Petersen v. Bitters et al
Filing
121
MEMORANDUM AND ORDER that Defendant William E. Bitters's Amended Motion to Dismiss (Filing No. 104 ) is GRANTED with respect to the Estate's NUDTPA, NCPA, and RICO claims and DENIED in all other respects. Defendant Robert W. Boland, Jr. 39;s Amended Motion to Dismiss (Filing No. 106 ) is GRANTED with respect to the Estate's NUDTPA, NCPA, and RICO claims and DENIED in all other respects. Defendant John Henry's Motion to Dismiss the plaintiff's breach-of-contract claim (Filing No. 112 ) is DENIED. The Estate's claims for violations of the NUDTPA, NCPA, and RICO are dismissed, without prejudice. Defendant John L. Henry's Motion for Cease and Desist Order (Filing No. 111 ) and Motion to Surpress [sic] an d Request for Sanctions (Filing No. 120 ) are DENIED. Defendants Bitters and Boland shall file an answer or otherwise plead within fourteen (14) days of the date of this order. Ordered by Judge Robert F. Rossiter, Jr. (Copy mailed to pro se party) (JSF)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEBRASKA
ESTATE OF JOYCE ROSAMOND
PETERSEN,
8:16CV183
Plaintiff,
vs.
MEMORANDUM AND ORDER
ROBERT W. BOLAND, JR., UNITED
FINANCIAL SERVICES, WILLIAM E.
BITTERS and JOHN L. HENRY,
Defendants.
This matter is before the Court on Defendant William E. Bitters’s Amended
Motion to Dismiss for Failure to State a Claim (Filing No. 104); Defendant Robert W.
Boland, Jr.’s Amended Motion to Dismiss for Failure to State a Claim (Filing No. 106);
and Defendant John L. Henry’s Motion for a Cease and Desist Order (Filing No. 111),
Motion to Dismiss (Filing No. 112), and Motion to Surpress [sic] and Request for
Sanctions (Filing No. 120). This is an action brought by the Estate of Joyce Petersen
(“Estate”) for damages and injunctive relief in connection with alleged investment advice
imparted by defendants Bitters and Boland and a promissory note executed by defendant
Henry. Jurisdiction is based on diversity of citizenship under 28 U.S.C. § 1332(a).
I.
FACTS
The Estate of Joyce Petersen, formerly known as Joyce Scroggins (“decedent”)
alleges ten causes of action: (1) breach of fiduciary duty; (2) negligence; (3) negligent
misrepresentation; (4) breach of contract; (5) breach implied duty of good faith and fair
dealing; (6) fraud; (7) assumpsit; (8) violations of the Racketeer Influenced and Corrupt
Organizations Act (“RICO”), 18 U.S.C. § 1961 et seq.; (9) violations of the Nebraska
Uniform Deceptive Trade Practices Act (“NUDTPA”), Neb. Rev. Stat. § 87-301 et seq.;
and (10) violations the Nebraska Consumer Protection Act (“NCPA”), Neb. Rev. Stat. §
59-1601 et seq. The Estate alleges that Bitters, doing business as United Financial
Information Services and/or United Financial Services, LLC, is registered with the
Nebraska Department of Insurance as a “Producer” with an active license. He is also
licensed in Iowa to sell life insurance and annuities. He allegedly gave financial advice
to the decedent’s husband, William Scoggins, during her marriage to Mr. Scoggins, and
continued to advise the decedent after Mr. Scoggins’s death in exchange for
compensation pursuant to a written or oral contract.
The Estate alleges Boland is
Bitters’s “partner” and knew or should have known of Bitters’s conduct. On Bitters’s
advice, the decedent allegedly loaned Henry the sum of $150,000.00. Henry executed a
promissory note in connection with that loan in Nebraska on February 8, 2008. The note
was due, together with compound interest of 11% per annum, one year later, with an
optional one-year renewal. Henry subsequently defaulted on the note.
The Estate alleges that Bitters misrepresented to the decedent that the loan to
Henry was a sound and reasonable investment. It alleges that these false statements were
made during meetings at the Comfort Inn & Suites in Omaha.
Bitters allegedly
persuaded the decedent that a loan to Henry was a better investment than her annuities,
and she sold $150,000 in annuities to make the loan to Henry. Bitters allegedly told the
decedent over the telephone that she had a “guaranteed return” on all of her investments
with him. The representations were also made in an accounting statement dated June 4,
2012, that Bitters allegedly mailed to the decedent. The Estate also alleges that Bitters
received “commissions and/or kick-backs” out of the $150,000 investment.
The Estate further alleges that from 2011 to 2013 Bitters assured the decedent that
she would be paid. The Estate alleges that the decedent did not discover the defendants’
allegedly wrongful conduct until 2013. 1 It also alleges that in phone calls that took place
1
Although the Estate’s factual allegations are generally couched in terms of
conduct by all of the defendants, the only factual allegations that relate to Henry are
claims for breach of contract and assumpsit that relate to the promissory note. Bitters and
Boland are alleged to have breached an oral or written contract with the decedent for
services and investment advice.
2
between 2009 and 2013, Bitters misled the decedent into believing she would be repaid,
and he discouraged her from taking legal action. The decedent died on October 20, 2013.
This action was filed on December 1, 2014. 2
Bitters asserts that all of the claims in the Estate’s First Amended Complaint are
subject to dismissal for failure to state a claim on which relief can be granted. Further, he
contends the claims are barred by statutes of limitation, and are not subject to equitable
estoppel.
Boland contends there are no allegations in the First Amended Complaint that
relate to him and also argues that the Estate’s claims are barred by statutes of limitation.
Henry, pro se, moves to dismiss the plaintiff’s breach-of-contract claim as timebarred and also argues insufficiency of process.
II.
DISCUSSION
A.
Pleading Standards
1.
Law
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); accord Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556 n.3 (2007).
“Specific facts are not necessary; the statement need only ‘give the defendant fair notice
of what the . . . claim is and the grounds upon which it rests.’” Erickson v. Pardus, 551
U.S. 89, 93 (2007) (quoting Twombly, 550 U.S. at 555). When ruling on a defendant’s
motion to dismiss, a judge must rule “on the assumption that all the allegations in the
complaint are true,” Twombly, 550 U.S. at 555, and draw all reasonable inferences in
favor of the non-moving party. Braden v. Wal-Mart Stores, Inc., 588 F.3d 585, 595 (8th
Cir. 2009).
2
The matter was originally filed in the Eastern District of Texas but transferred to
this Court on March 17, 2016.
3
Courts follow a “two-pronged approach” to evaluate Federal Rule of Civil
Procedure 12(b)(6) challenges. Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009). First, the
Court divides the allegations between factual and legal allegations; factual allegations
should be accepted as true but legal conclusions should be disregarded. Id. Second, the
Court reviews factual allegations for facial plausibility.
Id.
“A claim has facial
plausibility when the plaintiff pleads factual content that allows the court to draw the
reasonable inference that the defendant is liable for the misconduct alleged.” Id. at 677.
The Court should not “incorporate some general and formal level of evidentiary proof
into the ‘plausibility’ requirement of Iqbal and Twombly.” Whitney v. Guys, Inc., 700
F.3d 1118, 1128 (8th Cir. 2012). The question at this preliminary stage is not whether a
plaintiff might be able to prove its claim, but whether it has “adequately asserted facts (as
contrasted with naked legal conclusions) to support” those claims. Id. The complaint,
however, must still “include sufficient factual allegations to provide the grounds on
which the claim rests.” Drobnak v. Andersen Corp., 561 F.3d 778, 783 (8th Cir. 2009).
When it appears from the face of the complaint that a limitation period has run, a statute
of limitations defense may be asserted in a motion to dismiss under Federal Rule of Civil
Procedure 12(b)(6). Varner v. Peterson Farms, 371 F.3d 1011, 1016 (8th Cir. 2004).
Under Federal Rule of Civil Procedure 9(b), a party alleging fraud “must state
with particularity the circumstances constituting fraud.” Rule 9(b) is interpreted “‘in
harmony with the principles of notice pleading,’ and to satisfy it, the complaint must
allege ‘such matters as the time, place, and contents of false representations, as well as
the identity of the person making the misrepresentation and what was obtained or given
up thereby.’” Drobnak, 561 F.3d at 783 (quoting Schaller Tel. Co. v. Golden Sky Sys.,
Inc., 298 F.3d 736, 746 (8th Cir. 2002)). Essentially, the complaint “must plead the
‘who, what, where, when, and how’ of the alleged fraud.’” Id. (quoting United States ex
rel. Joshi v. St. Luke’s Hosp., 441 F.3d 552, 556 (8th Cir. 2005)). Because this higher
degree of notice is intended to enable the defendant to respond specifically and quickly to
4
potentially damaging allegations, conclusory allegations that a defendant’s conduct was
fraudulent and deceptive are not sufficient to satisfy the rule. Id.
A defendant must raise an objection to the sufficiency of process or service in his
answer or pre-answer motion. Fed. R. Civ. P. 12(h)(1). If objections to service are not
raised in the answer or pre-answer motion, they are waived. Resolution Trust Corp. v.
Starkey, 41 F.3d 1018, 1021 (5th Cir. 1995); see City of Clarksdale v. BellSouth
Telecomms., Inc., 428 F.3d 206, 214, n.15 (5th Cir. 2005) (holding that plaintiff’s failure
to properly serve defendant with original pleading was not problematic because
defendant filed an answer and, therefore, “submitted to the jurisdiction of the court” and
waived its right to object to service of process).
2.
Discussion
The Court first finds no merit to Henry’s assertion of insufficient process. The
record shows that Henry has made an appearance pro se in this action and has filed an
Answer (Filing No. 110) to the First Amended Complaint (Filing No. 106). He did not
raise insufficiency of service of process in his Answer. Also, he acknowledges receiving
a copy of the First Amended Complaint.
Henry has also filed motions for a “Cease and Desist Order,” and “to Surpress
[sic] and Request for Sanctions.” He asks the Court to order the Estate to “stop any and
all attempts to serve him at Metro Audio Dynamics,” to enjoin the defendants from
“further harassment of the establishment known as Metro Audio Dynamics” and to
impose sanctions on the plaintiff “as the court sees fit.” The court finds these motions are
frivolous and they will be denied.
As discussed below, the Court finds that certain allegations in Estate’s First
Amended Complaint survive the Rule 12(b)(6) and Rule 9(b) challenges, albeit barely so
in some cases.
5
B.
Negligence/Breach of Fiduciary Duty
1.
Law
“In order to recover in a negligence action, a plaintiff must show a legal duty owed
by the defendant to the plaintiff, a breach of such duty, causation, and damages.” A.W. v.
Lancaster Cnty. Sch. Dist. 0001, 784 N.W.2d 907, 913 (2010). “[T]he threshold inquiry
in any negligence action is whether the defendant owed the plaintiff a duty.” Durre v.
Wilkinson Dev., Inc., 830 N.W.2d 72, 80 (Neb. 2013) (citations omitted). A “duty” is an
obligation, to which the law gives recognition and effect, to conform to a particular
standard of conduct toward another. Id. The question whether a legal duty exists for
actionable negligence is a question of law dependent on the facts in a particular situation.
Id. If there is no duty owed, there can be no negligence. Id.
To recover on a breach of fiduciary duty claim, a plaintiff must prove: (1) the
defendant owed it a fiduciary duty; (2) the defendant breached the duty; (3) the breach
was the cause of the injury to the plaintiff; and (4) the plaintiff was damaged. McFadden
Ranch, Inc. v. McFadden, 807 N.W.2d 785, 790 (Neb. Ct. App. 2011). The existence of
a fiduciary duty and the scope of that duty are questions of law for a court to decide.
Gonzalez v. Union Pac. R.R., 803 N.W.2d 424, 446 (Neb. 2011). A fiduciary duty arises
out of a confidential relationship which exists when one party gains the confidence of the
other and purports to act or advise with the other’s interest in mind. Id. In a confidential
or fiduciary relationship in which confidence is rightfully reposed on one side and a
resulting superiority and opportunity for influence are thereby created on the other, equity
will scrutinize the transaction critically, especially where age, infirmity, and instability
are involved, to see that no injustice has occurred. Id.
2.
Discussion
The allegations in the Estate’s First Amended Complaint are sufficient to state
claims for negligence and breach of fiduciary duty against Bitters and Boland. The
reasonable inferences that can be drawn in the Estate’s favor supports those claims. The
6
Estate alleges that Bitters offered investment advice to the decedent. From the factual
allegations, the Court can infer, with respect to Bitters, the existence of a duty of
reasonable care and an alleged confidential or fiduciary relationship. At the pleading
stage, a plaintiff is not required to explain precisely how the defendant’s conduct was
unlawful, it is sufficient to plead facts indirectly showing unlawful behavior. Taking the
allegations of the First Amended Complaint as true, the Estate’s allegations that Boland is
Bitters’s partner, knew or should have known of Bitters’s allegedly wrongful conduct,
and is jointly liable for the alleged actions are sufficient—though barely—to withstand a
motion to dismiss.
C.
Fraud/Negligent Misrepresentation
1.
Law
In order to prove fraud under Nebraska law, a plaintiff must prove:
(1) a
representation was made; (2) the representation was false; (3) when made, the
representation was known to be false or made recklessly without knowledge of its truth
and as a positive assertion; (4) it was made with the intention that the plaintiff should rely
upon it; (5) the plaintiff did so rely; and (6) she suffered damage as a result. Freeman v.
Hoffman-La Roche, Inc., 618 N.W.2d 827, 844-45 (Neb. 2000). False representations
must be the proximate cause of the damage before a party may recover. Huffman v.
Poore, 569 N.W.2d 549, 560 (Neb. Ct. App. 1997).
Liability for negligent misrepresentation is based upon the failure of the actor to
exercise reasonable care or competence in supplying correct information.
Gibb v.
Citicorp Mortgage, Inc., 518 N.W.2d 910, 920 (Neb. 1994). “Under the law of negligent
misrepresentation, ‘one who, in a transaction in which he has a pecuniary interest,
supplies false information for the guidance of others . . . is subject to liability for
pecuniary loss caused by justifiable reliance upon the information, if he fails to exercise
reasonable care or competence in obtaining or communicating the information.’” Farm
Credit Servs. of Am. v. Haun, FLCA, 734 F.3d 800, 805 (8th Cir. 2013). Whether a
7
party’s reliance upon a misrepresentation was reasonable is a question of fact. Neb.
Nutrients, Inc. v. Shepherd, 626 N.W.2d 472, 496 (Neb. 2001). Misrepresentation claims
are “a subspecies of fraud,” and “a party must state with particularity the circumstances
constituting fraud” under Federal Rule of Civil Procedure 9(b). Id. (quoting Farr v.
Designer Phosphate & Premix Int’l, Inc., 570 N.W.2d 320, 326 (Neb. 1997)).
2.
Discussion
The allegations of the First Amended Complaint are also sufficient, at this stage of
the proceedings, to state a claim for fraud and negligent misrepresentation against
defendants Bitters and Boland. 3 The Estate alleges Bitters told the decedent the loan to
Henry was a better investment than annuities and alleged the time and place the
statements were made. The Estate sufficiently alleges the specifics of the allegedly
fraudulent conduct and adequately puts the defendants on notice of the claims and the
grounds on which they rest.
D.
Breach of Contract/Assumpsit
1.
Law
To state a claim for breach of contract under Nebraska law, a plaintiff must plead
facts showing “the existence of a promise, its breach, damage, and compliance with the
conditions precedent which activate the defendant’s duty.” Dep’t of Banking & Fin. of
Neb. v. Wilken, 352 N.W.2d 145, 147 (Neb. 1984). To create a contract, there must be
both an offer and an acceptance; there must also be a meeting of the minds or a binding
mutual understanding between the parties to the contract. City of Scottsbluff v. Waste
Connections of Nebraska, Inc., 809 N.W.2d 725, 740 (Neb. 2011). A binding mutual
understanding sufficient to establish a contract requires no precise formality or express
utterance from the parties about the details of the proposed agreement; it may be implied
3
There are no allegations of negligence, breach of fiduciary duty, or fraud that
relate to Henry. Henry can be liable for the other defendants’ allegedly wrongful acts
only if he was part of a civil conspiracy to commit those acts. As discussed below, the
plaintiff has not alleged sufficient facts to state a RICO conspiracy claim.
8
from the parties’ conduct and the surrounding circumstances. Id. At the pleading stage, a
plaintiff who fails to point to an identifiable contractual promise that the defendants did
not honor has not alleged a contract claim that plausibly entitles it to relief. Doe v. Bd. of
Regents of Univ. of Neb., 788 N.W.2d 264, 295 (Neb. 2010). The implied duty or
covenant of good faith and fair dealing exists in every contract. Farm Credit Servs. of
Am., FLCA v. Haun, 734 F.3d 800, 805 (8th Cir. 2013).
To recover for assumpsit, which is also referred to as an action for money had and
received, a plaintiff must show the defendant:
(1) received money; (2) retained
possession of the money; and (3) in justice and fairness ought to pay the money to the
plaintiff. Abante, LLC v. Premier Fighter, L.L.C., 836 N.W.2d 374, 379 (Neb. Ct. App.
2013). An action in assumpsit for money had and received may be brought where a party
has received money that in equity and good conscience should be repaid to another. City
of Scottsbluff, 809 N.W.2d at 739. In such a circumstance, the law implies a promise on
the part of the person who received the money to reimburse the payor in order to prevent
unjust enrichment. Id. When a party uses an assumpsit action in this sense, it is a quasicontract claim sounding in restitution. Id. Restitution is predominantly the law of unjust
enrichment. Id.
2.
Discussion
The Court finds the Estate adequately states a claim for breach of contract against
Henry in connection with the promissory note (the only apparent breach-of-contract
claim against Henry). It alleges Henry promised to repay the loan, did not do so and
thereby damaged the Estate. Bitters and Boland were not parties to the promissory note,
nor are they alleged to have breached it.
With respect to Bitters and Boland, the Estate’s allegation that Bitters breached an
oral or written contract for investment advice and services with the decedent, taken as
true, is sufficient to withstand the defendants’ Rule 12(b)(6) challenge. Again, Boland is
implicated by virtue of his alleged partnership with Bitters. The Court can draw the
9
reasonable inference that a contractual relationship existed given the parties’ alleged
conduct. Bitters allegedly imparted investment advice and the decedent followed it. The
Estate’s claims for breach of implied duties of good faith and fair dealing are subsumed
within its breach-of-contract claims.
The Estate also alleges facts sufficient to state a claim for assumpsit against all of
the defendants. It alleges that the defendants received money, retained possession of the
money, and in justice and fairness, ought to pay the money to the plaintiff. The Estate’s
allegations, taken as true, state a plausible claim under Nebraska law.
E.
NUDTPA/NCPA
1.
Law
The NUDTPA provides that a person engages in a deceptive trade practice when
he or she uses any “scheme or device to defraud by means of . . . [o]btaining money or
property by knowingly false or fraudulent pretenses, representations, or promises.” Neb.
Rev. Stat. § 87-302(a)(15)(i).
The Act provides for injunctive relief, but provides no
private right of action for damages. See Stenberg v. Consumer’s Choice Foods, Inc., 755
N.W.2d 583, 587 (Neb. 2008); Reinbrecht v. Walgreen Co., 742 N.W.2d 243, 247 (Neb.
Ct. App. 2007).
Nebraska courts routinely dismiss a plaintiff’s claims under the
NUDTPA if the complaint fails to seek injunctive relief. Reinbrecht, 742 N.W.2d at 24748 (dismissing a plaintiff’s claim “because he had not alleged or proved the likelihood of
future harm sufficient to assert a viable claim for injunctive relief.”).
The NCPA, Neb. Rev. Stat. § 59-1602, makes “[u]nfair methods of competition
and unfair deceptive acts or practices in the conduct of any trade or commerce” unlawful.
Neb. Rev. Stat. § 59-1602. To prove a violation of the NCPA a plaintiff must show:
(1) the defendant engaged in an act or practice that constitutes an unfair method of
competition or a deceptive trade practice in the conduct of any trade or commerce; (2) the
defendant’s conduct affected the public interest; (3) the plaintiff was injured in its
business or property by the defendant’s deceptive trade practice; and (4) the plaintiff
10
suffered damages. WWP, Inc. v. Wounded Warriors Family Support, Inc., 628 F.3d
1032, 1042 (8th Cir. 2011); Arthur v. Microsoft Corp., 676 N.W.2d 29, 36 (Neb. 2004)
(holding that for a claim to be actionable under the NCPA, “the unfair or deceptive act or
practice must have an impact upon the public interest”). The NCPA does not apply to
“isolated transactions between individuals that have no impact on consumers at large.
Arthur, 676 N.W.2d at 36. At the other end of the spectrum are cases alleging “a pattern
of calculated conduct intended to defraud numerous citizens of this state.” Eicher v. Mid
Amer. Fin. Inv. Corp., 748 N.W.2d 1, 12 (Neb. 2008). “[T]he [NCPA] is not available to
redress a private wrong where the public interest is unaffected.” Arthur, 676 N.W.2d at
36.
2.
Discussion
The Court finds the plaintiff’s allegations are not sufficient to state a claim for
violations of the NUDTPA. The allegations in the Estate’s First Amended Complaint are
attempts to “redress a private wrong” and are not sufficient to support the proposition that
the public interest is affected. Accordingly, the Estate’s First Amended Complaint fails
to state a claim for violations of the NUDTPA, and that claim will be dismissed against
all defendants.
Further, though the Estate prays for injunctive relief, the allegations of the First
Amended Complaint indicate the Estate seeks only damages for a past violation; there are
no allegations that any future harm is at issue. Because there is no private right of action
for damages under the NCPA, the Estate’s NCPA claim will also be dismissed against all
defendants.
F.
RICO
1.
Law
RICO prohibits “any person employed by or associated with any enterprise
engaged in . . . interstate . . . commerce, to conduct or participate, directly or indirectly, in
the conduct of such enterprise’s affairs through a pattern of racketeering activity.”
11
18 U.S.C. § 1962(c). A civil claim under “RICO ‘does not cover all instances of
wrongdoing. Rather, it is a unique cause of action that is concerned with eradicating
organized, long-term, habitual criminal activity.’” Crest Const. II, Inc. v. Doe, 660 F.3d
346, 353 (8th Cir. 2011) (quoting Gamboa v. Velez, 457 F.3d 703, 705 (7th Cir. 2006)).
To establish a civil claim for damages under RICO, a plaintiff must prove the defendant
engaged in “(1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering
activity.” Nitro Distrib., Inc. v. Alticor, Inc., 565 F.3d 417, 428 (8th Cir. 2009) (quoting
Sedima S.P.R.L. v. Imrex Co., 473 U.S. 479, 496 (1985)). The requirements of § 1962(c)
must be established as to each individual defendant and a plaintiff’s failure to establish
any one element of a RICO claim means the whole claim fails. Craig Outdoor Adver.,
Inc. v. Viacom Outdoor, Inc., 528 F.3d 1001, 1027 (8th Cir. 2008).
“The particularity requirements of Rule 9(b) apply to allegations of . . . fraud . . .
when used as predicate acts for a RICO claim.” Murr Plumbing, Inc. v. Scherer Bros.
Fin. Servs. Co., 48 F.3d 1066, 1069 (8th Cir. 1995). “[C]onclusory allegations that a
defendant’s conduct was fraudulent and deceptive are not sufficient to satisfy the rule.
Commercial Prop. Invs., Inc. v. Quality Inns Int’l, Inc., 61 F.3d 639, 644 (8th Cir. 1995).
“When pled as RICO predicate acts, mail and wire fraud require a showing of: (1) a plan
or scheme to defraud, (2) intent to defraud, (3) reasonable foreseeability that the mail or
wires will be used, and (4) actual use of the mail or wires to further the scheme.”
Wisdom v. First Midwest Bank, of Poplar Bluff, 167 F.3d 402, 406–07 (8th Cir. 1999).
“[T]he term ‘scheme to defraud’ connotes some degree of planning by the perpetrator,
[and] it is essential that the evidence show the defendant entertained an intent to
defraud.” Atlas Pile Driving Co. v. DiCon Fin. Co., 886 F.2d 986, 991 (8th Cir. 1989).
Acts and omissions such as breach of contract and breach of fiduciary duty are
insufficient to establish RICO liability. See Manion v. Freund, 967 F.2d 1183, 1186 (8th
Cir. 1992) (involving breach of fiduciary duty); Travel Bureau, Inc. v. Heritage Travel,
Inc., 904 F.2d 786, 791 (1st Cir. 1990) (involving a breach of contract). A RICO
enterprise “must have a common or shared purpose, some continuity of personnel, and an
12
ascertainable structure distinct from the pattern of racketeering.” Asa-Brandt, Inc. v.
ADM Investor Servs., Inc., 344 F.3d 738, 753 (8th Cir. 2003).
A pattern of racketeering is shown through two or more related acts of
racketeering activity that amount to or pose a threat of continued criminal activity. Crest
Const. II, 660 F.3d at 356. To satisfy RICO’s continuity element, a plaintiff must allege
multiple predicate acts occurring over a substantial period of time or allege facts showing
that the predicate acts threaten to extend into the future. Id. Civil RICO claims are
subject to a four-year statute of limitations. Agency Holding Corp. v. Mallei-Duff &
Assocs., Inc., 483 U.S. 143, 156 (1987).
2.
Discussion
With respect to the Estate’s claim for RICO violations, the Estate has failed to
allege the predicate acts of mail and wire fraud with sufficient particularity to withstand a
Rule 12(b)(6) challenge. Though the First Amended Complaint may contain sufficient
allegations of common law fraud, it does not allege a fraudulent scheme involving
repeated instances, planning, and intent so as to amount to a RICO claim. The factual
allegations, even with reasonable inferences drawn in the Estate’s favor, do not describe
organized, long-term, habitual criminal activity.
Also, although the plaintiff alleges
fraudulent conduct with respect to another investor, those allegations do not suggest the
sort of multiple predicate acts that occur over a substantial period of time or threaten to
extend into the future that amount to a pattern of racketeering activity. Also, the Estate’s
First Amended Complaint lacks sufficient allegations of an ongoing enterprise to trigger
RICO liability.
G.
Statutes of Limitations/Equitable Estoppel
1.
Law
“A period of limitations begins to run upon the violation of a legal right, that is,
when the aggrieved party has the right to institute and maintain suit.” Reinke Mfg. Co. v.
Hayes, 590 N.W.2d 380, 389 (Neb. 1999) (citations omitted). A “cause of action in
13
contract accrues at the time of the breach or failure to do the thing that is the subject of
the agreement, irrespective of any knowledge on the part of the plaintiff or of any actual
injury occasioned to him or her.”
Cavanaugh v. City of Omaha, 580 N.W.2d 541, 544
(Neb. 1998); see Neb. Rev. Stat. § 25-205(1).
Which statute of limitations applies is a question of law. Parks v. Merrill, Lynch,
Pierce, Fenner & Smith, 684 N.W.2d 543, 549 (Neb. 2004). The point at which a statute
of limitations begins to run must be determined from the facts of each case.” Reinke Mfg.
Co., 590 N.W.2d at 389–90. The issue as to when the statute of limitations begins to run
is a question of law only if the facts are undisputed. See id. at 390.
In Nebraska, actions for negligence, fraud, and breach of an oral contract must be
brought within four years. Neb. Rev. Stat. §§ 25-206, 25-207. With certain exceptions
not applicable here, an action for relief on the ground of fraud is not “deemed to have
accrued until the discovery of the fraud.” Neb. Rev. Stat. § 25-207(4). Absent a more
specific statute, actions on written contracts may be brought within five years pursuant to
Nebraska Revised Statutes § 25–205.
Reinke Mfg. Co., 590 N.W.2d at 387.
If a
promissory note is a negotiable instrument, the six-year statute of limitations provided in
Nebraska’s Uniform Commercial Code is applicable; if it is not a negotiable instrument,
the five-year statute of limitations for actions on written contracts is applicable. 4
4
The Uniform Commercial Code is applicable only to negotiable instruments. In
re Estate of Young v. Phillip, No. A-96-423, 1997 WL 426191, at *8 (Neb. Ct. App. July
1, 1997). See Neb. § U.C.C. 3-102(a) (Reissue 1992). An “instrument” is either a
“promise,” which is a written undertaking to pay money signed by the person undertaking
to pay, Neb. Rev. Stat. U.C.C. § 3-103(a)(9), or an “order,” which is a written instruction
to pay money signed by the person giving the instruction, Neb. Rev. Stat. § 3-103(a)(6).
Nebraska Revised Statutes U.C.C. § 3-104 provides that an instrument is negotiable if the
following requirements are met: (1) the promise or order must be unconditional; (2) the
amount of money must be “a fixed amount . . . with or without interest or other charges
described in the promise or order;” and (3) the promise or order must be “payable to
bearer or to order.” Neb. Rev. Stat. U.C.C. § 3-104(a). The language regarding “payable
to bearer or to order” is defined in Neb. Rev. Stat. U.C.C. § 3-109. In re Estate of Young,
No. A-96-423, 1997 WL 426191, at *8.
14
Emerson v. Zagurski, 531 N.W.2d 237, 241 (Neb. 1995); Neb. Rev. Stat. U.C.C. § 3-118;
Neb. Rev. Stat. § 25-205; see also Fales v. Norine, 644 N.W.2d 513, 521 (Neb. 2002).
Nebraska Revised Statutes § 25–222 is a special statute of limitations for
professional negligence. Reinke Mfg. Co., 590 N.W.2d at 387. A special statute of
limitations controls and takes precedence over a general statute of limitations. Id. In
determining whether the special statute of limitations for professional negligence applies
to a plaintiff’s claim, a court must determine whether the defendant is a professional and
was acting in a professional capacity in rendering the service on which the claim is based.
Parks, 684 N.W.2d at 549. The Nebraska Legislature has not specifically stated which
occupations are governed by § 25-222. Id. The Nebraska Supreme Court, however, has
determined that doctors, lawyers, accountants, medical technicians, physical therapists
and certain investment advisors are professionals for purposes of the statute of limitations
described in § 25–222. Churchill v. Columbus Comm. Hosp., 830 N.W.2d 53, 57 (Neb.
2013); see also Bixenmann v. Dickinson Land Surveyors, Inc., 882 N.W.2d 910, 916
(Neb. 2013) (finding registered surveyors are professionals); but see Jorgensen v. State
Nat. Bank & Trust, 583 N.W.2d 331, 335 (1998) (finding bank employees, even if
characterized as “retirement planners,” were not professionals); Tylle v. Zoucha, 412
N.W.2d 438, 440 (Neb. 1987) (finding real estate brokers are not professionals).
The professional negligence statute of limitations provides a two-year limitations
period for actions, whether pled in contract or tort, based on a professional relationship.
Jorgensen 583 N.W.2d at 388; see Neb. Rev. Stat. § 25-222. That statute also provides
that “if the cause of action is not discovered and could not be reasonably discovered
within such two-year period, then the action may be commenced within one year from
the date of such discovery or from the date of discovery of facts which would reasonably
lead to such discovery, whichever is earlier.” Neb. Rev. Stat. § 25-222. In the context of
statutes of limitations, “‘discovery’ refers to the fact that one knows of the existence of an
injury or damage, regardless of whether there is awareness of a legal right to seek redress
15
in court.” Reinke Mfg. Co., 590 N.W.2d at 390 (quoting Weaver v. Cheung, 254 576
N.W.2d 773, 778 (Neb. 1998)).
A continuous relationship may toll the statute of
limitations but requires that there is continuity of the relationship and services for the
same or a related subject matter after the alleged professional negligence. Id. at 391.
The elements of equitable estoppel are, as to the party estopped: (1) conduct that
amounts to a false representation or concealment of material facts, or at least which is
calculated to convey the impression that the facts are otherwise than, and inconsistent
with, those which the party subsequently attempts to assert; (2) the intention, or at least
the expectation, that such conduct shall be acted upon by, or influence, the other party or
other persons; and (3) knowledge, actual or constructive, of the real facts. Olsen v.
Olsen, 657 N.W.2d 1, 9 (Neb. 2003). As to the other party, the elements are: (1) lack of
knowledge of and means of knowledge of the truth as to the facts in question;
(2) reliance, in good faith, upon the conduct or statements of the party to be estopped; and
(3) action or inaction based thereon of such a character as to change the position or status
of the party claiming the estoppel, to his or her injury, detriment, or prejudice. Id. “The
first prong of this test is met when one lulls his or her adversary into a false sense of
security, thereby causing that person to subject his or her claim to the bar of the statute of
limitations, and then pleads the very delay caused by his or her conduct as a defense to
the action when it is filed.” Id.
2.
Discussion
With respect to the defendants’ statutes-of-limitations defenses, the Court finds
that it is not clear on the face of the First Amended Complaint that the Estate’s claims are
barred by the applicable statutes, even though such defenses may eventually have merit.
There are numerous issues of underlying fact to be explored before the Court can
determine as a matter of law which statutes are applicable, when the claims accrued, and
whether tolling or equitable estoppel are appropriate. For example, on the face of the
pleading, the Court is unable to determine the nature of the promissory note, the
16
relationship—whether fiduciary or professional—between the decedent and the
defendants, the nature and extent of the defendants’ duties, the status of Bitters and
Boland as professionals, the point at which the Estate discovered or should have
discovered any misfeasance, whether the defendants lulled the decedent or the Estate
plaintiff into inaction, or whether there was continuity in the relationship so as to toll the
limitations period. All of these issues require further factual development. The Court
thus finds the defendants’ motions to dismiss based on the statute of limitations should be
denied at this time. Accordingly,
IT IS ORDERED:
1.
Defendant William E. Bitters’s Amended Motion to Dismiss (Filing
No. 104) is GRANTED with respect to the Estate’s NUDTPA,
NCPA, and RICO claims and DENIED in all other respects.
2.
Defendant Robert W. Boland, Jr.’s Amended Motion to Dismiss
(Filing No. 106) is GRANTED with respect to the Estate’s
NUDTPA, NCPA, and RICO claims and DENIED in all other
respects.
3.
Defendant John Henry’s Motion to Dismiss the plaintiff’s breach-ofcontract claim (Filing No. 112) is DENIED.
4.
The Estate’s claims for violations of the NUDTPA, NCPA, and
RICO are dismissed, without prejudice.
5.
Defendant John L. Henry’s Motion for Cease and Desist Order
(Filing No. 111) and Motion to Surpress [sic] and Request for
Sanctions (Filing No. 120) are DENIED.
6.
Defendants Bitters and Boland shall file an answer or otherwise
plead within fourteen (14) days of the date of this order.
Dated this 19th day of October, 2016.
BY THE COURT:
s/ Robert F. Rossiter, Jr.
United States District Judge
17
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?