Strader et al v. Marshall et al

Filing 27

MEMORANDUM OPINION & ORDER granting 7 Motion to Dismiss; separate judgment entered this date. Signed by Judge Greg N. Stivers on 4/10/2015. cc: Counsel(KJA)

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF KENTUCKY
PADUCAH DIVISION
CIVIL ACTION NO. 5:14-CV-00013-GNS

JASON STRADER, et al.,

PLAINTIFFS

v.
MILTON MARSHALL, et al.

DEFENDANTS

MEMORANDUM OPINION AND ORDER
This matter is before the Court on Defendants Milton Marshall, Nell Marshall, and
Resthaven Memorial Gardens, Inc.’s Motion to Dismiss. (DN 7). This motion is ripe for a
decision, and for the reasons stated below, the Court GRANTS Defendants’ Motion.
I. BACKGROUND
Milton Marshall (“Milton”) acquired Greenhills Memorial Gardens of Christian County,
Inc. (“Greenhills”) on December 20, 1978, and operated the company until he sold it to Plaintiffs
Jason and Taunya Strader on July 20, 2012. (DN 1 at 4). Nell Marshall (“Nell”) is Milton’s wife,
and Resthaven Memorial Gardens, Inc. (“Resthaven”) is a cemetery in Clarksville, Tennessee
owned by Milton. At the time of Plaintiffs’ acquisition of Greenhills, an accounting firm1
represented to Plaintiffs that Greenhills’s trust funds were in full compliance with Kentucky law.
(DN 1 at 2, 29, 31-32).
Plaintiffs allege in their Complaint that during Milton’s ownership of Greenhills, an
enterprise consisting of the Defendants carried out a number of schemes. (DN 1 at 5-9). The first
is that Milton would allegedly write on a contract for sale of a preneed lawn crypt that the lawn

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Stone, Rudolph & Henry was initially a party to this action, but the Court has previously
dismissed the claims against that firm with prejudice. (DN 21).
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crypt had been installed at the time of sale, take the funds that by law had to be placed in trust
following such a transaction for himself rather that place it in trust, and fail to install the lawn
crypts for the buyers. (DN 1 at 5-6). The second is that Milton would allegedly sell a lawn crypt,
but instead of placing a requisite amount from the sale into trust as required by law, he would
retain the money himself.2 (DN 1 at 6). The third scheme is that Milton would allegedly sell a
mausoleum bed to customers listed as being in “Building F,” but Building F was never registered
with the Kentucky Attorney General’s office as required, and indeed was never constructed. (DN
1 at 6-7). The final scheme recited alleges that Milton would use the names of individuals whose
money was in trust as required, but who were still alive, in order to wrongfully withdraw money
from the trustee bank which was supposed to release the funds after the purchaser of a crypt or
bed died and his or her earthly remains were laid to rest as contracted. (DN 1 at 8-9). During this
final scheme, Milton would also allegedly submit the name of a deceased person a second time
in order to wrongfully withdraw additional monies from the trust. (DN 1 at 8-9).
As a result of these claimed schemes and in order for Greenhills to be in compliance with
Kentucky law, Plaintiffs would need to place an additional $2,974,4499.00 in its trust. (DN 1 at
32). Plaintiffs request this amount, punitive damages, treble damages, and an order prohibiting
Defendants from selling any capital asset with a value of $10,000.00 or more from Resthaven or
Milton’s home and yacht. (DN 1 at 32-33).
II. STANDARD OF REVIEW
Motions pursuant to Fed. R. Civ. P. 12(b)(6) require the Court “to construe the complaint
in the light most favorable to the plaintiff, accept all of the complaint’s factual allegations as

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While somewhat unclear, the Court interprets this scheme to be different from the first scheme
recited in that Milton actually installed the lawn crypts in the second scheme, where he did not in
the first.
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true, and determine whether the plaintiff undoubtedly can prove no set of facts in support of the
claims that would entitle relief.” Grindstaff v. Green, 133 F.3d 416, 421 (6th Cir. 1998).
III. DISCUSSION
Defendants’ motion rests primarily on one argument: that the Court lacks subject matter
jurisdiction. (DN 7-1 at 1). The subparts of that argument are that the Court lacks subject matter
jurisdiction pursuant to 28 U.S.C. § 1332 as not all parties are diverse, and that the Court lacks
subject matter jurisdiction under the Racketeer Influenced and Corrupt Organizations (“RICO”)
chapter of Title 18 as the requirements for such a claim have not been pleaded. (DN 7-1).
Plaintiffs agree in their response that diversity jurisdiction is lacking (DN 18 at 5), leaving only
the question of whether this Court has jurisdiction because of the presence of a properly pleaded
RICO claim.
RICO provides for criminal penalties and civil remedies when it has been violated. 18
U.S.C. §§ 1962-64. Because it contains civil remedies, RICO is a “civil action[ ] arising under
the . . . laws . . . of the United States.” 28 U.S.C. § 1331. Accordingly, a claim for civil
remedies pursuant to RICO provides a jurisdictional basis for this Court to hear a civil action.
See Williams v. Duke Energy Int’l, Inc., 681 F.3d 788, 799-803 (6th Cir. 2012); Riverview Health
Inst. LLC v. Med. Mut. of Ohio, 601 F.3d 505, 511 (6th Cir. 2010); Brown v. Cassens Transp.
Co., 546 F.3d 347, 363 (6th Cir. 2008). The Court could then elect to exercise supplemental
jurisdiction over Plaintiffs’ state-law claims pursuant to 28 U.S.C. § 1367(a), assuming that the
state-law claims “form[ed] part of the same case or controversy.” 28 U.S.C. § 1367(a).
“To state a RICO claim, a plaintiff must plead the following elements: (1) conduct (2) of
an enterprise (3) through a pattern (4) of racketeering activity.” Ouwinga v. Benistar 419 Plan
Servs., Inc., 694 F.3d 783, 791 (6th Cir. 2012) (internal quotation marks omitted) (citation

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omitted). Defendants argue that Plaintiffs have failed to sufficiently plead the existence of an
enterprise, with the result that a RICO claim has not been stated and this court lacks jurisdiction.
(DN 7-1 at 4-5, 7).
For the purposes of RICO, “enterprise” is defined 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). The latter groups, called associationin-fact enterprises, have three characteristics: “a purpose, relationships among those associated
with the enterprise, and longevity sufficient to permit these associates to pursue the enterprise’s
purpose.” Boyle v. United States, 556 U.S. 938, 948 (2009). Defendants argue that Plaintiffs have
“fail[ed] to plead facts sufficient to show that [Defendants] functioned, acted, or made decisions
together toward a common purpose.” (DN 26 at 2).
Defendants’ point is well-taken. Of the remaining three Defendants, “Nell Marshall”
appears in the complaint in the case style, in the description of the parties, in the section
describing jurisdiction and venue, in a bare allegation that she is a member of the enterprise, and
never again. See (DN 1). “Resthaven Memorial Gardens” appears in the complaint in the case
style, as an item in a list of things that Milton allegedly purchased or made payments on using
funds gained from racketeering, in Plaintiffs’ request for equitable relief in the form of an order
to prohibit Milton from selling any capital asset with a value of more than $10,000 from
Resthaven, and never again. (DN 1). All of the alleged racketeering actions alleged in Counts 11941, as well as the actions regarding an alleged inadequate bond and fraudulent concealment,
name only Milton as an actor. See (DN 1).
“[A] plaintiff cannot overcome a Rule 12(b)(6) motion to dismiss simply by referring to
conclusory allegations in the complaint that the defendant violated the law.” 16630 Southfield

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Ltd. P’ship v. Flagstar Bank, F.S.B., 727 F.3d 502, 504 (6th Cir. 2013). Instead, “a complaint
must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible
on its face,” which in turn means that “the plaintiff plead[ed] factual content that allow[ed] the
court to draw the reasonable inference that the defendant is liable for the misconduct alleged.”
Ctr. for Bio-Ethical Reform, Inc. v. Napolitano, 648 F.3d 365, 369 (6th Cir. 2011) (citation
omitted).
Plaintiffs have not provided sufficient factual matter to make a RICO claim against
Defendants plausible on its face. Taking every fact in the complaint to be true, the complaint
does not plausibly establish that Nell, Resthaven, and Milton functioned together toward a
common purpose. A bare statement that Nell is a member of the enterprise is conclusory rather
than factual. Indeed, Plaintiffs note that as to Nell, an amended complaint would be necessary.
(DN 18 at 7). The statements regarding Resthaven do not appear to assert a claim at all; rather, it
is simply listed as an interest allegedly wrongfully acquired by Milton from proceeds of
racketeering. While Plaintiffs have included a large amount of factual matter regarding Milton,
there are not sufficient factual allegations regarding Nell and Resthaven to make a plausible
argument that they were members of Milton’s alleged enterprise.
Additionally, Federal Rule of Civil Procedure 9(b) requires that, “[i]n alleging fraud or
mistake, a party must state with particularity the circumstances constituting fraud or mistake.”
Fed. R. Civ. P. 9(b). “In complying with Rule 9(b), a plaintiff, at a minimum, must allege the
time, place, and content of the alleged misrepresentation on which he or she relief; the fraudulent
scheme; the fraudulent intent of the defendants; and the injury resulting from the fraud.” Leeds v.
City of Muldraugh, 174 F. App’x 251, 254 (6th Cir. 2006) (internal quotation marks omitted)
(citing United States ex rel. Bledsoe v. Cmty. Health Sys., Inc., 342 F.3d 634, 643 (6th Cir.

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2003)). As recognized in Heinrich v. Waiting Angels Adoption Services, Inc., 668 F.3d 393 (6th
Cir. 2012):
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 the
statements were fraudulent. . . . . To allege a valid RICO claim, however, a
plaintiff must show not only that the predicate act was a but for cause of
plaintiff’s injuries, but also that it was a proximate cause.
Id. at 404 (citations omitted) (internal quotation marks omitted).
While Plaintiffs have provided information about the customers allegedly harmed in the
scheme (such as names, deed numbers, plots, and amounts paid) (DN 1-1; DN 1-2; DN 1-3, DN
1-4), they have not specified the statements which they contended are fraudulent. The statement
that a letter confirming the false contract was sent to each alleged victim is not sufficient, nor is
an allegation that Milton used the U.S. mail to make claims against the trustee bank.
Additionally, no date or even a date range has been given for any of these letters. Thus, Plaintiffs
have not satisfied the higher pleading standard of Rule 9(b).
Neither a RICO claim nor mail fraud has been properly pled as a predicate act, leaving
this matter without a claim that has an independent basis for federal jurisdiction. “[A] federal
court should typically decline to exercise pendent jurisdiction over a plaintiff’s state-law claims
after dismissing the plaintiff’s federal claims.” Brown, 546 F.3d at 363 (citations omitted). See
Reynosa v. Shultz, 282 F. App’x 386, 391 (6th Cir. 2008) (“Ordinarily, where all federal claims
have been dismissed, federal courts should decline to exercise supplemental jurisdiction over
state law claims.” (citation omitted)); Harper v. AutoAlliance Int’l, Inc., 392 F.3d 195, 210 (6th
Cir. 2004) (“Generally, if the federal claims are dismissed before trial, . . . the state claims should
be dismissed as well.” (alteration in original) (internal quotation marks omitted)); Taylor v. First

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Am. Bank-Wayne, 973 F.2d 1284, 1287 (6th Cir. 1992) (same). In keeping with Brown and other
binding case law, the Court declines to exercise jurisdiction over Plaintiffs’ remaining state law
claims.
IV. CONCLUSION
For the forgoing reasons, Plaintiffs have failed to state a claim upon which relief can be
granted. Accordingly, IT IS HEREBY ORDERED THAT Defendants’ Motion to Dismiss (DN
7) is GRANTED.

April 10, 2015

cc:

counsel of record

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