Wyatt et al v. WAMU/JP Morgan Chase Bank et al
Filing
123
ORDER Adopting Report and Recommendation for 111 Motion to Dismiss,, filed by WAMU/JP Morgan Chase Bank, 118 Report and Recommendation, WAMU/JP Morgan Chase Bank terminated. Signed by District Judge David M. Lawson. (DTof)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
ESTATE OF JAMES C. WYATT, II, and
LAYDELL WYATT,
Plaintiffs,
Case Number 09-14919
Honorable David M. Lawson
Magistrate Judge Michael J. Hluchaniuk
v.
WAMU/JP MORGAN CHASE BANK,
PATHWAY FINANCIAL, and TROTT
AND TROTT, P.C.,
Defendants.
____________________________________/
ORDER OVERRULING PLAINTIFFS’ OBJECTIONS TO REPORT AND
RECOMMENDATION, ADOPTING MAGISTRATE JUDGE’S
REPORT AND RECOMMENDATION, AND GRANTING
MOTION TO DISMISS BY DEFENDANT WAMU/JP MORGAN CHASE BANK
The matter is before the Court on objections to a report filed by Magistrate Judge Michael
J. Hluchaniuk recommending that a motion to dismiss filed by defendant WAMU/JP Morgan Chase
Bank be granted. The plaintiffs filed a pro se complaint against the defendants alleging violations
of federal law when the defendants attempted to collect payments and initiate foreclosure
proceedings on the plaintiffs’ house based on a mortgage that the plaintiffs allege does not exist and
never existed. Their original complaint alleged a violation of the Racketeer Influenced and Corrupt
Organizations (RICO) Act. The Court entered an order referring the case to the magistrate judge
to conduct all pretrial matters. The Court entered a previous order on an earlier report and
recommendation issued by Judge Hluchaniuk and referred the case back to him. Defendant Chase
then filed another motion to dismiss on August 29, 2011, to which the plaintiffs responded. Judge
Hluchaniuk filed his report on January 11, 2012 recommending that the motion be granted and the
case dismissed against Chase. The plaintiffs filed objections and the case is before this Court for
de novo review. The Court concludes that the plaintiffs’ objections lack merit, the magistrate judge
correctly concluded that the plainitffs abandoned all their claims except their RICO claim, and the
amended complaint clearly does not meet the continuity requirement for pleading RICO’s patternof-racketeering-activity requirement as construed by the Sixth Circuit. Therefore, the Court will
adopt the magistrate judge’s report and recommendation and grant defendant Chase’s motion to
dismiss.
I.
The facts of the case were set forth in detail by the magistrate judge in his first report and
summarized by this Court thereafter in its opinion on that report and recommendation. They need
not be repeated here, although there have been some procedural developments that deserve mention.
As mentioned in the magistrate judge’s first report, defendant Chase filed a motion to dismiss
the original complaint, arguing that the complaint did not state claims for which relief can be
granted. Thereafter, the plaintiffs filed a motion to amend the complaint to restate their RICO count
and add claims to quiet title, violation of the Fair Debt Collection Practices Act, violation of the Fair
Credit Reporting Act, defamation, and intentional infliction of emotional distress. The magistrate
judge filed a report suggesting that the probate exception ousted this Court’s jurisdiction, and also
recommended vacating a default judgment against defendant Pathway Financial. The Court adopted
the recommendation to set aside the default judgment and rejected the recommendation to dismiss
the case for want of subject matter jurisdiction. The Court also referred to several shortcomings in
the plaintiffs’ proposed amended complaint, and although an amendment was permitted, the Court
did not accept the proposed amended complaint. The Court’s order outlines in great detail the
guidelines for a claim under RICO.
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The plaintiffs then filed a new amended complaint on August 16, 2011. Despite their stated
intention to add other claims for relief, the only claim the plaintiffs identified in the amended
complaint is based on a violation of RICO. Defendant Chase responded with a motion to dismiss.
The magistrate judge ordered the plaintiffs to file a response by October 18, 2011. They filed their
response late on November 2, 2011, but the magistrate judge allowed it. Judge Hluchaniuk filed his
report on January 11, 2011 recommending that the motion be granted.
In his report, the magistrate judge concluded that the plaintiffs abandoned all their possible
claims except the RICO claim because the plaintiffs did not include those other claims in their
amended complaint, and when defendant Chase addressed those potential claims in its new motion
to dismiss, the plaintiffs did not respond to those arguments. The Court agrees that the only claim
in play presently is the RICO claim.
The magistrate judge then suggested that the plaintiffs’ amended complaint, even construed
liberally, failed to state a RICO claim. After outlining the pleading requirements of RICO and the
requirements for establishing standing under section 1964(c), the magistrate judge found that the
plaintiffs’ fraud claims were not sufficient to establish the predicate acts necessary for a RICO
claim. The magistrate judge also concluded that the plaintiffs’ attempt to predicate their RICO claim
on the collection of an unlawful debt, if indeed they were trying to do that, must fail because there
is no suggestion in the complaint that the $232,000 loan to James Wyatt was either a gamblingrelated debt or usurious, which is how “unlawful debt” is defined by RICO. See 18 U.S.C. §
1961(6). Relying on Moon v. Harrison Piping Supply, 465 F.3d 719, 724 (6th Cir. 2006), the
magistrate judge found that the plaintiff failed to plead facts that would support the conclusion that
the predicate acts are related and pose a threat of continuing criminal activity.
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As mentioned, the magistrate judge recommended that Chase’s motion to dismiss be granted.
The plaintiffs filed timely objections, listing six grounds. First, the plaintiffs object that they
were denied their right to be heard because the plaintiffs were ordered to respond to the motion to
dismiss by January 30, 2012, and the report and recommendation was entered on January 11, 2012.
Second, the plaintiffs object because the Court has proper subject matter jurisdiction over the
complaint because the plaintiffs are seeking relief under 18 U.S.C. § 1964. Third, the plaintiffs state
that the report and recommendation “impairs the promotion of simplicity in procedures, obstructs
the just determination of litigation, fails to eliminate unnecessary unjustifiable expenses and delay.”
Pls.’ Obj. at 6. Fourth, the plaintiffs state that the report and recommendation “violates Laydell
Wyatt’s constitutional right to be secure in her person and property and . . . to protect her home
against unlawful seizure.” Id. at 7. Fifth, the plaintiffs argue that the report and recommendation
denies the plaintiffs’ right to equal protection of the law. Sixth, the plaintiffs refute the conclusion
that the amended complaint fails to state a RICO claim because it alleges that the defendants
committed two or more predicate acts in a ten-year span, the predicate acts were related to one
another, and the predicate acts demonstrate criminal conduct of a continuing nature.
Defendant Chase filed a response to the objections.
II.
At the outset, it is useful to note that objections to a report and recommendation are reviewed
de novo. “A judge of the court shall make a de novo determination of those portions of the report
or specified proposed findings or recommendations to which objection is made. A judge of the court
may accept, reject, or modify, in whole or in part, the findings or recommendations made by the
magistrate judge.” 28 U.S.C. § 636(b)(1).
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The Sixth Circuit has stated that “[o]verly general objections do not satisfy the objection
requirement.” Spencer v. Bouchard, 449 F.3d 721, 725 (6th Cir. 2006). “The objections must be
clear enough to enable the district court to discern those issues that are dispositive and contentious.”
Miller v. Currie, 50 F.3d 373, 380 (6th Cir. 1995). “‘[O]bjections disput[ing] the correctness of the
magistrate’s recommendation but fail[ing] to specify the findings . . . believed [to be] in error’ are
too general.” Spencer, 449 F.3d at 725 (quoting Miller, 50 F.3d at 380).
“[T]he failure to file specific objections to a magistrate’s report constitutes a waiver of those
objections,” Cowherd v. Million, 380 F.3d 909, 912 (6th Cir. 2004), and releases the Court from its
duty to independently review the motion, see Thomas v. Arn, 474 U.S. 140, 149 (1985) (holding that
the failure to object to the magistrate judge’s report releases the Court from its duty to review the
motion independently); Smith v. Detroit Fed’n of Teachers Local 231, 829 F.2d 1370, 1373 (6th Cir.
1987).
A pro se litigant’s complaint is to be construed liberally, Erickson v. Pardus, 551 U.S. 89,
94 (2007), and is held to “less stringent standards” than a complaint drafted by counsel, Haines v.
Kerner, 404 U.S. 519, 520 (1972). Nonetheless, “[t]he leniency granted to pro se [litigants] . . . is
not boundless,” Martin v. Overton, 391 F.3d 710, 714 (6th Cir. 2004), and such complaints still must
plead facts sufficient to show a redressable legal wrong has been committed, Fed. R. Civ. P. 12(b);
Dekoven v. Bell, 140 F. Supp. 2d 748, 755 (E.D. Mich. 2001). To plead a case under the current
regime, a plaintiff “must plead ‘enough factual matter’ that, when taken as true, ‘state[s] a claim to
relief that is plausible on its face.’” Fabian v. Fulmer Helmets, Inc., 628 F.3d 278, 280 (6th Cir.
2010) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556, 570 (2007)). “Plausibility requires
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showing more than the ‘sheer possibility’ of relief but less than a ‘probab[le]’ entitlement to relief.”
Ibid. (quoting Ashcroft v. Iqbal, 556 U.S. 662, 129 S. Ct. 1937, 1949 (2009)).
A motion to dismiss under Rule 12(b)(6) is confined to a consideration of the pleadings.
Jones v. City of Cincinnati, 521 F.3d 555, 562 (6th Cir. 2008). “[A] court may accept ‘matters
outside the pleadings,’ but in doing so it generally must treat the motion ‘as one for summary
judgment under Rule 56.’” Ibid. (quoting Fed. R. Civ. P. 12(d)). However, “documents attached
to the pleadings become part of the pleadings and may be considered on a motion to dismiss. . . . In
addition, when a document is referred to in the pleadings and is integral to the claims, it may be
considered without converting a motion to dismiss into one for summary judgment.” Commercial
Money Ctr., Inc. v. Ill. Union Ins. Co., 508 F.3d 327, 335-36 (6th Cir. 2007) (citing Fed. R. Civ. P.
10(c); Jackson v. City of Columbus, 194 F.3d 737, 745 (6th Cir. 1999), abrogated on other grounds
by Swierkiewicz v. Sorema, N.A., 534 U.S. 506 (2002)). “[I]f the plaintiff fails to attach the written
instrument upon which he relies, the defendant may introduce the pertinent exhibit,” which is then
considered part of the pleadings. QQC, Inc. v. Hewlett-Packard Co., 258 F. Supp. 2d 718, 721 (E.D.
Mich. 2003) (citing Weiner v. Klais & Co., Inc., 108 F.3d 86, 89 (6th Cir. 1997)). “[D]ocuments
properly introduced by a defendant ‘“are considered part of the pleadings if they are referred to in
the plaintiff’s complaint and are central to [the plaintiff’s] claim.”’” Ibid. (Bowens v. Aftermath
Entm’t, 254 F. Supp. 2d 629, 639 (E.D. Mich. 2003) (quoting Weiner, 108 F.3d at 89)). Defendant
Chase has attached numerous documents to its motion to dismiss, many of which are referred to in
the complaint. However, consideration of those documents is not necessary to rule on defendant
Chase’s motion to dismiss.
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For the reasons discussed below, the Court finds that the magistrate judge correctly found
that the plaintiffs have failed to plead either the existence of an unlawful debt or continuity of the
alleged criminal enterprise.
The majority of the plaintiffs’ objections to the report and
recommendation either are irrelevant or clearly lack merit. The only objection with potential merit
is the plaintiffs’ objection that the amended complaint does state a claim because it adequately
pleads two predicate acts. Although the amended complaint, read generously, could plead the
existence of the two required predicate acts, the lack of continuity is dispositive and mandates
dismissal of the amended complaint.
A.
The plaintiffs’ first objection — that they were denied an opportunity to respond to defendant
Chase’s motion before the entry of the report and recommendation — is plainly without merit. The
plaintiffs were ordered to respond to the motion to dismiss by October 18, 2011 and they filed their
response on November 2, 2011. The order to which the plaintiffs refer requires a response to
defendant Trott & Trott’s motion to dismiss before January 30, 2012. There is no indication that
the plaintiffs were denied an opportunity to respond to defendant Chase’s motion.
B.
The plaintiffs’ second objection — that the Court has subject matter jurisdiction over the
complaint — is irrelevant. Defendant Chase does not dispute that subject matter jurisdiction exists.
The magistrate judge’s report and recommendation was not predicated on a finding that the Court
lacks subject matter jurisdiction; instead, the magistrate judge recommended that the Court grant
defendant Chase’s motion to dismiss because the amended complaint fails to state a claim. This
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objection appears to be a remnant of the last round of motions and recommendations; but the issue
discussed has no bearing on the issues presently before the Court.
C.
The plaintiffs’ third objection does not address the arguments advanced in the report and
recommendation. The objection reads in its entirety: “The Report and Recommendation impairs the
promotion of simplicity in procedures, obstructs the just determination of litigation, fails to eliminate
unnecessary unjustifiable expense and delay.” Pls.’ Obj. at 6. That language appears to be adapted
from 28 U.S.C. § 331, which deals with the Judicial Conference of the United States. The original
language describes the reasons for which the Judicial Conference should recommend changes in
rules of procedure to the Supreme Court. This third objection, which does not attack the reasoning
in the report and recommendation, provides no basis for overruling the magistrate judge or denying
the motion to dismiss.
D.
The plaintiffs’ fourth objection — that the report and recommendation violates plaintiff
Laydell Wyatt’s right to be secure in her person and property and to protect her home against
unlawful seizure — likewise is without merit. The objection appears to invoke rights under the
Fourth Amendment, but the plaintiffs have not identified a state actor, and state action is an essential
element of a claim under the Fourth Amendment as made applicable to the states by the Fourteenth
Amendment. Lugar v. Edmondson Oil Co., Inc., 457 U.S. 922, 937 (1982); Albright v. Oliver, 510
U.S. 266, 309 n. 28 (1994).
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E.
The plaintiffs’ fifth objection does not constitute a recognizable argument. The plaintiffs
state that their right to equal protection under the law is denied by the report and recommendation.
The plaintiffs do not provide any reason to believe that the Equal Protection Clause is implicated
by the report. The plaintiffs also outline the standards governing a motion to dismiss without
applying that standard to this case or arguing that the magistrate judge has misapplied the standard.
The plaintiffs’ fifth objection does not raise any argument that would upset the magistrate judge’s
findings.
F.
The plaintiffs’ sixth objection states, in essence, that the amended complaint does in fact
state a claim, and the magistrate judge is incorrect when he found that the fraud claims in the
amended complaint are insufficient to establish the predicate acts necessary for a RICO claim, the
amended complaint fails to establish the existence of an unlawful debt, and the amended complaint
does not establish sufficient continuity to establish a pattern of racketeering activity.
The magistrate judge is correct that the amended complaint fails to establish the existence
of an unlawful debt. Although it is possible that the amended complaint, viewed expansively, could
allege the existence of two predicate acts, the plaintiffs’ claim must nevertheless fail because it is
clear that the amended complaint does not establish sufficient continuity to state a RICO claim.
RICO’s civil remedy provision 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 . . . .” 18 U.S.C. § 1964(c). The plaintiffs originally alleged
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a violation of subsection 1962(c) against the defendants; the amended complaint and the plaintiffs’
objections also mention subsection 1962(b).
Subsection 1962(b) makes it “unlawful for any person through a pattern of racketeering
activity or through collection of an unlawful debt to acquire or maintain, directly or indirectly, any
interest in or control of any enterprise which is engaged in, or the activities of which affect,
interstate or foreign commerce.” 18 U.S.C. § 1962(b). To state a claim under subsection 1962(b),
a plaintiff must plead “facts tending to establish” that the defendants “(1) acquired or maintained
(2) through a ‘pattern of racketeering activity’ or the ‘collection of an unlawful debt’ (3) an interest
in or control of an enterprise (4) engaged in, or the activities of which affect, interstate or foreign
commerce.” Advocacy Organization for Patients and Providers v. Auto Club Ins. Ass’n, 176 F.3d
315, 321-22 (6th Cir. 1999). Subsection 1962(c) makes it “unlawful for any person employed by
or associated with any enterprise engaged in” activities affecting “interstate or foreign commerce
. . . to conduct or participate, directly or indirectly, in the conduct of such enterprise’s affairs through
a pattern of racketeering activity or collection of unlawful debt.” 18 U.S.C. § 1962(c). To state a
claim under subsection 1962(c), the plaintiff must plead “(1) conduct (2) of an enterprise (3) through
a pattern (4) of racketeering activity.” Sedima, S.P.R.L. v. Imrex Co., Inc., 473 U.S. 479, 496 (1985)
(footnote omitted); see also Moon v. Harrison Piping Supply, 465 F.3d 719, 723 (6th Cir. 2006).
Listing those elements makes clear that whether the plaintiffs intend to proceed under
subsection 1962(b) or subsection 1962(c), they must plead facts establishing that the defendants
have either attempted to collect an unlawful debt as defined by the RICO statute or engaged in a
pattern of racketeering activity. RICO pleadings are to be liberally construed. Begala v. PNC Bank
Ohio, Nat. Ass’n, 214 F.3d 776, 781 (6th Cir. 2000). However, under the current interpretation of
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Rule 12(b)(6), the court does not accept legal conclusions unsupported by the pleaded facts. Fabian,
628 F.3d at 280 (quoting Twombly, 550 U.S. at 556, 570; Iqbal, 129 S. Ct. at 1949).
RICO defines an unlawful debt as
a debt (A) incurred or contracted in gambling activity which was in violation of the
law of the United States, a State or political subdivision thereof, or which is
unenforceable under State or Federal law in whole or in part as to principal or
interest because of the laws relating to usury, and (B) which was incurred in
connection with the business of gambling in violation of the law of the United States,
a State or political subdivision thereof, or the business of lending money or a thing
of value at a rate usurious under State or Federal law, where the usurious rate is at
least twice the enforceable rate.
18 U.S.C. § 1961(6). There is no indication in the complaint that the mortgage debt that is the
subject of this litigation was incurred in gambling activity. Nor is there an allegation that the debt
is unenforceable under state or federal usury laws. The amended complaint does not state the
interest rate on the loan. The statutory interest cap in Michigan is twenty-five percent. Mich. Comp.
Laws § 438.31c(2), (4); Mich. Comp. Laws § 438.41. Defendant Chase has provided a copy of the
note that shows that the interest rate on the loan was six percent and the plaintiffs have not
contradicted that figure. In their objection, the plaintiffs state that the debt is unenforceable due to
laws relating to usury, but they neither identify what laws render the debt unenforceable nor explain
how those laws apply in this case. The plaintiffs have not stated a claim under RICO that the
defendants attempted to collected on an unlawful debt.
To plead a pattern of racketeering activity, the plaintiff must allege at least two predicate
acts, although that may not be sufficient. Brown v. Cassens Transp. Co., 546 F.3d 347, 354 (6th Cir.
2008) (citing H.J. Inc. v. Northwestern Bell Tel. Co., 492 U.S. 229, 238-43 (1989)). Acts
constituting racketeering activity are listed in subsection 1961(1) and include “any act or threat
involving . . . extortion,” mail fraud, wire fraud, counterfeiting, and money laundering. “Only those
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acts itemized in 18 U.S.C. § 1961(1) can constitute predicate offenses for RICO violations.” Frank
v. D’Ambrosi, 4 F.3d 1378, 1385 (6th Cir. 1993).
When the predicate acts are based on fraud, Federal Rule of Civil Procedure 9(b)’s
heightened pleading requirement applies. Brown, 546 F.3d at 356 n.4. At a minimum, a complaint
alleging a RICO claim must state “the nature of the fraud [that] gives rise to the predicate offense.”
Blount Fin. Servs., Inc. v. Walter E. Heller & Co., 819 F.2d 151, 152 (6th Cir. 1987). Rule 9(b)
requires that when “alleging fraud or mistake, a party must state with particularity the circumstances
constituting fraud or mistake.” Fed. R. Civ. P. 9(b). The plaintiff must “‘allege the time, place, and
content of the alleged misrepresentation on which he or she relied; the fraudulent scheme; the
fraudulent intent of [the other party]; and the injury resulting from the fraud.’” Coffey v. Foamex
L.P., 2 F.3d 157, 161-62 (6th Cir. 1993) (quoting Ballan v. Upjohn Co., 814 F. Supp. 1375, 1385
(W.D. Mich. 1992)); see also Vild v. Visconsi, 956 F.2d 560, 567 (6th Cir. 1992); Bender v.
Southland Corp., 749 F.2d 1205, 1216 (6th Cir. 1984) (holding that as to each predicate act, the
plaintiff must allege “the time, place and contents of the misrepresentation(s)”). Where a plaintiff
makes only “loose references” to support its allegations of mail and wire fraud, but otherwise fails
to identify the parties to those transactions, circuit courts have upheld the dismissal of the RICO
claims under both Rule 9(b) and RICO itself. See Jepson, Inc. v. Makita Corp., 34 F.3d 1321, 1328
(7th Cir. 1994) (“[W]ithout an adequately detailed description of the predicate acts of mail and wire
fraud, a complaint does not provide either the defendant or the court with sufficient information to
determine whether or not a pattern of racketeering activity has been established.”); Vennittilli v.
Primerica, Inc., 943 F. Supp. 793, 799 (E.D. Mich. 1996) (discussing Jepson). The complaint also
must identify the person making the alleged misrepresentations or involved in the alleged predicate
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acts. Jepson, 34 F.3d at 1328; Seattle-First Nat'l Bank v. Carlstedt, 800 F.2d 1008, 1011 (10th Cir.
1986); Vennittilli, 943 F. Supp. at 799.
The magistrate judge concluded that the plaintiffs failed to plead two predicate acts. The
amended complaint identifies eight predicate acts: execution of a mortgage using a forged signature
in violation of 18 U.S.C. §§ 1001, 1002, and 1005; the defendants’ “continued certification and
assertions” that the mortgage was valid and attempts to coerce the plaintiffs to pay the debt;
defendant Chase’s continued association with defendant Pathway “through its continued fraudulent
and false assertions by mail and wire fraud” that the mortgage was valid; defendant Chase’s payment
of a retainer to defendant Trott & Trott to assist with the collection of the debt; defendant Chase’s
and defendant Trott & Trott’s conspiracy to collect an unlawful debt; defendant Chase’s and
defendant Trott & Trott’s “agreement to conceal fraud, make fraudulent representations” and
continue to attempt to collect the debt despite alleged knowledge of its illegality; defendant Chase’s
and defendant Trott & Trott’s assertions that legal documentation supports the validity of the debt
and foreclosure of the property; and the defendants’ “unlawful contact attempts” with the plaintiffs
and relatives, including “continuous harassment, threats and intimidation tactics, unlawful electronic
access of Plaintiffs’ personal property and all unlawful physical attempts.” Am. Compl. at 16-17.
In addition, the amended complaint states that the defendants were involved in mail and wire fraud
in violation of 18 U.S.C. §§ 1341 and 1343 and violated 18 U.S.C. § 471 (prohibiting counterfeiting
a security of United States), 18 U.S.C. § 1951 (prohibiting interference with interstate commerce
through robbery or extortion), and 18 U.S.C. § 1956 (prohibiting money laundering). Am. Compl.
at 6, 8, 10.
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Several of those allegations are obviously insufficient to constitute the two predicate acts
required by RICO. Common law fraud is not included in the list of predicate acts in the RICO
statute. See 18 U.S.C. § 1961(1); see also German Free State of Bavaria v. Toyobo Co., Ltd., 480
F. Supp. 2d 958, 968 (W.D. Mich. 2007). Instead, the RICO statute specifies the types of fraud that
may constitute predicate acts, including wire fraud and mail fraud. Allegations of common law
fraud cannot support a RICO claim. Nor are 18 U.S.C. §§ 1001, 1002, and 1005, which the
plaintiffs allege the defendants violated, included in the list of predicate acts. See 18 U.S.C. §
1961(1). And although the plaintiffs mention violations of 18 U.S.C. §§ 471 and 1965, the plaintiffs
have pleaded no facts that would suggest that the defendants were involved in counterfeiting a
security of the United States or money laundering.
Once these allegations are pared away, there are three allegations in the amended complaint
that theoretically could constitute predicate acts: mail fraud, wire fraud, and extortion. Each of those
are included in the list of predicate acts in the RICO statute. See 18 U.S.C. § 1961(1) (listing
violations of 18 U.S.C. §§ 1341, 1343 and 1951 and “any act or threat involving . . . extortion” as
predicate acts). If the plaintiffs have pleaded facts that would support a claim that Chase engaged
in two of those violations, then the plaintiffs have met the predicate act requirement. As noted
above, wire and mail fraud claims must be pleaded with particularity to survive a motion to dismiss.
The plaintiffs reference a great number of letters and telephone calls in their complaint. Contrary
to the findings of the magistrate judge, those assertions are more than “vague references” that clearly
do not meet the pleading standard in Rule 9(b). It is true that many of the telephone calls and letters
discussed do not appear to contain misrepresentations; the communications assume the validity of
the note, but in most cases they are requests for the plaintiffs to take action rather than
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representations. However, the plaintiffs do allege some specific communications that contain
sufficient details at least to place the defendants on sufficient notice of the misrepresentation alleged
to permit them to answer the fraud claim. Coffey, 2 F.3d at 162. The plaintiffs point to a series of
conversations between plaintiff Laydell Wyatt and a Chase customer service representative. For
instance, the plaintiffs allege that Wyatt spoke on the phone to Chase employee Tamya Kennedy on
November 16, 2009, and that Kennedy told her the foreclosure had been placed on hold. Am.
Compl. ¶ 32. The plaintiffs allege that statement was a misrepresentation because the property had
been in active foreclosure on the date of the conversation. Id. ¶¶ 33-34. That conceivably could
constitute wire fraud, as the plaintiffs have alleged a misrepresentation made in a telephone call.
The plaintiffs have also alleged that plaintiff Laydell Wyatt received mail correspondence from
defendant Trott & Trott on November 23, 2009 containing pages of the allegedly fraudulent
mortgage and note containing the allegedly forged signatures of James C. Wyatt. Id. ¶ 37. That
mailing could amount to mail fraud because it could be viewed as a misrepresentation of the validity
of those signatures.
But it is not necessary to determine conclusively whether the plaintiffs have pleaded the
existence of two predicate acts, because even if they have, their RICO claim fails because they have
not demonstrated continuity. The Supreme Court has held that to demonstrate a “pattern of
racketeering activity,” plaintiffs must show “that the racketeering predicates are related, and that
they amount to or pose a threat of continued criminal activity.” H.J. Inc. v. Northwestern Bell
Telephone Co., 492 U.S. 229, 239 (1989) (emphasis in original). To demonstrate that the predicates
are related, it is sufficient to allege facts showing that the predicates “‘have the same or similar
purposes, results, participants, victims, or methods of commission, or otherwise are interrelated by
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distinguishing characteristics and are not isolated events.’” Id. at 240 (quoting 18 U.S.C. § 3575(e)).
The second requirement, continuity, “is both a closed- and open-ended concept, referring either to
a closed period of repeated conduct, or to past conduct that by its nature projects into the future with
a threat of repetition.” Id. at 241. “A party alleging a RICO violation may demonstrate continuity
over a closed period by proving a series of related predicates over a substantial period of time,” that
is, a period longer than “a few weeks or months.” Id. at 242. It is more difficult to define what
could demonstrate continuity through a threat of repetition; the inquiry is highly fact-specific. Ibid.
The Supreme Court gave as examples of this form of continuity a “hoodlum” selling “insurance”
to protect shopkeepers from broken windows and stating that he would return to collect the
premiums each month, and where “it is shown that the predicates are a regular way of conducting
defendant’s ongoing legitimate business.” Id. at 242-43.
The allegations in the amended complaint do not meet the continuity requirement because
they do not demonstrate continuity over a closed period. The actions alleged by the plaintiffs
occurred between May 2009 and December 2009. That period of eight months is insufficient to
constitute the “substantial period of time” that would permit the plaintiffs to demonstrate continuity
over a closed period. See H.J., Inc., 492 U.S. at 242 (a substantial period of time is longer than “a
few weeks or months”); Moon, 465 F.3d at 725 (series of acts over a nine month period insufficient
for closed-period continuity); Vemco, Inc. v. Camardella, 23 F.3d 129, 134 (6th Cir. 1994) (series
of acts spanning seventeen months insufficient to constitute closed-period continuity); Vild, 956 F.2d
at 569 (six or seven month period insufficient). Although the plaintiffs have alleged actions taken
by the defendants between December 2009 and May 2010, that activity either was taken to defend
the present litigation (such as filing required disclosure under Federal Rule of Civil Procedure 26(a))
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or otherwise does not plausibly constitute RICO predicate acts (such as various mailings about the
availability of a loan modification under HAMP). Am. Compl. at 13-14. Moreover, the elevenmonth period in which those actions were alleged to have occurred is insufficient to demonstrate
closed-period continuity under the precedents cited above.
Nor have the plaintiffs pleaded facts that would support a finding of continuity through a
threat of repetition. The plaintiffs have alleged that the defendants have been engaged in a scheme
to defraud them through a forged mortgage and note. That bears little similarity to the neighborhood
protection racket envisioned by the Supreme Court in H.J., Inc.. There is nothing in the amended
complaint to suggest that the predicate offenses identified by the plaintiffs are defendant Chase’s
regular way of doing business. The plaintiffs have not alleged, for example, that Chase has
attempted to enforce other forged notes through wire or mail fraud. Instead, the amended complaint
describes a single scheme to defraud the plaintiffs. Although the question whether a plaintiff has
alleged one “scheme” or multiple schemes is not dispositive, the Sixth Circuit repeatedly has found
that allegations that a defendant conducted a single scheme with a single purpose aimed at a single
victim over a short period of time are insufficient to meet the requirement of continuity under RICO.
Vemco, Inc., 23 F.3d at 135 (finding no open-ended continuity where complaint pleaded a scheme
to defraud one victim); Moon, 465 F.3d at 725-26 (finding no open-ended continuity where “[a]ll
of the predicate acts . . . were keyed to Defendants’ single objective of depriving [the plaintiff] of
his benefits”); Vild, 956 F.2d at 569 (finding no open-ended continuity where acts constituted “a
breach of contract with a single customer”); Thompson, 950 F.2d at 311 (finding no open-ended
continuity where defendant’s scheme to sell lots would end when the lots were sold). Like those
cases, the scheme alleged in the amended complaint was “inherently terminable” and had a “built-in
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ending point”: the plaintiffs would either pay the mortgage until the debt was extinguished or the
debt would be extinguished in foreclosure. Heinrich v. Waiting Angels Adoption Services, Inc., 668
F.3d 393, 410 (6th Cir. 2012). Also like those cases, the plaintiffs’ complaint identifies one victim.
The Court must conclude that although the plaintiffs’ allegations might support a claim for
fraud, they lack the continuity that the Supreme Court and the Sixth Circuit have found to be
indispensable for a successful RICO claim.
III.
As the Court observed in its previous order, RICO claims are difficult to plead correctly.
That warning is especially pertinent when a pro se party attempts to advance a RICO theory. The
Court has been mindful of the generous light cast upon such pleadings, and it previously furnished
step-by-step guidance for the plaintiffs’ attempt to amend their complaint successfully. The
plaintiffs’ amended complaint still falls short of the pleading requirements of RICO.
Accordingly, it is ORDERED that the magistrate judge’s report and recommendation [dkt.
#118] is ADOPTED.
It is further ORDERED that the plaintiffs’ objections to the magistrate judge’s report and
recommendation [dkt. #119] are OVERRULED.
It is further ORDERED that defendant WAMU/JP Morgan Chase Bank’s motion to dismiss
[dkt. #111] is GRANTED.
It is further ORDERED that the amended complaint is DISMISSED WITH PREJUDICE
as to defendant WAMU/JP Morgan Chase Bank ONLY.
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It is further ORDERED that the matter is referred to Magistrate Judge Michael J.
Hluchaniuk under the previous reference order [dkt. #14] to adjudicate the remaining motion to
dismiss, ready the matter for trial, and to conduct a trial if the parties consent under 28 U.S.C. §
626(b)(1)(c).
s/David M. Lawson
DAVID M. LAWSON
United States District Judge
Dated: March 20, 2012
PROOF OF SERVICE
The undersigned certifies that a copy of the foregoing order was served
upon each attorney or party of record herein by electronic means or first
class U.S. mail on March 20, 2012.
s/Deborah R. Tofil
DEBORAH R. TOFIL
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