Griffin v. Jones et al

Filing 103

MEMORANDUM AND OPINION by Senior Judge Thomas B. Russell on 9/29/2014; re 63 MOTION to Dismiss filed by Commonwealth Economics, LLC, John Farris, 49 MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM (Re Civil RICO Counterclaim of C. Jones), filed by David Griffin, 61 MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM filed by Joe Pat Cohoon, 56 MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM filed by John Wittman ; an appropriate order shall issuecc:counsel (KJA)

UNITED STATES DISTRICT COURT

WESTERN DISTRICT OF KENTUCKY

PADUCAH DIVISION

CIVIL ACTION NO. 5:12-CV-00163


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DAVID GRIFFIN

Plaintiff,

v.


CHARLES A. JONES, et al.

Defendants.

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MEMORANDUM OPINION
This matter comes before the Court upon several Motions to Dismiss filed by Counterclaim
Defendant David Griffin and Third-Party Defendants John Farris, Commonwealth Economics, LLC, John
Wittman, and Joe Pat Cohoon (collectively, “the Defendants”). (Docket Nos. 49, 56, 61, and 63.) Fully
briefed, these matters are ripe for adjudication. The Court will consider each Motion in turn.
Factual Background
This matter concerns the Counterclaim raised by Jones, which asserts that Defendants violated
Section 1964(c) of the Racketeer Influenced and Corrupt Organizations Act and various state law claims.
(Docket No. 44.)

As required when deciding a motion to dismiss, the Court presumes that the

counterclaim’s allegations are true. Total Benefits Planning Agency v. Anthem Blue Cross & Blue Shield,
552 F.3d 430, 434 (6th Cir. 2008). Taking them as true, the relevant facts are as follows.
This action arises from a soured business relationship between David Griffin and Charles Jones.
Jones founded a number of businesses, several of which have allegedly become extraordinarily successful
and some of which are at the heart of this lawsuit. In June 2008, Jones formed CA Jones Management
Group, LLC, (“CAJM”), to manage some of these companies. The Third-Party Defendants include John
Farris, a principal of Commonwealth Economics, LLC (“Commonwealth”), a business advisory and
consulting firm;

Commonwealth itself; John Wittman, an employee of CAJM, who served as vice-

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president of College Book Rental Company, LLC (“CBR”); and Joe Pat Cohoon, a former contractor for
CAJM.
Griffin became involved in several of these businesses in 2008, first purchasing a fifty percent
interest in Integrated Computer Solutions, Inc., (“ICS”).

Griffin and Jones formed Blackrock

Investments, LLC, (“Blackrock”), as a holding company for their investments. In July 2008, Blackrock
formed a subsidiary, SE Book Company, LLC, (“SE Book”), for the purpose of acquiring a textbook
company in Murray, Kentucky.

Although SE Book was initially wholly owned and managed by

Blackrock, its operating agreement was amended in July 2008 to add ICS as a member. In March 2009,
CBR was formed; later, CAJM was installed as the manager of both SE Book and CBR. With Griffin
serving as the “chairman of the board of directors” of CBR, he and Jones spoke regularly about the
financial outlook for Blackrock, ICS, SE Book, and CBR (collectively, “the Joint Companies”).
Jones asserts that in light of the Joint Companies’ success, in April 2010, Griffin sought to alter
the parties’ agreement such that Griffin would own 90% of the Joint Companies. In September 2011,
Farris, a business adviser with Commonwealth, valued CBR between $191 and $319 million to
Metropolitan Life Insurance Company in an effort to secure various loans. (Docket No. 44 at 18.) Jones
alleges that Griffin and Farris falsely represented the portion of the Joint Companies that Griffin owned,
exaggerating his ownership stake.

(Docket No. 44 at 18.)

In the same month, Griffin allegedly

confronted Jones, threatening that if Jones failed to cede 90% of the equity in CBR, Griffin would destroy
both the business and Jones himself. When Jones refused, Griffin caused CBR, SE Book, and Blackrock
to transfer $1.7 million to Griffin; in December 2011, Griffin forced an additional $1,070,000 transfer. In
Jones’s telling, these funds had been loaned to the Joint Companies to finance their continued operation
and expansion.
Jones further alleges that in October 2011, Griffin and Farris “forced” him to agree to forfeit half
of his interest in CBR, with no consideration paid, leaving Griffin with 75% ownership of the company.
This agreement, however, was ultimately revoked.

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In February 2012, Griffin sued Jones, CAJM, and Jones’s wife, Sarah, in this Court. (See Griffin
v. Jones, Civil Action No. 5:12-cv-00033-TBR.)

He also sued the Joint Companies. Jones alleges that

this litigation played into Griffin’s scheme to make the Joint Companies impossible to either operate or
sell, leaving banks and buyers alike reluctant to do business with them. As a result, the once-successful
businesses struggled. In August 2012, Griffin dismissed his February 2012 lawsuit, having agreed with
Jones that Myles MacDonald, a neutral third-party, would be installed as receiver to operate the Joint
Companies. Jones alleges that the Defendants gave MacDonald false information in an effort to harm
Jones. (Docket No. 44 at 20.) Jones further contends that the Defendants offered false information to law
enforcement personnel and prosecutors in an effort to convince them to prosecute Jones. (Docket No. 44
at 20.)
Jones contends that in July 2012, Griffin persuaded both Security Bank and Planters Bank to alter
their agreements with the companies at issue to the companies’ detriment. (Docket No. 44 at 20.) Jones
further claims that Griffin caused an involuntary bankruptcy petition to be filed against CBR on October
4, 2012, “falsely claiming that Griffin had loaned CBR $15,000,000 although he had in other legal
pleadings claimed that these funds had been used to purchase his equity interest in the Joint
Companies.” (Docket No. 44 at 20.)
Finally, Jones points to a series of allegedly vexatious lawsuits that Griffin brought or joined
against Jones, members of the Jones family, the Joint Companies, and/or other businesses owned by
Jones. (Docket No. 44 at 21-22.) Jones urges that Griffin levied these lawsuits as part of a “racketeering
scheme to punish Jones for failing to agree to turn over his interest in CBR, to deprive him of that
interest, and to drain him of assets” to prevent him from either operating competing businesses or
defending the lawsuits.

(Docket No. 44 at 22.)

Jones alleges that Griffin knowingly or recklessly

included a number of false and misleading allegations in the Complaints and other docket filings.
(Docket No. 44 at 22-23.)

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Legal Standard
The Federal Rules of Civil Procedure require that pleadings, including complaints, contain a
“short and plain statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)
(2). A complaint may be attacked for failure “to state a claim upon which relief can be granted.” Fed. R.
Civ. P. 12(b)(6). When considering a Rule 12(b)(6) motion to dismiss, a court will presume that all the
factual allegations in the complaint are true and will draw all reasonable inferences in favor of the
nonmoving party. Total Benefits, 552 F.3d at 434 (citing Great Lakes Steel v. Deggendorf, 716 F.2d 1101,
1105 (6th Cir. 1983)). “The court need not, however, accept unwarranted factual inferences.” Id. (citing
Morgan v. Church's Fried Chicken, 829 F.2d 10, 12 (6th Cir. 1987)).
Even though a “complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed
factual allegations, a plaintiff's obligation to provide the grounds of his entitlement to relief requires more
than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.”
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (citations omitted). Instead, the plaintiff's “[f]actual
allegations must be enough to raise a right to relief above the speculative level on the assumption that all
the allegations in the complaint are true (even if doubtful in fact).” Id. (citations omitted). That is, a
complaint must contain enough facts “to state a claim to relief that is plausible on its face.” Id. at 570. A
claim becomes plausible “when the plaintiff pleads factual content that allows the court to draw the
reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S.
662, 678 (2009) (citing Twombly, 550 U.S. at 556). If from the well-pleaded facts the court cannot “infer
more than the mere possibility of misconduct, the complaint has alleged—but has not ‘show[n]’—‘that
the pleader is entitled to relief.’” Id. at 679 (quoting Fed. R. Civ. P. 8(a)(2)). “[O]nly a complaint that
states a plausible claim for relief survives a motion to dismiss.” Id.

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Analysis
I.

Because Jones has failed to adequately allege a claim under the Racketeer Influenced and
Corrupt Organizations Act (“RICO”), this claim will be dismissed.
On October 25, 2013, Jones commenced a civil action pursuant to Section 1964(c) of RICO,

which authorizes a civil cause of action for any person injured in his business or property by reason of a
violation of 18 U.S.C. § 1962. 18 U.S.C. §§ 1961 et seq. Section 1962 provides a list of prohibited
“racketeering activities.” Jones relies upon § 1962(c), which provides:
It shall be unlawful for any person employed by or associated with any
enterprise engaged in, or the activities of which affect, interstate or
foreign commerce, to conduct or participate, directly or indirectly, in the
conduct of such enterprise’s affairs through a pattern of racketeering
activity or collection of unlawful debt.
Therefore, to allege a violation of the statute, Jones must point to “(1) conduct (2) of an enterprise
(3) through a pattern (4) of racketeering activity.” Heinrich v. Waiting Angels Adoption Services, Inc., 668
F.3d 393, 404 (6th Cir. 2012) (quoting Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 496 (1985)). Jones
contends that Defendants violated the Hobbs Act and committed wire fraud in an effort to deprive Jones
of his ownership interest in the Joint Companies, to retaliate against him for objecting to Griffin’s scheme,
and to deprive him of their honest services. (Docket No. 44 at 24.)
A.

Jones has not adequately alleged any predicate acts of racketeering activity.
Racketeering activity consists of acts deemed indictable under a number of federal statutes

enumerated in 18 U.S.C. §1961(1)(B).

Here, Jones alleges predicate acts of racketeering activity

consisting of wire fraud, 18 U.S.C. § 1343, and violation of the Hobbs Act, 18 U.S.C. § 1951. To allege a
valid RICO claim, a plaintiff must show not only that the predicate act was a “but for” cause of his
injuries, but also a proximate cause. Holmes v. Sec. Investor Prot. Corp., 503 U.S. 258, 268 (1992). He
must demonstrate “some direct relation between the injury asserted and the injurious conduct alleged.”
Id. The Court will consider each of the alleged predicate acts below.
Wire fraud consists of “(1) a scheme or artifice to defraud; (2) use of interstate wire
communications in furtherance of the scheme; and (3) intent to deprive a victim of money or property.”

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United States v. Prince, 214 F.3d 740, 747-48 (6th Cir. 2000) (footnote omitted).

“A scheme to defraud

includes any plan or course of action by which someone uses false, deceptive, or fraudulent pretenses,
representations, or promises to deprive someone else of money.” United States v. Jamieson, 427 F.3d
394, 402 (6th Cir. 2005).

A plaintiff alleging wire fraud must also demonstrate scienter—that is, a

showing that the defendant acted with either a specific intent to defraud or with recklessness with respect
to potentially misleading information. United States v. DeSantis, 134 F.3d 760, 764 (6th Cir. 1998).
Jones must also satisfy the more rigorous pleading standards of Rule 9(b) with regard to his
claims based on fraud. According to Rule 9(b), “[i]n alleging fraud or mistake, a party must state with
particularity the circumstances constituting fraud or mistake.” Fed. R. Civ. P. 9(b). “When pleading
predicate acts of mail or wire fraud, in order to satisfy the heightened pleading requirements of Rule 9(b),
a plaintiff must ‘(1) specify the statements that the plaintiff contends were fraudulent, (2) identify the
speaker, (3) state where and when the statements were made, and (4) explain why such statements were
fraudulent.’” Heinrich, 668 F.3d 3at 404 (citing Frank v. Dana Corp., 547 F.3d 564, 570 (6th Cir. 2008)).
Jones fails to plead the predicate act of wire fraud with the particularity demanded by Rule 9(b).
“Where a plaintiff makes only ‘loose references’ to support its allegations of . . . wire fraud, but otherwise
fails to identify the parties to those transactions, circuit courts have upheld the dismissal of the RICO
claims under both Rule 9(b) and RICO itself.” Tunne v. Hendrick, 2012 WL 3644825, at *13 (W.D. Ky.
Aug. 24, 2012) (quotation omitted); see also Jepson, Inc. v. Makita Corp., 34 F.3d 1321, 1328 (7th Cir.
1994) (“[W]ithout an adequately detailed description of the predicate acts of mail and wire fraud, a
complaint does not provide either the defendant or the court with sufficient information to determine
whether or not a pattern of racketeering activity has been established.”).
Jones points to the “electronic transmission from Tennessee to Kentucky” of four documents, two
of which were complaints, one an affidavit of Third-Party Defendant Farris, and one an involuntary
bankruptcy petition. (Docket No. 44 at 27-28.) It appears that the “electronic transmissions” at issue
refer to filings made through the Court’s CM/ECF system. Jones provides the case numbers associated
with the two complaints—“Racketeering Act No. 2” arising in Docket No. 5:12-cv-00033-TBR and

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“Racketeering Act No. 5” arising in Docket No. 5:12-cv-00163-TBR—and the affidavit, Docket No.
5:12-cv-00163-TBR, arising in “Racketeering Act No. 3.” (Docket No. 44 at 27-28.) However, he does
not identify the case number or debtor entity associated with the involuntary bankruptcy petition
identified as “Racketeering Act No. 4.” (See Docket No. 44 at 28.)
Griffin argues that each of the four documents to which Jones points was transmitted only
intrastate. (Docket No. 49-1 at 8.) The Court agrees. Even a cursory glance at the docket establishes that
the documents identified in what Jones labels as Acts No. 2, 3, and 5 were filed by attorney Charles M.
Pritchett, Jr., in Louisville, Kentucky. (See Griffin v. Jones, 5:12-cv-00033-TBR, Docket Nos. 1, 6; 5:12cv-00163, Docket No. 1.) Furthermore, Act No. 4—the involuntary bankruptcy petition filed for CBR—
was filed in the United States Bankruptcy Court for the Middle District of Tennessee by attorney Joseph
A. Kelly of Nashville, Tennessee. (See In re College Book Rental Co., LLC, 3:12-BK-09130, Docket No.
1.) Accordingly, these filings cannot satisfy the interstate requirement contemplated by the statute. This
jurisdictional flaw renders Jones unable to rely upon wire fraud as a predicate act.
Jones responds that Griffin’s argument must fail at the motion to dismiss stage, as Griffin cannot
demonstrate that the transmissions originating in one state did not pass through another before reaching
their destination. (Docket No. 58 at 7.) However, district courts have often noted that such general
allegations concerning intrastate wire communications do not give rise to the predicate act of wire fraud.
See, e.g., Tallely v. Halpern ex del Estate of Winderman, 2005 WL 2002611, at *4 (E.D. Penn. Aug. 16,
2005); In re Med. Educ. & Health Servs., Inc., 459 B.R. 527 (D. P.R. Sept. 2, 2011) (explaining that “an
essential element of the federal fraud statute is the use of interstate communication lines” and thus
dismissing the claim of a plaintiff who failed to allege that the wire communications at issue crossed state
lines). Because Jones has not plausibly pled that the relevant transmissions crossed state lines, his claim
cannot stand.
Jones also fails to allege that the four pleadings mentioned above constituted part of a “scheme to
defraud” or were causally related to the damages he seeks.

Taking the allegations of Jones’s

Counterclaim at face value, he has alleged that Griffin openly sought to acquire Jones’s interests in the

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Joint Companies; however, he has pointed to no “false, deceptive, or fraudulent pretenses, representations
or promises.” Although he alleges eight misstatements of fact in four court filings, (Docket No. 44 at 22),
he fails to adequately allege that these statements caused the damages he claims as a result of his lost
stake in CBR. This deficit renders his claim inadequate. See Heinrich, 668 F.3d at 405 (“‘A plaintiff
must show ‘some direct relation between the injury asserted and the injurious conduct alleged.’”) (citing
Holmes v. Sec. Investor Prot. Corp., 503 U.S. 258, 268 (1992)); see also Drobny v. JP Morgan Chase
Bank, NA, 929 F. Supp. 2d 839, 848 (N.D. Ill. 2013) (explaining that “filing and prosecuting a complaint
is not considered mail or wire fraud or a predicate act under RICO.”). As Griffin notes, the logical
extension of this argument would lead to absurd results (and a crowded federal court docket): ordinary
business disputes would transform dramatically into RICO violations, simply because a party transmitted
an electronic filing across state lines.
Furthermore, the Court rejects Jones’s attempt to rely upon theft of honest services as the required
scheme to defraud. 18 U.S.C. § 1346, entitled Definition of Scheme or Artifice to Defraud, explains that
“For the purposes of this chapter [Title 18 U.S.C. Part I — Crimes, Chapter 63 — Mail Fraud and Other
Fraud Offenses], the term ‘scheme or artifice to defraud’ includes a scheme or artifice to deprive another
of the intangible right of honest services.” The “honest services doctrine” expanded the mail fraud statute
to include deprivations of not just money or property, but also of intangible rights. See, e.g., Shushan v.
United States, 117 F.2d 110 (1941). “Most often these cases involved bribery of public officials, but over
time, the courts increasingly recognized that the doctrine applied to a private employee who breached his
allegiance to his employer, often by accepting bribes or kickbacks.” Skilling v. United States, 561 U.S.
358, 363-64 (2010).
In Skilling, the Supreme Court considered the doctrine’s scope and concluded that Congress
certainly intended § 1346 to reach at least bribes and kickbacks. But the Court also limited § 1346’s reach
to include only crimes encompassing this “bribe-and-kickback core.” Id. at 364. The Court rejected the
Government’s suggestion that § 1346 also prohibited undisclosed self-dealing by either a public official or
a private employee.

Although Jeffrey Skilling, the infamous Enron executive, was charged with

conspiring to defraud shareholders in an effort to maximize his own profit, the Government did not allege

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that he accepted bribes or kickbacks in exchange for doing so.

Given the absence of third-party

involvement, the Court found the Government’s allegation of “theft of honest services” lacking.
Skilling requires the same result here. Although Jones claims that the “scheme to defraud” was
intended to deprive him of Griffin’s honest services, he points to no contention that Griffin received
bribes or kickbacks throughout the parties’ rocky relationship. Consequently, Jones’s claim for theft of
Griffin’s honest services cannot survive to establish a predicate act of wire fraud.
Jones next claims that the Defendants engaged in extortion in violation of 18 U.S.C. § 1951.
Known as the Hobbs Act, this statute provides that
[w]hoever in any way or degree obstructs, delays, or affects commerce or
the movement of any article or commodity in commerce, by robbery or
extortion or attempts or conspires so to do, or commits or threatens
physical violence to any person or property in furtherance of a plan or
purpose to do anything in violation of this section shall be fined under
this title or imprisoned not more than twenty years, or both.
§ 1951(a). The Hobbs Act defines extortion as “the obtaining of property from another, with his consent,
induced by wrongful use of actual or threatened force, violence, or fear, or under color of official right.”
18 U.S.C. § 1951(b)(2). As the Sixth Circuit has explained, the statute contemplates not only fear of
physical violence, but also fear of economic harm: “[A] private citizen can commit extortion by leading
the victim to believe that the perpetrator can exercise his or her power to the victim’s economic
detriment.” Heinrich, 668 F.3d at 407. To claim acts of extortion in such cases, a plaintiff must allege
facts that show (1) that the defendants obtained the plaintiff’s property (2) through the wrongful use of (3)
threats or fear of economic harm. Id.
As sister district courts in the Sixth Circuit have noted, a plaintiff must make factual allegations
to support his allegations concerning predicate acts: “conclusory legal assertions do not adequately plead
a RICO claim.” Mann v. Compton, 2007 WL 854725, at *3 (E.D. Ky. Mar. 16, 2007) (citing Jennings v.
Emry, 910 F.2d 1434, 1438 (7th Cir. 1990) (“[I]n pleading predicate acts conclusory allegations that
various statutory provisions have been breached are of no consequence if unsupported by proper factual
allegations.”)). Here, Jones states that in September 2011, Griffin “executed this crime by threatening
Jones that if he did not agree to give Griffin 90% of the interest in CBR, Griffin would destroy the

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business and take it for himself.” (Docket No. 44 at 27.) No other information concerning the threat is
provided, including the damages that Jones allegedly suffered as a result. Moreover, Jones claims that in
October 2011, Farris and Griffin “forced” him to “agree to give up half of his interest in CBR for no
consideration.”

(Docket No. 44 at 19.)

However, he provides no explanation of how these two

Defendants effectuated this forced forfeiture—and in the same breath, he states that that agreement was
revoked, thus maintaining the evenly-split ownership interest. (Docket No. 44 at 19.)
What is more, there is no allegation that Jones was wrongfully “forced” to give up his interest in
CBR or that any such plan shared a causal relationship to Griffin’s alleged threat to destroy CBR.
Instead, the Defendants’ alleged plan “to take what rightfully belonged to Jones,” (Docket No. 58 at 10),
emerged only after the purported threat. Jones himself acknowledges this sequencing. (See Docket No.
44 at 19 (“Angered by the refusal, Griffin then launched a plan to squeeze Jones out of the business
interests he would not voluntarily give up and buy those businesses for himself.”).) Because the threat
predated the plan, no causal relationship can exist between the two.
The Court further notes that a threat of litigation does not constitute extortion. Sweden AB v.
Innovatech Prods. & Equip. Co., 2008 WL 4510710 (E.D. Tenn. Sept. 30, 2008) (“Threats of litigation,
even meritless litigation, do not constitute extortion under the Hobbs Act.” (citing Vemco, Inc. v.
Camardella, 23 F.3d 129, 134 (6th Cir. 1994)). Given the Sixth Circuit’s admonition in Vemvo that such
threats do not constitute predicate acts, the Court finds that Jones fails to allege any predicate acts
necessary for a violation of RICO. To the extent that Jones alleges that the threatened and actual litigation
supports a claim of extortion, the Court rejects this argument.
B.
Griffin argues that Jones has failed to adequately allege that the purported acts formed a
pattern of sufficient continuity.
Had Jones properly alleged the requisite predicate acts under RICO, his claim would nonetheless
fail, as he has failed to allege that any such acts constituted a pattern of racketeering activity. 18 U.S.C.
§ 1962(c) requires a plaintiff alleging a RICO violation to demonstrate “a pattern of racketeering
activity.” To show such a pattern, the plaintiff must point to two acts of racketeering activity within ten
years of each other. 18 U.S.C. § 1961(5). What is more, the plaintiff must show “‘that the racketeering

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predicates are related, and that they amount to or pose a threat of continued criminal activity.’” Heinrich,
668 F.3d at 409 (quoting H.J. Inc. v. N.W. Bell Tel. Co., 492 U.S. 229, 237-39 (1989)). Courts refer to this
requirement as the “relationship plus continuity” test. Id. (citing Brown v. Cassens Transp. Co., 546 F.3d
347, 355 (6th Cir. 2008)).
Jones fails to satisfy the test’s “continuity” prong.

A plaintiff may fulfill the continuity

requirement by showing either a “close-ended” or an “open-ended pattern.” Id. A “close-ended” pattern
refers to “a series of related predicate acts extending over a substantial period of time.” Id. However,
“‘[p]redicate acts extending over a few weeks or months . . . do not satisfy this [close-ended] continuity
requirement.’” Id. (quoting H.J., Inc., 492 U.S. at 242). The Sixth Circuit has found that racketeering
activity spanning seventeen months did not constitute a substantial period of time. See Vemco, 23 F.3d at
134 (finding that allegations of four predicate acts spanning seventeen months were insufficient to meet
the continuity requirement). Here, Jones alleges that the predicate acts of racketeering activity spanned
approximately fourteen months.

Consequently, they fail to meet the requirements for close-ended

continuity.
Nor does Jones demonstrate an “open-ended pattern”—that is, “a set of predicate acts that poses a
threat of continuing criminal conduct extending beyond the period in which the predicate acts were
performed.” Heinrich, 668 F.3d at 409-10. In such cases, the plaintiff must plausibly allege a threat of
ongoing criminal activity, extending beyond the period during which the predicate acts were performed.
Id. The scheme that Jones alleges was “an inherently short-term affair.” Derby City Capital, LLC v.
Trinity HR Servs., 949 F. Supp. 2d 712, 741 (W.D. Ky. 2013). Had the Defendants’ alleged scheme
reached a successful end, it would have necessarily concluded once Jones no longer held a controlling
interest in the Joint Companies. This “necessarily terminable scheme” shares the characteristics of others
in which the Sixth Circuit has found no open-ended continuity. See, e.g., id.; Vemco, 23 F.3d at 134
(discussed supra); Thompson v. Paasche, 950 F.2d 306 (6th Cir. 1991) (characterizing the defendant’s
scheme as “an inherently short-term affair” when he sold all of the lots at issue, rendering the scheme
“insufficiently protracted to qualify as a RICO violation.”).

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Attempting to save his claim, Jones points to three October 2013 lawsuits as evidence that the
alleged pattern of racketeering endures to this day. However, Jones does not claim that these lawsuits
contain misstatements about himself or his businesses, or more generally, that the lawsuits are otherwise
improper. The ongoing nature of the lawsuits between the parties cannot serve as the basis for openended continuity. Although the lawsuits likely cost Jones a great deal of expense, inconvenience, and
uncertainty, the Court finds nothing improper in the parties’ engagement with the legal process.
C.

Jones has failed to adequately allege that the Defendants formed a RICO enterprise.
RICO defines an “enterprise” as “any individual, partnership, corporation, association, or other

legal entity and any union or group of individuals associated in fact although not a legal entity.” 18
U.S.C. § 1961(4). Jones alleges that the Defendants created an association-in-fact enterprise. (Docket
No. 44 at 24.) To establish the existence of an “enterprise,” a plaintiff must demonstrate: “(1) an ongoing
organization with some sort of framework or superstructure for making and carrying out decisions; (2)
that the members of the enterprise functioned as a continuing unit with established duties; and (3) that the
enterprise was separate and distinct from the pattern of racketeering activity in which it engaged.”
Ouwinga v. Benistar 419 Plan Servs., Inc., 694 F.3d 783, 793 (6th Cir. 2012) (citing United States v.
Chance, 306 F.3d 356, 372 (6th Cir. 2002).
The Supreme Court has explained that an association-in-fact enterprise requires three structural
features: “‘a purpose, relationships among those associated with the enterprise, and longevity sufficient o
permit these associates to pursue the enterprise’s purpose.’” Id. (quoting Boyle v. United States, 694 F.3d
783, 794 (6th Cir. 2012)). Such an enterprise “require[s] a certain amount of organizational structure
which eliminates simple conspiracies from the Act’s reach.” Id. (quotation omitted). But this structure
can be an informal one, without official hierarchy or a formal procedure for making decisions; instead, a
plaintiff must show “‘simply a continuing unit that functions with a common purpose.’” Id. (quoting
Boyle, 556 U.S. at 948).
Jones’s RICO claim includes no specific allegations of the framework or structure in the
relationship between the Defendants. Rather, he alleges at most that the Defendants alleged in a simple

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conspiracy to remove Jones from his controlling position over the Joint Companies. In response, Jones
points to four separate purposes of the enterprise: to wrongfully deprive Jones of his interest in the Joint
Companies and acquire it for Griffin; to retaliate against Jones for objecting to the Defendants’ scheme; to
eliminate Jones as a competitor for the Defendants’ new business; and to deprive him of the Defendants’
honest services.

(Docket No. 58 at 14.) As explained above, Jones’s honest services claim cannot

withstand the motion to dismiss. The three remaining purposes do not reveal a purpose unrelated to the
alleged scheme; instead, each concerns Defendants’ scheme to divest Jones of his interest in the Joint
Companies. Because Jones has not adequately pled the existence of a RICO enterprise separate from an
underlying alleged pattern of activity.
In light of the above analysis of Jones’s defective RICO claim, the Court will dismiss this cause
of action in the instant case. The Court enjoys broad discretion in deciding whether to retain jurisdiction
over the remaining state law claims. Pinney Dock & Transp. Co. v. Penn Central Corp., 196 F.3d 617,
620 (6th Cir. 1999). The Court’s decision to exercise such discretion hinges upon “judicial economic,
convenience, fairness and comity.” Musson Theatrical, Inc. v. Fed. Express Corp., 89 F.3d 1244, 1254
(6th Cir. 1996). This case has remained upon the Court’s docket for a considerable amount of time, and
the remaining state law claims are no doubt entwined with the federal action. Therefore, the balance of
considerations points toward retaining supplemental jurisdiction pursuant to 28 U.S.C. § 1367(a). The
Court will discuss these claims below.
II. Jones has not properly stated a claim for breach of fiduciary duty.
The Kentucky Supreme Court has explained that generally, a fiduciary relationship is “one
founded on trust or confidence reposed by one person in the integrity and fidelity of another.” Steelvest,
Inc. v. Scansteel Serv. Cntr., Inc., 807 S.W.2d 476, 485 (Ky. 1991). The relationship must also involve
“an undertaking in which a duty is created in one person to act primarily for another’s benefit in matters
connected with such undertaking.” id. To prevail upon a claim for breach of fiduciary duty, a plaintiff
must demonstrate: (1) that the defendant owes a fiduciary duty to the plaintiff; (2) that the defendant

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breached that duty; and (3) that the plaintiff suffered damages as a result of the breach. Fastenal Co. v.
Crawford, 609 F. Supp. 2d 650, 665 (E.D. Ky. 2009).
Jones’s Counterclaim states, “As employees or contractors of Jones, Farris, Wittman, and Cohoon
owed common law duties of care and loyalty to Jones.” (Docket No. 44 at 29.) Jones alleges that the
Defendants either wantonly or recklessly breached those duties. The Court notes that Jones has offered
few details regarding the nature of the Third-Party Defendants’ relationship to Jones or the companies.
For example, the Counterclaim is silent as to the type of work that Cohoon contracted to do on behalf of
the companies, and it fails to indicate the dates of Cohoon’s engagement with the companies.
Furthermore, Jones states only that Wittman breached his fiduciary duty “by engaging in the conduct
described herein.” (Docket No. 44 at 29.) The Counterclaim provides two paragraphs alleged “upon
information and belief.”

It further asserts that Wittman caused an involuntary bankruptcy petition

containing allegedly false statements to be filed and “created or contributed to creating the plan to divest
Jones of his interest, and for which he was to receive stock in Griffin’s new company.”
The allegations regarding the involuntary bankruptcy petition cannot survive. The petition was
filed not against Jones, but against CBR; Jones fails to explain how this filing breached a duty to him
individually. Moreover, the filing of such a lawsuit does not constitute a breach of fiduciary duty. See,
e.g., Armenian Assembly of Am., Inc. v. Cafesjian, 692 F. Supp. 2d 29, 36-38 (D.D.C. 2010) (“A trustee
may file a lawsuit against a corporation in order to protect his own interests without breaching his
fiduciary duty.”).
But even had Jones provided sufficient detail to allege such claims, his Counterclaim would
nonetheless suffer a fatal flaw: the Third-Party Defendants were not employees of Jones himself, but of
the various companies at issue. Therefore, any duty owed by them was to the companies, not to Jones
personally.

Jones has not alleged that any of the Third-Party Defendants breached a duty to the

companies, nor has he raised a derivative suit on behalf of them. He points to no facts suggesting that the
Third-Party Defendants owed him fiduciary duties of loyalty and care.

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Jones offers no response to this reality. Instead, in an effort to save his claims, Jones suggests that
one who is not a fiduciary may nonetheless be liable for aiding and abetting a breach of fiduciary duty.
(Docket No. 64 at 19-20.)

However, Jones raises this claim for the first time in his response brief,

(Docket No. 64 at 19-20), having failed to raise it in his Counterclaim. Whatever the merits of this new
theory of liability may be, they were not properly raised in the original pleading and will not be
considered for purposes of the instant analysis.
III.

Jones’s claim for intentional interference with business relations may go forward.

Under Kentucky law, liability for the tort of intentional interference with business relations arises
when a party improperly interferes with a business expectancy. See NCAA v. Hornung, 754 S.W.2d 855,
857 (Ky. 1998). In Hornung, the Kentucky Supreme Court official adopted sections 776, 767, and 773 of
the Restatement (Second) of Torts, which explains:
One who intentionally and improperly interferes with another’s
prospective contractual relation . . . is subject to liability to the other for
the pecuniary harm resulting from loss of the benefits of the relation,
whether the interference consists of (a) inducing or otherwise causing a
third person not to enter into or continue the prospective relation or (b)
preventing the other from acquiring or continuing the prospective
relation.
Restatement (Second) of Torts § 767B. To recover under this cause of action, a plaintiff must prove:
“(1) the existence of a contract; (2) Defendants’ knowledge of this contract; (3) that it intended to cause
its breach; (4) its conduct caused the breach; (5) this breach resulted in damages to [the Plaintiff]; and (6)
Defendant[s] had no privilege or justification to excuse [their] conduct.” CMI, Inc. v. Intoximeters, Inc.,
918 F. Supp. 1068, 1079 (W.D. Ky. 1995). Furthermore, “[i]n Kentucky, intentional torts require proving
proximate cause.” Ventas, Inc. v. Health Care Property Investors, Inc., 635 F. Supp. 2d 612, 624 (W.D.
Ky. 2009). Such cause can be interrupted by a superseding, or intervening, cause. Id. (citation omitted).
“A superseding cause is an act of a third person or other force which by its intervention prevents the actor
from being liable for harm to another.” Id. (quotation omitted).
Jones contends that the Third-Party Defendants were aware that Jones maintained valid business
relationships with CBR, SE Book, Blackrock, and ICS, and had an expectancy that these relationships

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would continue.

He alleges that the Third-Party Defendants improperly acted to gain a financial

advantage for themselves, thus tortiously interfering with Jones’s relationship with the companies.
(Docket No. 44 at 29-30.) Namely, he argues that they provided false information about Jones to various
entities and individuals, including MacDonald, the third-party who oversaw the Joint Companies’
operations. (Docket No. 44 at 20.) According to Jones, these baseless allegations benefitted the ThirdParty Defendants and Griffin at Jones’s own expense.

He alleges that the Third-Party Defendants

disseminated false information throughout the Murray business community in an effort to interfere with
Jones’ relationships with the Joint Companies. (Docket No. 44 at 21.)
Having alleged the above facts, the Court finds that Jones has satisfied the requisite pleading
standard with regard to this claim. Although the Third-Party Defendants set forth several persuasive
arguments in their Motions to Dismiss, such arguments are more properly raised in a motion for summary
judgment. At this time, the Court will not dismiss Jones’s claim for intentional interference with business
relations against the Third-Party Defendants, as he has alleged facts sufficient to support such a claim.
IV. Jones’s abuse of process claim will be dismissed.
Finally, the Court turns to Jones’s claim for abuse of process. Abuse of process involves using a
“legal process for some other purpose than that which it was intended by the law to effect.” Raine v.
Drasin, 621 S.W.2d 895, 902 (Ky. 1981). A prima facie showing of abuse of process under Kentucky law
requires that (1) the process instituted by the defendant was for an ulterior purpose and (2) that the
defendant instituting the process must have performed a willful act in using the process that is not a part
of the regular conduct of the proceeding. See Simpson v. Laytart, 962 S.W.2d 392, 394 (Ky. 1998).
First, the Court will consider Wittman’s motion to dismiss this claim. Wittman argues that the
only specific allegation related to this claim as it relates to him asserts that he signed an involuntary
bankruptcy petition that contained an allegedly false statement:
Next, Griffin, along with Farris and Wittman, caused the filing of an
involuntary bankruptcy petition against CBR on or about October 4,
2012, falsely claiming that Griffin had loaned CBR $15,000,000,

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although he had in other legal pleadings claimed that these funds had
been used to purchase his equity interest in the Joint Companies.
(Docket No. 44 at 20.) Jones then alleges that the Defendants’ lawsuits against Jones were raised only to
punish Jones for not acceding to Griffin’s demands and to stop him from creating a company that would
compete with their own. (Docket No. 44 at 30.)
In his response brief, Jones asserts new factual allegations, pointing to the involuntary bankruptcy
petition wherein Wittman attests that CBR owed him a $158.72 debt. Jones disputes that Wittman was
actually owed this debt.

(Docket No. 64 at 22.)

However, this allegation finds no basis in the

Counterclaim; the Court must reject Jones’s attempt to amend his original pleading.

Jones contends

neither that this statement was false or that Wittman knew it was false. Jones identifies no “definite act”
that was not authorized by the process. Simpson, 962 S.W.2d at 394-95.
More generally, Jones has not alleged that the Third-Party Defendants have taken any legal action
against him. The Counterclaim itself states that the lawsuits of which Jones complains were each brought
by Jones or third-party entities. (See Docket No. 44 at 19, 22.) Jones has not properly alleged that
Cohoon has participated in the judicial process—and “[s]ince there is no process, there can be no abuse of
process.” Bonnie Braes Farms, Inc. v. Robinson, 598 S.W.2d 765 (Ky. Ct. App. 1980).
Moreover, Jones contends that the Defendants attempted to convince law enforcement authorities
to press criminal charges against Jones. (Docket No. 64 at 22.) This cannot serve as the basis of an abuse
of process claim:, which requires “the irregular or wrongful employment of a judicial proceeding,”
defined as “all acts of the court.” Bonnie Braes Farms, 598 S.W.2d at 765; see also Wigginton v. Scanlon,
2012 WL 5305077 (Ky. Ct. App. Oct. 26, 2012) (“[T]he first and most essential element of an abuse of
process claim is that there be an actual judicial process involved.”). Because Jones does not allege that
Cohoon’s alleged misdeeds involved an act of court, this allegation does not serve as an appropriate basis
for Jones’s claim.

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CONCLUSION
Therefore, for the reasons explained above, Griffin’s Motion to Dismiss will be GRANTED, and
the various Third-Party Defendants’ Motions to Dismiss will be GRANTED IN PART and DENIED IN
PART. An appropriate Order will issue concurrently with this Memorandum Opinion.

September 29, 2014

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