Martin et al v. Magee et al

Filing 129

ORDER & REASONS: for the reasons stated, the Court DENIES plas' motion to amd cmp, STRIKES the second amd cmp, GRANTS dfts' motions to dismiss, and DISMISSES this case without prejudice to plas' ability to move for leave to amend complaint within 20 days. Signed by Chief Judge Sarah S. Vance on 6/10/2011. (rll, )

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
LLOYD RAYMOND MARTIN, III, ET
AL.

CIVIL ACTION

VERSUS

NO: 10-2786

WILLIAM M. MAGEE, ET AL.

SECTION: R(4)

ORDER AND REASONS
In this case under the Racketeer Influenced and Corrupt
Organizations Act (“RICO”), 18 U.S.C. § 1961, et seq., numerous
defendants move to dismiss.1

Additionally, plaintiffs Lloyd and

Nicole Martin and Carol Robinson move to amend the complaint.2
Because plaintiffs (1) have not adequately alleged that
defendants Mark and Kristen Graziani violated RICO, and (2) have
not adequately alleged that their injuries were proximately
caused by the remaining defendants’ activities, the Court GRANTS

1

R. Doc. 27, 29, 32, 34, 35, 51, 55, 57.

2

R. Doc. 83.

defendants’ motions to dismiss, DENIES plaintiffs’ motion to
amend the complaint, and STRIKES the second amended complaint.

I.

Background

A.

Factual Background
This case involves an alleged scheme by defendants, led by

William Magee, to obtain numerous properties by filing fraudulent
actions in state court based on false quitclaim deeds.

After the

properties changed hands multiple times, the Martins eventually
bought one of these properties, and Carol Robinson bought
another.

Plaintiffs assert that they have been injured by

defendants’ scheme because their title to the properties is
defective.
In their complaint and RICO case statement, plaintiffs
allege that defendants fraudulently obtained fifteen separate
properties under this scheme.

For purposes of this background,

the Court will focus on the alleged scheme as it relates to the
properties owned by plaintiffs.

At this motion to dismiss stage,

the Court will assume the truth of plaintiffs’ plausible factual
allegations.

i.

Martin Property

2

The property where the Martins currently reside (the “Martin
Property”) is located in the Town of Abita Springs in St. Tammany
Parish, Louisiana.

On February 14, 2001, defendant Hickory Glade

Inc. conveyed by quitclaim deed any interest it had in a larger
parcel that includes the Martin Property to defendant William
Magee in exchange for ten dollars.

Hickory Glade is a Louisiana

corporation created by William Magee, and its officers are
defendants William Magee, Karen Magee, and Timothy Dunaway.
According to plaintiffs, the record owner of that larger parcel
(the “Nill Property”) at the time of the February 14, 2001
conveyance was William C. Nill, who bought it on May 6, 1959.
Plaintiffs assert that Hickory Glade had no ownership interest in
the Nill Property at that time.

Thus, according to plaintiffs,

Magee essentially used a quitclaim deed to transfer a nonexistent
interest in the Nill Property to himself.
On April 9, 2002, Magee filed a petition for declaratory
judgment in the 22nd Judicial District Court of Louisiana.

In

that petition, Magee alleged that he had been in possession of
the Nill Property for one year.

Magee asked the court to

recognize his ownership of the property if the absent Nill
defendants did not file a petitory action asserting any adverse
claim of ownership within thirty days.

The court appointed

defendant Salvador Liberto as curator to represent the absent
3

owner, but plaintiffs allege that Liberto did not contact William
Nill’s heirs.

The state court granted a default judgment to

Magee on September 13, 2002.
In March of 2004, Magee conveyed the property to Matthew
Organ, who conveyed the property back to Magee in April of that
year.

Then, on April 28, 2005, Magee donated a 26.5 percent

interest in the portion of the Nill Property containing the
Martin Property to the Great Commission Foundation of Campus
Crusade for Christ, Inc.

Magee and the Great Commission sold

that parcel to Buddy Coate, L.L.C. (or a related Buddy Coate
entity) on May 25, 2005.

On August 16, 2005, Buddy Coate,

represented by Magee, filed a petition for declaratory judgment
and to quiet title in the 22nd Judicial District Court requesting
that the court recognize its right to possess the property.

The

state court granted default judgment to Buddy Coate on December
20, 2005.
Buddy Coate built homes on the property and then sold the
individual lots.

On October 13, 2005, Buddy Coate sold the

Martin Property to Mark and Kristen Graziani with full warranty
of title.

Then, on January 31, 2007, the Grazianis sold the

property to the Martins with full warranty of title.

On that

date, the Martins also obtained title insurance on the property
from Fidelity National Title Insurance Company, Inc.
4

In December of 2008, the Martins were preparing to sell the
property when they were informed by the closing agent for the
purchaser that there was a problem with the title.

The Martins

were unable to sell the property, and they still own it today.

ii.

Robinson Property

The property where Carol Robinson resides (the “Robinson
Property”) is also a part of the Nill Property and was subject to
the February 14, 2001 quitclaim deed and the September 13, 2002
state court judgment in favor of Magee.

The Robinson Property is

located in a portion of the Nill Property that Magee donated in
full to the Great Commission, which then sold the property to
Scoggin Homes, Inc. on June 4, 2004.

Scoggin built homes on the

property and sold the Robinson Property to Frank and Tonia Costa
on October 6, 2005.

On May 5, 2008, the Costas sold the property

to Carol Robinson, who owns it today.

iii. Other Properties
Plaintiffs also allege that defendants fraudulently obtained
or attempted to obtain thirteen other properties under this
scheme.

Each property follows the same general pattern, but the

defendants did not always play the same roles.

According to

plaintiffs, Hickory Glade conveyed many of the properties by
5

quitclaim deed to other participants in the scheme.

William

Magee and Landmark Properties, acting through its officer Glynn
Dykes, both sold and obtained properties using quitclaim deeds
under the alleged scheme.

Acquisitive Prescription, LLC, now

known as A.P.-St. Tammany, LLC and co-owned by William Magee and
Glynn Dykes, allegedly obtained properties in this manner as
well.

Plaintiffs also allege that Karen Magee fraudulently sold

one property to William Magee and obtained another property under
the scheme.

Salvador Liberto was appointed curator for most of

the properties and allegedly failed to contact the record owners.
Phillip Lynch was the curator for one property and allegedly
acquired another property as well.

Additionally, Mary Devereaux,

William Magee’s law partner, and Charlene Kazan, a law associate,
allegedly filed petitions and facilitated sales under the scheme.

B.

Procedural Background
Before setting out the procedural history of this RICO case,

it is necessary to have an understanding of two related cases
that are also before this Court.

On June 29, 2009, the Martins

sued Fidelity National Title Insurance Company (Case No. 094195).

In that case, the Martins allege that Fidelity breached

the title insurance policy it issued to them and, in doing so,
violated certain Louisiana statutes.
6

Fidelity then filed a

third-party complaint against William Magee, the Great
Commission, the Buddy Coate entities, James Coate, and the
Grazianis.3

Fidelity alleges that to the extent it is liable to

plaintiffs under the title insurance policy, the third-party
defendants are liable to Fidelity for breach of warranty of title
and warranty against eviction.

The Grazianis then filed a cross-

claim against the other third-party defendants on the same
grounds.4

Judge Mary Ann Lemmon dismissed the case for failure

to meet the amount in controversy requirement on August 18,
2010,5 but then vacated that order on November 10, 2010.6

In the

meantime, the Martins filed another action against Fidelity and
its officer Ronald Wood (Case No. 10-3595), but that case has
been dormant since Judge Lemmon vacated the dismissal in the
original action.
Returning to the original action against Fidelity, on
December 15, 2010, Judge Lemmon denied a motion for summary
judgment filed by William Magee, James Coate, and the Buddy Coate

3

Case No. 09-4195, R. Doc. 8.

4

Case No. 09-4195, R. Doc. 24.

5

Case No. 09-4195, R. Doc. 85.

6

Case No. 09-4195, R. Doc. 97.
7

entities.7

The Court held that the third-party claims against

those defendants were not foreclosed by the Rooker-Feldman
doctrine and that there are genuine issues of material fact as to
whether the Martins’ title to the property is unmerchantable.
The Martins have now filed a motion for summary judgment in that
case,8 and that motion is pending.

The case was then transferred

to this Section of the Court.9
Meanwhile, the Martins and Carol Robinson filed this RICO
action on August 19, 2010 against William Magee; his law firm
William M. Magee, APLC; Acquisitive Prescription, LLC and its
successor A.P.-St. Tammany, LLC; Karen Jean Hokanson Magee;
Hickory Glade, Inc.; Timothy K. Dunaway; Mary Devereaux; Salvador
Liberto, Jr.; Phillip Lynch, Jr.; Charlene Ory Kazan; Glynn T.
Dykes; Landmark Properties of St. Tammany, Inc.; Kimberly Russo
Scoggin; Steven W. Scoggin; Scoggin Homes, Inc.; James G. Coate,
Jr.; Buddy Coate, LLC; Mark J. Graziani; Kristen Taylor Graziani;
John and Jane Doe Public Officials and Private Persons; and XZY
Title, Lender, and Other Insurance Companies.10

7

Case No. 09-4195, R. Doc. 105.

8

Case No. 09-4195, R. Doc. 111.

9

Case No. 09-4195, R. Doc. 126.

10

Case No. 10-2786, R. Doc. 1.
8

In their

complaint and RICO case statement, plaintiffs allege that the
defendants committed numerous predicate acts of racketeering and
violated 18 U.S.C. § 1962(a), (c), and (d).

The alleged

predicate acts include theft, filing of false public records,
corrupt influencing of judges, extortion, wire fraud, mail fraud,
and tax fraud, among others.

Defendants now move to dismiss on

numerous grounds.

II.

Standard
To survive a Rule 12(b)(6) motion to dismiss, the plaintiffs

must plead enough facts “to state a claim to relief that is
plausible on its face.”

Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949

(2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 547
(2007)).

A claim is facially plausible when the plaintiff pleads

facts that allow the court to “draw the reasonable inference that
the defendant is liable for the misconduct alleged.”
S.Ct. at 1949.

Iqbal, 129

A court must accept all well-pleaded facts as

true and must draw all reasonable inferences in favor of the
plaintiff.

Lormand v. U.S. Unwired, Inc., 565 F.3d 228, 232-33

(5th Cir. 2009); Baker v. Putnal, 75 F.3d 190, 196 (5th Cir.
1996).

But the Court is not bound to accept as true legal

conclusions couched as factual allegations.
1949-50.
9

Iqbal, 129 S.Ct. at

A legally sufficient complaint must establish more than a
“sheer possibility” that plaintiffs’ claim is true.

Id.

It need

not contain detailed factual allegations, but it must go beyond
labels, legal conclusions, or formulaic recitations of the
elements of a cause of action.

Twombly, 550 U.S. at 555.

In

other words, the face of the complaint must contain enough
factual matter to raise a reasonable expectation that discovery
will reveal evidence of each element of the plaintiffs’ claim.
Lormand, 565 F.3d at 255-57.

If there are insufficient factual

allegations to raise a right to relief above the speculative
level, Twombly, 550 U.S. at 555, or if it is apparent from the
face of the complaint that there is an insuperable bar to relief,
Jones v. Bock, 549 U.S. 199, 215 (2007); Carbe v. Lappin, 492
F.3d 325, 328 & n.9 (5th Cir. 2007), the claim must be dismissed.

III. Discussion
Defendants argue that plaintiffs’ RICO claims must be
dismissed on numerous grounds, including the proximate cause
requirement for RICO actions.

Defendants also contend that the

complaint does not adequately allege that they committed
predicate acts of racketeering, formed a RICO enterprise, or
violated 18 U.S.C. § 1962(a), (c), and (d).

10

RICO claims under section 1962 require, inter alia, “1) a
person who engages in 2) a pattern of racketeering activity, 3)
connected to the acquisition, establishment, conduct or control
of an enterprise.”

Abraham v. Singh, 480 F.3d 351, 355 (5th Cir.

2007) (quoting Word of Faith World Outreach Ctr. Church, Inc. v.
Sawyer, 90 F.3d 118, 122 (5th Cir. 1996)).

To allege a “pattern

of racketeering activity,” a plaintiff must show that the
defendant committed two or more predicate offenses that are (1)
related and (2) amount to or pose a threat of continued criminal
activity.
(1989).

H.J. Inc. v. Nw. Bell Tel. Co., 492 U.S. 229, 239

Predicate offenses include violations of certain state

and federal laws, as set out in 18 U.S.C. § 1961(1).

The

enterprise those acts are connected to need not be formal, but
may be an association-in-fact built around a common purpose.
Boyle v. United States, 129 S.Ct. 2237, 2244 (2009).
Plaintiffs allege that defendants violated the RICO
provisions of 18 U.S.C. § 1962(a), (c), and (d).

Subsection (a)

prohibits any person from investing income derived from a pattern
of racketeering activity in an enterprise.

Subsection (c)

prohibits any person employed by or associated with an enterprise
from conducting or participating in the conduct of the enterprise
through a pattern of racketeering activity.

11

Finally, subsection

(d) prohibits any person from conspiring to violate subsections
(a), (b), or (c).
The private cause of action for RICO violations is provided
in 18 U.S.C. § 1964(c), which states that “[a]ny person injured
in his business or property by reason of a violation of section
1962 of this chapter may sue therefor in any appropriate United
States district court and shall recover threefold the damages he
sustains and the cost of the suit, including a reasonable
attorney’s fee . . . .”

The Supreme Court has found that the “by

reason of” language requires not only that a RICO predicate
offense was the “but for” cause of the plaintiff’s injury, but
also that it was the proximate cause of the injury.

Hemi Group,

LLC v. City of New York, 130 S.Ct. 983, 989 (2010) (quoting
Holmes v. Sec. Investor Prot. Corp., 503 U.S. 258, 268 (1992))
(requiring “some direct relation between the injury asserted and
the injurious conduct alleged”).
After reviewing the pleadings, the Court finds that
plaintiffs have not adequately alleged that the Grazianis
committed any predicate acts of racketeering or violated section
1962.

Further, the Court finds that plaintiffs have not

adequately alleged proximate causation as to the remaining
defendants.

The Court will address these issues in turn.

12

A.

Mark and Kristen Graziani
Plaintiffs allege that after the Grazianis bought the Martin

Property, the Grazianis were informed of the defect in their
title when they attempted to refinance their mortgage.

The

Grazianis allegedly sold the property to the Martins with full
warranty of title without revealing that defect.

Further,

plaintiffs allege that Mark Graziani steered the closing of the
sale to Mahoney Title because he knew that Mahoney Title would
not diligently perform the title examination.

Plaintiffs allege

that these acts constitute obstruction of justice under 18 U.S.C.
§ 1503, interference with commerce by threats or violence under
18 U.S.C. § 1951, mail fraud under 18 U.S.C. § 1341, wire fraud
under 18 U.S.C. § 1343, and bank fraud under 18 U.S.C. § 1344.
As is demonstrated below, plaintiffs have not adequately alleged
that the Grazianis committed any such predicate acts, eliminating
any liability under the substantive RICO provisions of 18 U.S.C.
§ 1962(a) and (c).

See Salinas v. United States, 522 U.S. 52,

65-66 (1997) (defendant who did not commit two predicate acts
cannot be liable under RICO’s substantive provisions but may
still be liable for conspiracy under section 1962(d)).

Further,

plaintiffs have failed to state claims against the Grazianis
under section 1962(a), (c), or (d).

Therefore, plaintiffs’

claims against the Grazianis must be dismissed.
13

i. Predicate Acts
Plaintiffs have not adequately alleged that the Grazianis
committed any predicate acts of racketeering under 18 U.S.C. §
1961(1).

First, plaintiffs have not adequately alleged that the

Grazianis obstructed justice under 18 U.S.C. § 1503.
“Obstruction of justice involves any attempt to impede the due
administration of justice.”
252, 262 (5th Cir. 1998).

United States v. Cihak, 137 F.3d

For defendants to have obstructed

justice, “there must have existed a pending judicial proceeding
at the time that defendants acted.”

Id. at 263.

Further,

defendants must have had specific intent to influence, obstruct,
or impede the due administration of justice.
388 F.3d 507, 514 (5th Cir. 2004).

Alwan v. Ashcroft,

Plaintiffs have not alleged

that any of these elements are true with respect to the
Grazianis, and their bare allegation that the Grazianis
obstructed justice is insufficient.
Further, plaintiffs have not adequately alleged that the
Grazianis interfered with commerce by threats or violence under
the Hobbs Act, 18 U.S.C. § 1951.

A defendant violates the Hobbs

Act by committing, or attempting or conspiring to commit, “a
robbery or act of extortion that caused an interference with
interstate commerce.”
(5th Cir. 2007).

United States v. Mann, 493 F.3d 484, 494

Plaintiffs have not alleged that the Grazianis
14

committed, or attempted or conspired to commit, any act of
robbery or extortion, nor that any such act interfered with
interstate commerce.

Plaintiffs merely assert that the Grazianis

violated 18 U.S.C. § 1951, which is clearly insufficient.
Additionally, plaintiffs allege that the Grazianis committed
wire fraud and mail fraud.

The elements of wire fraud are “(1) a

scheme to defraud, and (2) the use of, or causing the use of,
wire communications in furtherance of that scheme.”

United

States v. Rush, 236 F. App’x 944, 947 (5th Cir. 2007).

“The

elements of mail fraud are (1) a scheme to defraud; (2) use of
the mails to execute the scheme; and (3) the specific intent on
the part of the defendant to defraud.”

United States v. Smith,

46 F. App’x 225, 2002 WL 1939843, at *2 (5th Cir. July 16, 2002).
Plaintiffs allege generally that the “named defendants” committed
mail and wire fraud by “using the United States Mail” and “the
communications systems in conveyance of their falsified
documents, public records, and other instruments and by
conveyance of false and unlawful pleadings, petitions, motions
and requests for judgment.”11

Plaintiffs do not, however,

specify a single wire or mail communication that was an incident
to an essential part of the Graziani’s alleged scheme.

11

R. Doc. 1 at ¶297 & 300.
15

See

Schmuck v. United States, 489 U.S. 705, 712 (1989) (mailing must
be incident to an essential part of the scheme to constitute mail
fraud); Old Time Enterprises, Inc. v. International Coffee Corp.,
862 F.2d 1213, 1218 (5th Cir. 1989) (dismissing RICO claim when
plaintiff did not indicate “the content of the communications or
how or in what manner they violated” the mail and wire fraud
statutes).

Thus, plaintiffs have not adequately pleaded the

elements of mail and wire fraud as to the Grazianis.12
Plaintiffs also allege that the Grazianis committed bank
fraud under 18 U.S.C. § 1344.

The elements of bank fraud are

that the defendant “knowingly executed or attempted to execute a
scheme or artifice 1) to defraud a financial institution or 2) to
obtain any property owned by, or under the custody or control of
a financial institution by means of false or fraudulent
pretenses, representations or promises.”

United States v.

Odiodio, 244 F.3d 398, 401 (5th Cir. 2001).

Further, the

financial institution must be FDIC insured, and the defendant
must have placed that institution at risk of civil liability.
Id.

Plaintiffs have not specified how any of the elements of

12

Even if plaintiffs could cure these deficiencies, they
have not adequately alleged that the Grazianis violated RICO
section 1962, as discussed infra.
16

bank fraud apply to the Grazianis or even explained in general
terms how the Grazianis committed bank fraud.
Plaintiffs have failed to adequately allege that the
Grazianis committed any predicate acts, much less the two
predicate acts necessary to form a pattern of racketeering
activity.

Thus, plaintiffs’ claims against the Grazianis under

section 1962(a) and (c) must be dismissed.

ii. Section 1962
Even if plaintiffs did adequately allege that the Grazianis
committed two predicate acts of racketeering, their allegations
that the Grazianis violated section 1962(a), (c), and (d) are
inadequate.

Plaintiffs’ RICO claims against the Grazianis must

therefore be dismissed.

a. Section 1962(a)
Plaintiffs do not state a claim against the Grazianis, or
indeed any defendants, under section 1962(a).

That subsection

prohibits any person from investing income derived from a pattern
of racketeering activity in an enterprise.

To state a claim

under section 1962(a), plaintiffs must allege that they were
injured by defendants’ “use or investment of racketeering
income.”

Abraham v. Singh, 480 F.3d 351, 356 (5th Cir. 2007)
17

(quoting St. Paul Mercury Ins. Co. v. Williamson, 224 F.3d 425,
441 (5th Cir. 2000)).

An injury arising “solely from the

predicate racketeering acts themselves is not sufficient.”
Abraham, 480 F.3d at 356 (quoting Nolen v. Nucentrix Broadband
Networks Inc., 293 F.3d 926, 929 (5th Cir. 2002)).
Here, plaintiffs’ injuries flow, albeit indirectly, from the
alleged predicate acts of racketeering, not from any use or
investment of racketeering income by defendants.

In fact,

plaintiffs admit in their case statement that “[t]he Martins and
Robinson have not alleged that they were injured by the
Enterprise and its associates’ reinvestment of money acquired
through their racketeering activities[.]”13

Thus, plaintiffs

have not stated a claim under section 1962(a).

b. Section 1962(c)
Plaintiffs have also failed to state a claim against the
Grazianis under section 1962(c).

That section makes it unlawful

for “any person employed by or associated with any enterprise . .
. to conduct or participate, directly or indirectly, in the
conduct of such enterprise’s affairs through a pattern of
racketeering activity[.]”

13

In order to meet the “conduct or

R. Doc. 5 at 49.
18

participate” language of the statute, a defendant must
“participate in the operation or management of the enterprise
itself.”

Reves v. Ernst & Young, 507 U.S. 170, 185 (1993).

A

defendant need not direct the affairs of an enterprise to fall
under this subsection, but the defendant must take part in its
operation or management.

Id. at 179; United States v.

Posada-Rios, 158 F.3d 832, 856 (5th Cir. 1998).

In Reves, the

Court noted that an enterprise may be operated or managed “not
just by upper management but also by lower rung participants in
the enterprise who are under the direction of upper management”
or “by others ‘associated with’ the enterprise who exert control
over it as, for example, by bribery.”

507 U.S. at 184.

The

Reves Court went on to hold that an accounting firm that
allegedly failed to inform plaintiffs of a defendant’s financial
condition did not meet this test.

Id. at 186.

Plaintiffs have not adequately alleged that the Grazianis
participated in the operation or management of the purported RICO
enterprise.

Plaintiffs contend that William Magee was the

mastermind of the criminal enterprise, but they do not allege
that the Grazianis had any contact with Magee.

Rather, Magee and

the Grazianis are separated by the intermediate purchasers of the
property.

The Grazianis’ only relationship with the other

purported members of the enterprise was as innocent buyers of the
19

property.

Plaintiffs assert that the Grazianis did not even

learn of the title defect until they attempted to refinance their
mortgage, which occurred after they bought the Martin Property.
Plaintiffs allege that after the Grazianis learned of the defect,
they sold the property to the Martins with full warranty of title
without revealing that defect.

Further, according to plaintiffs,

Mark Graziani steered the closing of the sale to Mahoney Title
knowing that it would not use due diligence in performing the
title examination.

These allegations, if true, may demonstrate

that the Grazianis committed a separate fraud after learning that
they had themselves been defrauded.

Notwithstanding their

alleged subsequent fraud, the Grazianis’ only association with
the enterprise was as its victims.

See Collective Federal Sav.

v. Creel, 746 F.Supp. 1307, 1309 (M.D. La. 1990) (“The purpose of
RICO statutes is to reach the racketeer, not the victims.”).

The

allegations do not indicate that the Grazianis played any part in
the operation or management of the alleged scheme to take
properties from their rightful owners, and plaintiffs therefore
have not stated a claim against the Grazianis under section
1962(c).

c. Section 1962(d)

20

Plaintiffs have also failed to state a claim against the
Grazianis under section 1962(d), which prohibits any person from
conspiring to violate subsections (a), (b), or (c).

The elements

of a RICO conspiracy are “(1) that two or more people agreed to
commit a substantive RICO offense and (2) that the defendant knew
of and agreed to the overall objective of the RICO offense.”
United States v. Posada-Rios, 158 F.3d 832, 857 (5th Cir. 1998).
“[B]ecause the core of a RICO civil conspiracy is an agreement to
commit predicate acts, a RICO civil conspiracy complaint, at the
very least, must allege specifically such an agreement.”

Abraham

v. Singh, 480 F.3d 351, 357 (5th Cir. 2007) (quoting Crowe v.
Henry, 43 F.3d 198, 206 (5th Cir. 1995)).
Plaintiffs allege broadly that all of the defendants entered
into an agreement to breach section 1962(c).

In particular,

plaintiffs allege that “[t]here was a tacit understanding and
more between the defendants that objectively manifested an
agreement to participate directly, or indirectly, in the affairs
of [the] enterprise through the commission of two or more
predicate acts.”14

Simply alleging the existence of an

agreement, however, is not sufficient.

In Bell Atlantic Corp. v.

Twombly, 550 U.S. 544 (2007), plaintiffs alleged that defendants

14

R. Doc. 1 at ¶307; see also R. Doc. 5 at 51 (similar
allegations in RICO case statement).
21

made an agreement in restraint of trade or commerce in violation
of the Sherman Act, 15 U.S.C. § 1.

The Court ruled that

plaintiffs’ complaint had to contain factual allegations
“plausibly suggesting” that such an agreement was made.
556-57.

Id. at

Plaintiffs’ “legal conclusions” that an agreement

existed were insufficient, and the Court dismissed plaintiffs’
claim for conspiracy in restraint of trade.

Id. at 564.

The facts that plaintiffs allege do not plausibly suggest
that the Grazianis entered into an agreement in furtherance of a
RICO conspiracy.

To the contrary, plaintiffs’ allegation that

the Grazianis participated in the conspiracy is distinctly
implausible.

Plaintiffs do not allege that the Grazianis had any

contact with Magee, and the Grazianis’ only contact with any of
the other members of the purported conspiracy was as innocent
buyers of the property.

Further, the Grazianis did not learn of

the defect in their title to the property until they later
attempted to refinance their mortgage.

It simply makes no sense

to suggest that the Grazianis agreed to enter the conspiracy, but
found out about the title defect only after they bought the
property.

Thus, plaintiffs’ conspiracy claim against the

Grazianis under section 1962(d) must be dismissed.
Because plaintiffs have not adequately alleged that the
Grazianis committed any predicate acts of racketeering or
22

violated section 1962, plaintiffs’ claims against the Grazianis
must be dismissed.

B.

Proximate Causation as to the Remaining Defendants
With the elimination of the claims against the Grazianis,

plaintiffs have not adequately alleged proximate causation as to
the remaining defendants.

Under the proximate cause requirement,

which stems from section 1964(c), plaintiffs must show a “direct
relation” between the injury plaintiffs suffered and a RICO
predicate offense.

Hemi Group, LLC v. City of New York, 130

S.Ct. 983, 989 (quoting Holmes v. Sec. Investor Prot. Corp., 503
U.S. 258, 268 (1992)).

Proximate cause does not exist if the

relationship between the injury and the offense is “too remote,
purely contingent, or indirect.”

Hemi Group, 130 S.Ct. at 989

(2010) (quoting Holmes, 503 U.S. at 268) (internal quotation
marks and brackets removed).

Thus, a plaintiff whose injury

flows from the harm a defendant causes to a third party cannot
recover under RICO.

Holmes, 503 U.S. at 268-69.

The Supreme Court first set out the proximate causation
requirement for RICO claims in Holmes v. Sec. Investor Prot.
Corp., 503 U.S. 258 (1992).

In that case, the Securities

Investor Protection Corporation alleged that the defendant
manipulated stock in which certain broker-dealers had invested.
23

When the stock later declined, the broker-dealers were unable to
meet their obligations to their customers, and SIPC had to
advance funds to cover those customer’s claims.

Id. at 262-63.

The Court held that even if SIPC were subrogated to the rights of
the customers, “the link is too remote between the stock
manipulation alleged and the customers’ harm, being purely
contingent on the harm suffered by the broker-dealers.”
271.

Id. at

Thus, the RICO claims did not satisfy the proximate

causation requirement.
In deciding that proximate causation is required in order to
bring a RICO claim, the Holmes Court noted that Congress modeled
section 1964(c) on the civil action provision of the federal
antitrust laws, section 4 of the Clayton Act, which reads in
relevant part:
any person who shall be injured in his business or
property by reason of anything forbidden in the
antitrust laws may sue therefor . . . and shall recover
threefold the damages by him sustained, and the cost of
suit, including a reasonable attorney’s fee.
503 U.S. at 267 (quoting 15 U.S.C. § 15).

The Supreme Court set

out the proximate cause requirement under the Clayton Act in
Associated General Contractors of Cal., Inc. v. Carpenters, 459
U.S. 519 (1983).

In that case, the Court noted the similarity

between the effort to define “proximate cause” in the common law
and “the struggle of federal judges to articulate a precise test
24

to determine whether a party injured by an antitrust violation
may recover treble damages.”

Id. at 535-36.

Further, the Court

had earlier ruled in Illinois Brick Co. v. Illinois, 431 U.S. 720
(1977), that only overcharged direct purchasers, not subsequent
indirect purchasers, may recover treble damages under section
four of the Clayton Act.

Id. at 735-36.

Treble damages are also

available under RICO, and the Court has found that the same
concerns about when a plaintiff may bring suit and recover such
damages under the Clayton Act inform the proximate cause
determination under RICO.
Thus, relying on Associated General Contractors, the Holmes
Court set out three reasons why recovery under RICO must be
limited to plaintiffs who were directly injured by a defendant.
First, requiring a direct relationship between the plaintiff’s
injury and the defendant’s conduct mitigates the need to
“ascertain the amount of a plaintiff’s damages attributable to
the violation, as distinct from other, independent, factors.”
503 U.S. at 269 (citing Associated General Contractors, 459 U.S.
at 542-43).

Second, the direct injury requirement means that

courts are not required “to adopt complicated rules apportioning
damages among plaintiffs removed at different levels of injury
from the violative acts, to obviate the risk of multiple
recoveries.”

Holmes, 503 U.S. at 269 (citing Associated General
25

Contractors, 459 U.S. at 543-44).

Finally, “directly injured

victims can generally be counted on to vindicate the law” without
raising these concerns.

Holmes, 503 U.S. at 269-70 (citing

Associated General Contractors, 459 U.S. at 541-42).

As the

following cases demonstrate, courts look to these policy concerns
to determine whether the proximate cause requirement is met.
The Supreme Court next considered RICO’s proximate cause
requirement in Anza v. Ideal Steel Supply Corp., 547 U.S. 451
(2006).

In Anza, a steel mill products supplier allegedly failed

to charge New York sales tax to cash-paying customers, which
allowed it to reduce its prices and injured the plaintiff, its
principal competitor.

Id. at 454.

The Court held that the

plaintiff could not maintain its claim under section 1962(c)
because the State of New York, not the plaintiff, was the direct
victim of the defendant’s conduct, and many independent factors
could have caused the defendant to lower its prices.

Id. at 458.

The Court further held that the plaintiff did not meet the
proximate cause requirement simply by alleging that the
defendant’s intent was to harm the plaintiff.

Id. at 460-61.

Rather, the “central question” is “whether the alleged violation
led directly to the plaintiff’s injuries.”

Id. at 461.

The Supreme Court then found that the RICO proximate cause
requirement was met in Bridge v. Phoenix Bond & Indem. Co., 553
26

U.S. 639 (2008).

In that case, plaintiffs and defendants were

bidders in yearly public auctions of tax liens held by Cook
County, Illinois.

Each bidder in these auctions was required to

submit bids in its own name and was prohibited from using agents
or related entities to submit simultaneous bids.

Plaintiffs

alleged that defendants fraudulently obtained a disproportionate
share of the tax liens by entering bids in violation of the
single, simultaneous bidder rule, causing plaintiffs to lose the
opportunity to acquire those liens.

Id. at 642-46.

The Court

held that plaintiffs’ injury was the direct result of defendants’
alleged fraud, unlike in Holmes and Anza, because no independent
factors accounted for the injury, there was no risk of
duplicative injuries, and no other victim was more directly
injured.

Id. at 658.

Thus, the proximate causation requirement

was satisfied.
The most recent Supreme Court decision on the topic of
RICO’s proximate causation requirement is Hemi Group, LLC v. City
of New York, 130 S.Ct. 983 (2010).

Hemi Group, which sold

cigarettes online, allegedly failed to provide certain customer
information to the State of New York that was required by federal
law.

That failure meant that the State could not pass on that

information to the City of New York, which therefore could not
use the information to determine which customers failed to pay
27

its tax on the possession of cigarettes.

Id. at 987.

The Court

held that the proximate causation requirement was not met because
the link between the defendant’s alleged fraud and the harm to
the City was very attenuated.

Id. at 990.

Further, the Court

noted that the State, which also charges cigarette taxes, was
better situated to seek recovery than the City.

Id.

The Court

also ruled that “the directness of the relationship between the
conduct and the harm,” not the foreseeability of the harm, is the
“focus” of the proximate cause analysis.

Id. at 991.

Based on these principles, plaintiffs’ RICO claims under
sections 1962(a), (c), and (d) do not meet the proximate
causation requirement.

Plaintiffs discuss injuries to numerous

individuals and entities in the complaint, but section 1964(c)
requires that the plaintiffs’ injuries be proximately caused “by
reason of” the RICO violation.

Plaintiffs also purport to bring

claims on behalf of “John & Jane Doe Property Owners,” but they
do not bring a class action, and there is no indication that they
have standing to bring claims on behalf of others.

Thus, in

evaluating proximate cause, the Court will look only to the
injuries that the Martins and Carol Robinson allegedly suffered.
Plaintiffs allege that their injuries consist of the loss of
clear and merchantable title to their property, loss of value of
the property because of those defects, loss of profits due to
28

inability to sell the property, mental anguish over these
property injuries, and the costs of retaining legal
representation.15

Plaintiffs allege that the title to their

property is defective, causing the rest of their injuries,
because the defendants fraudulently took the property from its
rightful owners, the heirs of William Nill.
Plaintiffs’ losses are too remote to satisfy the proximate
cause requirement because their losses are collateral to the harm
that the defendants allegedly inflicted on the Nill heirs.
Indeed, at oral argument, plaintiffs’ counsel conceded that
defendants’ purpose was to take the properties from their
rightful owners, not to cause title defects.

The link between

plaintiffs’ injuries and defendants’ actions is not sufficiently
direct under section 1964(c) because plaintiffs’ injuries are at
least one step removed from any predicate acts of racketeering or
RICO conspiracy.

The Martins were allegedly injured when they

bought the property from Mark and Kristen Graziani on January 31,
2007.

Plaintiffs name the Grazianis as defendants, but the Court

has ruled that plaintiffs have not adequately alleged that the
Grazianis committed any acts of racketeering or violated section
1962.

Under Beck v. Prupis, 529 U.S. 494 (2000), an overt act

15

R. Doc. 1 at ¶337.
29

that is part of a conspiracy under section 1962(d) can give rise
to a cause of action under section 1964(c) only if it is a
predicate act of racketeering or otherwise wrongful under RICO.
Id. at 505.

Plaintiffs have not adequately alleged that the

Grazianis committed any such acts of racketeering.

Further, as

discussed supra, plaintiffs have not adequately alleged that the
Grazianis participated in a RICO conspiracy under section
1962(d).

The Grazianis are not tied to the other defendants by a

RICO conspiracy, and there is no connection between any actions
by the Grazianis that may have proximately caused the plaintiffs’
injuries and the alleged actions of the other defendants.

See

Pennsylvania Chiropractic Ass’n v. Blue Cross Blue Shield Ass’n,
No. 09-5619, 2010 WL 1979569, at *10-11 (N.D. Ill. May 17, 2010)
(“plaintiffs may not lump together all defendants in a single
section 1962(c) claim”); see also Bridge, 553 U.S. at 659 (2008)
(county’s actions would arguably constitute an intervening cause,
and plaintiffs may not meet the proximate cause requirement, if
county knew that bidders’ statements were false but nonetheless
permitted them to participate in the tax lien auction).
Because plaintiffs have not adequately alleged that the
Grazianis committed any predicate acts of racketeering or were
part of a RICO conspiracy, plaintiffs cannot rely on the
Grazianis’ actions to show proximate cause as to the remaining
30

defendants.

Any harm that those defendants caused the Martins

was derivative of the harm to the Grazianis, who plaintiffs
assert were innocent victims of the scheme when they purchased
the property.

Plaintiffs’ alleged injuries were directly caused

by the further independent actions of the Grazianis, which did
not violate RICO.

See Pillsbury, Madison & Sutro v. Lerner, 31

F.3d 924, 929 (9th Cir. 1994) (no proximate cause when the
tenant’s harm of increased rent flowed through the master
tenant).

The Martins therefore cannot establish proximate cause

under section 1964(c).
Likewise, Carol Robinson was allegedly injured when she
bought her property from Frank and Tonia Costa on May 5, 2008.
The Costas are not defendants in this case and are not alleged to
have committed any acts of racketeering.

According to

plaintiffs, the defendants harmed the Nill heirs, which resulted
in harm to the Costas, which resulted in harm to Robinson.

The

Supreme Court has ruled that in assessing causation of an injury
under RICO, courts should not “go beyond the first step.” Hemi
Group, LLC v. City of New York, 130 S.Ct. 983, 989 (2010)
(quoting Holmes v. Sec. Investor Prot. Corp., 503 U.S. 258, 27172 (1992)).

The link between defendants’ actions and plaintiffs’

injuries, however, involves multiple steps and is not
sufficiently direct.
31

The reasons for requiring a direct relationship between the
plaintiffs’ injury and the defendants’ conduct, outlined by the
Supreme Court in Holmes, 503 U.S. at 269, underscore the lack of
proximate causation in this case.

First, plaintiffs themselves

point to independent factors that led to their injuries.

One

such factor is the Grazianis’ alleged failure to inform
plaintiffs of the title defect.

The Grazianis’ silence, even if

fraudulent, weighs against a finding of proximate cause because
it is not an act of racketeering and was not part of the alleged
RICO conspiracy.

Further, plaintiffs’ title examiners and

closing agents failed to spot the alleged defect before
plaintiffs bought the properties.

Indeed, plaintiffs allege that

Fidelity, which provided title insurance for the Martin Property
and is not a defendant in this RICO case, “shielded the discovery
of prior fraud like that of Magee and the Enterprise[.]”16
Plaintiffs also suggest that Mahoney Title did not use due
diligence in examining the title of the Martin Property.17
Although plaintiffs have “reserved the right” to name Fidelity
and Mahoney as defendants in this RICO action,18 they have not

16

R. Doc. 1 at ¶86(b).

17

R. Doc. 71 at 2.

18

R. Doc. 1 at 13.
32

specified any predicate acts of racketeering that those entities
committed, and the activities of those entities do not support a
finding of proximate cause.

Rather, their alleged contributions

to plaintiffs’ injury are independent factors that weigh against
such a finding.

Other factors may have also played a role in

plaintiffs’ inability to sell the property, such as the state of
the broader housing market.
Additionally, the defendants injured the Nill heirs more
directly than they injured the plaintiffs, and those heirs could
sue the defendants for the alleged theft of their property.

As

discussed in Holmes and the other Supreme Court decisions cited
supra, a more directly injured victim’s ability to sue is a
strong indication that defendants’ activities are not the
proximate cause of plaintiffs’ injuries.

Plaintiffs’ claims are

based upon the allegation that defendants stole the Nill heirs’
property, and plaintiffs do not argue that the Nill heirs are
incapable of suing.19

Further, duplicative recoveries could

potentially result if both the Nill heirs and plaintiffs were to

19

In the related matter in which the Martins are suing
Fidelity, Fidelity has indicated that at least some of the Nill
heirs have agreed to a settlement in which they gave up any claim
to the property. Case No. 09-4195, R. Doc. 87 at 4; R. Doc. 88,
Ex. 3, Affirmative Defense ¶2. Settling their claims is the Nill
heirs’ prerogative, and any such settlement does not change the
fact that the plaintiffs are not the directly injured parties in
this matter.
33

recover the full value of the properties.

These difficulties are

avoided by restricting plaintiffs, whom defendants did not injure
directly, from bringing suit.
Because the link between plaintiffs’ injuries and
defendants’ acts of racketeering is indirect, plaintiffs have not
met the proximate causation requirement of section 1964(c), and
their RICO claims under sections 1962(a), (c), and (d) must be
dismissed.

C.

Motion to Amend
Plaintiffs have moved for leave to file an amended

complaint.20

In their proposed amended complaint, plaintiffs add

a new property that they allege defendants fraudulently obtained
from the heirs of an individual named Jules D’Hemecourt.

The

D’Hemecourt heirs are not named as plaintiffs, but only as
“injured parties.”

Plaintiffs also name as a defendant Raymond

Childress, a law partner of Magee and Devereaux who allegedly
served as curator for that property.
Plaintiffs filed their motion for leave to amend after the
time to amend the complaint as a matter of course under Fed. R.
Civ. P. 15(a)(1) had expired.

20

In such circumstances, courts must

R. Doc. 83.
34

“freely give leave” to amend “when justice so requires.”
15(a)(2).

Id.

The Court, however, may deny leave to amend when

amendment of the complaint would be futile.
Co., 301 Fed.Appx. 333, 336 (5th Cir. 2008).

Landavazo v. Toro
Plaintiffs’

proposed amendment does not remedy the deficiencies in their
claims, so permitting the amendment would serve no purpose.

See

Old Time Enterprises, Inc. v. International Coffee Corp., 862
F.2d 1213, 1220 (5th Cir. 1989) (denying leave to amend when
proposed amended complaint did not remedy deficient RICO
allegations).

The Court therefore DENIES plaintiffs’ motion for

leave to amend.
Additionally, Andrea Smith Lampo and John George Lampo have
filed what purports to be a second amended complaint.21

The

Lampos are the owners of one of the properties described in the
original complaint,22 and like the Martins and Robinson, they
allege that their title is defective because of defendants’ RICO
activities.

The Lampos did not seek leave to file this

amendment, however, as required under Fed. R. Civ. P. 15(a)(2).
Therefore, at this juncture, the second amended complaint is
STRICKEN.

The Court also notes that it is unclear whether the

21

R. Doc. 119.

22

R. Doc. 1 at ¶231-247.
35

Lampos are attempting to join plaintiffs’ action or to substitute
for the existing plaintiffs.

It appears, however, that the

Lampos’ RICO claims suffer from the same deficiencies as the
Martins’ and Robinson’s claims.

The Lampos are cautioned to read

this opinion carefully before refiling their claims.
Plaintiffs also generally request leave to amend the
complaint in the event that their RICO claims are defective.
Such an amendment would be plaintiffs’ fourth complaint, in
effect, if the Lampos’ complaint is counted in that tally.

Given

the complaint’s structural defects, which are endemic to the
relationships among the parties, the success of any further
attempt to amend the complaint is doubtful.

Nonetheless, the

Court will allow plaintiffs twenty days to file a motion for
leave to amend the complaint.

IV.

Conclusion
For the foregoing reasons, the Court DENIES plaintiffs’

motion to amend the complaint, STRIKES the second amended
complaint, GRANTS defendants’ motions to dismiss, and DISMISSES
this case without prejudice to plaintiffs’ ability to move for
leave to amend the complaint within TWENTY DAYS.

36

10th
New Orleans, Louisiana, this ____ day of June, 2011.

_________________________________
SARAH S. VANCE
UNITED STATES DISTRICT JUDGE

37