THE PUTNAM GROUP LLC v. FIRST CITIZENS BANK AND TRUST COMPANY INC
ORDER DENYING 4 Motion to Dismiss Complaint. Putnam is responsible in part for the Bank's exercise in futility. Local Rule 33.3 directed Putnam to file RICO interrogatories with the complaint identifyin g which subsection (or subsections) of 18 U.S.C. § 1962 it relied on. M.D. Ga. LR 33.3. Putnam did not file the required RICO interrogatories with the complaint. Three months after filing the complaint and after a reminder by the Court, Putna m filed the interrogatories, but they still fail to identify [w]hether the alleged unlawful conduct is a violation of 18 U.S.C. § 1962(a), (b), (c), (d), or a combination thereof. Doc. 10 at 1. Accordingly, Putnam is ORDERED to file a suppleme nt to the interrogatories correcting this omission by May 31, 2017. Also, if Putnam is asserting a 18 U.S.C. § 1962(c) RICO claim, Putnam is ORDERED to provide, also by May 31, 2017, authority to support the position that its bare assertions of the existence of unidentified agents orchestrating the consent orders with the Bank state a plausible claim that a person employed by or associated with [an] enterprise... conduct[ed] or participate[d], directly or indirectly, in the conduct of such enterprise's affairs through a pattern of racketeering activity under 18 U.S.C. § 1962(c). Putnam should also address why the orchestration of two consent orders over several months is sufficient to state a claim for either an open or closed-ended pattern of racketeering activity. The Bank shall provide any contrary authority by June 9, 2017. Ordered by US DISTRICT JUDGE MARC THOMAS TREADWELL on 5/18/2017. (tlh)
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF GEORGIA
THE PUTNAM GROUP, LLC,
FIRST CITIZENS BANK AND
TRUST COMPANY, INC., assignee and
successor in interest to the FDIC as
receiver for Georgian Bank,
CIVIL ACTION NO. 5:17-cv-67 (MTT)
First Citizen’s Bank and Trust Company, Inc. has filed a three-part pre-answer
motion. Doc. 4. For the reasons that follow, it is DENIED.
I. MOTION TO DISMISS COMPLAINT FOR FAILURE TO JOIN RULE 19 PARTY
The Bank moves to dismiss the complaint for failure to join a Rule 19 party—N.D.
Horton, Jr.—pursuant to Federal Rule of Civil Procedure 12(b)(7). Doc. 4 at 7-12. The
complaint is premised on the Bank making false representations to the U.S. District
Court for the Northern District of Georgia that it had The Putnam Group, LLC’s consent
to sell certain of its assets and apply the proceeds to an outstanding judgment held by
the Bank against several related third parties. See generally Doc. 1. The Bank argues
that it cannot be liable because Horton purported to consent to the sale on Putnam’s
behalf. Doc. 4 at 9-10. Accordingly, a key question in this case will be whether Horton
had actual or apparent authority to act for Putnam in this matter. If Horton did not, the
Bank and/or Putnam almost certainly have claims against him. The Bank accordingly
begins with the assumption that Horton is jointly liable for any of its wrongdoing,1 and
Putnam maintains that Horton is not liable at all, and accordingly must maintain that Horton is not a
joint tortfeasor. Doc. 7 at 8-10. Horton is not directly implicated as a joint tortfeasor by the complaint.
That said, the Court also considers the consent motion and consent orders submitted by the Bank with its
motion. Docs. 4-6; 4-7; 4-8. See Day v. Taylor, 400 F.3d 1272, 1276 (11th Cir. 2005) (“[T]he court may
consider a document attached to a motion to dismiss without converting the motion into one for summary
concludes that Horton’s intimate involvement in the underlying transactions renders him
a required party under Rule 19(a).2
Rule 19(a) provides that certain persons are required to be joined where
feasible.3 The rule gives three circumstances in which a person will be a required party:
[I]f (A) in that person’s absence, the court cannot accord
complete relief among existing parties; or (B) that person
claims an interest relating to the subject of the action and is
so situated that disposing of the action in the person’s
absence may: (i) as a practical matter impair or impede the
person’s ability to protect the interest; or (ii) leave an existing
party subject to a substantial risk of incurring double,
multiple, or otherwise inconsistent obligations because of the
Fed. R. Civ. P. 19(a)(1). The Court “must base its decision on the pleadings as they
appear at the time of the proposed joinder; it is only after the party has been joined that
claims can be asserted against the party that are unrelated to the issues for which
joinder was necessary.” Charles Alan Wright, Arthur R. Miller & Edward H. Cooper, 7
Federal Practice and Procedure § 1604 (3d ed. Apr. 2017 update). If Putnam’s
prosecution of its claims against the Bank in Horton’s absence does not implicate these
concerns, the Bank’s motion fails.
But the Bank does not rely on any of these reasons. Rather, the Bank puts
forward a confusing argument based on an apparent misunderstanding of Eleventh
judgment if the attached document is (1) central to the plaintiff’s claim and (2) undisputed.”). Horton
signed off on the relevant consent orders, purportedly on Putnam’s behalf. Docs. 4-6 at 5; 4-7 at 4; 4-8 at
4. These documents also appear to support the proposition that any benefit to the Bank was, to the same
degree, a benefit to Horton. Accordingly, the Court tends to agree with the Bank’s position that Horton
should be considered a joint tortfeasor at least for the purpose of determining his status as a Rule 19(a)
party at this time.
Of course, the Bank, correctly, does not stop with analyzing Rule 19(a), but looks to subsection (b) as
well. Doc. 4 at 8-10. Strangely, the Bank conceded that NHD could be feasibly joined, arguing that the
Court should dismiss the action anyway. Doc. 4 at 8, 10-11. Putnam pointed out that joining Horton
would not be feasible because it would destroy diversity. Doc. 7 at 9. Then the Bank changed its
position. Doc. 8 at 6.
The parties talk about persons required to be joined if feasible under Rule 19(a) using the old, though
still often used, label “necessary parties.” See, e.g., Docs. 4 at 9; 7 at 9. Of course, the current
nomenclature for these parties is “required parties;” the two labels mean the same thing. See Republic of
Philippines v. Pimentel, 553 U.S. 851, 855 (2008).
Circuit case law addressing joint tortfeasors. Before diving into the Bank’s argument,
some background is necessary. There is a bright-line rule that joint tortfeasors are not
required parties under Rule 19(a). Temple v. Synthes Corp., 498 U.S. 5, 7 (1990); Fed.
R. Civ. P. 19(a) advisory committee notes to 1966 amendments (“[A] tortfeasor with the
usual ‘joint-and-several’ liability is merely a permissive party to an action against
another with like liability.”). But the Eleventh Circuit has made some exceptions to this
rule, such as in Laker Airways, Inc. v. British Airways, PLC, 182 F.3d 843, 848 (11th Cir.
1999), relied on by the Bank.
The Bank, quoting Laker Airways, argues that “‘a joint tortfeasor will be
considered a necessary party when the absent party emerges as an active participant in
the allegations made in the complaint that are critical to the disposition of important
issues in the litigation’ and ‘under the circumstances . . . are more significant than those
of routine joint tortfeasor.’” Doc. 4 at 8 (quoting Laker Airways, Inc., 182 F.3d at 848).
The Bank continues by asserting that the quantum of Horton’s factual involvement in the
events underlying the complaint makes him an active participant in the critical alleged
events within the Laker Airways exception and thus a required party. Id. at 8-10.
In doing this, the Bank has put the cart before the horse. Without showing a valid
Rule 19(a) consideration, there is no need to address the Temple rule.4 This is
confirmed by Laker Airways and the cases it relies on, as well as the subsequent case
law cited by the Bank.5
Though the Court does not need to resolve the issue, the Court does not think that the Laker Airways
exception to the Temple rule is as broad as the Bank thinks; such an exception would swallow the rule.
Joint tortfeasors will nearly always be active participants in the important issues in the litigation in such a
bare factual sense.
In Laker Airways, the court looked first to Rule 19(a), examining whether “complete relief [could] be
granted with the present parties or the absent party has an interest in the disposition of the current
proceedings.” 182 F.3d 847 (citing Rule 19). The court reasoned that any judgment against the
defendant might, practically speaking, hurt the absentee joint tortfeasor—a quasi-governmental entity
operating under the purview of the British government—because the judgment would require a finding of
partial behavior by the absentee, “inevitably comment[ing] upon the neutrality and independence of the
process.” Id. at 847-48. In other words, the absentee tortfeasor was required because the absentee
tortfeasor’s interests were at risk of practical impairment—adverse British governmental action—
implicating Rule 19(a)(1)(B)(i). See id.
Though Rule 19(a) offers three, and only three, considerations, the Court notes
two considerations that are not on that list: (1) the absentee’s usefulness as a fact
witness (even if the absentee “emerges as an active participant in the allegations made
in the complaint that are critical to the disposition of important issues in the litigation”);6
and (2) considerations stemming from the nature of joint-and-several liability, such as
contribution or indemnity rights by the named defendant against the absentee.7
The Bank does not explain why the Court cannot accord complete relief to
Putnam on its claims against the Bank if it prevails. The Bank does not offer any
The language quoted by the Bank from Laker Airways is the rule laid down in Haas v. Jefferson
National Bank, 442 F.2d 394 (5th Cir.1971). Laker Airways, Inc., 182 F.3d at 848 (quoting Haas, 442
F.2d at 398). In Haas, the court expressly noted two Rule 19(a) considerations: (1) exposure of the
named defendant to inconsistent obligations as to the stock at issue, and (2) the possibility of a practical
impairment of the absentee’s rights in the stock. 442 F.2d 394, 398; see also Laker Airways, Inc., 182
F.3d at 848 (citing Occidental Petroleum Corp. v. Buttes Gas & Oil Co., 331 F. Supp. 92, 106 (C.D. Cal.
1971), aff’d, 461 F.2d 1261 (9th Cir. 1972) (absentee’s “status as a joint tortfeasor would not as a
practical matter negate its status as a contractual party, with interests that are covered by Rule 19(a)”
Also, Laker Airways cites a line of cases recognizing the practical effect of adjudicating disputes that
heavily impact unrepresented governmental interests (whether foreign or domestic), which is a Rule
19(a)(1)(B)(i) consideration. See Boles v. Greeneville Hous. Auth., 468 F.2d 476, 479 (6th Cir. 1972) (“In
order to grant the relief sought by the appellants this court would be compelled to hold in effect that not
only did HUD misinterpret its own guidelines, but that it also misconceived its function and prerogatives
under the Urban Renewal Act. To make such a determination without joining HUD is to deprive it of the
right to defend the integrity of its administrative decisions in these areas which so intimately affect its
policies and procedures.” (internal citations omitted)); Occidental Petroleum Corp. v. Buttes Gas & Oil
Co., 331 F. Supp. 92, 106 (C.D. Cal. 1971), aff’d, 461 F.2d 1261 (9th Cir. 1972) (“In the present case,
however, the fact that the absent co-conspirator is a foreign country could present countervailing
considerations against the court’s obstructing or countermanding the performance of a contract with it.”).
The one additional Temple-exception case cited by the Bank (Doc. 4 at 8-9 n.4)—Geico General
Insurance Company v. Gould, 595 F. App’x 901, 906 (11th Cir. 2014)—relied on the rule that “absent tort
claimants [are] indispensable parties to [an] insurer’s declaratory judgment action against the insured
because, were the case allowed to proceed without them, “the claimants’ interests would be prejudiced.”
595 F. App’x at 906 (quoting Ranger Ins. Co. v. United Housing of New Mexico, 488 F.2d 682 (5th
Cir.1974)). This clearly stems from Rule 19(a)(1)(B)(i).
Though this could be rightfully considered in the context of Rule 19(b). See Temple, 498 U.S. at 7-8.
Suing one of jointly and severally liable parties always leaves the named defendant at risk of
inconsistent adjudications (what if they lose in a later contribution or indemnity suit against the
absentee?). But, “‘Inconsistent obligations’ are not . . . the same as inconsistent adjudications or results.
Inconsistent obligations occur when a party is unable to comply with one court’s order without breaching
another court’s order concerning the same incident. Inconsistent adjudications or results, by contrast,
occur when a defendant successfully defends a claim in one forum, yet loses on another claim arising
from the same incident in another forum.” Winn-Dixie Stores, Inc. v. Dolgencorp, LLC, 746 F.3d 1008,
1040 (11th Cir. 2014) (quoting Delgado v. Plaza Las Ams., Inc., 139 F.3d 1, 3 (1st Cir. 1998)).
Accordingly, Rule 19(a) is not implicated by contribution or indemnity rights by the named defendant
against the absentee regardless of the Temple rule.
competing claims as to any existing property interests. The Bank does not explain how
proceeding in Horton’s absence could subject it or Horton to inconsistent obligations.
The Bank does not demonstrate any practical prejudice to either it or Horton. Rather,
the Bank’s arguments demonstrate that Horton is a material—perhaps key—fact
witness. Docs. 4 at 9-10; 8 at 3-7. Further, the Bank offers many practical reasons why
joining Horton could be convenient and otherwise a good idea. Id. But all this has
nothing to do with Rule 19(a). The Bank’s motion under Rule 12(b)(7) for failure to join
Horton as a Rule 19 party is accordingly DENIED.
II. MOTION TO TRANSFER
The Bank seeks transfer of the case to the Northern District, citing inconvenience
to itself and its witnesses, the Northern District’s involvement in several related actions
by the Bank against Horton and Horton entities, as well as the Northern District’s
involvement in the consent orders at issue here. Doc. 4 at 12-17. But, as Putnam
notes, it brought the action in this District, its documentary evidence and its witnesses
are located in this District, the auction occurred in this District, and it was not a named
party in the previous Northern District action. Doc. 7 at 12-14. Putnam does not appear
to be named in the other Horton actions noted by the Bank. See Doc. 4 at 5. The Court
is accordingly not convinced that “the convenience of parties and witnesses” or the
“interest[s] of justice” dictate transfer. See 28 U.S.C. § 1404(a). The motion to transfer
is accordingly DENIED.
III. MOTION TO DISMISS COUNT VII FOR FAILURE TO STATE A CLAIM
Last, the Bank moves to dismiss Putnam’s RICO claim under Rule 12(b)(6).
Doc. 4 at 17-20. Putnam’s complaint alleges that the Bank and its agents orchestrated
two consent orders, effectively committing fraud and theft of Putnam property. Doc. 1
¶¶ 8, 15, 46. The Bank’s motion rests on two grounds. Doc. 8 at 9-10 (clarifying bases
for dismissing Putnam’s RICO complaint).
First, the Bank argues that the orchestration of the two orders cannot constitute
the two predicate acts (referred to by the parties as “indictable activities”) required to
establish a pattern of racketeering. Docs. 4 at 19; 8 at 9-10; see also Doc. 7 at 17-18.
This question seems to boil down to whether the Bank’s orchestration of the two
consent orders would be separately chargeable (whether as theft or fraud or some other
crime) under Georgia law.8 See 18 U.S.C. § 1961(1)(A). The Bank has offered no
reason why these two acts would not be separately indictable; accordingly, the Bank
has not demonstrated that Putnam’s claim is not plausible. The Court declines to
dismiss on these grounds.
Second, the Bank seeks dismissal of Putnam’s RICO claim because Putnam has
failed to allege a conspiracy. Docs. 4 at 19-20; 8 at 10. This seems to assume that
Putnam asserts a RICO conspiracy claim under 18 U.S.C. § 1962(d). But Putnam
never asserts a RICO conspiracy claim under 18 U.S.C. § 1962(d). Rather, Putnam
seems to rely on Mohawk, which dealt with an 18 U.S.C. § 1962(c) RICO claim. Docs.
7 at 17; 8 at 9; see also Williams v. Mohawk Indus., Inc., 465 F.3d 1277, 1283-84 (11th
Cir. 2006). The Court accordingly declines to dismiss on these grounds also.
That said, Putnam is responsible in part for the Bank’s exercise in futility. Local
Rule 33.3 directed Putnam to file RICO interrogatories with the complaint identifying
which subsection (or subsections) of 18 U.S.C. § 1962 it relied on. M.D. Ga. LR 33.3.
Putnam did not file the required RICO interrogatories with the complaint. Three months
after filing the complaint and after a reminder by the Court, Putnam filed the
interrogatories, but they still fail to identify “[w]hether the alleged unlawful conduct is a
violation of 18 U.S.C. § 1962(a), (b), (c), (d), or a combination thereof.” Doc. 10 at 1.
Accordingly, Putnam is ORDERED to file a supplement to the interrogatories correcting
this omission by May 31, 2017. Also, if Putnam is asserting a 18 U.S.C. § 1962(c)
In its late-filed RICO interrogatories, Putnam identified the criminal provisions as O.C.G.A. §§ 16-8-2
(Theft by Taking) and 16-8-3 (Theft by Deception). Doc. 10 at 4.
RICO claim, Putnam is ORDERED to provide, also by May 31, 2017, authority to
support the position that its bare assertions of the existence of “unidentified” agents
orchestrating the consent orders with the Bank state a plausible claim that a “person
employed by or associated with [an] enterprise . . . conduct[ed] or participate[d], directly
or indirectly, in the conduct of such enterprise’s affairs through a pattern of racketeering
activity” under 18 U.S.C. § 1962(c).9 Putnam should also address why the orchestration
of two consent orders over several months is sufficient to state a claim for either an
open or closed-ended pattern of racketeering activity.10 The Bank shall provide any
contrary authority by June 9, 2017.
SO ORDERED this 18th day of May, 2017.
S/ Marc T. Treadwell
MARC T. TREADWELL, JUDGE
UNITED STATES DISTRICT COURT
“[T]o establish liability under § 1962(c) one must allege and prove the existence of two distinct
entities: (1) a ‘person’; and (2) an ‘enterprise’ that is not simply the same ‘person’ referred to by a different
name.” Cedric Kushner Promotions, Ltd. v. King, 533 U.S. 158, 161 (2001). Putnam identifies the
enterprise as the Bank “and unidentified parties/agents of the Bank.” See Doc. 10 at 3; see also Doc. 7 at
17. Putnam notes that it “cannot correctly identify which agents of the Bank were complicit in the
wrongful predicate acts until discovery is obtained. Agents of the Bank that orchestrated the alleged
conspiracy will be added in a Motion to Add to this lawsuit upon learning their identities during discovery
of this case.” Doc. 10 at 3. And, “It is expected to be proven that there are other agents of the Defendant
Bank that engaged in the alleged enterprise upon which damages are sought.” Id. A corporation is
distinct from its agents. Cedric Kushner Promotions, Ltd., 533 U.S. at 161. A corporation and its agents
can constitute an enterprise. Mohawk, 465 F.3d at 1283-84. However, in Mohawk, upon which Putnam
relies, the complaint identified the agents as being third-party recruiters and identified their common
purpose with the corporate defendant as recruiting illegal workers to work for the corporation. Id. at 1284.
Putnam’s complaint does not offer any such specifics, just conclusions. Also, it is notable that Mohawk
was decided under the less stringent pre-Iqbal and Twombly pleading standards. Ashcroft v. Iqbal, 556
U.S. 662 (2009); Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007).
H.J. Inc. v. Nw. Bell Tel. Co., 492 U.S. 229, 241, (1989) (“[A] pattern is [not] established merely by
proving two predicate acts . . . . Congress had a more natural and commonsense approach to RICO’s
pattern element in mind, intending a more stringent requirement than proof simply of two predicates, but
also envisioning a concept of sufficient breadth that it might encompass multiple predicates within a single
scheme that were related and that amounted to, or threatened the likelihood of, continued criminal
activity. . . . What a plaintiff or prosecutor must prove is continuity of racketeering activity, or its threat,
simpliciter. . . . ‘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.”); Aldridge v. Lily-Tulip, Inc. Salary Ret. Plan Benefits Comm., 953 F.2d 587, 593 (11th Cir.
1992) (“[The defendant’s] alleged illegal activity was not a pattern of racketeering of the closed-ended
type. We find that it was accomplished in too short a period of time, approximately six months, in order to
qualify as a pattern of racketeering activity. . . . [P]redicate acts extending over a few weeks or months
and threatening no future criminal conduct do not satisfy the pattern requirement.” (citations and
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