Atel Maritime Investors, LP et al v. Sea Mar Management, LLC et al

Filing 555

ORDER re dfts' 518 Motion for Summary Judgment: IT IS HEREBY ORDERED that Motion is GRANTED and that Atel's claims brought under the Louisiana Unfair Trade Practices and Consumer Protection Act and under the Racketeering Influenced and Corrupt Organizations Act are DISMISSED. Signed by Judge Nannette Jolivette Brown on 7/20/2012. (rll, ) Modified on 7/20/2012 to add text (rll).

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
ATEL MARITIME INVESTORS, LP, et al.

CIVIL ACTION

VERSUS

NO. 08-1700

SEA MAR MANAGEMENT, L.L.C., NABORS
WELL SERVICES, CO., and NABORS
INDUSTRIES, LTD.

SECTION: “G”(4)

ORDER AND REASONS
Before the Court is Defendants Nabors Industries, Ltd., Nabors Well Services Company and
Sea Mar Management, L.L.C.’s (collectively, “Defendants”) Motion for Summary Judgment,1 in
which Defendants seek summary judgment in their favor on Plaintiff Atel Maritime Investors, LP,
et al.’s (“Atel”) claims for violations of the Louisiana Unfair Trade Practices and Consumer
Protection Act2 (“LUTPA”), because the claims are time-barred under the statute’s peremptive
period.

Defendants further seek summary judgment on Atel’s claims brought under the

Racketeering Influenced and Corrupt Organizations Act3 (“RICO”) on the basis that: 1) Atel cannot
establish a pattern of racketeering activity or a RICO enterprise, necessary elements for any RICO
claim under 28 U.S.C. § 1962; and 2) Atel cannot establish specific elements necessary to support
claims under each subsection of Section 1962. Having considered the motion, the response, the
reply, the record, and the applicable law, for the following reasons, the Court will grant the motion.

1

Rec. Doc. 518.

2

La. R.S. § 51:1401, et seq.

3

18 U.S.C. § 1961, et seq.

1

I. Background
On July 7, 2004, Atel entered into two Master Bareboat Charter Agreements (“MBCA”) with
Defendant, Sea Mar Management, L.L.C. (“Sea Mar”).4 Under the MBCA, Atel granted Sea Mar
a demise charter5 for four Atel vessels (the “Atel vessels”) for a period of three years.6 The MBCA
obligated Sea Mar to “use its commercially reasonable efforts to obtain time charters for the
[v]essels and to keep the [v]essels under time charter throughout the term of this Charter.”7
To understand Atel’s allegations in this case, it is important to examine Defendants’
corporate structure. Defendant, Nabors Industries, Ltd. (“NIL”) is a holding company.8 At the time
of the contract at issue, NIL held interests in both Sea Mar and Defendant Nabors Well Services
Company (“NWS”).9 NWS was a wholly owned subsidiary of NIL, and NIL held a 25% interest
in Sea Mar.10 Additionally, the President of NWS, Van DeWitt, was a member of the board of
directors of Sea Mar.11 Atel alleges that the relationship between these companies provided the

4

Rec. Doc. 1. Atel and Sea Mar entered into two charter agreements covering four vessels. The terms of
the charter agreements are identical with the exception of the vessel names and the Atel entity involved. See Rec.
Doc. 161-4. Because the material terms are identical, the Court will treat the agreements as one agreement for the
purposes of deciding this motion.
5

A demise charter is “a charter under which the shipowner surrenders possession and control of the vessel
to the charterer, who then succeeds to many of the shipowner’s rights and obligations.” Black’s Law Dictionary 250
(8th ed. 2008).
6

Rec. Doc. 161-4 at pp. 1-2.

7

Rec. Doc. 161-4 at p. 3. A time charter is “[a] charter under which the shipowner continues to manage
and control the vessel, but the charterer designates the ports of call and the cargo carried.” Black’s Law Dictionary
250-251 (8th ed. 2008).
8

Id. at p. 16.

9

Id.

10

Rec. Doc. 161-9 at p. 21.

11

Rec. Doc. 161-6 at p. 17.

2

motive for the alleged misconduct. According to Atel, over the course of the MBCA, Sea Mar, NIL,
and NWS engaged in fraud to steal a portion of the revenues generated from time chartering the Atel
vessels.12 Atel brought claims under LUPTA13 and RICO,14 in addition to other causes of action not
relevant to the pending motion, based on this allegedly fraudulent conduct.
Under the MBCA, in exchange for Sea Mar’s commercially reasonable efforts to obtain time
charters, Atel promised to pay Sea Mar a management fee of $300 per day per vessel plus an
incentive fee of 5% of the gross daily revenues in excess of $5000 per day per vessel.15 However,
Sea Mar did not charter the vessels directly; instead, it entered into a Master Time Charter
Agreement (“MTCA”) with NWS on January 19, 2005.16 Under this agreement, NWS would locate
potential charterers, and once a customer was found, Sea Mar would charter the vessel to NWS, and
in turn, NWS would subcharter the Atel vessels to the end user at a higher rate.17 Because Sea Mar
paid Atel the revenue earned as a result of the initial charter between Sea Mar and NWS, Atel
contends that this arrangement resulted in Atel receiving less revenue than if Sea Mar had chartered
the vessels directly to the end-users.18
As a result of these events, on April 21, 2008, Atel filed the pending lawsuit.19 This case has

12

Rec. Doc. 102.

13

Rec. Doc. 259.

14

Rec. Doc. 210.

15

Rec. Doc. 161-4 at p. 12.

16

Rec. Doc. 518-3 at p. 2.

17

Id. at pp. 2-3.

18

Rec. Doc. 102 at ¶ 42.

19

Rec. Doc. 1.

3

a lengthy and complicated procedural history, which this Court finds no need to recount in detail.
This case was originally assigned to Section “I” of the Eastern District of Louisiana; it was
reassigned to this Section, Section “G”, on October 7, 2011.20
On June 2, 2012, Defendants filed a Motion for Summary Judgment, seeking summary
judgment in their favor on Atel’s LUTPA and RICO claims.21 However, that motion was filed after
a deadline set forth by this Court. Accordingly, on June 4, 2012, Defendants sought leave to file the
motion,22 which this Court granted,23 such that the pending Motion for Summary Judgment was filed
into the record on June 5, 2012.24 However, prior to this Court’s granting of leave, Atel had
previously filed its response in opposition to the June 2, 2012 Motion for Summary Judgment.25
Atel did not re-submit its opposition, and the Court considers Atel’s June 5, 2012 response as the
opposition to Defendants’ June 5, 2012 motion. After receiving this Court’s leave, Defendants filed
a reply on June 12, 2012.26

II. Law and Analysis
A. Standard of Review
Summary judgment is appropriate when the pleadings, the discovery and disclosure materials

20

Rec. Doc. 455.

21

Rec. Doc. 518.

22

Rec. Doc. 515.

23

Rec. Doc. 517.

24

Rec. Doc. 518.

25

Rec. Doc. 516.

26

Rec. Doc. 541.

4

on file, and any affidavits show that “there is no genuine issue as to any material fact and that the
movant is entitled to judgment as a matter of law.”27 When assessing whether a dispute as to any
material fact exists, the court considers “all of the evidence in the record but refrains from making
credibility determinations or weighing the evidence.”28 All reasonable inferences are drawn in favor
of the nonmoving party, but “unsupported allegations or affidavits setting forth ‘ultimate or
conclusory facts and conclusions of law’ are insufficient to either support or defeat a motion for
summary judgment.”29 If the record, as a whole, could not lead a rational trier of fact to find for the
non-moving party, then no genuine issue of fact exists and the moving party is entitled to judgment
as a matter of law.30
As here, if the dispositive issue is one on which the nonmoving party will bear the burden
of proof at trial, the moving party may satisfy its summary judgment burden merely by pointing out
that the evidence in the record is insufficient with respect to an essential element of the nonmoving
party’s claim.31 At that time, the burden shifts to the nonmoving party, who must, by submitting or
referring to evidence, set out specific facts showing that a genuine issue exists.32 The nonmoving
party may not rest upon the pleadings, but must identify specific facts that establish a genuine issue

27

Fed. R. Civ. P. 56(a); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986); Little v. Liquid Air
Corp., 37 F.3d 1069, 1075 (5th Cir. 1994).
28

Delta & Pine Land Co. v. Nationwide Agribusiness Ins. Co., 530 F.3d 395, 398-99 (5th Cir. 2008).

29

Galindo v. Precision Am. Corp., 754 F.2d 1212, 1216 (5th Cir. 1985); Little, 37 F.3d at 1075.

30

Matsushita Elec. Indus. Co. v. Zenith Radio, 475 U.S. 574, 586 (1986).

31

See Celotex, 477 U.S. at 325.

32

See id. at 324.

5

for trial.33

B. Louisiana Unfair Trade Practices and Consumer Protection Act
1. Applicable Law
LUTPA prohibits “[u]nfair methods of competition and unfair or deceptive acts or practices
in the conduct of any trade or commerce.”34 “[A] practice is considered unfair, in the context of
unfair trade practice law, when it offends public policy, and when the practice is unethical,
oppressive, unscrupulous, or substantially injurious to consumers or business competitors.”35 This
determination that conduct constitutes unfair practice is a fact-sensitive decision to be made on a
case-by-case basis.36
Under the statute, any person who suffers a loss “as a result of the use or employment by
another person of an unfair or deceptive method, act, or practice” may bring an action to recover
damages.37 Additionally, treble damages may be available for violations that continue after the
Louisiana Attorney General provides notice to a party to cease or desist its LUTPA violations.38
However, claims for violations must be brought within one year “from the time of the transaction

33

See, e.g., id. at 325; Little, 37 F.3d at 1075; Isquith ex rel. Isquith v. Middle South Utils., Inc., 847 F.2d
186, 198 (5th Cir. 1988), cert. denied, 488 U.S. 926 (1988).
34

La. R.S. § 51:1405(A).

35

Donald v. ACM Gaming Co., 921 So.2d 196, 202 (La. App. 3 Cir. 2005); see also Computer Mgmt.
Assistance Co. v. Robert F. DeCastro, Inc., 220 F.3d 396, 404 (5th Cir. 2000) (citation omitted).
36

Omnitech Int’l, Inc. v. Clorox Co., 11 F.3d 1316, 1332 (5th Cir. 1994); Donald, 921 So.2d at 202 (citing
Vermilion Hosp., Inc. v. Patout, 906 So.2d 688 (La. App. 3 Cir. 2005)).
37

La. R.S. § 51:1409(A).

38

Id.

6

or act which gave rise” to the asserted LUTPA claim.39 Louisiana courts have held that the statute
is peremptive, rather than prescriptive,40 such that the period cannot be renounced, interrupted, or
suspended41 and such that it is not subject to the doctrine of contra non valentum, which suspends
the running of prescription when the cause of action is not known or reasonably knowable by the
plaintiff.42 However, Louisiana courts have recognized that a “continuing violation” of LUTPA can
prevent the peremptive period from running.43
The continuing violation doctrine derives from tortious property damages cases, and it
requires that the injury is continuous and that the injury results in continuous damages.44 “A
continuing tort is occasioned by unlawful acts, not the continuation of the ill effects of an original,
wrongful act.”45 Mere failure to remedy a wrong does not constitute a continuous tort,46 and a
plaintiff who attempts to avail himself of the continuing tort theory bears the burden of establishing

39

La. R.S. § 51:1409(E).

40

See, e.g., Tubos de Acero de Mexico v. Am. Int’l Inv. Corp., Inc., 292 F.3d 471, 481 n.4 (5th Cir. 2002)
(citing America’s Favorite Chicken Co. v. Cajun Enters., Inc., 130 F.3d 180, 185 & n.6 (5th Cir. 1997) (citations
omitted)).
41

La. C.C. art. 3461.

42

Louisiana. v. McInnis Bros. Constr., 701 So.2d 937, 939-40 (La. 1997).

43

See, e.g., Benton, Benton, & Benton v. La. Pub. Facilities Auth., 672 So.2d 720, 723 (La. App. 1 Cir.
1996). Louisiana’s Third Circuit Court of Appeals has expressly held that LUTPA’s peremptive period is not
subject to the continuing violation doctrine. Glod v. Baker, 899 So.2d 642, 648-49 (La. App. 3 Cir. 2005), writ
denied, 920 So.2d 238 (La. 2006). However, this Court is bound by the Fifth Circuit’s opinion in Tubos de Aceros,
where the Fifth Circuit held that the continuing violation doctrine applies to the LUTPA peremptive period. 292
F.3d at 482 (noting the “tension” between the Louisiana appellate courts and agreeing with those appellate courts
that have found the continuing violation doctrine to apply to LUTPA peremption).
44

Crump v. Sabine River Auth., 737 So.2d 720, 726 (La. 1999) (rehearing denied).

45

Id. at 728.

46

Terrebonne Parish School Bd. v. Mobile Oil Corp., 310 F.3d 870, 885 (5th Cir. 2002); Crump, 737 So.2d
at 729 (“[T]he breach of the duty to right a wrong and make the plaintiff whole simply cannot be a continuing wrong
which suspends the running of prescription.”).

7

its applicability.47

2. Arguments and Analysis
Here, Defendants assert that Atel’s LUTPA claim is barred because Atel did not assert the
claim until after the LUTPA one-year peremptive period had expired and that, accordingly, the claim
must be dismissed.48 It is undisputed that Atel did not assert its claim against Defendants for
LUTPA violations until Atel sought leave to file its Third Amended Complaint on February 19,
2010.49 Likewise, it is uncontested that Defendants’ involvement with the Atel vessels ceased in
August 2007.50 Therefore, if the peremptive period began to run in August 2007, Atel’s LUTPA
claims are clearly and undisputedly perempted. However, in opposition to the motion for summary
judgment, Atel asserts that Defendants engaged in a continuing violation after August 2007, such
that the peremptive period began to run at a later date. Specifically, Atel argues that Defendants’
violations were not limited to their direct involvement with the vessels but that, instead, Defendants
“conspired to withhold material information” regarding the fee scheme previously utilized by
Defendants, in which Defendants charged higher rates for the vessels than was paid to Atel.51
In support of its position that Defendants engaged in a continuing violation, Atel relies upon

47

Id. at 877, 885-86; In re Med. Review Panel for Maria Moses, 788 So.2d 1173, 1177 (La. 2002).

48

Rec. Doc. 518-1at p. 4.

49

Rec. Doc. 237. The Third Amended Complaint was filed into the record on April 30, 2010. Rec. Doc.

259.
50

See, e.g., Rec. Doc. 516 (“ATEL further acknowledges that the Defendants’ involvement with the ATEL
vessels ceased in August 2007”).
51

Rec. Doc. 516 at p. 6.

8

two decisions from the Louisiana First Circuit Court of Appeal: Fox v. Dupree52 and Capitol House
Preservation Company v. Perryman Consultants, Inc.53

In Fox, the defendants filed a

reconventional demand against the plaintiff for violations of the Louisiana Loan Brokers’ statute,
which expressly allowed an unfair trade practices action to be brought.54 The trial judge dismissed
the unfair trade practices action for being brought out of time, despite the defendants’ arguments that
the plaintiff had engaged in a continuing violation by failing to comply with the bond filing and
disclosure requirements set forth in the statute.55 On appeal, the Louisiana First Circuit determined
that the trial judge had erred in dismissing the claims because there existed continuing violations by
virtue of the Louisiana Loan Brokers’ statute’s disclosure requirements, such that the peremption
period could not begin to run until the loan broker complied with the law.56
In Capitol House, the plaintiff was the successor in interest to a company that had been
denied a riverboat-gaming license by the defendants. The plaintiff alleged an unfair trade practices
violation by the defendants and claimed that the defendants not only conspired and participated in
a scheme to fraudulently obtain riverboat-gaming licenses but also that the defendants violated their
own continuing statutory duty to disclose fraudulent and misleading information submitted to the
Louisiana Gaming Enforcement Division.57 The trial court had found the plaintiff’s claims to be
perempted, which the plaintiff claimed was error because of the continuing violation in the

52

633 So.2d 612 (La. App. 1 Cir. 1993), writ denied, 635 So.2d 233 (La. 1994).

53

745 So.2d 1194 (La. App. 1 Cir. 1999), writ denied, 754 So.2d 937 (La. 2000).

54

La. R.S. § 51:1910-1916.

55

Fox, 633 So.2d at 613-14.

56

Id. at 614.

57

Capitol House, 745 So.2d at 1195.

9

defendants’ failure to disclose fraudulent and misleading material information submitted to the
Louisiana Gaming Enforcement Division.58 On appeal, the court found that, under Louisiana law,
the defendants had a duty to disclose and that, therefore, their actions constituted a continuing
violation such that the one year peremptive period began anew each day that the defendants violated
their duty to disclose; accordingly, the court found that the suit was not perempted.59
Thus, in both of the cases cited by Atel, a Louisiana appellate court found a continuing
violation such that the unfair trade practices claims were not perempted. However, in both Fox and
Capitol House, there existed an express, ongoing, statutory duty to disclose violations of Louisiana
law. Here, Atel has pointed to no such law that would have required Defendants to disclose their
allegedly fraudulent conduct in previously subcontracting vessels to others for an amount higher
than that disclosed to Atel. Thus, Atel has not met its burden to establish the applicability of the
continuing violation doctrine. The mere failure of Defendants to disclose their allegedly fraudulent
conduct or to remedy that conduct is not enough to constitute a continuing violation that would
extend this period, and the one-year peremption period expired in or around August 2008.60
Having found that Atel’s LUTPA claims are perempted, this cause of action will not lie and treble
damages will also be unavailable.

58

Id. at 1195-96.

59

Id. at 1196-97.

60

Additionally, the Court notes that Atel has offered no evidence that there existed any continuous damage
caused by Defendants’ failure to disclose. In arguing that Defendants engaged in a continuing violation, Atel
ignores the fact that it has not provided any evidence from which this Court could conclude that there existed
continuing damages caused by Defendants’ acts or failures to act.

10

C. Racketeering Influenced and Corrupt Organizations Act
Atel has alleged that Defendants violated RICO, which provides for civil liability for
activities committed in violation of 18 U.S.C. § 1962.61 Specifically, Atel has alleged that
Defendants violated Subsections (a), (b), (c), and (d) of Section 1962. The Fifth Circuit has
explained, that “boiled down to their essence in plain English,” these subsections state:
(a) a person who has received income from a pattern of racketeering cannot invest
that income in an enterprise.
(b) a person cannot acquire or maintain an interest in an enterprise through a pattern
of racketeering activity.
(c) a person who is employed by or associated with an enterprise cannot conduct the
enterprise’s affairs through a pattern of racketeering.
(d) a person cannot conspire to violate subsection (a), (b), or (c).62
Accordingly, “RICO claims under all four subsections necessitate: 1) a person who engages
in 2) a pattern of racketeering activity, 3) connected to the acquisition, establishment, conduct, or
control of an enterprise.”63 Moreover, each subsection carries additional elements that must be
demonstrated to establish a violation of that subsection.
Here, Defendants have not contested whether Atel has established the RICO person element;
instead Defendants argue that Atel has not established a pattern of racketeering activity, has not
established an enterprise, and has not established elements necessary to bring claims under each
subsection of Section 1962.

61

18 U.S.C. § 1964.

62

In re Burzynski, 989 F.2d 733, 741 (5th Cir. 1993).

63

Id.

11

1. Whether Atel has Established a Pattern of Racketeering Activity
a. Parties’ Arguments
Defendants argue that Atel’s RICO claims fail, even assuming that predicate acts exist,
because the alleged predicate acts do not meet the “continuity” requirement necessary to
demonstrate a pattern of racketeering activity under Supreme Court precedent.64 For support,
Defendants rely on two Fifth Circuit cases: Delta Truck & Tractor, Inc. v. J. I. Case Company65
and In re Burzynski.66
In Delta Truck & Tractor, the Fifth Circuit found that the plaintiff pled facts sufficient to
demonstrate continuity so as to establish a pattern of racketeering activity, but the Court determined
that the plaintiff failed to plead facts that established continuity as required to establish an enterprise.
Although the court found the establishment of continuity lacking as to the enterprise element rather
than the pattern of racketeering activity element, other Fifth Circuit cases have relied upon Delta
Truck & Tractor’s discussion of continuity under the enterprise element when those cases have
analyzed whether a plaintiff has established continuity regarding the pattern element.67
In Delta Truck & Tractor, the plaintiff, a company involved in the sale and repair of farm
equipment, filed suit against three corporate defendants alleging that the defendants “consolidated
[farm equipment] dealerships through numerous acts of wire and mail fraud to appropriate the

64

Rec. Doc. 518-1 (citing H.J. Inc. v. Northwestern Bell Tele., Co., 492 U.S. 229, 239 (1989); Landry v.
Air Line Pilots Ass’n Int’l, 901 F.2d 404, 432 (5th Cir. 1990)).
65

855 F.2d at 241.

66

989 F.2d at 733.

67

See Burzynski, 989 F.2d at 743; Word of Faith, 90 F.3d 118, 123 (5th Cir. 1996).; Abraham v. Singh, 480
F.3d 351, 356 (5th Cir. 2007).

12

business assets of [the plaintiff] and over 400 other terminated [farm equipment] dealers.”68 The
court held that the association-in-fact enterprise was not continuous because the plaintiff “alleged
as a pattern of racketeering activity nothing more than numerous predicate acts which were
necessary segments of an otherwise singular commercial endeavor,” namely the merger.69 The court
therefore affirmed the dismissal of the RICO claims.70
In Burzynski, the Fifth Circuit held that the plaintiff failed to sufficiently plead “continuity”
and, therefore, could not establish a pattern of racketeering activity.71 There, the plaintiff doctor
alleged that the defendant insurance company committed predicate acts for the purpose of avoiding
paying plaintiff’s just insurance claims and putting the plaintiff out of business.72 The prior acts,
which all occurred during a previous lawsuit between the two parties, consisted of the defendant
sending thirty-five letters to other insurance companies to dissuade them from paying plaintiff’s
claims during the prior litigation, filing fraudulent pleadings in the prior litigation, submitting false
grant applications, providing false information about plaintiff to federal investigators, and denying
coverage of plaintiff’s claims for patients insured by defendant.73 The court held that the plaintiff
failed to allege continuity because all of the predicate acts were “part and parcel of a single, discrete
and otherwise lawful commercial transaction,” namely defending a lawsuit.74 Thus the court, citing

68

Delta Truck & Tractor, 855 F.2d at 242.

69

Id. at 244.

70

Id.

71

989 F.2d at 742.

72

Id.

73

Id.

74

Id. at 743.

13

Delta Truck & Tractor, specifically held that the plaintiff had failed to allege a “pattern of
racketeering activity” because the plaintiff had failed to establish continuity.75
Here, Defendants argue that all of the alleged predicate acts – namely, the allegations of mail
and wire fraud in connection with Defendants’ retaining the difference in charter rates – stem from
one discrete transaction, the MBCA between Sea Mar and Atel. Defendants argue that this situation
is analogous to that in Burzynski, where the Fifth Circuit found no continuity, and thus no pattern
of racketeering, because all of the alleged predicate acts there concerned one transaction – the
defense of one lawsuit. Therefore, Defendants argue that Atel’s RICO claims must be dismissed
because Atel cannot establish continuity and, therefore, has failed to establish a pattern of
racketeering activity.
In opposition, Atel argues that the predicate acts of mail and/or wire fraud committed by
Defendants76 satisfy the requirements of close-ended continuity – one method by which a pattern
of racketeering activity may be established.77 Atel states that the predicate acts were committed over
a three year period and thus were committed over a “substantial period of time” and that it is clear
that the predicate acts were a regular way of conducting business and thus constitute close-ended
continuity.78 Atel identifies the predicate acts of mail and/or wire fraud specifically as “the
invoicing and collection of payment at higher rates then [sic] retained by NWS.”79 Atel also

75

Id. The Court addresses the requirements for establishing continuity in Section B, infra.

76

Atel notes that for the purposes of this motion, Defendants assume, without admitting, that the predicate
acts occurred.
77

Rec. Doc. 516 at p. 15.

78

Id.

79

Id. at p. 14.

14

contends that Defendants’ argument – that there is no continuity because the pattern stemmed from
the MBCA between Sea Mar and Atel – is without merit. Atel argues that Sea Mar and NWS
repeatedly entered into charters with each other and that NWS repeatedly entered into third-party
charters with other entities and that these acts did not result from the MBCA because Atel was not
a party to these charters and subcharters and so, Atel argues, Defendants are not entitled to summary
judgment on the issue of continuity.

b. Applicable Law
A pattern of racketeering activity “requires at least two acts of racketeering,”80 although the
Supreme Court has noted that “while two acts [of racketeering] are necessary, they may not be
sufficient [to establish a pattern of racketeering activity].”81 In World of Faith Outreach Center
Church, Inc. v. Sawyer,82 the Fifth Circuit explained that “[t]o establish a pattern of racketeering
activity . . . a plaintiff ‘must show that the racketeering predicates are related, and that they amount
to or pose a threat of continued criminal activity.’”83
To establish that the predicate acts are related, a plaintiff must show that “the acts have the
‘same or similar purposes, results, participants, victims, or methods of commission.’”84 To establish
continuity, a plaintiff must show “either [] a closed period of repeated conduct or [] past conduct that

80

Delta Truck & Tractor, 855 F.2d at 243 (quoting 18 U.S.C. § 1961(5)).

81

Sedima S.P.R.L. v. Imrex Co., 473 U.S. 479, 496 n. 14.

82

90 F.3d 118 (5th Cir. 1996).

83

Id. at 122 (quoting H.J. Inc., 492 U.S. at 239 (1989)).

84

Id. (quoting H.J. Inc., 492 U.S. at 440)).

15

by its nature projects into the future with a threat of repetition.”85 Here, Defendants have not
challenged that the alleged predicate acts are related; instead, Defendants assert that Atel has failed
to establish continuity.
A plaintiff may demonstrate continuity by either showing a closed-ended or open-ended
pattern of racketeering activity.86 However, the Fifth Circuit has held that it is not necessary “to
delve into the arcane concepts of close-end[ed] or open-ended continuity under RICO” when the
alleged RICO predicate acts are “part and parcel of a single, otherwise lawful transaction.”87 In such
a situation, according to the Fifth Circuit, “a ‘pattern of racketeering activity’ has not been shown.”88

c. Analysis
In this case, Atel has not shown continuity because all of the alleged predicate acts are “part
and parcel of a single, otherwise lawful transaction,”89 namely the chartering of the Atel vessels.
Atel has not provided evidence that Defendants defrauded any other parties through similar
activities, and the chartering of the Atel vessels was done by virtue of the MBCA entered into
between Atel and Sea Mar.90 Therefore, without the MBCA between Atel and Sea Mar, none of the
85

Burzynski, 989 F.2d at 742.

86

Word of Faith, 90 F.3d at 122.

87

Id. at 123.

88

Id.

89

Id.

90

Again, the Court notes that although Atel and Sea Mar entered into two charter agreements covering four
vessels, the charter agreements are identical with the exception of the vessel names and the Atel entity involved. See
Rec. Doc. 161-4. Further, the charter agreements were entered into at the same time. See id. Atel has not argued
that the existence of two charter agreements between Atel and Sea Mar demonstrates that the alleged predicate acts
were not part and parcel of a single lawful activity; instead, as noted above, Atel specifically argues that the
predicate acts did not arise from the MBCA and instead involved the subcharters entered into by NWS. Therefore,

16

alleged predicate acts would have occurred; thus the alleged predicate acts were part and parcel of
participating in the MBCA.
A review of Fifth Circuit precedent demonstrates that Atel’s contention that the predicate
acts were not part of one discrete transaction because NWS entered into many third-party
subcharters and because Atel was not a party to the contracts authorizing these third-party
subcharters is misguided. For instance, as stated above, in Burzynski, the Fifth Circuit held that the
alleged predicate acts of mail and wire fraud – which included the defendant sending thirty-five
letters to other insurance companies to dissuade them from paying plaintiff’s claims during the prior
litigation, filing fraudulent pleadings in the prior litigation, submitting false grant applications,
providing false information about plaintiff to federal investigators, and denying coverage of
plaintiff’s claims for patients insured by defendant – failed to demonstrate the necessary continuity
to establish a pattern of racketeering activity because all of the acts occurred as part of the single,
otherwise lawful transaction of defending a lawsuit.91
Likewise, in Word of Faith World,92 the plaintiff, a church, alleged that defendants violated
RICO by producing a news program about the plaintiff that the plaintiff contends was false and was
intended to drive the plaintiff out of business. The plaintiff alleged predicate acts which consisted
of the transportation of stolen computer disks; the theft of donations, church mail, and other church
property by defendants; wire fraud in the form of false statements; a scheme to deprive the plaintiff

the existence of two charter agreements between Atel and Sea Mar does not affect this Court’s reasoning.
91

Burzynski, 989 F.2d at 742-743.

92

90 F.3d at 118.

17

church of the honest services of its employees; and obstruction of justice.93 All of these acts were
allegedly done in the preparation and airing of the news report about the plaintiff church.94 The
plaintiff argued that it had demonstrated both open-ended and closed-ended continuity95; however,
the Fifth Circuit held that the alleged predicate acts failed to establish any form of continuity. The
court stated:
It is unnecessary to delve into the arcane concepts of closed-end[ed] or open-ended
continuity under RICO . . . . [W]here alleged RICO predicate acts are part and parcel
of a single, otherwise lawful transaction, a ‘pattern of racketeering activity’ has not
been shown. In this case, the alleged predicate acts occurred during the production
and airing of PrimeTime broadcasts concerning [plaintiff]. The alleged acts were all
part of a single lawful endeavor–namely the production of television news reports
concerning a particular subject . . . . [Plaintiff] has failed to plead a ‘continuity of
racketeering activity or its threat.’96
Conversely, in Abraham v. Singh,97 the Fifth Circuit determined that the plaintiffs did, in fact,
allege continuity in that the alleged predicate acts were not “part and parcel” of a single transaction.
That case, however, is distinguishable from this case. In Abraham, a number of plaintiffs brought
suit alleging that they were recruited to travel from India to the United States by defendant Chad
Chandler to work for Chandler’s company, defendant Falcon Steel.98 The plaintiffs alleged that
when they arrived in the United States, there were no jobs, defendants confiscated their passports,
they were housed in poor conditions, and defendants demanded monetary payments from the

93

Id. at 121.

94

Id.

95

Id. at 122.

96

Id. at 123 (internal citations omitted).

97

480 F.3d 351 (5th Cir. 2007).

98

Id. at 353.

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plaintiffs.99 The alleged predicate acts included money laundering, peonage, visa fraud, immigration
violations, Travel Act violations, and Hobbs Act extortion.100 The district court dismissed the
plaintiffs’ RICO claims finding that the alleged predicate acts did not pose a threat of continuing
racketeering activity.101 On appeal, the Fifth Circuit reversed, finding that the plaintiffs sufficiently
pled a pattern of racketeering activity.102 Specifically, the Fifth Circuit explained, “[u]nlike our
precedents identifying a single illegal transaction, there are multiple victims, and there is no reason
to suppose that this systematic victimization allegedly begun in November 2000 would not have
continued indefinitely had the plaintiffs not filed this lawsuit.”103 In the case now pending before
this Court, there are no other alleged victims nor are there MBCAs with other parties to sustain
Atel’s claim and establish continuity; therefore, Atel cannot establish a pattern of racketeering
activity.
Furthermore, other district courts within the Fifth Circuit have found a lack of continuity in
cases with similar fact patterns to that before this Court. For instance, in Conry v. Daugherty,104 the
court found that the plaintiff had failed to allege continuity and thus could not establish a pattern of
racketeering activity.105 In that case, the plaintiff had purchased from defendant a property, and
pursuant to a purchase agreement, the defendant allegedly promised to spend $60,000 renovating
the property and promised that he would not use substandard materials in completing the
99

Id. at 354.

100

Id.

101

Id.

102

Id. at 356.

103

Id. (citing Word of Faith, 90 F.3d at 123).

104

No. 10-4599, 2011 WL 2473959, *4-*6 (E.D. La. June 22, 2011) (Vance, C.J.).

105

Id. at *6.

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renovations.106 The plaintiff subsequently purchased the property with the defendant financing
$180,000 of the purchase price.107 The plaintiff alleged that he later learned that the defendant used
Chinese drywall throughout the house and that this created health risks. Further, the plaintiff stated
that he fell behind on his loan payments to the defendant and that the defendant made various threats
towards the plaintiff regarding the debt.108 The plaintiff alleged that the defendant engaged in
multiple acts of mail fraud, wire fraud, and extortion in relation to the sale of the property and the
subsequent debt collection as a result of these events.109 The court held, however, that these alleged
predicate acts were all part of a single transaction and, therefore, could not constitute a pattern of
racketeering activity.110
Likewise, in Young v. Scruggs,111 the plaintiffs alleged that the defendants withheld funds
that were owed to the plaintiffs by virtue of written agreements that the plaintiffs entered into with
the defendants to assist with legal services in tobacco litigation cases.112 The plaintiffs alleged that
the defendants withheld funds owed to the plaintiffs on multiple occasions in order to bribe public
officials during the course of a separate lawsuit.113 The court found that the alleged predicate acts
arose from a single contract and occurred during the course of an otherwise lawful transaction,

106

Id. at *1.

107

Id.

108

Id. at *1-*2.

109

Id. at *4.

110

Id. at *6 (citing Word of Faith, 90 F.3d at 123; Stewart v. GMAC Mortg. LLC, No. 10-149, 2011 WL
1296887, at *4 (S.D. Miss. Mar. 31, 2011); Castrillo v. Am. Home Mortg. Servicing, Inc., 670 F.Supp.2d 516, 531
(E.D. La. 2009) (Vance, C.J.)).
111

No. 09-669, 2010 WL 2301641, *6 (S.D. Miss. 2010).

112

Id. at *1, *6.

113

Id. at *5-*6.

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namely the separate lawsuit. Thus, the court held that the plaintiffs had failed to allege continuity.114
In this case, Atel alleges that Defendants engaged in a pattern of racketeering by committing
various acts of mail and wire fraud to enable Defendants to retain the difference in charter hire rates;
however, these alleged acts of fraud were “part and parcel” of an otherwise lawful transaction –
namely, the chartering of the Atel vessels, which occurred by virtue of the MBCA – a single
transaction.115 Specifically, it is undisputed that it was lawful for Sea Mar to charter the Atel vessels
pursuant to the MBCA – in fact, this was the entire purpose of the MBCA. All of the alleged
wrongful acts involved the rates solicited from the entities that eventually chartered the Atel vessels;
thus, all of these acts occurred by virtue of the one transaction – the MBCA. Moreover, unlike
Abraham, there is no reason to believe that these violations would have continued indefinitely had
Atel not filed suit116 because the MBCA that allowed Sea Mar to charter the Atel vessels was no
longer in effect between Atel and Sea Mar at the time this suit was filed and therefore, the activity
had ceased. Therefore, Atel has failed to demonstrate continuity and, in turn, has failed to establish
a pattern of racketeering activity. Thus, all of Atel’s RICO claims must be dismissed.
Having found that Atel’s RICO claims must be dismissed because Atel has failed to establish
the necessary element of a pattern of racketeering activity, the Court will not address the parties’
arguments concerning whether Atel has established an enterprise and whether Atel has established
the necessary elements for a claim under each RICO subsection.

114

Id. at *6.

115

Again, the Court will treat the agreements as one agreement for the purposes of deciding this motion.
See supra n. 4, n. 90.
116

Abraham, 480 F.3d at 356.

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III. Conclusion
Defendants have established that Atel’s LUPTA claim must fail as a matter of law because
it is undisputed that Atel did not assert this claim until after the one-year peremptive period had
expired and because Atel has not demonstrated that Defendants’ conduct amounts to a continuing
violation, which could have prevented the peremptive period from running. Further, Defendants
have established that Atel’s RICO claims fail as a matter of law because Atel cannot establish a
pattern of racketeering activity, a necessary element for claims brought under any RICO subsection.
Accordingly;
IT IS HEREBY ORDERED that Defendants’ Motion for Summary Judgment117 is
GRANTED and that Atel’s claims brought under the Louisiana Unfair Trade Practices and
Consumer Protection Act and under the Racketeering Influenced and Corrupt Organizations Act are
DISMISSED.
NEW ORLEANS, LOUISIANA, this 20th day of July, 2012.
____
_________________________________
NANNETTE JOLIVETTE BROWN
UNITED STATES DISTRICT JUDGE

117

Rec. Doc. 518.

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