Global Oil Tools, Inc. v. Barnhill et al
Filing
108
ORDER & REASONS: granting in part and denying in part 21 Defendants Wilfred Barnhill, Brian Barnhill, Diane Barnhill, Downhole-Surface Manufacturing, LLC, and Barnhill Industries Inc's Motion to Dismiss Pursuant to Rule 12(b)(6); granting in part and denying in part 22 Defendants Denise Leblanc and Daniel Triche's Motion to Dismiss Pursuant to Rule 12(b)(6) as set forth in document. Signed by Judge Carl Barbier on 11/19/12. (sek, )
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
GLOBAL OIL TOOLS, INC.
CIVIL ACTION
VERSUS
NO: 12-1507
BARNHILL ET AL.
SECTION: "J”(4)
ORDER AND REASONS
Before
Barnhill,
the
Court
Diane
Downhole-Surface
Inc.
d/b/a
Barnhill
are
Defendants
Barnhill
Wilfred
(collectively,
Manufacturing,
LLC,
Global
International
Defendants”)’s
Motion
and
Tools
to
Barnhill,
Brian
“the
Barnhills”),
Barnhill
Industries,
(collectively,
Dismiss
Pursuant
to
“the
Rule
12(b)(6) (Rec. Doc. 21), Defendants Denise Leblanc and Daniel
Triche’s Motion to Dismiss Pursuant to Rule 12(b)(6) (Rec. Doc.
22),
Plaintiff
Global
Oil
Tools,
Inc.
(“Global
Oil”)’s
oppositions to same (Rec. Docs. 25, 30, respectively), Defendants
replies thereto (Rec. Docs. 39, 40), and Plaintiff’s surreply
(Rec.
Doc.
54).
Having
considered
the
motions
and
legal
memoranda, the record, and the applicable law, the Court finds
that Defendants’ motions should be GRANTED in part and DENIED in
1
part for the reasons set forth more fully below.
PROCEDURAL HISTORY AND BACKGROUND FACTS
This
action
arises
out
of
claims
under
the
Racketeer
Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. §
1962 et seq., the Lanham Act, 15 U.S.C. § 1125 et seq., state law
claims
for
breach
misappropriation
and
of
fiduciary
conversion,
duties,
tortious
civil
fraud,
interference
with
business relations, and claims under the Louisiana Unfair Trade
Practices Act (“LUTPA”), La. Rev. Stat. § 51:1401 et seq. On July
13, 2012, Plaintiff filed the instant suit naming as Defendants
Wilfred
Barnhill,
Brian
Barnhill,
Diane
Barnhill,
Downhole-
Surface Manufacturing, LLC, Global International Tools, Denise
Leblanc (“Ms. Leblanc” or “Leblanc”), and Daniel Triche (“Mr.
Triche” or “Triche”).
Plaintiff’s complaint alleges that Global Oil is a company
that
manufactures
wireline
tools
and
downhole
flow
control
systems for the oil and gas industry. In 2005, Global Oil was
purchased by Grifco International, Inc. (“Grifco”). At that time,
Wilfred
Barnhill
was
Global
Oil’s
reported
president
and
shareholder, responsible for the management of the company. Brian
Barnhill,
president,
Wilfred
Barnhill’s
financial
officer,
son,
and
2
was
the
treasurer
reported
of
Global
viceOil,
responsible for all financial reporting, payroll, purchasing,
tracking physical inventory, signing checks and corporate tax
returns,
hiring,
and
marketing.
In
2007,
Lyamec
Corp.,
Inc.
acquired ownership of Global Oil from Grifco. Wilfred and Brian
Barnhill
remained
in
their
respective
leadership/management
positions following the acquisition, and Plaintiff maintains that
at all times pertinent to the complaint the two Barnhills were
responsible
for
Global
Oil’s
daily
operations.
Shortly
thereafter, Diane Barnhill, Wilfred Barnhill’s wife, reportedly
became an employee of Global Oil as a part of the administrative
staff. In addition, Plaintiff alleges that Ms. Leblanc and Mr.
Triche were also employees of the Barnhills and Global Oil.
Wilfred Barnhill is reported to have remained in his position as
president until 2011, resigning completely from Global Oil in
January 2012. Brian Barnhill remained employed by Global Oil
until February 2012. Diane Barnhill resigned in January 2012.
The complaint reports that in 2005 the average sales of
Global Oil remained in the range of $4 million; however, by the
2009 - 2010 tax year, average sales had dropped to $2.5 million.
In the 2010 - 2011 tax year, average sales rose to $2.9 million
but were coupled with large operating losses. In conjunction,
Plaintiff
alleges
that
on
May
3
24,
2010,
Wilfred
and
Diane
Barnhill had their company, Barnhill Industries, register the
trade name Global International Tools (“GIT”), which, thereafter,
allegedly engaged in competing business with Global Oil. The
complaint further alleges that in January 2011, Wilfred Barnhill
also registered the trade name Downhole-Surface Manufacturing
(“DSM”), another competing company.
During the time period that the competing companies existed
(2010 - present), Plaintiff asserts that the Barnhill Defendants,
together with Ms. Leblanc and Mr. Triche, engaged in a scheme to
defraud
Global
Oil.
Specifically,
Plaintiff
alleges
that
the
Defendants stole blueprints, tools, and customers from Global
Oil. It asserts that as part of their scheme, Defendants engaged
in
acts
of
wire
fraud
and
mail
fraud
by
sending
various
misleading emails, disseminating misleading information over the
phone, and making shipments via the competing companies to Global
Oil’s customers. In the complaint, Plaintiff further avers that
DSM bought tools from Global Oil at steep discounts and that
Global Oil paid for expenses incurred by the competing companies.
All of the acts alleged in the complaint are reported to have
taken place between May 24, 2010 and February 2012. Plaintiff
further asserts that Defendants’ activities resulted in financial
injury to Global Oil, for which it seeks damages under the above-
4
referenced legal theories.
On August 3, 2012, the Barnhill Defendants and Mr. Triche
and Ms. Leblanc filed the instant motions to dismiss asserting
that Plaintiff’s complaint should be dismissed for failure to
properly state a claim under RICO and the Lanham Act.1 Plaintiff
replied to Defendants’ motions on August 24, 2012. Subsequently,
the Barnhill Defendants filed a reply thereto, asserting in the
reply that the Plaintiff was barred from bringing an action due
to the existence of an arbitration agreement. Plaintiff filed a
surreply
on
Defendants’
September
17,
assertions
about
2012,
the
arguing
that
arbitration
the
Barnhill
agreement
were
improper, because they presented arguments that were not made in
Plaintiff’s opposition or in the Defendants’ original motions.
The
Court
addressed
the
Barnhill
Defendants’
arguments
with
respect to the arbitration agreement in an October 16, 2012 Order
and Reasons (Rec. Doc. 91). Therefore, in the instant Order, the
Court will only address Defendants’ arguments as to Plaintiff’s
failure to state a claim.
PARTIES’ ARGUMENTS
Defendants assert that Plaintiff has failed to state a claim
1
Defendants Triche and Leblanc also assert independent arguments for
dismissing all of Plaintiff’s claims against them; namely, that they are not
liable because they were acting as employees of Global Oil at the time the
alleged acts were committed.
5
upon
which
relief
can
be
granted
on
four
grounds.
First,
Defendants argue that Plaintiff has failed to state a proper RICO
claim. Specifically, Defendants contend that (1) the complaint
does not properly articulate a RICO enterprise; (2) Plaintiff
fails to demonstrate a pattern of racketeering activity; and (3)
there is no indication of closed-ended or open-ended continuity.
Furthermore, Defendants argue that Plaintiff has failed to allege
fraud with particularity and that, generally, the facts present
do not support allegations of a RICO conspiracy.
With regard to Defendants’ arguments that Plaintiff has
failed to properly plead a RICO enterprise, Defendants contend
that Count I of the complaint does not establish an associationin-fact
enterprise.
In
particular,
Defendants
argue
that
the
Plaintiff has not pled specific facts that demonstrate that the
alleged association-in-fact enterprise functions as a continuing
unit through either hierarchical or consensual decision-making.
Moreover, Defendants assert that, to the extent that Plaintiff
may
have
successfully
enterprise,
Plaintiff
pleaded
has
that
failed
to
an
association-in-fact
demonstrate
that
the
enterprise existed for any purpose other than committing the
alleged predicate offenses, which Defendants contend is required
under
RICO.
Specifically,
Defendants
6
point
to
Plaintiff’s
statement in Count I that the enterprise was maintained “for
purposes
of
defrauding
Global
and
committing
the
unlawful
activity.” (Rec. Doc. 21-1, p. 12) Lastly, Defendants also assert
that
Plaintiff’s
allegations
in
Count
II
of
the
complaint
directly conflict with the allegations in Count I. Defendants
argue
that
the
RICO
enterprises
named
in
Count
II
of
the
complaint (DSM and GIT) are also named as RICO persons in Count
I. Defendants contend that under Fifth Circuit precedent, RICO
enterprises and persons must be distinct entities. Thus, because
Count
II
Defendants
was
not
argue
designated
that
the
as
two
an
alternative
sections
are
in
pleading,
conflict
and
neither can stand.
Additionally, as to Defendants’ argument that Plaintiff has
failed
to
demonstrate
a
pattern
of
racketeering
activity,
Defendants assert that in order for a pattern of racketeering
activity to exist, the Plaintiff must demonstrate either openended or closed-ended continuity. Defendants contend that openended continuity refers to the possibility of a future threat
from the RICO defendant’s behavior, and closed-ended continuity
refers to a substantial closed period of repeated conduct. Here,
Defendants argue that because Plaintiff has admitted that none of
the Defendants continue to work for Global Oil, no open-ended
7
continuity exists. Likewise, Defendants assert that no closedended continuity exists, because the period of time in which the
alleged predicate activities took place is less than thirteen
months and, therefore, does not qualify as substantial.
Second, Defendants assert that Plaintiff has not stated a
claim for unfair competition under the Lanham Act. Specifically,
Defendants argue that Plaintiff has failed to show (1) that the
Defendants made a false statement of fact, and (2) that the false
statement actually deceived or potentially deceived customers.
Third,
jurisdiction
federal
Defendants
if
claim,
argue
the
Plaintiff
the
Court
that
has
should
because
failed
not
the
to
Court
state
exercise
a
has
no
viable
supplemental
jurisdiction over the remaining state law claims. In particular,
Defendants contend that dismissal has been sought early in these
proceedings; therefore, the Plaintiff is not prejudiced by having
its state law claims dismissed.
Fourth, Defendants LeBlanc and Triche also independently
assert that Plaintiff has failed to plead a cause of action
against them, because they were acting within the course and
scope of their employment for Global Oil at all times pertinent
to the complaint. Ms. Leblanc and Mr. Triche argue that the facts
alleged only support their role as employees of Global Oil. They
8
contend that because they were employees, they are not liable
under
any
of
the
legal
theories
that
Plaintiff
has
pleaded
because they were acting at the direction of their employer.
Moreover, they assert that Plaintiff has specifically failed to
plead that they were “engaged in criminal wrongdoing, that they
knew
or
should
have
known
of
any
alleged
theft
or
misappropriation, or that they injured Global Oil [] in any
manner whatsoever.” (Rec. Doc. 22-1, p. 2)
In response, Plaintiff makes the following arguments. First,
Plaintiff contends that Count I and Count II of its complaint are
not inconsistent with each other. Plaintiff asserts that pursuant
to Federal Rule of Civil Procedure 8(d), it may plead multiple
claims
in
the
alternative,
without
regard
to
consistency.
Therefore, Plaintiff asserts that naming DSM and GIT as persons
in Count I and enterprises in Count II is not inconsistent and,
even if it is inconsistent, such inconsistency is permitted by
the rule. In conjunction, Plaintiff argues that Rule 8(d) does
not require that the alternative claims be designated as such.
Furthermore,
Plaintiff
contends
that
each
count
sufficiently
fulfills the separateness requirement for alleging RICO persons
and
enterprises.
Plaintiff
asserts
that
under
Count
I,
separateness is met because each Defendant is individually named
9
a RICO person and, collectively, part of the alleged associationin-fact enterprise. Plaintiff argues that courts allow such a
configuration, and that the individuals are still deemed to be
separate from the association-in-fact enterprise because they are
merely one part of the larger organization, not the organization
itself. Additionally, Plaintiff asserts that the separateness
requirement is met in Count II, because the RICO persons are the
individual defendants, and the RICO enterprises are the corporate
defendants. Plaintiff argues that this is an acceptable RICO
structure within the Fifth Circuit.
Second, Plaintiff asserts that it
has sufficiently pleaded
a pattern of racketeering activity with respect to the predicate
acts of mail and wire fraud. In particular, Plaintiff contends
that it has specifically pleaded the fraudulent scheme, detailed
the
instances
in
which
emails
and
mailings
were
used
to
perpetuate that scheme, and stated the dates and contents of the
same.
As
such,
particularity
Plaintiff
requirements
asserts
of
Rule
that
9(b)
it
and,
has
met
therefore,
the
has
pleaded the requisite two predicate acts necessary for a RICO
claim. Likewise, Plaintiff argues that it has also sufficiently
pleaded the relatedness of the acts because it has alleged that
the acts were all part of the same overlying scheme, had a
10
unified purpose, and did not involve isolated events.
In response to the Defendants’ arguments about continuity,
Plaintiff argues that it has alleged both open-ended and closedended
continuity.
complaint
Plaintiff
indicates
that
the
contends
fraud
that
nothing
Defendants
have
in
its
allegedly
engaged in will end just because they have left Global Oil.
Rather,
Plaintiff
argues
that
Defendants
still
possess
blueprints, samples, work product, tools, and part specifications
which allow it to continue defrauding Global Oil with each use,
thereby indicating that the continuity is open-ended. Moreover,
Plaintiff avers that just because the Defendants have left Global
Oil, it does not necessarily mean that the fraudulent mailings
will
cease.
Specifically,
Plaintiff
points
to
an
allegedly
fraudulent mailing that was sent after Defendants left Global
Oil.
Similarly,
Plaintiff
also
asserts
that
closed-ended
continuity is also present. Plaintiff argues that when evaluating
closed-ended continuity, the court must look beyond just the
specific predicate acts and instead look to the incidents of
deceit which form the underlying fraudulent scheme. Plaintiff
asserts that these incidents began on May 24, 2010 when GIT was
formed. Plaintiff avers that, thereafter, the fraud continued
while GIT and the Barnhills conducted the competing businesses.
11
Furthermore, Plaintiff also notes that new discovery has produced
evidence of
fraudulent activities dating back until at least
January 2011, thereby lending more support to the establishment
of closed-ended continuity in this case.
Third,
Plaintiff
contends
that
it
has
also
successfully
pleaded that an enterprise exists because it has pleaded facts
that
demonstrate
that
the
group
of
named
Defendants
had
“structure, longevity, and the requisite relationships.” (Rec.
Doc. 25, p. 16) Additionally, Plaintiff argues that, to the
extent that it has not pleaded an association-in-fact enterprise
in Count I, Count II sufficiently alleges that the corporations
(GIT and DSM) are enterprises, thereby satisfying the enterprise
requirement of a RICO claim.
Fourth, in response to Defendants’ allegations that
the
Plaintiff has failed to sufficiently plead a conspiracy claim,
Plaintiff contends that it only has to generally allege that
Defendants agreed to the overall objective of the conspiracy, not
necessarily to the commitment of each individual act. Plaintiff
asserts
that
it
has
met
that
requirement
by
stating
in
the
complaint that, “in each instance, at least two of the defendants
agreed
to
commit
a
substantive
RICO
offense
and
the
other
defendants knew of an [sic] agreed to the overall objective of
12
the RICO offense and agreed to facilitate that objective.” (Rec.
Doc. 25, p. 19)
Fifth, with respect to Defendants’ Lanham Act arguments,
Plaintiff
asserts
demonstrate
that
it
has
alleged
facts
which
fully
plausible claims for unfair competition and reverse
passing off under the Lanham Act. Specifically, Plaintiff asserts
that it has given numerous examples of defendants intentionally
confusing
customers
by
(1)
using
only
the
word
“Global”
to
signify either Global Oil or GIT, (2) directing employees to do
work that was for the competing companies rather than Global Oil,
and (3) using Global Oil’s resources and products to convert
customers
to
the
competing
businesses.
Likewise,
Plaintiff
asserts that it has demonstrated a claim for reverse passing off
by alleging that GIT and DSM passed, or could have passed, Global
Oil’s
tools
and
products
off
as
their
own
to
former
and/or
potential Global Oil customers.2
Sixth,
individual
in
response
arguments,
to
Mr.
Plaintiff
Triche
asserts
and
that
Ms.
Leblanc’s
employees
who
engage in fraud, theft, conversions, and misappropriation are not
2
In their reply brief, Defendants specifically argue that Plaintiff’s
reverse passing off claim should be dismissed because Plaintiff first alleged it
in its opposition, rather than in the complaint. Additionally, Defendants argue
that Plaintiff has failed to allege specific instances in which GIT and/or DSM
sold Global Oil’s products as their own, which Defendants assert is required for
a reverse passing off claim.
13
acting within the course and scope of their employment and,
therefore, are not granted any immunity under the “intracorporate
immunity doctrine” relied on by the Defendants. Additionally,
Plaintiff asserts that the complaint outlined numerous instances
which
demonstrate
participated
in
that
the
each
of
the
conspiracy
and
aforementioned
had
Defendants
knowledge
that
a
conspiracy existed. Moreover, with respect to Mr. Triche’s and
Ms.
Leblanc’s
arguments
that
the
complaint
failed
to
state
allegations against them under LUTPA and the legal theories of
misappropriation and conversion, tortious commercial conduct, and
wrongdoing of any sort, Plaintiff asserts that it specifically
alleged behavior which would qualify as unfair, unscrupulous, and
substantially injurious under LUTPA. Likewise, Plaintiff contends
that it also pleaded numerous facts that meet the elements of the
other
state
law
claims.
Lastly,
in
response
to
Defendants’
arguments that they did not owe a fiduciary duty to Global Oil,
Plaintiff contends that under Louisiana law, employees have an
obligation
of
loyalty
and
faithfulness
to
employers,
which
Plaintiff’s complaint alleges the Defendants violated.
Lastly, Plaintiff argues that if the Court does find that
any part of Defendants’ motions should be granted, the Court
should grant leave to amend rather than dismiss the complaint
14
and/or individual claims with prejudice. Plaintiff argues that
newly produced evidence may allow it to cure any defects and,
moreover, that granting leave to amend is a more prudent action
at
this
stage
of
the
proceedings.
Additionally,
Plaintiff
contends that even if the Court were to find that the Plaintiff
had failed to state any cognizable federal claims, it should
still choose to exercise supplemental jurisdiction over the state
law
claims,
because
the
parties
have
already
engaged
in
substantial discovery, and the Court has familiarity with the
case.
DISCUSSION
A. Legal Standard
Under the Federal Rules of Civil Procedure, a complaint must
contain “a short and plain statement of the claim showing that
the pleader is entitled to relief.”
FED. R. CIV. P. 8(a)(2).
The
complaint must “give the defendant fair notice of what the claim
is and the grounds upon which it rests.” Dura Pharm., Inc. v.
Broudo,
544
U.S.
336,
346
simple, concise, and direct.”
(2005).
The
allegations
“must
be
FED. R. CIV. P. 8(d)(1).
Notwithstanding Rule 8's liberal pleading requirements, when
a party pleads claims of fraud, such claims must be plead with
particularity. FED. R. CIV. P. 9(b). The claimant must assert more
15
than mere conclusory allegations or technical elements. Id. The
claim must contain “particularized allegations of time, place,
and
contents
of
the
false
representations,
as
well
as
the
identity of the person making the misrepresentation.” Castillo v.
First City Bancorporation of Texas, Inc., 43 F.3d 953, 961 (5th
Cir. 1994) (citing Tel-Phonic Servs., Inc. v. TBS Int’l, Inc.,
975
F.2d
1134,
1139
(5th
Cir.
1992)).
However,
Rule
9(b)’s
particularity requirement should not abrogate the requirements of
Rule 8, and both rules should be read in conjunction with one
another. Burford v. Cargill, Inc., No. 05-0283, 2011 WL 432124,
at *12 (W.D. La. Sept. 20, 2011) (citing In re Catfish Antitrust
Litig., 826 F. Supp. 1019, 1029 (N.D. Miss. June 28, 1993)); 5A
CHARLES ALAN WRIGHT & ARTHUR MILLER, FEDERAL PRACTICE
AND
PROCEDURE § 1298
(3d ed.).
To survive a Rule 12(b)(6) motion to dismiss, the plaintiff
must plead enough facts to “state a claim to relief that is
plausible on its face.”
Ashcroft v. Iqbal, 556 U.S. 662, 678
(2009) (quoting Bell Atl. 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.” Id. A court
must accept all well-pleaded facts as true and must draw all
16
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).
The court is not,
however, bound to accept as true legal conclusions couched as
factual allegations. Iqbal, 556 U.S. at 678. When evaluating a
motion to dismiss, the court is usually restricted to reviewing
only the complaint. Sullivan v. Leor Energy, LLC, 600 F.3d 542,
546 (5th Cir. 2010). However, in a RICO case, the court may also
look to the RICO case statement. See Dennis v. Gen. Imaging,
Inc., 918 F.2d 496, 511 (5th Cir. 1990); Glessner v. Kenny, 952
F.2d 702, 712 (3rd Cir. 1991).
B.
RICO Claims 18 U.S.C.
§ 1962(c)
To succeed in a claim under 18 U.S.C.
§ 1962(c) a plaintiff
must demonstrate that (1) a person employed by or associated with
(2) an enterprise engaged in interstate or foreign commerce (3)
has conducted or participated in (4) a pattern of racketeering
activity. 18 U.S.C.
“RICO
person
must
§ 1962(c). The Fifth Circuit has held that a
be
one
that
either
poses
or
has
posed
a
continuous threat of engaging in the acts of racketeering.” Crowe
v. Henry, 43 F.3d 198, 204 (5th Cir. 1995) (quoting Delta Truck &
Tractor, Inc. v. J.I. Case Co., 855 F.2d 241, 242 (5th Cir.
1989)).
Generally,
a
RICO
person
17
is
the
defendant.
In
re
MasterCard Int’l Inc. v. Internet Gambling Litig., 132 F. Supp.
2d 468, 477 (E.D. La. 2001), aff’d, 313 F.3d 257 (5th Cir. 2002)
(citation omitted). A RICO enterprise can either be an actual
legal entity, or it can be an association-in-fact. Elliott v.
Foufas, 867 F.2d 877, 881 (5th Cir. 1989). The enterprise must be
distinct from the defendant, and it must exist “separate and
apart from the pattern of activity in which it engages.” Id.
(quoting Atkinson v. Anadarko Bank & Trust Co., 808 F.2d 438, 441
(5th Cir. 1987)). To show a pattern of racketeering activity, a
plaintiff must plead at least two predicate racketeering acts
that are related and that either amount to, or threaten the
likelihood of, continued criminal activity. H.J. v. Northwestern
Bell, 492 U.S. 229, 239 (1989).
As a preliminary matter, the Court addresses the Defendants’
arguments
regarding
to
the
incompatibility
of
Plaintiff’s
pleadings in Count I and Count II of the complaint. Rule 8(d)
states that,
A party may set out 2 or more statements of a
claim or defense alternatively or hypothetically,
either in a single count or defense or in separate
ones. If a party makes alternative statements, the
pleading
is
sufficient
18
if
any
one
of
them
is
sufficient.
.
.
.
A
party
may
state
as
many
separate claims or defenses as it has, regardless
of consistency.
FED. R. CIV. PROC. 8(d)(2)(3).
In addition, Rule 8(d)(1) states that “[n]o technical form
[of pleading] is required.” FED. R. CIV. PROC. 8(d)(1). As such,
the Court finds that Defendants’ arguments with respect to the
inconsistencies between Count I and Count II are without merit.
The
Plaintiff
is
allowed
to
set
out
alternative
statements
regardless of whether they are designated as alternative, and
regardless
of
whether
they
are
consistent
with
each
other.
Therefore, if either one of the scenarios set out in Count I or
Count II sufficiently alleges a RICO claim, then the Court may
find that Plaintiff has sufficiently pleaded a claim under 18
U.S.C.
§ 1962(c).
i.
RICO 18 U.S.C. § 1962(c) Claim: Pattern of Racketeering
Activity
To
demonstrate
plaintiff
related
must
and
a
allege
that
pattern
at
amount
least
to,
or
19
of
two
racketeering
predicate
threaten
the
activity,
acts
a
that
are
likelihood
of,
continued
criminal
activity.
H.J.
Inc.,492
U.S.
at
238-39.
Predicate “acts are related if they ‘have the same or similar
purposes,
results,
commission
or
participants,
otherwise
are
victims,
interrelated
or
by
methods
of
distinguishing
characteristics and are not isolated events.’” Calcasieu Marine
Nat.
Bank
v.
Grant,
943
F.2d
1453,
1463-64
(5th
Cir.
1991)
(quoting H.J. Inc., 492 U.S. at 240). Continuity may be either
open-ended or closed-ended. Calcasieu, 943 F.2d at 1464. Closedended continuity refers to continuity demonstrated by “a series
of
related
predicates
extended
over
a
substantial
period
of
time.” Id. There is no set time requirement for a substantial
period of time; however, “acts extending over a few weeks or
months and threatening no future criminal conduct do not satisfy
[the]
requirement.”
H.J.,
Inc.,
492
U.S.
at
242.
Open-ended
continuity refers to “past conduct that by its nature projects
into the future with the threat of repetition.” Calcasieu, 943
F.2d at 1464. In cases of open-ended continuity the question is
“whether the threat of continuity is demonstrated.” H.J., Inc.,
492 U.S. at 242 (citing S. Rep. No. 91-617, at 518). Continuity
can also be demonstrated “where it is shown that the predicates
are a regular way of conducting defendant’s ongoing legitimate
business . . . or of conducting or participating in an ongoing
20
and legitimate RICO enterprise.’” H.J., Inc., 492 U.S. at 243.
Mail fraud in violation of 18 U.S.C. § 1341, wire fraud in
violation of 18 U.S.C. § 1343, and interstate transportation of
stolen goods in violation of 18 U.S.C. §§ 2314, 2315 qualify as
predicate acts for a RICO claim. 18 U.S.C. § 1961. Mail fraud and
wire fraud are defined as (1) a scheme to defraud (2) involving
the use of mail/wire communications (3) used for the purposes of
executing the scheme. United States v. Bueno, 450 F.’App’x 391,
392 (5th Cir. 2011); United States v. Rush, 236 Fed. App’x 944,
947 (5th Cir. 2007).
Plaintiff
alleges
that
Defendants
have
committed
the
predicate acts of wire fraud, mail fraud, and transportation of
stolen goods. Specifically, Plaintiff asserts that Defendants
committed
wire
fraud
when
Ms.
Leblanc
gave
customer/potential customer false information about
a
Global
Oil
Global Oil’s
inventory over the phone, and then directed the customer to the
competing DSM; when
Wilfred Barnhill used his Global Oil email
to give a customer a GIT quote for tools in March 2012;
and to
generally conduct business in both of the competing companies in
furtherance of their scheme to defraud Global. (Complaint, Rec.
Doc. 1, pp. 9-11, 29, ¶¶ 34, 38, 97) Likewise, in asserting the
predicate act of mail fraud, Plaintiff claims that Defendants
21
committed mail fraud when they caused Global Oil to ship products
to Wyoming on behalf of DSM; when they mailed false shipping
invoices on August 11, 2011 and August 22, 2011; and to generally
conduct
business
in
both
of
the
competing
companies
in
furtherance of their scheme to defraud Global. (Complaint, Rec.
Doc. 1, pp. 10, 13-14, 29-30, ¶¶ 36, 46-48, 98) Plaintiff also
alleges
that
Defendants
transferred
stolen
goods
when
they
shipped over $5,000 worth of shock absorbers to a California
company in March 2012. (Complaint, Rec. Doc. 1, p. 30, ¶ 99)
Looking at Plaintiff’s allegations on whole, Plaintiff has
alleged at least five specific predicates acts which occurred, at
a minimum, over a course of eight months. In addition, to the
specific acts that Plaintiff has alleged, Plaintiff has also
generally alleged that Defendants used these and other predicate
acts to conduct their overall business and fraud on Global Oil.
Under
the
more
general
allegations,
the
time
frame
for
the
predicate acts extends out over at least a two year period, from
May
24,
2010,
when
Wilfred
and
Diane
Barnhill
allegedly
registered GIT with the secretary of state (presumably by mail or
wire), until May 7, 2012, when Plaintiff allegedly received an
invoice
for
services
falsely
attributed
Complaint, Rec. Doc. 1, pp. 7-8, 30,
22
to
Global
Oil.
(See
¶¶ 26, 101) As alleged, all
of
these
acts
appear
to
have
been
for
the
same
or
similar
purposes (defrauding Global Oil), have reached the same results
(defrauding Global Oil), and have included the same participants
(the Barnhill Defendants and Ms. Leblanc)3 and victim (Global
Oil). Therefore, the acts are not isolated incidents but, rather,
are related. Likewise, Plaintiff has alleged that the commission
of the predicate acts was a regular way in which Defendants
conducted their business for at least two years, and the facts
alleged, taken in the light most favorable to the Plaintiff,
demonstrate as much. As such, the Court finds that Plaintiff has
sufficiently established the necessary element of continuity over
a closed-ended period of time.4 Therefore, the Court finds that
3
The Court notes that there is no specific mention of Mr. Triche with
reference to either the acts of wire fraud or mail fraud. The complaint does
assert that Mr. Triche was involved in stealing tools; however, it does not
actually state that the stolen tools constitute a violation of 18 U.S.C. § 2314,
transportation of stolen goods. Therefore, to the extent that the complaint
alleges a pattern of racketeering activity, it does not sufficiently allege that
Mr. Triche was a part of that pattern of activity. Conversely, although the
foregoing examples do not reference Brian Barnhill, the complaint does include
him as a participant in these predicate acts. For example, he is alleged to have
caused invoices for deliveries to GIT to be fraudulently mailed to and billed to
Global Oil. (Complaint, Rec. Doc. 1, p. 13, ¶ 46)
4
Although the Court makes no formal finding as to open-ended continuity,
it notes that it finds Plaintiff’s arguments on this point persuasive. There is
at least one reference to a predicate act which occurred after Wilfred Barnhill
left his position at Global Oil. (See Complaint, Rec. Doc. 1, p. 11, ¶ 38) Taking
this as true, it essentially negates Defendants’ arguments that all harm and
threat of harm to the Plaintiff has ceased because the Defendants no longer work
at Global Oil. Likewise, Plaintiff’s arguments about the threat of harm caused
by the stolen intellectual property, tools, and blueprints, all of which are
alleged to be part of the larger scheme to defraud Global Oil, also indicate that
the harm in this case could project out into the future and, thereby, satisfy
the requirement of open-ended continuity.
23
Plaintiff
has
sufficiently
pleaded
a
pattern
of
racketeering
activity as to the Barnhill Defendants and Ms. Leblanc. Plaintiff
has failed to sufficiently plead that Mr. Triche was involved in
a pattern of racketeering activity.
With respect to Defendants’ arguments as to the sufficiency
of
the
pleadings
under
Rule
9(b),
the
Court
notes
that
the
pleading requirement under Rule 9(b) must be read in conjunction
with the more liberal notice pleading requirements of Rule 8. In
general, the Plaintiff has stated the time, place, and manner for
each of the aforementioned predicate acts.5 To the extent that a
specific date is missing from an alleged act, the participants in
the act have been listed and vice-versa. Moreover, a detailed
description of the fraudulent activity has been given, such that
the Defendants should be able to identify the act in question for
the purposes of discovery. Likewise, the listed acts provide a
sound basis for placing Defendants on notice as to other alleged
5
For example, Plaintiff asserts that in January 2012 Defendant Brian
Barnhill utilized his GIT email address to quote an order to a customer, and that
later, on March 14, 2012, the customer responded to Defendant Wilfred Barnhill
via his Global Oil email regarding the quote. (Rico Case Statement, Rec. Doc. 14,
pp. 7-8); (Complaint, Rec. Doc. 1, p. 11, ¶ 38) Likewise, Plaintiff refers to
mailings sent on August 11, 2011, August 22, 2011, and May 7, 2012, which were
falsely billed to Global Oil. The mailings specifically reference GIT, Wilfred
Barnhill, and Brian Barnhill. (Rico Case Statement, Rec. Doc. 14, p. 8) Likewise,
the complaint notes that Ms. Leblanc, over the phone, also directed customers
(specifically, the customer that was billed in the August invoice exchange) to
bill to Global Oil rather than the rival companies. (Rico Case Statement, Rec.
Doc. 14, p. 8); (Complaint Rec. Doc. 1, p. 14, ¶ 49)
24
activities which occurred between 2010 and 2012 as part of the
overall
fraudulent
scheme
and
are
at
issue
in
this
suit.
Therefore, the Court finds that the allegations of fraud against
the Barnhill Defendants and Ms. Leblanc have been pleaded with
sufficient particularity.6
ii.
As
RICO 18 U.S.C.
previously
§ 1962(c) Claim: Enterprise
noted,
a
RICO
enterprise
can
be
a
legal
entity, such as a corporation or partnership or an associationin-fact enterprise. Elliott, 867 F.2d at 881. Where a legal
entity is the defendant, it may not be both a person and an
enterprise
under
RICO.
See
St.
Paul
Mercury
Inc.,
Co.
v.
Williamson, 224 F.3d 425, 447 (5th Cir. 2000). Nevertheless,
“‘[a]lthough a [corporate] defendant may not be both a person and
an enterprise, an [individual] defendant may be both a person and
a part of an enterprise. In such a case, the individual defendant
is distinct from the organizational entity.’” Id. (quoting United
States v. Fairchild, 189 F.3d 769, 777 (8th Cir. 1999)).
An
association-in-fact
enterprise
is
an
(1)
ongoing
6
The Court notes that its analysis on this point also applies to the
allegations of civil fraud raised against Defendants Triche and Leblanc. As
discussed, Plaintiff has presented with sufficient particularity that Defendant
Leblanc misrepresented a material fact that resulted in injury to the Plaintiff,
when she allegedly lied about products manufactured by Global and directed
customers to send DSM/GIT invoices to Global. (Complaint, Rec. Doc. 1, pp. 9-10,
14, ¶¶ 34, 39) As to Defendant Triche, the Court finds that the Plaintiff has
failed to sufficiently allege fraud.
25
organization
that
(2)
exists
“separate
and
apart
from
the
[alleged] pattern of racketeering;” and (3) “function[s] as a
continuing unit as shown by a hierarchical or consensual decision
making structure.” Montesano et al. v. Seafirst Commercial Corp.
et al., 818 F.2d 423, 426-27 (5th Cir. 1987). The organization
may be formed for the purpose of engaging in either legitimate or
illegitimate conduct. United States v. Turkette, 452 U.S. 574,
583-87 (1981). While the organization must have a consensual
decision making structure, the United States Supreme Court has
stated that the structure need not have a distinct “chain of
command,” decisions can be made on an “ad-hoc basis,” members of
the association “need not have fixed roles,” and that, “[w]hile
the
group
must
function
as
a
continuing
unit
and
remain
in
existence long enough to pursue a course of conduct, nothing
[precludes those] whose associates engage in spurts of activity
punctuated by periods of quiescence.” Boyle v. United States, 129
S. Ct. 2237, 2245-46 (2009). “[T]wo individuals who join together
for the commission of one discrete criminal offense have not
created an “association-in-fact” enterprise, even if they commit
two predicate acts during the commission of this offense, because
their relationship to one another has no continuity.” Montesano,
818 F.2d at 427. However, “‘if the individuals associate together
26
to commit several criminal acts, their relationship gains an
ongoing nature, coming within the purview of RICO.’” Ocean Energy
II, Inc. v. Alexander & Alexander, Inc., 868 F.2d 740, 749 (5th
Cir. 1989) (quoting Montesano, 818 F.2d at 427).
In
Count
I,
Plaintiff
alleges
that
DSM,
GIT,
Wilfred
Barnhill, Brian Barnhill, Diane Barnhill, Ms. Leblanc, and Mr.
Triche are all RICO persons. Likewise, Plaintiff alleges that all
of these same Defendants “formed, maintained, and continue to
maintain a close interlocking association [-in-fact enterprise]
for purposes of defrauding Global and committing the unlawful
activity as set forth in [the complaint].” (Complaint, Rec. Doc.
1, p. 25, ¶ 87) Throughout the complaint, Plaintiff also alleges
that at various points, Ms. Leblanc and Mr. Triche worked at the
direction
of
Wilfred
Barnhill,
Wilfred
Barnhill
and
Brian
Barnhill worked in concert with one another, and Wilfred Barnhill
and
Diane
Barnhill
worked
together
—
all
in
the
process
of
defrauding Global Oil.7 The complaint indicates that it was the
7
For example, the complaint states that Wilfred and Diane Barnhill
registered the competing GIT together. (Complaint, Rec. Doc. 1, p. 7, ¶ 25)
Likewise, it states that Ms. Leblanc, at the direction of Wilfred Barnhill, asked
other employees at Global Oil to work on tools for Wilfred Barnhill, and that
Wilfred Barnhill directed Mr. Triche to take certain tools. (Complaint, Rec. Doc.
1, p. 16, ¶¶ 55, 59) Additionally, both Ms. Leblanc and Mr. Triche are alleged
to currently be working in some capacity for Wilfred Barnhill and/or his
companies GIT or DSM. (Complaint, Rec. Doc. 1, pp. 9-10, 18, ¶¶ 34, 62) The
complaint also alleges that Brian Barnhill acted in concert with Wilfred Barnhill
to cover up the defrauding. (Complaint, Rec. Doc. 1, pp. 22-24, ¶¶ 75-84)
27
actions of all of these individuals, working together, which lead
to
the
defrauding
Plaintiff
has
of
met
Global
its
Oil.
burden
in
As
such,
pleading
it
appears
that
the
that
alleged
association-in-fact enterprise functioned as a continuing unit
and for long enough to maintain a specific course of conduct. See
Boyle, 129 S. Ct. at 2245-46.
Nevertheless, the Court notes that while each individual
member of the association-in-fact enterprise may also be a RICO
person/defendant,
the
same
is
not
true
for
the
corporate
Defendants, DSM and GIT. The Fifth Circuit has explained that
listing a corporation as a RICO defendant and as part of a RICO
association-in-fact
distinction
that
is
enterprise
required
violates
by
28
the
U.S.C.
person/enterprise
§
1962(c),
which
requires that an “enterprise [] be more than an association of
individuals
or
entities
conducting
the
normal
affairs
or
a
defendant corporation.” St. Paul Mercury Ins. Co., 224 F.3d at
447 n. 16 (stating that “[c]ourts have roundly criticized [the]
formul[a]”
of
having
the
corporation
serve
as
a
RICO
person/defendant and a part of an association-in-fact enterprise
(citations omitted)). Therefore, the Court finds that while an
association-in-fact of all the individual Defendants and/or the
individual
and
corporate
Defendants
28
may
exist,
as
currently
pleaded, Count I fails because the corporate Defendants cannot be
both a RICO person and a part of the RICO
association-in-fact
enterprise. Therefore, this section of the complaint fails to
properly establish a RICO association-in-fact enterprise.8
Likewise, Count I also alleges that the association-in-fact
enterprise exists “for the purposes of defrauding Global and
committing
the
unlawful
activity
as
set
forth
[in
the
complaint].” (Complaint, Rec. Doc. 1, p. 25, ¶ 87) Fifth Circuit
precedent makes it clear that individuals who join together for
the commission of one discrete offense have not successfully
created
an
association-in-fact
enterprise,
because
the
association of the individuals has no continuity.9 In particular,
the Fifth Circuit has stated that once the discrete act has been
committed, the association, if it has only come together for one
purpose, will likely disband. Id. In the instant case,
Plaintiff
has
pleaded
that
the
individual
members
while
of
the
association committed multiple predicate acts, Plaintiff has also
8
Additionally, the Court also notes that although Mr. Triche may form a
part of the RICO enterprise, he cannot be named as a RICO Defendant/person under
18 U.S.C. § 1962(c) since Plaintiff did not plead sufficient facts to demonstrate
that he engaged in a pattern of racketeering activity.
9
See Montesano, 818 F.2d at 427. It should be noted that the continuity
necessary for the establishment of an association-in-fact enterprise is different
from the continuity necessary for the establishment of a patter of racketeering
activity.
29
indicated that these acts were directed at one discrete goal —
defrauding
economic
Global
goal
Oil.
or
Plaintiff
purpose,
or
has
that
not
alleged
any
other
the
association-in-fact
extended beyond the acts of fraud and theft; therefore, the Court
finds that the Plaintiff has failed to effectively plead the type
of continuity necessary to establish a RICO association-in-fact
enterprise in Count I.10
Nevertheless,
effectively
establish
distinction.
Barnhill,
as
In
Diane
Count
currently
the
II,
Barnhill,
pleaded,
required
Plaintiff
and
Brian
RICO
Count
II
does
person/enterprise
alleges
Barnhill
that
are
Wilfred
the
RICO
persons. (Complaint, Rec. Doc. 1, p. 32, ¶ 110) Plaintiff also
alleges that GIT and DSM are the enterprises. (Complaint, Rec.
Doc. 1, p. 33, ¶ 111) Additionally, Count II does not allege that
the sole purpose of GIT and DSM was to defraud Global Oil. (See
10
See id. (citing to the United States’ Attorney’s Manual which instructs
attorneys that,
No RICO count of an indictment shall charge the enterprise as a
group associated in fact, unless the association-in-fact has an
ascertainable structure which exists for the purpose of maintaining
operations directed toward an economic goal, that has an existence
that can be defined apart from the commission of the predicate acts
constituting the patterns of racketeering activity.
United States Attorney's Manual, Title 9-Criminal Division, Guideline No. 9110.360); see also, Crowe v. Henry, 43 F. 3d 198, 205 (5th Cir. 1995) (noting
that an association-in-fact existed where plaintiff alleged that the individual
members joined together to form a farming venture and their association extended
beyond the members acts of fraud and theft).
30
generally, Complaint, Rec. Doc. 1, pp. 32-33) Therefore, the
Court finds that Plaintiff has sufficiently alleged a cognizable
federal claim under RICO against Defendants Wilfred Barnhill,
Diane Barnhill, and Brian Barnhill.11
Moreover, because it appears that the Plaintiff could also
establish
a
proper
association-in-fact
enterprise
under
some
variation of the Count I person/enterprise construction and/or by
more clearly defining the nature of the alleged enterprise, the
Court
finds
that
rather
than
dismissing
the
Plaintiff’s
complaint, the proper course of action is to allow Plaintiff
leave to amend Count I to attempt to cure the defects in the
complaint
as
it
currently
stands.12
Furthermore,
because
Plaintiff’s federal cause of action is preserved, the Defendants
face no potential prejudice by allowing Plaintiff the opportunity
to amend its other allegations under RICO.
C.
RICO Claims 18 U.S.C. § 1962(d)
Subsection 1962(d) of the RICO statute makes it unlawful
“for any person to conspire to violate any of the provisions of
subsections (a), (b), or (c) of [section 1962].” 18 U.S.C. §
11
Because Count II does not list Ms. Leblanc as a RICO person/defendant,
the Court finds that the current construction of the complaint contains no
cognizable RICO claims against her.
12
Federal Rule of Civil Procedure 15 indicates that leave to amend should
be freely given when justice so requires.
31
1962(d). To successfully allege that a defendant has engaged in a
RICO conspiracy, a plaintiff must plead that (1) “‘two or more
people agreed to commit a substantive RICO offense,’” and that
(2) the defendants “‘knew of and agreed to the overall objective
of the RICO offense.’” Chaney v. Dreyfus Serv. Corp., 595 F.3d
219, 239 (5th Cir. 2010) (quoting United States v. Sharpe, 193
F.3d 852, 869 (5th Cir. 1999)). The core of a RICO conspiracy is
the allegation of an agreement between the alleged conspirators
to commit the predicate acts. Abraham v. Singh, 480 F.3d 351, 357
(5th
Cir.
2007)
(citing
Crowe,
43
F.3d
at
206).
Conclusory
allegations of an agreement or conspiracy are not sufficient, the
plaintiff must allege “facts implying an agreement to commit
predicate acts of racketeering.” Crowe, 43 F.3d at 206.
Plaintiffs
conspired
Defendants
to
allege
violate
“knowingly
that
18
the
U.S.C.
and
RICO
§
Defendants
1962(c),”
intentionally
“agreed
and
that
furthered
and
the
the
conspiracy.” (Complaint, Rec. Doc. 1, p. 33, ¶ 115) In support of
this allegation, Plaintiff incorporates the facts outlined in the
preceding sections. For example, Plaintiff alleges that (1) that
Brian and Wilfred Barnhill worked together to cover up the fraud
from the parent Lyamec Corp. and (2) that Wilfred and Diane
Barnhill registered the corporation GIT together.(See generally,
32
Complaint, Rec. Doc. 1) Together, these facts support Plaintiff’s
more general allegation that at various points, each of the
Defendants was in agreement with at least one other Defendant to
defraud Global Oil via some commission of a predicate act. As
such, the Court finds that Plaintiff has sufficiently alleged a
conspiracy against the Barnhills under 18 U.S.C. § 1962(d).13
D.
Lanham Act Claims
The Lanham Act creates a federal remedy against any person
who uses “a word, term, name, symbol . . . false designation of
origin, false or misleading description of fact, or false or
misleading representation of fact” in commerce, in connection
with any goods or services, which is likely to cause
confusion,
mistake, or may “deceive as to the affiliation, connection, or
13
Plaintiff has failed to successfully allege a conspiracy against Mr.
Triche because it failed to successfully allege that he violated 18 U.S.C. §
1962(c). Likewise, as the corporate Defendants, GIT and DSM, and Ms. Leblanc are
not alleged to be RICO defendants under Count II, they also have not violated 18
U.S.C. § 1962(c) and, therefore, cannot be found to have violated 18 U.S.C. §
1962(d). Additionally, the Court also finds that Ms. Leblanc and Mr. Triche’s
independent arguments with respect to Plaintiff’s failure to state a claim for
conspiracy against them are not persuasive. In particular, the Court notes that
the proposition espoused by Ms. Leblanc and Mr. Triche — that as a matter of law
they cannot be held liable for conspiracy because they were employees of Global
Oil — is highly contested with respect to RICO conspiracy claims, and it has also
been called into doubt by the Supreme Court. See Cedric Kushner Promotions, Ltd.
v. King, 533 U.S. 158, 163 (2001) (stating that lower-level employees of a
corporation are both legally and linguistically speaking, separate from a
corporation, particularly when the employee conducts the acts of the corporation
illegally as alleged in the instant case and, therefore, implying that where an
employee could meet the separateness requirements under 18 U.S.C. § 1962( c), he
or she could also necessarily be found liable under 18 U.S.C. § 1962 (d)). As
such, in the absence of clear authority, this Court declines to dismiss
Plaintiff’s claims against Defendants Leblanc and Triche on those grounds.
33
association” of that person with the goods or services. 15 U.S.C.
§
1125(a)(1)(A).
competition
and
The
Lanham
reverse
Act
passing
includes
off.
claims
See
for
Dastar
unfair
Corp.
v.
Twentieth Century Fox Film Corp., 539 U.S. 23, 29 (2003).
i.
Unfair Competition
In order to bring a federal claim for unfair competition, a
Plaintiff
must
statements
of
allege
fact
that:
about
[a
(1)
the
product];
defendants
(2)
made
those
false
statements
deceived, or had the potential to deceive, a substantial segment
of potential customers; (3) the deception was material, in that
it tended to influence purchasing decisions; (4) the defendants
caused their products to enter interstate commerce; and (5) the
claimant has been, or is likely to be, injured as a result. King
v. Ames, 179 F.3d 370, 373-74 (5th Cir. 1999) (citing Taquino v.
Teledyne Monarch Rubber, 893 F.2d 1488, 1500 (5th Cir. 1990)).
“Likelihood of confusion” is the essential element for a claim of
unfair competition. King, 179 F.3d at 374. In determining whether
a likelihood of confusion exists, the court considers a variety
of
nonexhaustive factors, such as: the “similarity of products,
identity
of
retail
outlets
and
purchasers,
identity
of
advertising media, type (i.e., strength) of trademark or trade
dress,
defendant’s
intent,
similarity
34
of
design,
and
actual
confusion.” Sno-Wizard Mfg., Inc. v. Eisemann Prod. Co.,791 F.2d
423, 428 (5th Cir. 1986) (citing Falcon Rice Mill, Inc. v. Comm.
Rice Mill, Inc., 725 F.2d 336, 345 (5th Cir. 1984)).” “[A]lthough
a showing of actual confusion is not mandatory, it is ‘patently
the best evidence of likelihood of confusion.’” Louisiana World
Exposition, Inc. v. Logue, 746 F.2d 1033, 1041 (5th Cir. 1984)
(quoting Falcon Rice Mill, 725 F.2d at 345).
In the instant case, Plaintiff alleges that Defendants made
false statements about Global Oil by directing customer calls to
their cell phones and answering the calls as “Global” in order to
also take calls for GIT and, on one specific occasion, falsely
telling a customer that Global Oil did not make a specific tool,
but that the competing DSM did make the tool. (Complaint, Rec.
Doc. 1, pp. 7-10, ¶¶ 26, 34 (referring specifically to Defendant
Leblanc)). Likewise, Plaintiff has alleged that those statements
deceived and/or had the potential to deceive, by showing that
emails were sent to Global Oil accounts in regard to GIT products
and that orders were improperly billed to the wrong company.
(Complaint, Rec. Doc. 1, pp. 11, 13-14, ¶¶ 38, 46-47 (referring
specifically to Wilfred and Brian Barnhill)). Plaintiff has also
reported that due to these and other actions of the Defendants,
it suffered substantial operating losses and lost customers and,
35
moreover, that products from the competing companies (or Global
Oil products disguised as products from the competing companies)
were sold and shipped out of state. (Complaint, Rec. Doc. 1, pp.
6, 10-11, ¶¶ 19, 36, 39) All of these facts, taken as true,
indicate that the Defendants use of the competing companies and
the practices associated with their use of those companies, did
actually
confuse
purchasers
and
potential
purchasers
of
Plaintiff’s products.(See Complaint, Rec. Doc. 1, p. 8, ¶ 29
(noting that trucks making deliveries to GIT often mistakenly
arrived at Global Oil)). As such, the Court find that Plaintiff
has successfully pleaded a claim of unfair competition under the
Lanham Act.14
ii.
Reverse Passing Off
Reverse passing off is a type of unfair trade practice
14
This claim encompasses all Defendants as all are alleged to have
participated in the overall confusion of customers. In addition to the instances
mentioned in the text, it should also be noted that Diane Barnhill allegedly
participated by establishing the competing GIT company, which facilitated the
confusion due to the similarity of the names of the companies. (See Complaint,
Rec. Doc. 1, p. 7, ¶ 25) Likewise, Defendant Triche is alleged to have
participated by stealing the tools which were allegedly used by either GIT or
DSM, which also contributed to the confusion and unfair trade practices. (See
Complaint, Rec. Doc. 1, pp. 17-18, ¶¶ 59, 62) Moreover, the Court notes that the
law governing unfair trade practices makes no distinction as to the individual
Defendant’s roll in the practices, i.e. employee versus employer. Furthermore,
the case cited by Defendants Leblanc and Triche as supporting the proposition
that employees cannot be held liable, actually indicates that regardless of
whether a person is acting on behalf of a corporation or not, they are not
relieved of individual responsibility. Eng’g Dynamic, Inc. v. Structural
Software, Inc., 26 F.3d 1335, 1350 (5th Cir. 1994) (citing Mead Johnson & Co. v.
Baby’s Formula Serv., Inc., 402 F.2d 19, 23 (5th Cir. 1968)).
36
encompassed under the Lanham Act. Roho, Inc. v. Marquis, 902 F.2d
356, 360 (5th Cir. 1990). Reverse passing off occurs when a
“producer misrepresents someone else's goods or services as his
own.” Dastar, 539 U.S. at 27 n.1. “A defendant may also be guilty
of
reverse
another's
[passing]
product
off
that
has
by
selling
been
or
offering
for
sale
modified
slightly
and
then
labeled with a different name.” Roho, Inc., 902 F.2d
at 359.
To
adequately assert a claim for reverse passing off, the plaintiff
must allege facts that plausibly lead to an inference that the
defendant took tangible items from the plaintiff and passed them
off as his or her own. Gen. Universal Sys., Inc. v. Lee, 379 F.3d
131, 149 (5th Cir. 2004).
Plaintiff alleges that DSM purchased Global Oil’s products
at a discount and, on at least one occasion, shipped them to
another purchaser, with the implication being that the products
were represented as DSM’s products. (Complaint, Rec. Doc. 1, pp.
10-11, ¶¶ 36, 37) As such, the Court finds that the Plaintiff has
sufficiently stated a cognizable claim for reverse passing off
against DSM.15
15
With respect to Defendants’ argument that Plaintiff did not raise a
claim for reverse passing off in the complaint but, rather, waited until the
submission of its opposition memorandum, the Court notes that the complaint
broadly raises a claim under the Lanham Act that is consistent with the facts
alleged in the complaint. While the section of the complaint which references the
Lanham Act does primarily indicate that the claim raised is one for unfair trade
37
E.
Supplemental Jurisdiction
When a district court has original jurisdiction over an
action,
it
is
also
given
supplemental
jurisdiction
over
any
claims that are related to the claims in the action before it,
when they form part of the same case or controversy. 28 U.S.C. §
1367. A district court may decline to exercise that supplemental
jurisdiction under four circumstances: (1) when “the claim raises
a novel or complex issue of State law; (2) [when] the claim
substantially predominates over the claim or claims over which
the district court has original jurisdiction; (3) [when] the
district
court
has
dismissed
all
claims
over
which
it
has
original jurisdiction; or (4) [when] there are other compelling
reasons for declining jurisdiction.” Id.
The Court has original jurisdiction over the claims in this
action pursuant to RICO and the Lanham Act, therefore, it also
has
supplemental
jurisdiction
over
the
state
law
claims.
Furthermore, the Court finds that none of the aforementioned
circumstances for declining to exercise that jurisdiction apply
to this case. As such, the Court finds that it has jurisdiction
over the state law claims asserted in the Plaintiff’s complaint.
practices, the above-referenced facts of the complaint are clearly consistent
with a reverse passing off; therefore, the Court finds that per the liberal
notice requirements of Rule 8, Defendants were on notice of a reverse passing off
claim from the time that the initial complaint was filed.
38
F.
Defendant Leblanc and Triche’s Independent Arguments on
Plaintiff’s State Law Claims
i.
Louisiana Unfair Trade Practices Act
The Louisiana Unfair Trade Practices Act (“LUTPA”) makes it
unlawful for any person to engage in unfair competition and/or
“deceptive acts” when conducting trade or commerce.16 In order to
establish a claim under LUTPA, a plaintiff must demonstrate that
the defendant has engaged in conduct which “offends established
public
policy
and
.
.
.
is
immoral,
unscrupulous, or substantially injurious.”
unethical,
oppressive,
Cheramie Servs., Inc.
v. Shell Deepwater Prod., Inc., 2009-1633 (La. 4/23/10), 35 So.
3d 1053, 1059 (quoting Moore v. Goodyear Tire & Rubber Co., 364
So. 2d 630, 633 (La. App. 2 Cir. 1978).
The statute does not
specifically define or enumerate the acts and practices that
constitute unfair competition or deceptive acts; rather, courts
make a determination on a case-by-case basis. Levine v. First
Nat. Bank of Commerce, 2006-0394 (La. 12/15/06); 948 So. 2d 1051,
1065 (citing Jarrell v. Carter, 557 So. 2d 120, 123 (La. App. 1
Cir. 1991)). “[T]he range of prohibited practices under LUTPA is
16
LA. REV. STAT. § 51:1405(A). Under the act, a “person” is defined as “a
natural person, corporation, trust, partnership, incorporated or unincorporated
association, and any other legal entity.” Id. § 1402.
39
extremely narrow.” Cheramie Servs., Inc., 35 So. 2d at 1060.
“[O]nly
egregious
actions
involving
elements
of
fraud,
misrepresentation, deception, or other unethical conduct will be
sanctioned based on LUTPA.” Id. The Fifth Circuit has stated that
“under LUTPA [,] the Louisiana courts appear to zealously guard
against allowing managers, employees, and persons in a special
position of trust to profit from their wrongdoing.” Reingold v.
Swiftships, Inc., 126 F.3d 645, 653 (5th Cir. 1997) (citations
omitted).
Defendants Triche and Leblanc have argued that the Plaintiff
has
failed
to
state
a
LUTPA
claim
against
them
because,
as
alleged, they were acting as employees of Global Oil and at the
direction
of
the
Barnhills
at
all
times
relevant
to
the
complaint. The Court finds that Defendants’ argument on this
point is without merit. As demonstrated, the language of LUTPA is
broad in scope, and claims are not restricted only to mangers,
employers, shareholders, etc. of corporations. See LA. REV. STAT.
§ 51:1402 (including any natural person in the definition of
persons to whom the act is applicable). Rather, claims can be
brought against persons who have engaged in “actions involving
elements
of
fraud,
misrepresentation,
deception,
or
other
unethical conduct.” Cheramie Servs., Inc., 35 So. 2d at 1060. In
40
the
instant
case,
has
in
participated
Plaintiff
scheme
defraud
a
to
alleged
that
Global
Ms.
Oil,
Leblanc
that
she
committed unlawful conduct (namely, the predicate act of wire
fraud),
that
she
misrepresented
the
company
in
her
phone
conversations with customers, and that she diverted customers to
the competing companies. (Complaint, Rec. Doc. 1, pp. 9-10, 14,
¶¶
34,
39)
sufficiently
As
such,
pleaded
the
its
Court
LUTPA
finds
claim
that
Plaintiff
against
Ms.
has
Leblanc.
Likewise, Plaintiff has alleged that Defendant Triche stole from
Global Oil (an action that is unlawful and, thus, unethical), and
that the products stolen from Global Oil were misrepresented as
GIT and/or DSM’s products. (Complaint, Rec. Doc. 1, pp. 16 - 18,
¶¶
55,
59,
62-63)
Therefore,
the
Court
also
finds
that
the
Plaintiff has sufficiently pleaded its LUTPA claim against Mr.
Triche.
ii.
Breach of Fiduciary Duties
Under Louisiana law, an employee owes a duty of good faith
to his or her employer. Texana Oil & Refining Co. v. Belchic, 90
So. 522, 527 (La. 1922). An employee’s duty of good faith is
limited to fidelity and loyalty, and only rises to the level of a
fiduciary
duty
where
the
employee
employer.
See ODECO Oil & Gas Co. v. Nunez, 532 So. 2d 453, 462
41
is
also
an
agent
of
the
(La. App. 1 Cir. 1988). An employee’s duty of loyalty means that
the
employee
is
“duty
bound
not
to
act
in
antagonism
or
opposition to the interest of the employer.” Restivo v. Hanger
Prosthetics & Orthotics, Inc., 483 F. Supp. 2d 521, 534 (E.D. La.
2007). As such, the employee is precluded from diverting an
employer’s business, soliciting an employer’s customers, and/or
using
confidential
employer,
while
information
still
employed
that
was
acquired
for
the
employer.
from
Huey
the
T.
Littleton Claims Serv., Inc. v. McGuffee, 497 So. 2d 790, 794
(La. App. 3 Cir. 1986); Dufau v. Creole Eng’g, Inc., 465 So. 2d
752, 758 (La. App. 5 Cir. 1985). In general, the question of
whether or not an employee has breached his duty to his employer
“has been contemplated in instances when an employee has engaged
in dishonest behavior or unfair trade practices for the purpose
of his own financial or commercial benefit.” Restivo, 483 F.
Supp. 2d at 534. Therefore, the question of whether or not an
employee has breached his or her fiduciary duty is necessarily
folded into the question of whether or not an employee has acted
in violation of LUTPA. Id.
In the instant case, the Court finds that Defendants Triche
and Leblanc’s arguments that they have no duty to Global Oil as
employees fails. Louisiana law clearly provides that employees
42
have a duty of good faith and loyalty to their employers and
that, while employed, employees must uphold that duty. See Texana
Oil & Refining Co., 90 So. 522 at 527; ODECO Oil & Gas Co., 532
So. 2d at 462.
not
an
Moreover, as noted, the question of whether or
employee
necessarily
has
folded
breached
into
the
his
or
her
question
of
fiduciary
whether
or
duty
is
not
an
employee has violated LUTPA. Therefore, because the Court has
already determined that the Plaintiff has sufficiently pleaded
its LUTPA claims against Defendants Leblanc and Triche, the Court
also
finds
that
the
Plaintiff
has
sufficiently
pleaded
that
Leblanc and Triche breached their duty of good faith and loyalty
to Global Oil.
iii.
Conversion
individual
(1)
Misappropriation and Conversion
is
a
delictual
acquires
action
possession
which
of
an
occurs
object
when
an
in
an
unauthorized manner; (2) removes the object from its original
location and places it in another location with the intent to
exercise control over the object; (3) the acquired possession is
unauthorized; (4) the individual withholds possession from the
owner
of
destroyed;
the
(6)
object;
the
(5)
the
object
object
is
used
is
either
improperly;
altered
or
(7)
or
the
individual asserts ownership over the object. Dual Drilling Co.
43
v. Mills Equip. Inv., Inc., 98-0343 (La. 12/1/98); 721 So. 2d
853, 857 (citing FRANK L. MARAIST & THOMAS C. GALLIGAN, LOUISIANA TORT
LAW § 1-2, at 3 (1998)). The action of conversion constitutes an
act
of
ownership
over
another
individual’s
property
that
is
inconsistent with the true owner’s rights. Louisiana Health Care
Grp., Inc. v. Allegiance Health Mgt., Inc., 09-1093 (La. App. 3
Cir. 3/10/10); 32 So. 3d 1138, 1143.
Plaintiff has alleged that Defendants Leblanc and Triche
took work products, tools, and blueprints from Global Oil and
moved them to another location, i.e. outside of the Global Oil
facility and/or to a storage unit located on Wilfred Barnhill’s
property. (Complaint, Rec. Doc. 1, pp. 16-19, ¶¶ 34, 49, 55, 59,
66) Likewise, Global Oil has indicated that it did not authorize
the removal of the objects. While the Plaintiff’s complaint does
not specifically assert that Ms. Leblanc and Mr. Triche have
exercised ownership over the objects, it does allege that the
items have not been returned to Global Oil’s possession. (See
Complaint, Rec. Doc. 1, pp. 16-19, ¶¶ 34, 49, 55, 59, 66 (noting
that
the
items
have
“disappeared”))
Under
Louisiana
law,
“subsequent refusal to surrender [] goods to one who is entitled
to them may constitute conversion;” therefore, the Court finds
that
the
Plaintiff
has
sufficiently
44
plead
its
claims
of
conversion against Ms. Leblanc and Mr. Triche.17
iv.
Tortious Interference with Business Relations
In order to state a claim for tortious interference with
business relations, a plaintiff must allege “that a defendant
improperly and maliciously influenced others not to deal with
him.” Sandolph v. P & L hauling Contractors, Inc., 430 So. 2d
102, 103 (La. App. 5 Cir. 1983); see also Dussouy v. Gulf Coast
Inv. Corp., 660 F.2d 594, 601 (5th Cir. 1981).
To prove a claim
for tortious interference with business relations a plaintiff
“must show by a preponderance of the evidence that the defendant
improperly influenced others not to deal with the plaintiff.”
Medx., Inc. of Fla. v. Ranger, No. 91-3099, 193 WL 21250, at *5
(E.D. La. Jan. 25, 1993) (citing McCoin v. McGehee, 498 So. 2d
272, 274 (La. App. 1 Cir. 1986)). A cause of action for tortious
interference
with
business
relations
“is
not
restricted
to
officers of corporations.” Restivo, 483 F. Supp. 2d at 537.
Plaintiff
alleges
that
Defendants
Triche
and
Leblanc
“wantonly and maliciously” interfered with Global Oil’s business
17
Louisiana Health Care Grp., 32 So. 3d at 1143 (citing Kinchen v. Louie
Dabdoub Sell Cars, Inc., 05-218 (La. App. 5 Cir. 10/6/05); 912 So. 2d 715, 718).
It should also be noted that to the extent that Defendants argue that they were
authorized to take the objects because Wilfred Barnhill directed them to take
them, Louisiana jurisprudence indicates that even though “a party may have
rightfully come into possession of another’s goods,” the failure to return them
still may constitute a conversion. Louisiana Health Care Grp., 32 So. 3d at 1143
(citing Kinchen, 912 So. 2d at 718).
45
relationships.
(Complaint,
Rec.
Doc.
1,
p.
41,
¶
149)
With
respect to Ms. Leblanc, Plaintiff specifically alleges that on at
least one occasion, Ms. Leblanc falsely informed a Global Oil
customer/potential
customer
that
Global
Oil
did
not
make
a
product, and then directed the customer away from Global and
toward the competing DSM. (Complaint, Rec. Doc. 1, pp. 9-10, 14,
¶¶
34,
39)
Looking
at
these
allegations
in
the
light
most
favorable to the Plaintiff, it could certainly be inferred that
Ms. Leblanc diverted a customer away from Global Oil out of
malice. Moreover, Plaintiff’s complaint states that she did act
with
malice.18
As
such,
the
Court
finds
that
Plaintiff
has
adequately pleaded a cause of action for tortious interference
with business relations against Defendant Leblanc.
However, with regard to Defendant Triche, Plaintiff has only
alleged that Mr. Triche took tools and work product from Global
Oil. (Complaint, Rec. Doc. 1, pp. 16 - 18, ¶¶ 55, 59, 62-63)
While the implication is that those stolen products were then
18
Whether Defendant Leblanc did or did not act with malice is a subjective
question that can only be fully proven with more discovery. In this manner, it
is akin to the elements of intent and knowledge that are required in fraud
pleadings. When pleading these elements, plaintiffs are permitted to plead them
generally, rather than specifically, precisely because they can only be verified
by the defendant. See, e.g., Tel-phonic Servs., Inc., 975 F.2d at 1139. As such,
the Court finds that the general pleading of “malice” coupled with the specific
description of acts that constitute interference with business is sufficient for
the purposes of the instant pleadings, which are only governed under the more
lenient pleading standard in Rule 8.
46
misrepresented as GIT and DSM’s products, there is no indication
in the complaint that Mr. Triche actually directed customers to
the competing companies to sell those products, and/or that Mr.
Triche himself misrepresented the products and diverted business
from Global Oil to competing companies. Therefore, the Court
finds that the Plaintiff has not sufficiently pleaded tortious
interference
with
business
relations
as
to
Defendant
Triche.
Accordingly,
IT IS ORDERED that Defendants motions are GRANTED in part
and DENIED in part as follows.
With respect to RICO Count I, IT IS ORDERED that Plaintiff’s
claims
are
DISMISSED
without
prejudice.
However,
because
it
appears that the defects in Plaintiff’s pleading can be cured by
amendment, Plaintiff is GRANTED leave to amend its pleading as to
Count I in accordance with this Order. Plaintiff must submit an
amended complaint to this Court within twenty-one (21) days of
entry
of
this
Order.
Failure
to
amend
Plaintiff’s
complaint
within the required period will result in complete dismissal of
Plaintiff’s claims under Count I.
With respect to RICO Count II, Plaintiff has sufficiently
stated
Wilfred
its
18
U.S.C.§
Barnhill,
1962(c)
Brian
RICO
Barnhill,
47
claim
against
Defendants
and
Diane
Barnhill.
Accordingly, IT IS ORDERED that Defendants’ motions are DENIED
with respect to this count.
With respect to RICO Count III, Plaintiff has sufficiently
stated its 18 U.S.C. § 1962(d) RICO conspiracy claim against
Defendants Wilfred Barnhill, Brian Barnhill, and Diane Barnhill.
Plaintiff has failed to state a RICO conspiracy claim against
Defendants GIT, DSM, Leblanc, and Triche. However, because it
appears to the Court that the defects in this claim can be cured
by amendment, Plaintiff is GRANTED leave to amend its pleading as
to Count III in accordance with this Order. Plaintiff must submit
an amended complaint to this Court within twenty-one (21) days of
entry
of
within
this
the
Order.
required
Failure
period
to
will
amend
Plaintiff’s
result
in
complaint
dismissal
of
Plaintiff’s claims against the aforementioned Defendants under
Count III. Accordingly, IT IS ORDERED that Defendants’ motions
are GRANTED in part and DENIED in part with respect to this
count.
With respect to Count IV, the Lanham Act claims, Plaintiff
has sufficiently stated a claim against all Defendants under the
Lanham Act. Accordingly, IT IS ORDERED that Defendants’ motions
are DENIED with respect to this count.
With respect to Count V, VI, VIII, the LUTPA, breach of
48
fiduciary duty, and conversion claims, Plaintiff has sufficiently
stated claims against Defendants Leblanc and Triche. Accordingly,
IT IS ORDERED that Defendants Leblanc and Triche’s motion is
DENIED with respect to this count.
With
respect
to
Count
VII
and
IX,
the
civil
fraud
and
tortious interference with business relations claims, Plaintiff
has
sufficiently
stated
a
claim
against
Defendant
Leblanc.
Plaintiff has failed to state a claim against Defendant Triche.
Accordingly, IT IS ORDERED that Defendants Leblanc and Triche’s
motion is GRANTED in part and DENIED in part with respect to this
count.
New Orleans, Louisiana this 19th day of November, 2012.
____________________________
CARL J. BARBIER
UNITED STATES DISTRICT JUDGE
49
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