Joseph v. Bernstein et al
Filing
39
ORDER granting 33 MOTION to Dismiss 29 Amended Complaint filed by American General Assurance Company, Inc, American General Life Insurance Companies LLC, Richard S. Bernstein and Associates, Inc., American International Group , Inc., Richard S. Bernstein. Closing Case. Signed by Judge Cecilia M. Altonaga on 8/19/2014. (ps1) NOTICE: If there are sealed documents in this case, they may be unsealed after 1 year or as directed by Court Order, unless they have been designated to be permanently sealed. See Local Rule 5.4 and Administrative Order 2014-69.
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
MIAMI DIVISION
CASE NO. 13-24355-CIV-ALTONAGA
JOEL D. JOSEPH,
Plaintiff,
v.
RICHARD S. BERNSTEIN, et al.,
Defendants.
______________________________/
ORDER
On April 28, 2014, Plaintiff, Joel D. Joseph (“Plaintiff”), filed a First Amended
Complaint . . . (“Amended Complaint”) [ECF No. 29], asserting claims under the Racketeer
Influenced and Corrupt Organizations Act (“RICO” or the “RICO Act”), 18 U.S.C. section 1961
et seq., and the Florida Unfair Insurance Trade Practices Act (“FUITPA”), Florida Statute
section 626.951 et seq., in addition to claims of elder abuse and fraud. Defendants, Richard S.
Bernstein (“Bernstein”) and Richard S. Bernstein and Associates, Inc. (“Bernstein, Inc.”)
(collectively, the “Bernstein Defendants”); and American General Life Insurance Companies
LLC (“American Insurance”), American International Group, Inc. (“American Group”), and
American General Assurance Company, Inc. (“American Assurance”) (collectively, the
“American Companies”); filed a Consolidated Motion to Dismiss . . . (“Motion”) [ECF No. 33].
The Court has carefully considered the Motion, Plaintiff’s Opposition . . . (“Response”) [ECF
No. 35], Defendants’ Consolidated Reply . . . (“Reply”) [ECF No. 38], and applicable law. For
the reasons that follow, the Motion is granted.
CASE NO. 13-24355-CIV-ALTONAGA
I. BACKGROUND
On November 15, 1993, then-72-year-old Harold Joseph (“Harold”) purchased a life
insurance policy from Defendants. (See Am. Compl. ¶¶ 9–10). At the time, Harold was
suffering from Alzheimer’s disease. (See id. ¶ 10). The Bernstein Defendants are Florida
insurance brokers (see id. ¶¶ 4–5); American Assurance is an Illinois corporation (see id. ¶ 6);
American Insurance is a Delaware limited liability company (see id. ¶ 7); and American Group is
a Delaware corporation (see id. ¶ 8). The face amount of the insurance policy was originally
$3,261,392.00, and is now $2,086,044. (See id. ¶ 11). Plaintiff, along with his sisters, is a
beneficiary of the policy, and the sisters have assigned their claims concerning this case to
Plaintiff. (See id. ¶ 12). Plaintiff is also a trustee of the life insurance trust that owns the life
insurance policy. (See id.).
According to Plaintiff, Bernstein knew Harold was vulnerable to persuasion, but
Bernstein “convinced, pressured, cajoled and conned Harold Joseph into buying a life insurance
policy that he did not understand.” (Id. ¶ 13). Harold understood the policy would pay his
beneficiaries upon his death, but this was not the case, as the policy does not pay anything until
Harold and his wife both pass away. (See id. ¶ 14). Harold also did not understand the policy
would never pay off if either he or his wife lived to be over 100. (See id. ¶ 16). Plaintiff alleges
Bernstein held himself out as a friend to Harold, but he was not truly a friend; Bernstein was
only interested in earning a very large commission (more than $100,000) from the sale of the
policy. (See id. ¶¶ 17–18).
On the basis of these and other factual allegations, Plaintiff attempts to state several
claims for relief — the first two of which are not based on the above allegations. The First
Cause of Action (Count I), titled “For Violations of Sections 1962(c) and (d) of RICO,” does not
2
CASE NO. 13-24355-CIV-ALTONAGA
incorporate any of the previous paragraphs of the pleading, instead resting exclusively on
Plaintiff’s allegations he has been harmed by Defendants’ alleged racketeering activity. (See id.
¶¶ 19, 45–47). Plaintiff alleges Defendants “have engaged in a pattern of racketeering activity . .
. by committing and/or aiding and abetting at least two such acts of racketeering activity within
the past 10 years.” (Id. ¶ 25 (alteration added)). Plaintiff claims Defendants conspired to
commit an assortment of criminal activities, including securities fraud. (See id. ¶¶ 23–43).
According to Plaintiff, these activities “were acts of criminal fraud meant to manipulate the
capital positions and earnings of financial companies around the world.” (Id. ¶ 34). Plaintiff
claims Defendants’ financial transactions led to the federal government’s seizure of American
Group, injuring Plaintiff and leaving him unable to sell Harold’s life insurance policy. (See id.
¶¶ 44–47).
In his Second Cause of Action (Count II), titled “Violations of Sections 1962(a) and (d)
of RICO,” Plaintiff “seeks to recover actual and treble damages based on defendant’s [sic]
violations of [sections] 1962(a) and (d) of RICO.” (Id. ¶ 48 (alteration added)). Count II does
not incorporate any of the Amended Complaint’s previous paragraphs, but Plaintiff claims
Defendants’ violations of the RICO Act, which he links to “the above-described pattern of
racketeering activity,” resulted in Plaintiff’s injury — his inability to sell the policy. (Id. ¶¶ 49–
50).
The Third Cause of Action (Count III), titled “Violations of the Unfair Insurance Trade
Practices Act,” does not incorporate any of the Amended Complaint’s previous paragraphs and
states the Florida Insurance Code, Florida Statute section 624.155, provides a civil remedy for
violations of sections of the insurance law, including section 626.9541. (Id. 10, ¶ 53). The
FUITPA, at section 626.9541, makes illegal “unfair methods of competition and unfair or
3
CASE NO. 13-24355-CIV-ALTONAGA
deceptive acts of [sic] practices.” (Id. ¶ 54). Plaintiff alleges Defendants violated the FUITPA
by misrepresenting to Harold that his children would receive a payment upon his death, and by
failing to explain the policy would be worthless if he or his wife survived past the age of 100.
(See id. ¶¶ 16, 55–56). Plaintiff claims he has been injured by the misrepresentations and
violations of law because the policy cannot be sold now and because despite Harold’s passing,
the beneficiaries have not been paid. (See id. ¶ 57).
The Fourth Cause of Action (Count IV), titled, “Elder Abuse in Violation of Florida
Social Welfare Law,” does not incorporate any of the pleading’s preceding paragraphs. (Id. 11–
12). Plaintiff alleges: “A vulnerable adult who has been abused, neglected, or exploited . . . has a
cause of action against any perpetrator and may recover actual and punitive damages . . . . The
action may be brought by the vulnerable adult, . . . or by the personal representative of the estate
of a deceased victim . . . .” (Id. ¶ 58 (quoting FLA. STAT. § 415.1111 (alterations added))).
Plaintiff alleges Harold was a vulnerable adult, and Defendants abused, neglected, and exploited
him by selling him a policy he did not understand nor want. (See id. ¶¶ 59–60). Plaintiff has
suffered damages as a result of Defendants’ abuse, neglect, and exploitation. (See id. ¶ 62).
The Fifth Cause of Action (Count V), titled “Common Law Fraud Against All
Defendants,” does not incorporate any of the Amended Complaint’s preceding paragraphs. (See
id. 12–13). Plaintiff alleges Bernstein misrepresented to Harold that his children would receive
the policy’s benefits upon his death, and Harold relied on these misrepresentations. (See id. ¶¶
63, 65). Plaintiff states Bernstein is an agent of Bernstein, Inc. and the American Companies,
“and all [D]efendants are liable under agency principles.” (Id. ¶ 64 (alteration added)). Plaintiff
alleges Defendants intended to deceive Harold, and both Harold and Plaintiff were harmed by
the misrepresentation. (See id. ¶¶ 66–67).
4
CASE NO. 13-24355-CIV-ALTONAGA
Plaintiff previously attempted to plead the claims stated in Counts III, IV, and V in his
initial Complaint (see Complaint [ECF No. 1]), which the Court dismissed for various pleading
deficiencies and for failure to state a claim (see April 21, 2014 Order (“April 21 Order”) [ECF
No. 28]).1 Plaintiff’s Amended Complaint essentially re-pleads the same failed counts, and adds
two new RICO claims. (See generally Am. Compl.). Defendants move to dismiss the Amended
Complaint in its entirety for failure to state a claim, as well as a variety of other reasons. (See
generally Mot.). The Court addresses the relevant arguments below.
II. LEGAL STANDARDS
Several rules governing the sufficiency of pleading are at issue.
Federal Rule of Civil Procedure 12(b)(6)
Under Rule 12(b)(6), “[t]o survive a motion to dismiss, a complaint must contain
sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544,
570 (2007)) (alteration added)). Although this pleading standard “does not require ‘detailed
factual allegations,’ . . . it demands more than an unadorned, the-defendant-unlawfully-harmedme accusation.” Id. (quoting Twombly, 550 U.S. at 555). Pleadings must contain “more than
labels and conclusions, and a formulaic recitation of the elements of a cause of action will not
do.” Twombly, 550 U.S. at 555. Indeed, “only a complaint that states a plausible claim for relief
survives a motion to dismiss.” Iqbal, 556 U.S. at 679 (citing Twombly, 550 U.S. at 556). To
meet this “plausibility standard,” a plaintiff must “plead[] factual content that allows the court to
draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. at 678
(alteration added) (citing Twombly, 550 U.S. at 556). “The mere possibility the defendant acted
1
This Order assumes the reader is familiar with the case and the April 21 Order, and consequently
contains an abbreviated discussion of the issues and applicable law where the Amended Complaint
mirrors the initial, dismissed Complaint.
5
CASE NO. 13-24355-CIV-ALTONAGA
unlawfully is insufficient to survive a motion to dismiss.” Sinaltrainal v. Coca-Cola Co., 578
F.3d 1252, 1261 (11th Cir. 2009) (citing Iqbal, 556 U.S. at 678).
When reviewing a motion to dismiss, a court must construe the complaint in the light
most favorable to the plaintiff and take the factual allegations therein as true. See Brooks v. Blue
Cross & Blue Shield of Fla., Inc., 116 F.3d 1364, 1369 (11th Cir. 1997). Pro se pleadings in
particular are construed liberally. See Boxer X v. Harris, 437 F.3d 1107, 1110 (11th Cir. 2006).
Federal Rule of Civil Procedure 8(a) and Claims Against Multiple Defendants
A complaint is adequate if it contains “a short and plain statement of the claim showing
that the pleader is entitled to relief.” FED. R. CIV. P. 8(a)(2). When a complaint indiscriminately
lumps all defendants together, it fails to comply with Rule 8. See Lane v. Capital Acquisitions &
Mgmt., Co., No. 04-60602 CIV, 2006 WL 4590705, at *5 (S.D. Fla. Apr. 14, 2006) (“By
lumping all the defendants together in each claim and providing no factual basis to distinguish
their conduct, the [] Complaint fails to satisfy the minimum standard of Rule 8.”). While a
complaint against multiple defendants may be “read as making the same allegation against each
defendant individually,” the “factual allegations must give each defendant ‘fair notice’ of the
nature of the claim and the ‘grounds’ on which the claim rests.”
George & Co., LLC v.
Alibaba.com, Inc., No. 2:10-cv-719-FtM-29DNF, 2011 WL 6181940, at * 2 (M.D. Fla. Dec. 13,
2011) (citations omitted).
Federal Rule of Civil Procedure 9(b)
In addition to satisfying Rule 8(a), a complaint asserting a fraud claim must also satisfy
the heightened pleading requirements of Rule 9(b), stating “with particularity the circumstances
constituting fraud.” Mizzaro v. Home Depot, Inc., 544 F.3d 1230, 1237 (11th Cir. 2008); see
also Edward J. Goodman Life Income Trust v. Jabil Circuit, Inc., 594 F.3d 783, 789 (11th Cir.
6
CASE NO. 13-24355-CIV-ALTONAGA
2010) (citations omitted). Rule 9(b) is satisfied where the complaint states:
(1) precisely what statements were made in what documents or oral
representations or what omissions were made, and (2) the time and place of each
such statement and the person responsible for making (or, in the case of
omissions, not making) same, and (3) the content of such statements and the
manner in which they misled the plaintiff, and (4) what the defendants obtained as
a consequence of the fraud.
Mizzaro, 544 F.3d at 1237 (quoting Tello v. Dean Witter Reynolds, Inc., 494 F.3d 956, 972 (11th
Cir. 2007)). “[U]nder Rule 9(b), it is sufficient to plead the who, what, when, where, and how of
the allegedly false statements and then allege generally that those statements were made with the
requisite intent.” Id. (alteration added). The purpose for this degree of particularity is to “alert[]
defendants to the precise misconduct with which they are charged and protect[] defendants
against spurious charges of immoral and fraudulent behavior.” Durham v. Bus. Mgmt. Assocs.,
847 F.2d 1505, 1511 (11th Cir. 1988) (citations and internal quotation marks omitted; alterations
added).
III. ANALYSIS
A.
The RICO Claims (Counts I and II)
Plaintiff attempts to state two claims for relief under the RICO Act, 18 U.S.C. section
1964(c), which allows “[a]ny person injured in his business or property by reason of a violation
of section 1962” to bring a suit in district court. 18 U.S.C. § 1964(c) (alteration added). To state
a claim under this section, the plaintiff must establish “first, that the defendant committed a
pattern of RICO predicate acts under 18 U.S.C. [section] 1962; second, that the plaintiff suffered
injury to business or property; and, finally, that the defendant’s racketeering activity proximately
caused the injury.” Simpson v. Sanderson Farms, Inc., 744 F.3d 702, 705 (11th Cir. 2014)
(citations omitted; alteration added).
7
CASE NO. 13-24355-CIV-ALTONAGA
In Count I, Plaintiff alleges Defendants’ violations of 18 U.S.C. sections 1962(c) and (d)
led to him being unable to sell Harold’s life insurance policy. (See Am. Compl. ¶¶ 45–47). In
Count II, Plaintiff alleges Defendants’ violations of sections 1962(a) and (d), as described in
Count I, caused him damage. (See id. ¶ 50). Plaintiff claims Defendants’ racketeering activity
led to American Group’s financial insolvency and later to its seizure by the federal government,
all of which injured Plaintiff by leaving him unable to sell the policy. (See id. ¶¶ 44–47).
Defendants assert Counts I and II should be dismissed because: (1) the RICO claims are
preempted by Florida state law under the McCarran-Ferguson Act, 15 U.S.C. section 1012; (2)
the RICO claims lack specificity; (3) Plaintiff fails to plead sufficient predicate acts; and (4)
Plaintiff has not demonstrated proximate cause between the acts and his injury. (See Mot. 6–13).
1. The McCarran-Ferguson Act
Under the McCarran-Ferguson Act, “[n]o Act of Congress shall be construed to
invalidate, impair, or supersede any law enacted by any State for the purpose of regulating the
business of insurance . . . unless such Act specifically relates to the business of insurance.” 15
U.S.C. § 1012(b) (alterations added). The Act bars application of federal law where “(1) the
federal statute at issue does not specifically relat[e] to the business of insurance; (2) the state
statute at issue was enacted . . . for the purpose of regulating the business of insurance; and (3)
application of the federal statute would invalidate, impair, or supersede the state statute.” Moore
v. Liberty Nat’l Life Ins. Co., 267 F.3d 1209, 1220 (11th Cir. 2001) (quoting Humana Inc. v.
Forsyth, 525 U.S. 299, 307 (1999)) (internal quotation marks omitted; alterations in original);
see also 15 U.S.C. § 1012(b).
The McCarran-Ferguson Act only applies to the “business of insurance,” not the
‘business of insurance companies.” Group Life & Health Ins. Co. v. Royal Drug Co., 440 U.S.
8
CASE NO. 13-24355-CIV-ALTONAGA
205, 217 (1979) (internal quotation marks omitted).
“[B]usiness activities of insurance
companies not peculiar to the insurance industry are outside the scope of the ‘business of
insurance.’” Perry v. Fid. Union Life Ins. Co., 606 F.2d 468, 470 (5th Cir. 1979) (citation
omitted; alteration added) (“In making available premium financing, an insurance company is
acting not as an insurer but as a creditor . . . .”)).
Defendants assert the court’s opinion in Braunstein v. Gen. Life Ins. Co. of Am., No. 016040-CIV, 2002 WL 31777635 (S.D. Fla. Nov. 19, 2002), dictates a finding of preemption. (See
Reply 4). In Braunstein, the plaintiff brought a private RICO suit alleging the defendant injured
him by misrepresenting a policy’s premium due date and coverage period. See Braunstein, 2002
WL 31777635, at *2–3. The court held, pursuant to the McCarran-Ferguson Act, the FUITPA
preempted the RICO claim because Florida Statute section 626.9541(1)(o) already provided a
private right of action for the kind of injury the plaintiff was alleging, and allowing the RICO
claim to go forward would supersede state policy. See id. at *3–8.
Although Defendants argue the FUITPA likewise preempts Plaintiff’s RICO claims (see
Mot. 6–7), that argument fails to recognize Plaintiff’s RICO claims are not predicated upon
allegedly deceptive acts that occurred in connection with the sale of the insurance policy to
Harold (see Am. Compl. ¶¶ 19–51). Unlike the plaintiff in Braunstein, whose claims were based
on practices regarding the sale of an insurance policy, see 2002 WL 31777635, at *2–3,
Plaintiff’s RICO claims are more properly characterized as based not on the “business of
insurance,” but on the “business of insurance companies,” Royal Drug Co., 440 U.S. at 217.
Plaintiff’s RICO claims are predicated on Defendants’ financial transactions, including
alleged securities fraud — acts Plaintiff claims led to American Group being seized, leaving
Plaintiff unable to sell his insurance policy. (See Am. Compl. ¶¶ 23–51). While Plaintiff
9
CASE NO. 13-24355-CIV-ALTONAGA
attempts to make a FUITPA claim in Count III of his Amended Complaint, the FUITPA claim
and the RICO claims stem from completely different predicates.
The FUITPA claim is
predicated on the deceptive sale of the policy to Harold (see id. ¶¶ 55–57), but the Amended
Complaint makes plain the RICO claims flow exclusively from Defendants’ alleged racketeering
activities (see id. ¶¶ 44–47, 50). Because Plaintiff’s RICO claims are based on Defendants’
racketeering activities and not any deceptive acts committed in connection with the sale of
insurance, Braunstein is inapplicable, and Plaintiff’s RICO claims are not preempted by the
FUITPA.
2. Pleading Deficiencies
Defendants argue Plaintiff’s RICO claims, if not preempted by the FUITPA, must
nevertheless be dismissed because they lack the requisite specificity. (See Mot. 12–13). Plaintiff
fails to address this argument. (See generally Resp.). Plaintiff’s RICO claims must comply with
Federal Rule of Civil Procedure 8, and, because civil RICO claims “are essentially a certain
breed of fraud claims,” Counts I and II must also comply with the heightened pleading standard
of Rule 9(b). Ambrosia Coal & Constr. Co. v. Pages Morales, 482 F.3d 1309, 1316 (11th Cir.
2007); see also Am. Dental Ass’n v. Cigna Corp., 605 F.3d 1283, 1291 (11th Cir. 2010).
Counts I and II do not satisfy Rule 8 because Plaintiff’s allegations indiscriminately lump
all five Defendants together. In Count I, Plaintiff alleges American Group engaged in various
financial transactions.
(See Am. Compl. ¶¶ 30–41).
Plaintiff then claims all Defendants
“participated, either directly or indirectly” and “conspired amongst each other” to engage in this
activity without articulating the factual basis for each Defendant’s liability. (Id. ¶¶ 42–43).
Similarly, in Count II, Plaintiff alleges all Defendants invested or conspired to invest the
proceeds of the racketeering activity without explaining the factual basis for each one’s liability.
10
CASE NO. 13-24355-CIV-ALTONAGA
(See id. ¶¶ 49–50).
By lumping all Defendants together, Plaintiff has not “give[n] each
defendant ‘fair notice’ of the nature of the claim and the ‘grounds’ on which the claim rests.”
George & Co., LLC, 2011 WL 6181940, at *2 (citation omitted; alteration added).
The allegations of fraud likewise fail to satisfy the heightened pleading standard of Rule
9(b). Even in the allegations pertaining to American Group — the only Defendant individually
named as engaging in the various fraudulent activities forming the basis for the RICO claims —
Plaintiff fails to “plead the who, what, when, where, and how of the allegedly false statements
and then allege generally that those statements were made with the requisite intent.” Mizzaro,
544 F.3d at 1237.
3. Predicate Acts
Defendants also argue Counts I and II fail to state RICO claims because Plaintiff has
failed to allege sufficient predicate acts (see Mot. 7–9), and any predicate acts alleged are
exempted from RICO (see id.; Reply 5). Defendants are correct.
To establish a cause of action under the RICO Act, Plaintiff must establish Defendants
“committed a pattern of RICO predicate acts.” Simpson, 744 F.3d at 705. An “exhaustive list”
of predicate acts is found in 18 U.S.C. section 1961. Beck v. Prupis, 529 U.S. 494, 497 n.2
(2000); see also 18 U.S.C. § 1961(1). “To successfully allege a pattern of racketeering activity,
plaintiff[] must charge that: (1) the defendants committed two or more predicate acts within a
ten-year time span; (2) the predicate acts were related to one another; and (3) the predicate acts
demonstrated criminal conduct of a continuing nature.” Jackson v. BellSouth Telecomms., 372
F.3d 1250, 1264 (11th Cir. 2004) (citations omitted; alteration added; emphasis in original).
Plaintiff argues securities fraud qualifies as a predicate act. (See Resp. 18; see also Am.
Compl. ¶¶ 35, 38). But RICO provides “no person may rely upon any conduct that would have
11
CASE NO. 13-24355-CIV-ALTONAGA
been actionable as fraud in the purchase or sale of securities to establish a violation of section
1962” unless the action is against one who has been “criminally convicted in connection with the
fraud.”
18 U.S.C. § 1964(c).
Although Plaintiff alleges American Group has committed
criminal acts and has settled criminal and civil charges (see Am. Compl. ¶¶ 32, 35–36, 38–40),
Plaintiff does not allege American Group or any other Defendant has ever been convicted of
securities fraud. Therefore, Plaintiff’s allegations of securities fraud do not satisfy the predicate
act requirement.
Plaintiff also argues “theft” is a predicate act. (Resp. 18; see also Am. Compl. ¶ 29). But
the only kind of “theft” recognized in section 1961 is “theft from [an] interstate shipment”.2 18
U.S.C. § 1961(1). Therefore, Plaintiff’s allegations of theft also fail to satisfy the predicate act
requirement.
Even if Plaintiff had alleged qualifying predicate acts, he has failed to show how these
acts demonstrate a continuing pattern of criminal conduct. Although Plaintiff claims Defendants
“conducted or participated, either directly or indirectly . . . [in] a pattern of racketeering activity”
(Am. Compl. ¶ 42), “legal conclusions masquerading as facts will not prevent dismissal.”
Jackson, 372 F.3d at 1262 (internal quotations marks and citations omitted).
4. Proximate Cause
Finally, Defendants argue even if Plaintiff alleges sufficient predicate acts, Counts I and
II still fail because Plaintiff has not shown the acts proximately caused Plaintiff’s injury. (See
Mot. 9–12).
In his Response, Plaintiff does not address Defendants’ arguments, instead
reiterating his general allegation American Group’s “criminal activities that nearly caused the
Plaintiff omits this key language. (See Am. Compl. ¶ 26 (“Section 1961(1) of RICO provides that a
‘person’ commits and [sic] act of ‘racketeering activity’ by engaging in (a) ‘any act or threat involving . . .
theft . . . .’” (alterations in original))).
2
12
CASE NO. 13-24355-CIV-ALTONAGA
collapse of the U.S. economy, made it impossible to sell [sic] policy at issue herein, damaging
plaintiff directly.” (Resp. 18).
To bring a private suit under RICO, a plaintiff must allege his or her business or property
was injured “by reason of a violation of [18 U.S.C.] section 1962.” 18 U.S.C. § 1964(c)
(emphasis and alteration added). The “by reason of” limitation requires “‘a showing that the
defendant’s violation not only was a ‘but for’ cause of his injury, but was the proximate cause as
well.’” Anza v. Ideal Steel Supply Corp., 547 U.S. 451, 457 (2006) (quoting Holmes v. Sec.
Investor Prot. Corp., 503 U.S. 258, 268 (1992)). Proximate cause requires “some direct relation
between the injury asserted and injurious conduct alleged.” Holmes, 503 U.S. at 268. “A link
that is too remote, purely contingent, or indirect is insufficient.” Hemi Group, LLC v. City of
N.Y., N.Y., 559 U.S. 1, 9 (2010) (internal quotation marks, alteration, and citation omitted).
“[C]ourts should scrutinize proximate causation at the pleading stage and carefully evaluate
whether the injury pled was proximately caused by the claimed RICO violations.” Williams v.
Mohawk Indus., Inc., 465 F.3d 1277, 1287 (11th Cir. 2006) (citation omitted; alteration added).
A plaintiff fails to state a valid RICO claim in its pleading when it cannot show
proximate cause. See Hemi Group, LLC, 59 U.S. at 8–12. In Hemi Group, the Supreme Court
considered whether under the RICO Act an out-of-state cigarette retailer proximately caused a
city’s inability to collect taxes. See id. at 4–6. The city, which relied on information in federally
required sales reports to recover out-of-state sales taxes, brought a RICO claim against the
retailer, alleging its failure to file the required reports injured the city in the form of lost tax
revenues. See id. The Court rejected the city’s claim, finding no proximate cause where the
relationship between the predicate acts and the harm suffered was “anything but
straightforward[, as m]ultiple steps . . . separate the alleged fraud from the asserted injury.” Id.
13
CASE NO. 13-24355-CIV-ALTONAGA
at 15 (alterations added). Noting the city’s theory of liability rested on “separate actions carried
out by separate parties,” the Court held that allowing the city to hold out-of-state retailers
responsible for “fourth-party” taxpayers’ nonpayment would stretch the causal chain of RICO
too far. Id. at 11 (emphasis in original). See also Anza, 547 U.S. at 457–58 (rejecting plaintiff’s
RICO claim it was injured when a competitor’s tax fraud allowed it to offer lower prices that
attracted customers and reduced plaintiff’s market share); Halpin v. Crist, 405 F. App’x 403, 406
(11th Cir. 2010) (holding state officials’ acceptance of bribes to license a prison canteen did not
proximately cause plaintiffs’ injury when plaintiffs claimed they had been injured by paying
inflated prices).
In Count I, Plaintiff alleges he was injured by Defendants’ violations of section 1962(c).
(See Am. Compl. ¶¶ 19, 46–47). As in Hemi Group, the link between Defendants’ racketeering
activity and Plaintiff’s injury is far too attenuated. Plaintiff’s allegations similarly involve
different actions by different parties, but here, the causal chain is even longer and even more
speculative. Several steps separate Plaintiff’s injury — his inability to resell the insurance policy
— from Defendants’ alleged acts of racketeering. “When a court evaluates a RICO claim for
proximate causation, the central question it must ask is whether the alleged violation led directly
to the plaintiff’s injuries.” Anza, 547 U.S. at 461. Here, there is simply no direct relationship
between the claimed injury and the alleged activity. “Linking the alleged racketeering activity
with [Plaintiff’s] claimed injury requires . . . a huge leap in logic.” Browning v. Clinton, 292
F.3d 235, 250 (D.C. Cir. 2002) (alterations added; citation and internal quotation marks omitted).
Therefore, Plaintiff fails to state a claim based on a violation of section 1962(c).
Plaintiff also fails to state a claim for a violation of section 1962(d). Subsection (d)
requires a plaintiff to allege he was “injured by reason of a conspiracy to violate [section]
14
CASE NO. 13-24355-CIV-ALTONAGA
1962(c)’s substantive provision.” Grange Mut. Cas. Co. v. Mack, 290 F. App’x 832, 835 (6th
Cir. 2008) (alteration added; emphasis in original) (citing Beck, 529 U.S. at 500, 507). Plaintiff
has not sufficiently alleged “an illegal agreement to violate a substantive portion of the RICO
statute,” Jackson, 372 F.3d at 1269 (citations omitted), and the conspiracy claim cannot stand.
In Count II, Plaintiff alleges he was injured as a result of Defendants’ violations of
sections 1962(a) and (d). That claim likewise fails, as Plaintiff has not alleged sufficient facts to
show how Defendants’ alleged RICO violations proximately caused his injury. See Anza, 547
U.S. at 461–62 (stating a RICO claim based on a violation of section 1962(a) is cognizable only
if the violation proximately caused the plaintiff’s injury).
In evaluating proximate cause under section 1962(a), a majority of courts have adopted
the “investment rule.” Cox v. Cmty. Loans of Am., Inc., No. 4:11-CV-177 (CDL), 2014 WL
1216511, at *9 (M.D. Ga. Mar. 24, 2014) (citing Sybersound Records, Inc. v. UAV Corp., 517
F.3d 1137, 1149 (9th Cir. 2008); Fogie v. THORN Ams., Inc., 190 F.3d 889, 896 (8th Cir. 1999);
Vicom v. Harbridge Merchant Servs., Inc., 20 F.3d 771, 778–79 n.6 (7th Cir. 1994); Ouaknine v.
MacFarlane, 897 F.2d 75, 83 (2d Cir. 1990)). Under this rule, “the plaintiff must show that he
was injured by the use or investment of racketeering income, and reinvestment of proceeds from
alleged racketeering activity back into the enterprise to continue its racketeering activity is
insufficient to show proximate causation.” Id. (internal quotation marks, citation, and alteration
omitted).
Plaintiff’s allegations are so lacking it is not at all apparent how Defendants’ “use or
investment of racketeering income” might have injured Plaintiff.
Id.
Plaintiff alleges
Defendants “conspired to use or invest, and used or invested, such proceeds in the operation of
the association-in-fact enterprises” (Am. Compl. ¶ 49), but under the investment rule,
15
CASE NO. 13-24355-CIV-ALTONAGA
“reinvestment of proceeds . . . back into the enterprise . . . is insufficient to show proximate
causation.” Cox, 2014 WL 1216511, at *9 (alterations added). Therefore, Plaintiff has not stated
a claim for a violation of section 1962(a). And, as in Count I, Plaintiff’s allegations are wholly
insufficient to state a RICO conspiracy claim pursuant to section 1962(d).
B.
Counts III, IV, and V
In Counts III and IV, Plaintiff attempts to re-plead claims raised in his initial, failed
Complaint — without curing the deficiencies identified in the April 21 Order. (See Am. Compl.
10–12; see generally April 21 Order). Count V is Plaintiff’s attempt to re-plead his fraud claim,
despite being warned by the Court that it was completely barred by the applicable statute of
repose. (See Am. Compl. 12–13; April 21 Order 12–13).
Count III of the Amended Complaint, for “Violations of the Unfair Insurance Trade
Practices Act” (Am. Compl. 10–11), is nearly identical to Count I of the initial Complaint (see
Compl. 3–4). The April 21 Order dismissed Plaintiff’s original FUITPA claim because no
private right of action exists in Florida Statute subsection 626.9541(1)(a), Plaintiff failed to
allege compliance with the condition precedent in violation of Rule 9(c) of the Federal Rules of
Civil Procedure, and if even a private right of action did exist, it is barred by the statute of
limitations. (See April 21 Order 9–10).
Likewise, Count IV, titled “Elder Abuse in Violation of Florida Social Welfare Law”
(Am. Compl. 11–12), mirrors Count II of the initial Complaint (see Compl. 4–5). The April 21
Order dismissed this claim because no private right of action exists under the 1993 version of the
law; if a private right of action did exist, it is barred by the statute of limitations; and Plaintiff is
not qualified to bring the claim. (See April 21 Order 10–12).
16
CASE NO. 13-24355-CIV-ALTONAGA
Count V, for “Common Law Fraud Against All Defendants” (Am. Compl. 12–13), is
Plaintiff’s attempt to revive his original Count III (see Compl. 5–6), dismissed for multiple
reasons, including Plaintiff’s failure to plead fraud with particularity as required by Rule 9(b),
and — most saliently — the claim is “absolutely barred” by Florida’s statute of repose. (April
21 Order 12–13). Although the Court gave Plaintiff an opportunity to file an amended complaint
(see id. 13), it did not give Plaintiff the opportunity to re-plead the fraud claim, noting Plaintiff
cannot overcome the absolute bar imposed by a statute of repose (see id. 12).
A side-by-side comparison of Plaintiff’s initial Complaint and Amended Complaint
reveals Plaintiff has made only a few minor revisions and has not cured the flaws present in the
previous Complaint. (See generally Compl.; Am. Compl.). Because the Court has already
addressed these claims, and Plaintiff’s Amended Complaint fails to remedy the issues addressed
in the April 21 Order, the Court incorporates the April 21 Order in holding Counts III, IV and V
must be dismissed. (See April 21 Order 9–13).
In his Response, Plaintiff raises various arguments regarding the timeliness of his claims.
(See Resp. 13–17). The Court briefly addresses those arguments, despite finding once again that
dismissal of Counts III, IV, and V is appropriate on other grounds. (See April 21 Order 9–13).
1. The Continuing Fraud Doctrine
Plaintiff asserts each payment he makes on the insurance policy restarts the statute of
limitations because each payment constitutes a continuation of Defendants’ fraud. (See Resp.
15–16). According to Plaintiff, “[u]nder the continuing fraud doctrine, all acts in furtherance of
a scheme where the early acts were within the statute of limitations are considered timely, even
if, when the acts, viewed independently, may be time barred.” (Id. 15 (alteration added)). So
17
CASE NO. 13-24355-CIV-ALTONAGA
“[e]ach time that [P]laintiff makes a payment to the [American Companies] the fraud is
continuing.” (Id. (alterations added)).
Florida law recognizes the “continuing tort doctrine.” Suarez v. City of Tampa, 987 So.
2d 681, 685 (Fla. 2d DCA 2008). “Where the [continuing tort] doctrine applies, a plaintiff may
recover damages for tortious acts committed within the limitations period prior to the filing of
suit.” Id. (alteration added). “A continuing tort is ‘established by continual tortious acts, not by
continual harmful effects from an original, completed act.’”
Id. at 686 (citation omitted;
emphasis in original); see also Winn-Dixie Stores, Inc. v. Dolgencorp, LLC, 746 F.3d 1008, 1042
(11th Cir. 2014) (quoting same). “When a defendant’s damage-causing act is completed, the
existence of continuing damages to a plaintiff, even progressively worsening damages, does not
present successive causes of action accruing because of a continuing tort.” Suarez, 987 So. 2d at
686 (internal quotation marks and citation omitted). Moreover, this doctrine does not extend the
statute of repose. See Kaye v. Ingenio, Filiale De Loto-Quebec, Inc., No. 13-61687-CIV, 2014
WL 2215770, at *6 (S.D. Fla. May 29, 2014).
Plaintiff alleges Bernstein “convinced, pressured, cajoled and conned Harold Joseph into
buying a life insurance policy that he did not understand” (Am. Compl. ¶ 13), but nowhere does
he allege any Defendant fraudulently induced Plaintiff, Harold, or anyone else to make further
payments on the policy (see generally id.). Plaintiff’s claims are based on continuing harmful
effects from an original act, not continual tortious acts committed by Defendants.
The
continuing tort doctrine is inapplicable, and Plaintiff’s argument his continued payments
constitute a continuing fraud is unavailing.
18
CASE NO. 13-24355-CIV-ALTONAGA
2. Insurance Payments Resetting the Statute of Limitations
Plaintiff also argues the continued payments on the insurance policy reset the statute of
limitations. (See Resp. 16 (citing Hosp. Constructors Ltd. ex rel Lifemark Hosps. of Fla., Inc. v.
Lefor, 749 So. 2d 546 (Fla. 2d DCA 2000))). In Lefor, the court declined to dismiss a hospital’s
claim for unpaid medical bills, finding the debtors’ payments on the debt tolled the statute of
limitations pursuant to Florida Statute section 95.051(1)(f). See Lefor, 749 So. 2d at 547–48.
Yet “[s]ection 95.051 delineates an exclusive list of conditions that can ‘toll’ the running of the
statute of limitations.” Major League Baseball v. Morsani, 790 So. 2d 1071, 1075 (Fla. 2001)
(alteration added). Payments on an insurance policy are not on this list. See FLA. STAT. §
95.051. Therefore, this argument also fails.
3. Tolling the Statute of Limitations Based on Disability
Finally, Plaintiff argues the statute of limitations must be tolled because Harold suffered
from Alzheimer’s disease at the time the alleged fraud took place and his worsening condition
prevented suing Defendants. (See Resp. 16–17). Under Florida Statute section 95.051, a statute
of limitations is tolled by “[t]he adjudicated incapacity, before the cause of action accrued, of the
person entitled to sue. In any event, the action must be begun within 7 years after the act, event,
or occurrence giving rise to the cause of action.” FLA. STAT. § 95.051(1)(d) (alteration added).
Nowhere does Plaintiff allege Harold was adjudicated incompetent before the cause of action
accrued. In any event, it has been more than twenty years since Harold purchased the policy.
Therefore, this argument is also unavailing, and Plaintiff’s claims are time-barred.
IV.
CONCLUSION
For the foregoing reasons, it is
ORDERED AND ADJUDGED that Defendants’ Motion to Dismiss [ECF No. 33] is
19
CASE NO. 13-24355-CIV-ALTONAGA
GRANTED.
The Court notes this is Plaintiff’s second attempt at stating claims for relief in his
pleading, and the deadline for amending pleadings contained in the Court’s Order Setting Trial
and Pre-Trial Schedule . . . (“Scheduling Order”) [ECF No. 16] passed a long time ago, on May
15, 2014. Plaintiff does not seek additional leave to amend nor does he request an amendment to
the Scheduling Order. In any event, “denial of leave to amend is justified by futility when the
complaint as amended is still subject to dismissal.” Hall v. United Ins. Co. of Am., 367 F.3d
1255, 1263 (11th Cir. 2004) (citation and internal quotation marks omitted); Burger King Corp.
v. Weaver, 169 F.3d 1310, 1319 (11th Cir. 1999) (“The U.S. Supreme Court has held that undue
delay and futility are adequate bases for denying leave to amend.”
(citation omitted)).
Therefore, the case is DISMISSED, and the Clerk is instructed to mark this case as CLOSED.
DONE AND ORDERED in Chambers in Miami, Florida, this 19th day of August, 2014.
_________________________________
CECILIA M. ALTONAGA
UNITED STATES DISTRICT JUDGE
cc:
counsel of record; Plaintiff, pro se
20
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?