Horace-Manasse v. Wells Fargo Bank N. A.
Filing
47
OPINION ORDER granting 34 Defendant's Motion to Dismiss with Prejudice. Signed by Judge Daniel T. K. Hurley on 4/12/12. (lr)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
CASE NO. 10-81623-CV-HURLEY
NERLINE HORACE-MANASSE, et al.,
Plaintiffs,
v.
WELLS FARGO BANK, N.A.,
Defendant.
________________________________________/
ORDER GRANTING DEFENDANT’S MOTION TO DISMISS WITH PREJUDICE
THIS CAUSE comes before the court upon Defendant’s Motion to Dismiss Amended
Complaint [DE # 34]. The motion is fully briefed and ripe for adjudication. For the reasons to
follow, the court will grant the motion and dismiss the amended complaint with prejudice.
I.
The facts underlying this action have previously been set forth in the court’s order of
December 13, 20111:
[F]rom January of 2007 to December of 2008[,] Henry Theodule and others
perpetrated a Ponzi scheme through which he misappropriated over $68 million from
Plaintiff and the class she seeks to represent. Wells Fargo’s alleged involvement in
the scheme occurred during the five-month period during which Theodule utilized
Wachovia’s2 banking services to conduct the scheme.
On March 25, 2008, after another bank ended its relationship with Theodule and the
entities he had created to perpetrate the scheme, Theodule began to open accounts at
Wachovia [now known as Wells Fargo, N.A.]. In total, Theodule opened forty
accounts, many associated with entities identified as investment clubs—e.g., Golden
1
Plaintiff has since submitted an amended complaint, but the factual allegations therein are
substantially the same as those in the original complaint.
2
Wells Fargo, N.A. is the successor-in-interest to Wachovia Bank, N.A.
Investment Club, East Broward Private Investment Club, Premium Investment Club,
etc. Plaintiff alleges that “clearly suspicious activity” ensued shortly thereafter such
that on May 9, 2008, within six weeks of the time the accounts were opened, the
Bank noted “numerous small dollar even amount checks from individuals” and
“[l]arge dollar transfers to [Wachovia] accounts titled to Creative Capital
Consortium, LLC.” Compl. at ¶ 37 [DE # 1]. Plaintiff further alleges that the Bank
nevertheless permitted large cash deposits and withdrawals from the accounts
without filing the required Suspicious Activity Reports or Currency Transaction
Reports. From May 9, 2008 to July 31, 2008, Theodule and others deposited
$10,067,443.51 and nearly simultaneously withdrew $10,560,239.93 from the
Creative Capital account.
Ultimately, the Bank investigated the accounts and closed them approximately four
months after they were opened based on mounting evidence and suspicions of
fraudulent activity. From May 9, 2008 to May 13, 2008, the Bank placed restraints
on the Creative Capital Accounts and accounts associated with Wealth Builders
Circle, LLC after the Bank discovered that a customer in whose account a counterfeit
check had been deposited issued a check to the Wealth Builders Circle account. The
restraints were removed after Theodule provided the Bank with information
regarding his business—i.e., that he invested funds for customers—and a package
that was supposed to be representative of the material provided to prospective
investors. The Bank continued to investigate the accounts, however, by inter alia,
visiting the physical location assigned to the Creative Capital accounts and contacting
investigators with the Internal Revenue Service and Florida Department of Law
Enforcement.
In total, fifty-nine days elapsed from the date the restraints were removed and the
date the Bank reimplemented restraints in preparation for the final closing of the
Creative Capital Accounts. The Creative Capital accounts were formally closed on
July 25, 2008. In late September, the Bank notified a number of other individuals it
suspected may have been involved with Theodule that their accounts would also be
closed.
Order Granting Def.’s Mot. to Dismiss 1-3 [DE # 30].
Based on these facts, Plaintiff filed a complaint on December 23, 2010 that the court
dismissed in the aforementioned order. Id. Plaintiff then filed an amended complaint asserting
causes of action for violation of Florida’s Civil Remedies for Criminal Practices Act (the “Florida
RICO Act”), Fla. Stat. § 772.01, and conspiracy to violate the Florida RICO Act. Plaintiff argues
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that the Bank engaged in a pattern of criminal activity as defined under the Act by repeatedly
accepting cash deposits in excess of $10,000 without preparing or submitting the required currency
transaction reports. Am. Compl. ¶¶ 65-74. Plaintiff also alleges that the Bank knowingly engaged
in monetary transactions in criminally derived property. The Bank responded with the instant motion
to dismiss pursuant to Fed. R. Civ. P. 12(b)(6), arguing that Plaintiff’s allegations of criminal activity
are insufficient and also challenging the sufficiency of the allegations with respect to each of the
elements of a RICO cause of action.
II.
This court has jurisdiction over this action pursuant to 28 U.S.C. § 1367(a), and venue is
proper pursuant to 28 U.S.C. § 1391 because this action is ancillary to the court’s exclusive
jurisdiction over the receivership estate. See Secs. & Exch. Comm’n v. Creative Capital Consortium,
LLC, No. 9:10-cv-81565-DTKH, 2009 WL 5031353 (S.D. Fla. Dec. 14, 2009). Additionally, the
conduct underlying Plaintiff’s claims occurred in this district.
III.
On this motion to dismiss, the court accepts the factual allegations in the amended complaint
as true and views all inferences in the light most favorable to the non-moving party. Hishon v. King
& Spalding, 467 U.S. 69, 73 (1984). However, “[t]hreadbare recitals of the elements of a cause of
action, supported by mere conclusory statements” are insufficient, Ashcroft v. Iqbal, 556 U.S. 662,
____; 129 S. Ct. 1937, 1949 (2009), and regardless of the alleged facts, a court may dismiss a
complaint on a dispositive issue of law. Marshall Cnty. Bd. of Educ. v. Marshall Cnty. Gas Dist.,
992 F.2d 1171, 1174 (11th Cir. 1993).
Applying the foregoing to the instant case, the court finds that although Plaintiff has alleged
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criminal conduct that falls within the ambit of the Florida RICO Act,3 Plaintiff has failed to allege
sufficient continuity to state a claim under the Act. Because Plaintiff has already had one
opportunity to amend the complaint and because additional opportunities would be futile, the court
will dismiss Plaintiff’s claim with prejudice.
A.
Qualifying Predicate Acts
The Florida RICO Act states that “[a]ny person who . . . has been injured by reason of any
violation of the provisions of s. 772.103 shall have a cause of action . . . .” Fla. Stat. § 772.104(1).
Under § 772.103, “[i]t is unlawful for any person [e]mployed by, or associated with, any enterprise
to conduct or participate, directly or indirectly, in such enterprise through a pattern of criminal
activity . . . .” Fla. Stat. § 772.103(3). The Florida RICO Act contains a long list of state crimes that
qualify as “criminal activity” (also termed “predicate acts”). In addition, the Act incorporates by
reference “[a]ny conduct which is subject to indictment or information as a criminal offense and [is]
listed in 18 U.S.C. s. 1961(1)(A), (B), (C) or (D).” Fla. Stat. § 772.102(1)(b). This provision refers
to the federal RICO Act, which, in turn, defines racketeering to include money laundering.
Defendant concedes that the conduct Plaintiff alleges qualifies as money laundering under 18 U.S.C.
§ 19564 or engaging in monetary transactions in property derived from unlawful activity under 18
3
Due to the similarity of the Florida and federal RICO Acts, under Florida law a court can
look to federal courts’ interpretations of the federal RICO Act for guidance and persuasive authority
in construing the Florida RICO Act. See, e.g., Lugo v. State, 845 So. 2d 74, 96 n.39 (Fla. 2003);
Gross v. State, 765 So. 2d 39, 42 (Fla. 2000); Palmas y Bambu, S.A. v. E.I. Dupont De Nemours &
Co., Inc., 881 So. 2d 565, 570 n.1 (Fla. 3d DCA 2004).
4
The majority of the alleged criminal activity falls under 18 U.S.C. § 1956(a)(1)(B)(ii),
which states:
Whoever, knowing that the property involved in a financial transaction represents the
proceeds of some form of unlawful activity, conducts or attempts to conduct such a
financial transaction which in fact involves the proceeds of specified unlawful
4
U.S.C. § 1957 and that these offenses are listed under 18 U.S.C. § 1961(1)(B).
Initially, Defendant argues that because the same conduct falls squarely within certain Florida
statutes—specifically, Fla. Stat. §§ 655.50 and 896.101—and because these state statutes are not
listed in the Florida RICO Act, the Florida legislature thereby manifested its intent to exclude such
conduct from the Act’s remedies. Defendant relies upon various principles of statutory construction
to reach this conclusion. However, a statute’s plain meaning is always the starting point, Roberts
v. Sea-Land Servs., Inc., ___ U.S. ____, 2012 WL 912953, *5 (2012), and only in certain
cases—e.g., ambiguity or an absurd result—would a court need to go further. Harrison v.
Benchmark Elecs. Huntsville, Inc., 593 F.3d 1206, 1212-13 (11th Cir. 2010). In the instant case,
Florida’s RICO Act expressly incorporates encompasses the federal violations as adequate predicate
acts, and consequently, the court is bound by the plain, unambiguous language of the statute.
B.
Legal Sufficiency of Plaintiff’s Florida RICO Claim
Having determined that Plaintiff has alleged qualifying criminal activity to state a Florida
RICO claim, the court must now determine whether she can “satisfy four elements of proof: (1)
conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity.” Doorbal v. State, 983
SO. 2d 464, 492 (Fla. 2008); see also Williams v. Mohawk Indus., Inc., 465 F.3d 1277, 1282 (11th
Cir. 2006). Although Defendant disputes the sufficiency of Plaintiff’s allegations with respect to
activity . . . knowing that the transaction is designed in whole or in part . . . to avoid
a transaction reporting requirement under State or Federal law, shall be sentenced .
...
Plaintiff also alleges a violation of § 1956(a)(1)(B)(i) and § 1957(a). In the instant motion, the Bank
does not directly challenge whether Plaintiff has sufficiently alleged the elements of these violations.
For this reason and because the court can fully resolve the motion on the issue of continuity, see Part
III.B., the court will forgo an analysis of whether Plaintiff has adequately alleged a violations of §§
1956 and 1957.
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each of the elements, the court will focus its attention on the pattern element and specifically its
subsidiary requirement that “the predicate acts demonstrate[] criminal conduct of a continuing
nature.” Jackson v. BellSouth Telecomms., 372 F.3d 1250, 1264 (11th Cir. 2004).
The Supreme Court in H.J. Inc. v. Nw. Bell Tel. Co. defined the federal RICO term “pattern”
to include two constituent elements: relatedness and continuity. 492 U.S. 229, 239 (1989).
“Relatedness” refers to “criminal acts that have the same or similar purposes, results, participants,
victims, or methods of commission, or otherwise are interrelated by distinguishing characteristics
and are not isolated events.” Id. at 240. “Continuity,” on the other hand, requires proof that the
criminal acts “amount to, or that they otherwise constitute a threat of continuing racketeering
activity.” Id. at 240-41.
1. Applicability of the Continuity Requirement to the Florida RICO Act
There is no doubt that the continuity requirement applies equally to the Florida RICO Act
as it does to the federal Act. State v. Lucas, 600 So. 2d 1093, 1094 (Fla. 1992); Bowden v. State, 402
So. 2d 1173, 1174 (Fla. 1981) (“We construe the ‘pattern’ element to require . . . proof that a
continuity of particular criminal activity exists.”); Lugo, 845 So. 2d at 99 (“To satisfy the pattern of
racketeering requirement, the State must offer . . . ‘proof that a continuity of particular criminal
activity exists.’” (quoting State v. Lucas, 600 So. 2d 1093, 1094 (Fla. 1992))). The court will
therefore apply the continuity requirement to Plaintiff’s Florida RICO claims and will look to
interpretations of the Federal RICO Act for guidance in doing so. Id. at 96 n.39.
2. Closed-Ended Continuity
“‘Continuity’ is both a closed- and open-ended concept, referring either to a closed period
of repeated conduct, or to past conduct that by its nature projects into the future with a threat of
repetition.” H.J., 492 U.S. at 241. “A party . . . may demonstrate continuity over a closed period
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by proving a series of related predicates extending over a substantial period of time.” Id. (emphasis
added). “Predicate acts extending over a few weeks or months . . . do not satisfy this requirement.”
Id. “The overwhelming weight of case authority suggests that nine months is not an adequately
substantial period of time.” Jackson, 372 F.3d at 1266.
In the instant case, Plaintiff alleges predicate acts from April 3, 2008 to July 31, 2008, a span
of 120 days. While Florida courts have not ruled out periods as short as six-months, Lucas, 600 So.
2d at 1095, Plaintiff cites no authority finding closed-ended continuity for predicate acts spanning
only four months. Even for a scheme of particularly grand scope, the court in Magnifico v.
Villanueva considered it a “close question” whether a duration of eighteen months was sufficient.
783 F. Supp. 2d 1217, 1229 (S.D. Fla. 2011).
Plaintiff has a substantial burden to demonstrate that the short period in this case satisfies the
continuity requirement, and she has failed to do so. Not only is the alleged RICO scheme of
unprecedented brevity, but certain factors particular to this case also undermine the notion of
continuity. Simply put, the clock was ticking on the Theodule’s relationship with the Bank from the
outset. Within six weeks of the date the accounts were opened, the Bank began noting its suspicions
of impropriety, and after intermittently placing restraints on the accounts, the Bank closed them on
its own initiative after approximately four months. Am. Compl. Ex. B [DE # 32-1]. Even if the
Bank wrongfully allowed the accounts to stay active after it knew of Theodule’s improper conduct,
it is undisputed that once the evidence reached a certain threshold, the Bank voluntarily terminated
the relationship. This limited period of time during which the Bank is alleged to have participated
in the RICO enterprise precludes a finding of continuity.
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3. Open-Ended Continuity
Plaintiff has also failed to demonstrate open-ended continuity, which depends on a “threat
of continuity.” Id. See also Moon v. Harrison Piping Supply, 465 F.3d 719, 726 (6th Cir. 2006)
(“This inquiry turns on whether the plaintiff has pleaded facts suggesting the threat of continued
racketeering activities projected into the future.”). The purpose of the open-ended continuity concept
is to allow a plaintiff to bring a RICO claim without, in an effort to meet the closed-ended continuity
requirement, having to wait for the alleged criminal activity to extend over a “substantial period of
time.” Naturally, courts do not want to impose a doctrine that would tie a plaintiff’s hands in the
face of ongoing criminal activity. Thus, the concept of open-ended continuity was fashioned to
allow plaintiffs to project the “substantial period of time” into the future by showing that the criminal
activity alleged would likely continue and that eventually the plaintiff would have been able to show
related, continuous predicate acts sufficient for closed-ended continuity.
While the open-ended continuity inquiry is too fact specific to permit the articulation of a
bright-line standard, the court in H.J. provided a number of useful examples. 492 U.S. at 242. For
instance, if a “hoodlum” were to extort from storekeepers a monthly fee to “insure” against
vandalism and harassment, open-ended continuity would be apparent because “the racketeering acts
themselves include a specific threat of repetition extending indefinitely into the future.” Id. The
Court also conceived that the continuity requirement might be satisfied when “the predicates are a
regular way of conducting defendant’s ongoing legitimate business.” Id. at 243. In each case, the
threat of continuity is clear enough to assure the court that the RICO claim addresses “long-term
criminal activity” even if the activity has not yet occurred for a substantial duration.
Applying this reasoning, the court finds the open-ended continuity approach inapplicable to
the instant case. Plaintiff’s allegations simply provide no basis to infer a threat, implicit or
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otherwise, of the Bank’s predicate acts continuing into the future. To the contrary, Plaintiff admits
that once the Bank gained a certain amount of evidence, it closed the accounts. The absence of openended continuity is apparent most plainly because by the time this action commenced the Bank had
already terminated its relationship with Plaintiff on its own initiative and after only four months.
Am. Compl. ¶ 46 [DE # 32]. It was not, as Plaintiff suggests, merely a “fortuitous interruption . .
. such as by an arrest” that terminated the Bank’s criminal activity but an entirely predictable
interruption that was the product of Bank’s own internal policy of monitoring and reviewing its
customers’ accounts. See United States v. Busacca, 936 F.3d 232, 238 (6th Cir. 1991), cert. denied,
502 U.S. 985 (1991).
Plaintiff cannot overcome this analysis by resort to an allegation that the alleged predicate
acts, specifically the alleged repeated failures to file required currency transaction reports, exemplify
the Bank’s “regular way of doing business.” H.J., 492 U.S. at 243. Even if it is true that the Bank
regularly fails to comply with reporting requirements, any future noncompliance would bear no
relationship to the failures that constitute the alleged predicate acts,5 which Plaintiff alleges were
committed in concert with Theodule for the purpose of “bilk[ing] millions of dollars from literally
thousands of hard-working members of the Haitian community.” Am Compl. ¶ 59. None of
Plaintiff’s allegations support a finding that the Bank routinely fails to file currency transaction
reports with similar purposes, results, participants, or victims. Thus, even if Plaintiff had waited any
5
Importantly, the H.J. Court noted not only “what must be continuous,” namely, the
predicate acts, but also “the relationship the[] predicates must bear one to another.” Id. This is
presumably why the court in GE Investment Private Placement Partners II v. Parker stated when
evaluating a “regular way of doing business” argument that “[t]he predicate acts of fraud directed
at the lenders are relevant in this case only insofar as they are related to the acts of fraud directed at
Plaintiffs.” 247 F.3d 543, 550 (4th Cir. 2001); see also Moon, 465 F.3d at 728 (rejecting a “regular
way of doing business” for open-ended continuity because the allegations “d[id] not support a
systematic threat of ongoing fraud.”).
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amount of time, there would never come a point when the Bank’s alleged criminal activity would
have been sufficiently related and continuous to warrant a RICO claim.
For the foregoing reasons, the court finds that Plaintiff has not met the continuity
requirement. Plaintiff’s claim therefore does not address the sort of “long-term criminal activity”
the Florida RICO Act is meant to confront and must be dismissed.6
C.
Conspiracy to Violate Florida’s RICO Act
Because Plaintiff has failed to state a claim of a primary RICO violation and the conspiracy
count does not contain any additional allegations, the claim for conspiracy to commit a RICO
violation also fails. Am. Dental Ass’n v. Cigna Corp., 605 F.3d 1283, 1296 n.6 (11th Cir. 2010).
IV.
For the foregoing reasons, the court concludes that Plaintiff’s amended complaint must be
dismissed for failure to state a claim. The court further finds that this dismissal should be with
prejudice. The court has already afforded Defendant an opportunity to amend, and additional
opportunities would be futile in light of the court’s reasoning in this Order. Ostrzenski v. Seigel, 177
F.3d 245, 252-53 (4th Cir. 2004). Plaintiff’s own allegations and exhibits make clear that she cannot
establish the requisite continuity to state a claim under the Florida RICO Act.
Accordingly, it is hereby ORDERED and ADJUDGED that:
1.
Defendant’s motion [DE # 34] is GRANTED.
6
This motion is being resolved on other grounds. However, the court has carefully
considered the issue of whether the “operation and management” test articulated in Reves v. Ernst
& Young, 507 U.S. 170, 179 (1993), applies to Florida RICO claims. Without deciding this issue,
the court notes that the language in Fla. Stat. § 772.103(3) differs from the federal statute, which may
render the analysis in Reves inapplicable to the Florida RICO Act. See Etan Mark & Monica F.
Rossbach, Qué RICO? Discarding the Fallacy that Florida RICO and Federal RICO Are Identical,
86 Fla. B.J. 10 (January 2012).
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Order Granting Defendant’s Motion to Dismiss with Prejudice
Manasse v. W ells Fargo Bank, N.A.
Case No. 10-81623-CV-HURLEY/HOPKINS
2.
The amended complaint is DISMISSED WITH PREJUDICE.
3.
Pursuant to Fed. R. Civ. P. 58(a), the court will enter final judgment in a separate
document.
DONE and SIGNED in Chambers in West Palm Beach, Florida, this 12th day of April, 2012.
________________________________
Daniel T. K. Hurley
United States District Judge
Copies provided to counsel of record
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