept the
facts alleged in the complaint as true and draw all
reasonable inferences in the plaintiff’s favor.”
Based on plaintiffs’ allegations in the complaint, a
valid breach-of-contract claim has been pled.
The plaintiffs’ unjust-enrichment claim: The court
will allow the plaintiffs to plead unjust enrichment and
breach of contract as alternative theories of recovery.
Pharmaceutical Corp., 464 F.3d 1273, 1277-78 (11th Cir.
2006) (“Federal Rule of Civil Procedure 8(e) allows a
plaintiff to plead in the alternative ... separate counts
of the complaint must be read separately.”)
unjust-enrichment claim should be dismissed as to the
individual defendants because the plaintiffs did not
Alabama, “the essence of ... unjust enrichment ... is
that a plaintiff can prove facts showing that defendant
holds money which, in equity and good conscience, belongs
to plaintiff or holds money which was improperly paid to
defendant because of mistake or fraud.”
General Const. Co., Inc. v. Trane Co., 499 So.2d 1385,
1387 (Ala. 1986) (emphasis original).
Under Florida law,
“the essential elements of a claim for unjust enrichment
are: (1) a benefit conferred upon a defendant by the
benefit, and (3) the defendant’s acceptance and retention
of the benefit under circumstances that would make it
inequitable for him to retain it without paying the value
Vega v. T–Mobile USA, Inc., 564 F.3d 1256,
Here, the plaintiffs allege that the fees
intentionally inflated, such that the Veolia companies’
profits increased. The named individuals’ yearly bonuses
increased, as well.
However, there was no money paid by
the plaintiffs to the named individuals.
defendants by the plaintiffs.
Ultimately, any benefit the individual defendants
received came from their corporate employers, who paid
No direct line has been established
compensation received by the individuals, such that it
could be determined what portion of their compensation
resulted from the allegedly fraudulent fees.
individual defendants enjoyed no direct benefit, the
amend, should their claims be dismissed.
While it is
true that a court should give leave to amend “when
justice so requires,” Fed. R. Civ. P. 159a)(2), a court
may also deny such a motion as futile.
LLC v. McCarty, 605 F.3d 865, 870 (11th Cir. 2010).
Here, the plaintiffs have already had three bites at the
Their case was removed to this court on March 6,
They first amended their complaint and added the
RICO claims on November 17, 2009.
The court then granted
complaint, which they did on September 15, 2010.
complaint were dismissed, the court again granted leave
for them to file the third amended complaint currently
under consideration, filed December 22, 2010.
plaintiffs have attempted to plead a valid RICO claim in
three of their complaints, and have yet to succeed.
Their theory of the case has not changed with each
pleading, but only the individuals and entities who form
the alleged RICO enterprises.
The court does not see
how, based on the allegations, the plaintiffs can state
a RICO claim that will withstand scrutiny.
It would thus
be futile to grant the plaintiffs leave to amend their
complaint a fourth time.
Moreover, regardless as to
issue of futility, the plaintiffs have been given many
times to amend their complaint, and there comes a time
when enough is enough.
The plaintiffs’ request to amend
their complaint again is denied.
DONE, this the 19th day of July, 2011.
/s/ Myron H. Thompson
UNITED STATES DISTRICT JUDGE
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