TM, LLC v. Anderson, et al

Filing 64

ORDER - The Desibia defendants' motion to dismiss (DE # 48) is GRANTED IN PART as to the RICO claims and DENIED IN PART as to lack of personal jurisdiction. Other defendants' first motion for costs and to strike (DE # 50) is DENIED AS MOOT and the second motion for costs and to strike (DE # 55) is GRANTED IN PART AND DENIED IN PART as to the request for costs, as set forth in this order, and DENIED as to the request to strike certain allegations from the complaint. Plaintiff's motion for extension of time for service and to conduct discovery (DE # 60) is GRANTED. Signed by District Judge Louise Wood Flanagan on 9/26/2012. (Baker, C.)

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF NORTH CAROLINA
NORTHERN DIVISION
No. 2:11-CV-00071-FL

TM, LLC,
Plaintiff,
v.
GARY CHARLES ANDERSON,
KATHERINE GAIL ANDERSON, CYA
OBX, LLC, ANDERSON HOMES OF
THE OUTER BANKS, LLC, LINDA
DESIBIA, ELIZABETH DESIBIA,
ALEXANDRA DESIBIA, QUINN
DESIBIA, AND PARIS FASCHETTE,
Defendants.

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ORDER

This matter is before the court on four motions: a motion to dismiss by defendants Linda
Desibia, Elizabeth Desibia, Alexandra Desibia, and Quinn Desibia (collectively the "Desibia
defendants") (DE # 48), to which plaintiff has responded in opposition (DE # 53); two motions for
costs and to strike by defendants Gary Charles Anderson, Katherine Gail Anderson, CYA OBX,
LLC, and Anderson Homes of the Outer Banks, LLC (collectively the"Anderson defendants") (DE
# 50, 55), to which plaintiff has responded in opposition (DE # 59, 62); and a motion for extension
of time for service and to conduct discovery by plaintiff (DE # 60), to which no response has been
filed. In this posture, the issues raised are ripe for decision. For reasons given, the Desibia
defendants' motion to dismiss (DE # 48) is granted in part and denied in part. Also for reasons given
below, the Anderson defendants' first motion for costs and to strike (DE # 50) is denied as moot, and

their second motion for costs and to strike (DE # 55) is granted in part and denied in part as to the
motion for costs and denied as to the motion to strike. Finally, plaintiff's unopposed motion for
extension of time for service and to conduct discovery (DE # 60) is granted.
BACKGROUND
Plaintiff filed complaint on December 21, 2011, asserting a federal claim pursuant to the
Racketeer Influenced and Corrupt Organizations Act ("RICO") along with several state law claims,
all arising out of an alleged scheme to shield assets from plaintiff, a judgment creditor of defendants
Gary Charles Anderson (“Gary Anderson”) and Katherine Gail Anderson (“Katherine Anderson”).
Plaintiff’s claims are contained in complaint spanning over forty (40) pages. The core of plaintiff’s
claims devolves around allegations the Anderson defendants, the Desibia defendants, and Paris
Faschette conspired to commit fraudulent transfers of assets belonging to Gary Anderson and
Katherine Anderson in order to secrete them from plaintiff and frustrate efforts of plaintiff to collect
an award in arbitration confirmed as a Florida and North Carolina judgment against Gary Anderson
and Katherine Anderson in the amount of $403,335.43 plus interest.
On February 28, 2012, the Desibia defendants filed motion to dismiss pursuant to Rules 9,
12(b)(2) and 12(b)(6) of the Federal Rules of Civil Procedure. On March 5, 2012, the Anderson
defendants filed an incorporated answer and motion for costs and to strike. On March 27, 2012, the
Anderson defendants filed an amended answer and separately refiled their motion for costs and to
strike.1 On April 20, 2012, plaintiff filed a motion for extension of time to serve defendant Paris
Faschette and for leave to conduct third-party discovery.
DISCUSSION
1

As a result of Anderson defendants' refiling of the motion (DE # 55), the first motion for costs and to strike (DE #
50) is denied as moot.

2

A.

Motion to Dismiss

The Desibia defendants seek to dismiss the RICO claims against them for failure to state a
claim, pursuant to Rule 12(b)(6), and to dismiss the remaining state law claims for lack of personal
jurisdiction, pursuant to Rule 12(b)(2). The court will address each in turn.
1.

RICO Claims
a.

Standard of Review

The purpose of a Rule 12(b)(6) motion for failure to state a claim upon which relief can be
granted is to eliminate claims that are factually or legally insufficient. Fed. R. Civ. P. 12(b)(6);
Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949-50 (2009); Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570
(2007). "To survive a motion to dismiss, a complaint must contain sufficient factual matter,
accepted as true, to 'state a claim to relief that is plausible on its face.'" Iqbal, 129 S. Ct. at 1949
(quoting Twombly, 550 U.S. at 570). "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. (quoting Twombly, 550 U.S. at 556). "The plausibility standard is not
akin to a 'probability requirement,' but it asks for more than a sheer possibility that a defendant has
acted unlawfully." Id. "A court need not accept a complaint's legal conclusions, elements of a cause
of action, and bare assertions devoid of further factual enhancement." Alfaro v. United States, No.
5:09-CT-3073-D, 2011 WL 561320, at *1 (E.D.N.C. Feb. 8, 2011) (citing Iqbal, 129 S. Ct. at
1949-50; Nemet Chevrolet, Ltd. v. Consumeraffairs.com, Inc., 591 F.3d 250, 255 (4th Cir. 2009)).
The sufficiency of a civil RICO claim is judged in accordance with the notice pleading
requirement of Rule 8(a), requiring a "short and plain statement of the claim showing that the
pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). At the same time, however, "where RICO

3

claims are based on predicate acts of fraud, the heightened pleading standard set forth in Rule 9(b)
of the Federal Rules of Civil Procedure applies." Field v. GMAC, LLC, 660 F. Supp. 2d 679, 686
(D. Md. 2011) (citing Menasco, Inc. v. Wasserman, 886 F.2d 681, 684 (4th Cir. 1989)). Rule 9(b)
requires that "in alleging fraud or mistake, a party must state with particularity the circumstances
constituting fraud or mistake. Malice, intent, knowledge, and other conditions of a person's mind
may be alleged generally." Fed. R. Civ. P. 9(b).
b.

Analysis

Plaintiff asserts claims under RICO subsections (b), (c), and (d). 18 U.S.C. § 1962(b), (c),
(d). To state a RICO claim under subsection (b), plaintiff must plead facts that, if proven, would
tend to establish (1) the acquisition or maintenance of an interest in or control; (2) of an enterprise;
(3) through a pattern of racketeering activity. 18 U.S.C. § 1962(b); see Beck v. Prupis, 529 U.S.
494, 497 (2000). The elements of a RICO claim under subsection (c) are: (1) the conduct; (2) of an
enterprise; (3) through a pattern of racketeering activity. 18 U.S.C. § 1962(c); see Salinas v. United
States, 522 U.S. 52, 63 (1997). "'Enterprise' includes any individual, partnership, corporation,
association, or other legal entity, and any union or group of individuals associated in fact although
not a legal entity." 18 U.S.C. § 1961(4). "Racketeering activity" includes, inter alia, "any act which
is indictable" under specifically enumerated criminal provisions, including those relating to mail and
wire fraud set forth in 18 U.S.C. §§ 1341 and 1343. 18 U.S.C. § 1961(1). Finally, a "'pattern of
racketeering activity' requires at least two acts of racketeering activity, one of which occurred after
the effective date of this chapter and the last of which occurred within ten years . . . after the
commission of a prior act of racketeering activity," 18 U.S.C. § 1961(5), and the predicate acts must
be related and amount to or pose a threat of continued criminal activity, H.J. Inc. v. Northwestern

4

Bell Telephone Co., 492 U.S. 229, 239 (1989). Subsection (d) is aimed at conspiracies to violate
subsections (a) through (c). To state a subsection (d) claim, plaintiff must allege that "each
defendant agreed that another co-conspirator would commit two or more acts of racketeering."
United States v. Pryba, 900 F.2d 748, 760 (4th Cir. 1990).
The Desibia defendants first contend, with respect to subsections (b) and (c), that plaintiff
failed to properly allege a pattern of racketeering activity as to each of them and that, therefore, the
RICO claims against them should be dismissed. Plaintiff alleged predicate acts of mail fraud, 18
U.S.C. § 1341, and wire fraud, 18 U.S.C. § 1343; specifically, that on or about October 8, 2009,
Andersons transferred a total of $104,000.00 "to the Desibia family via personal checks" through
the U.S. mail to Linda Desibia, Elizabeth Desibia, Quinn Desibia, and Alexandra Desibia in the
amount of $26,000.00 each and that "[d]uring late 2010," Andersons transferred, by use of the U.S.
mail and wires, $26,000.00 to each Desibia defendant. (Compl. 97, 101-108, 242(k)-(n),
260(k)-(n)). It is not entirely clear to the court that two sets of transfers to each Desibia defendant
actually took place.2 However, even assuming, arguendo, that there were two predicate acts as to
each Desibia defendant, the court finds that they are insufficient to satisfy the pattern requirement.
The Fourth Circuit has been "cautious about basing a RICO claim on predicate acts of mail
and wire fraud because it will be the unusual fraud that does not enlist the mails and wires in its

2

It appears that "2010" may have been a typographical error and that plaintiff intended to refer to the October 2009
transfers, as occurring in "late 2009." In the "Background Facts" section of complaint entitled "Illicit Transfers
Involving the Desibias," plaintiff makes its allegations with respect to the October 8, 2009 transfers of $26,000.00 to
each Desibia defendant, (Compl. ¶¶ 101-108), but makes no mention of any "late 2010" transfers, which only appear
in counts ten and eleven of complaint, (id., ¶¶ 242(k)-(n), 260(k)-(n)). Conversely, counts ten and eleven of
complaint make no mention of the October 8, 2009 transfers. Additionally, plaintiff only provided copies of the
October 8, 2009 checks as an exhibit to complaint, (id., Ex. I at 1-4), and failed to mention any "late 2010" transfers
to Desibia defendants in its response in opposition to the motion to dismiss while citing to the October 8, 2009
transfers multiple times. Pl.'s Resp. in Opp'n at 3, 6, 12, 16. Accordingly, the reasonable inference is that plaintiff
has alleged that only one set of transfers to Desibia defendants occurred in October 2009.

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service at least twice." GE Inv. Private Placement Partners II v. Parker, 247 F.3d 543, 549 (4th Cir.
2001) (quoting Al-Abood v. El-Shamari, 217 F.3d 225, 238 (4th Cir. 2000)). "This caution is
designed to preserve a distinction between ordinary or garden-variety fraud claims better prosecuted
under state law and cases involving a more serious scope of activity." Al-Abood, 217 F.3d at 238.
"RICO liability is reserved for ongoing unlawful activities whose scope and persistence pose a
special threat to social wellbeing." Id. (quoting Menasco, Inc. v. Wasserman, 886 F.2d 681, 684 (4th
Cir. 1989)). The acts alleged with respect to the Desibia defendants, which can be distilled to the
receipt of one or at the most two fraudulent transfers, lack the "scope and persistence" for which
RICO liability was intended to apply and are more properly characterized as garden-variety state law
fraudulent transfer claims.
In an attempt to broaden the scope of the fraud as to the Desibia defendants, plaintiff argues
that they played a role in planning and benefitting from more than forty transactions involving
Andersons’ assets. (Pl.'s Mem. in Opp'n at 8). However, the court must consider the allegations
with respect to each particular defendant, and the allegations with respect to Desibia defendants'
involvement in the broader alleged scheme are conclusory and speculative at best. With the
exception of the $26,000.00 transfers, the Desibia defendants are not mentioned in connection with
any transfers. (Compl. ¶¶ 39-95; 111-124). Absent some factual enhancement, allegations such as
"[d]efendants agreed, cooperated, and conspired with one another to commit the fraudulent
transfers," (Compl. ¶ 188), or that the Desibia defendants, Anderson Homes, and CYA "joined in
a scheme such that they also acquired and maintained an interest in the enterprise through a pattern
of racketeering activity," (id. at 238), are insufficient to satisfy Twombly, not to mention Rule 9(b)'s
particularity requirement.

6

Finally, plaintiff contends that a "long line of cases establish that RICO liability may be
predicated upon a scheme to defraud creditors through a series of fraudulent transfers." (Pl.'s Mem.
in Opp'n at 7-8). The court neither endorses a per se rule that fraudulent transfers conducted by use
of the mail or wires can never be the basis for a civil RICO claim, nor does it make any judgment
as to the sufficiency of the allegations as to other defendants. As the Fourth Circuit has observed,
"[t]here is no mechanical formula to assess whether the pattern requirement has been satisfied; it is
a commonsensical, fact-specific inquiry." ePlus Technology, Inc. v. Aboud, 313 F.3d 166, 181-82,
(4th Cir. 2002) (citations omitted). Furthermore, the cases cited by plaintiff are distinguishable from
the present case. See, e.g., Fed. Deposit Ins. Corp. v. Kerr, 637 F. Supp. 828 (W.D.N.C. 1986)
(predicate acts also included securities fraud); Gutierrez v. Givens, 989 F. Supp. 1033 (S.D. Cal.
1997) (predicated acts also included racketeering in interstate travel or commerce and money
laundering). Here, the facts as alleged with respect to the Desibia defendants are insufficient to
establish a pattern of racketeering activity. Accordingly, plaintiff has failed to state a claim as to
the Desibia defendants under RICO subsections (b) and (c).
With respect to the subsection (d) conspiracy claim, plaintiff must show that each defendant
agreed with another co-conspirator to commit two or more acts of racketeering, although "[t]here
is no requirement that each conspirator personally commit illegal acts in furtherance of the
conspiracy or to accomplish its objectives." Pryba, 900 F.2d at 760. As explained above, plaintiff's
conclusory allegations with respect to the Desibia defendants' involvement in planning and
executing the alleged fraudulent scheme are insufficient to allow the court to draw a plausible
inference that the Desibia defendants were in agreement as to the alleged conspiracy. See Walters
v. McMahen, 795 F. Supp. 2d 350, 355-56 (D. Md. 2011). Accordingly, the RICO conspiracy claim

7

as to the Desibia defendants also fails as a matter of law.
In sum, the RICO claims as to Desibia defendants are dismissed for failure to state a claim
upon which relief may be granted.
2.

Personal Jurisdiction
a.

Standard of Review

Where the court addresses a Rule 12(b)(2) motion without the benefit of evidentiary hearing,
but rather relies only on the motions papers, supporting memoranda, affidavits, and pleadings, the
plaintiff's burden is simply to make a prima facie showing of jurisdiction. Carefirst of Md. Inc. v.
Carefirst Pregnancy Ctrs., Inc., 334 F.3d 390, 396 (4th Cir. 2003). Ultimately, the burden of proof
on the plaintiff is one of preponderance of the evidence. New Wellington Fin. Corp. v. Flagship
Resort Dev. Corp., 416 F.3d 290, 294 (4th Cir. 2005). In this context, the court construes the
allegations in the light most favorable to the plaintiff, assumes credibility, and draws the most
favorable inferences for the existence of jurisdiction. Carefirst, 334 F.3d at 396. All that is initially
required of the plaintiff to make out a prima facie showing of personal jurisdiction are allegations
that such jurisdiction exists. Clark v. Remark, No. 92-1682, 1993 U.S. App. LEXIS 10043 *6 (4th
Cir. Apr. 29, 1993).
However, a plaintiff may not rest on mere jurisdictional allegations where defendants have
countered those allegations with evidence that jurisdiction does not exist. Id. (citing Barclays
Leasing v. Nat'l Bus. Sys., 750 F. Supp. 184, 186 (W.D.N.C. 1990)). Rather, plaintiff must come
forward with affidavits or other evidence to counter defendants' arguments, and once both parties
have presented evidence, factual conflicts are resolved in favor of the party asserting jurisdiction.
Id. In construing the pleadings, affidavits, and other supporting documents in the light most

8

favorable to plaintiff, the court does not "credit conclusory allegations or draw farfetched
inferences." Masselli & Lane, PC v. Miller & Schuh, PA, No. 99-2440, 2000 U.S. App. LEXIS
11932 * 5 (4th Cir. May 30, 2000) (citations omitted).
b.

Analysis

The Desibia defendants contend that, absent RICO's provision for nationwide service and
the exercise of personal jurisdiction over foreign defendants, they are not subject to personal
jurisdiction in North Carolina. Plaintiff faces a two-part test in establishing personal jurisdiction
over a nonresident defendant: (1) jurisdiction must be authorized by the state long-arm statute and
(2) the exercise of jurisdiction in the particular case must be consistent with due process. Christian
Sci. Bd. of Dirs. v. Nolan, 259 F.3d 209, 215 (4th Cir. 2001). North Carolina's long-arm statute
extends jurisdiction to the full extent permitted by the Due Process Clause. Id. Therefore, the court
need only determine whether "the defendant has such 'minimal contacts' with the forum state that
maintenance of the suit does not offend 'traditional notions of fair play and substantial justice.'" Id.
(quoting Int'l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945)).
To establish general jurisdiction, "the defendant's activities in the State must have been
'continuous and systematic,' a more demanding standard than is necessary for establishing specific
jurisdiction." ALS Scan, Inc. v. Digital Serv. Consultants, Inc., 293 F.3d 707, 712 (4th Cir. 2002).
In determining whether the exercise of specific jurisdiction is appropriate, the court weighs three
factors: "(1) the extent to which the defendant purposefully availed itself of the privilege of
conducting activities in the State; (2) whether the . . . claims arise out of those activities directed at
the State; and (3) whether the exercise of personal jurisdiction would be constitutionally
reasonable." Id.

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According to their declarations, the Desibia defendants have never resided in or owned
property in North Carolina, nor have they conducted or solicited business in North Carolina, but they
have traveled to North Carolina for "family visits." (Decl. of Alexandra Desibia ¶¶ 4-7; Decl. of
Elizabeth Desibia ¶¶ 4-7; Decl. of Linda Desibia ¶¶ 4-7; Decl. of Quinn Desibia ¶¶ 4-7). It is not
necessary for the court to determine at this juncture whether a prescribed number of "family visits"
would or would not rise to the level of continuous and systematic contacts with the forum necessary
to establish general jurisdiction, where the declarations at issue provide no indication as to the
frequency or duration of these visits. Id. Furthermore, "[e]ven a single contact may be sufficient
to create [specific] jurisdiction when the cause of action arises out of that single contact, provided
that the principle of 'fair play and substantial justice' is not thereby offended." Carefirst, 334 F.3d
at 397.
Given the nature of the allegations, i.e., fraudulent transfers between family members, and
construing the allegations in the light most favorable to the plaintiff and drawing the most favorable
inferences for the existence of jurisdiction, the motion to dismiss for lack of personal jurisdiction
is denied.
B.

Motion for Costs and to Strike
1.

Rule 41(d) Motion for Costs

The Anderson defendants contend that this action is based on some of the same transactions
and includes some of the same claims plaintiff asserted against them in a prior state court action and
that, therefore, pursuant to Rule 41(d), this court should order plaintiff to pay these defendants' costs
in defending the prior action and stay these proceedings pending plaintiff's compliance with such
order. In response, plaintiff does not appear to contest that some of the claims in this action were

10

previously asserted in the prior state court action, which was voluntarily dismissed on the second
day of trial, but, rather, contends that the current action is much broader than the state court action.
Furthermore, plaintiff argues that the state and not the federal rule of procedure governs the instant
request for costs, and thus the court is strictly limited in the types of costs that may be awarded.
Further, plaintiff argues that even if the federal rule applies, an award of costs is not justified.
The federal rule provides as follows:
If a plaintiff who previously dismissed an action in any court files an action based
on or including the same claim against the same defendant, the court: (1) may order
the plaintiff to pay all or part of the costs of that previous action; and (2) may stay
the proceedings until the plaintiff has complied.
Fed. R. Civ. P. 41(d). The state rule is similar in that it provides for payment of costs and a stay of
proceedings, yet differs in that the language in the state rule is mandatory and not permissive:
A plaintiff who dismisses an action or claim under section (a) of this rule shall be
taxed with the costs of the action unless the action was brought in forma pauperis.
If a plaintiff who has once dismissed an action in any court commences an action
based upon or including the same claim against the same defendant before the
payment of the costs of the action previously dismissed, unless such previous action
was brought in forma pauperis, the court, upon motion of the defendant, shall make
an order for the payment of such costs by the plaintiff within 30 days and shall stay
the proceedings in the action until the plaintiff has complied with the order. If the
plaintiff does not comply with the order, the court shall dismiss the action.
N.C. Gen. Stat. § 1A-1, Rule 41(d).
Plaintiff first argues that the state and federal rules are consistent and that, therefore, this
court should apply the state procedural rule and related state statutes limiting the categories of costs
that may be awarded. (See Pl’s. Opp. at 4-12). The Supreme Court in Hanna considered whether
service of process in a civil action brought in federal court under diversity jurisdiction would be
governed by the Federal Rules of Civil Procedure or a contrary Massachusetts law that required "in
hand" service. 380 U.S. at 461-62. The Court ruled that where the state and federal rules were in
11

direct conflict, the federal rule controlled. Id. at 473-74. In doing so, the Court noted that it had
only "held applicable a state rule in the face of an argument that the situation was governed by one
of the Federal Rules" where the "scope of the Federal Rule was not as broad as the losing party
urged, and therefore, there being no Federal Rule which covered the point in dispute, Erie
commanded the enforcement of the state law." Id. at 470.
Such is not the case here where the federal rule sufficiently covers the "point in dispute."
See Kahn v. Sturgil, 66 F.R.D. 487, 491 (M.D.N.C. 1975). Furthermore, while the state and federal
rule contemplate the same issue, they address it in contradictory ways, i.e., a state court is required
to order payment of costs, to impose a stay, and ultimately to dismiss the case in the event of
noncompliance, whereas the federal court is given broad discretion to impose such measures. The
state and federal rules are in conflict; ergo, the federal rule is controlling. Id.; Hanna, 380 U.S. at
473.
Even assuming, arguendo, that plaintiff is correct that the state and federal rules are
consistent, this court would still be bound to apply the federal rule. The Court unequivocally stated
in Hanna that "were there no conflicting state procedure," the Federal procedural rule "would clearly
control." 380 U.S. at 465 (citing Nat'l Equip. Rental, Ltd. v. Szukhent, 375 U.S. 311, 316 (1963)).
See also Hottle v. Beech Aircraft Corp., 47 F.3d 106, 109 (4th Cir. 1995) ("[A]s a general rule, a
federal court sitting in diversity is to apply state substantive law and federal procedural law.") (citing
Stonehocker v. General Motors Corp., 587 F.2d 151, 154 (4th Cir. 1978)). Thus, the court will apply
the federal rule.
Plaintiff contends that even if the court applies the federal rule, an award of costs is not
justified. Whether to award costs pursuant to Rule 41(d) is within the sound discretion of the trial

12

court. Hython v. City of Steubenville, No. 95-3629, 1996 U.S. App. LEXIS 22264 *4 (6th Cir.
Aug. 12, 1996) (citing Wright & Miller, Federal Practice and Procedure: Civil 2d § 2375 at 415
(1995)). Plaintiff explains its basis for dismissal of the state court fraudulent conveyance action as
follows:
The 2010 matter proceeded to trial before Dare County Superior Court Judge Jerry
R. Tillett. Trial proceedings involved two witnesses (Gary Anderson and Tom Sims)
who testified on a single day, October 5, 2011. Plaintiff's fraudulent conveyance
complaint requested a series of remedies against CYA OBX, LLC, including
execution sale and receivership over the fraudulently transferred real estate. On the
evening of October 5, 2011, Judge Tillett informed Plaintiff's counsel that he would
not grant Plaintiff any remedy other than a judgment against CYA OBX, LLC.
Plaintiff disagreed with Judge Tillett's election of remedies statement. . . .
Plaintiff understood that, if it did not dismiss the proceedings, the parties would
spend significantly higher costs proceeding with Plaintiff's case in chief,
appealing Judge Tillett's eventual ruling, and conducting remanded
proceedings. Accordingly, Plaintiff dismissed the 2010 case without prejudice when
the courthouse opened the next morning.
(Pl.'s Opp. at 3) (emphasis added). Plaintiff dismissed the state court action on the second day of
trial because plaintiff took issue with the Judge's ruling and determined implicitly to proceed again
before another tribunal.
Rule 41(d) serves the remedial purpose of preventing "vexatious litigation" and forum
shopping, including "attempts to gain any tactical advantage by dismissing and refiling th[e] suit."
Rogers v. Wal-Mart Stores, Inc., 230 F.3d 868, 874 (6th Cir. 2000) (citations omitted). Plaintiff's
dismissal of one suit in search of a more favorable ruling in another court is precisely the type of
forum shopping conduct that Rule 41(d) was enacted to redress. See id. These defendants are
entitled to an award of costs, and the court must now determine the appropriate amount.
The Anderson defendants seek to recover $66,098.79, which sum is itemized as follows:
$2,075.00 for an appraisal; $1,200.00 for the appraiser's appearance fee for trial; $1,265.00 in travel

13

and accommodation expenses for two additional non-testifying trial witnesses; and $61,558.79 in
attorney's fees and costs in defending two state court cases, $27,553.89 in No. 09-CVS-1134 and
$34,024.90 in No. 10-CVS-322. (Defs.' Br. in Supp. at 3-4).
As an initial matter, the appraisal cost and appraiser's appearance fee were paid by Anderson
Homes of the Outer Banks, which does not appear to have been a party to the prior litigation. (Defs.'
2d. Mot. for Costs and Mot. to Strike, Ex. 1, 3). Accordingly, the court finds that it would be
inappropriate to award those costs. Additionally, although the court has not been provided with a
copy of the complaint in the first state court case, No. 09-CVS-1134, it appears that it was initiated
in order to domesticate plaintiff's Florida judgment and to conduct post-judgment discovery, (Pl.'s
Opp. at 2), and that the second state court case, No. 10-CVS-322, was the fraudulent conveyance
action, which embodied some of the claims brought in this action. Importantly, plaintiff contends
that it did not dismiss the first case, which is a prerequisite for an award of costs under Rule 41(d),
and defendants have provided no evidence to the contrary. (Pl.'s Opp. at 11). Accordingly, the court
finds that it would be inappropriate to award costs attributable to the first state court action, No.
09-CVS-1134.
With respect to the travel and accommodation costs of $1,265.00 paid to the two
non-testifying trial witnesses, John Desibia and Adam Meyer, the court finds it appropriate to award
the actual costs of travel, meals and accommodations expended by these witnesses, not to exceed
the $1,265.00 expense incurred by Gary Anderson. (Defs.' 2d. Mot., Ex. 3, Aff. of Gary Anderson).
Counsel are directed to confer in a good faith attempt to reach an agreement on the appropriate
amount. In the event they fail to do so, Anderson defendants are directed to file a Bill of Costs
within fourteen (14) days of the date of this order, to which plaintiff will have fourteen (14) days

14

to object.
With respect to the request for attorney's fees and costs of $34,024.90 incurred in defending
the state court fraudulent conveyance action, the court will award the claimed costs of $53.40,
(Defs.' 2d. Mot. Ex. 3, Aff. of Dana W. Roepcke Ex. A), but declines to award attorney's fees, for
the reasons stated below.
The Fourth Circuit has not addressed the issue of whether, for the purpose of Rule 41(d),
"costs" include attorney's fees, and other circuit courts have reached varying conclusions. Compare
Meredith v. Stovall, No. 99-3350, 2000 U.S. App. LEXIS 14553 *4, (10th Cir. June 23, 2000)
(finding no abuse of discretion in district court's award of attorney's fees pursuant to Rule 41(d)),
and Evans v. Safeway Stores, Inc., 623 F.2d 121, 122 (8th Cir. 1980) (affirming a Rule 41(d) award
of attorney's fees without substantive discussion), with Esposito v. Piatrowski, 223 F.3d 497, 501
(7th Cir. 2000) (holding that a party may recover reasonable attorney's fees as part of its "costs"
under Rule 41(d) only where the underlying statute defines costs to include attorney's fees), and
Rogers v. Wal-Mart Stores, Inc., 230 F.3d 868, 875 (6th Cir. 2000) (vacating Rule 41(d) award of
attorney's fees, because they are not expressly provided for by the rule).
Decisions in the lower court are likewise divergent, although some have noted that a majority
allow for attorney's fees in an award of costs under Rule 41(d). Compare Andrews v. Am.'s Living
Ctrs., LLC, No. 1:10cv257, 2011 WL 3359921, at *2 (W.D.N.C. Aug. 3, 2011) (concluding that
"costs" as used in Rule 41(d) includes attorney's fees, but limiting award of fees to those associated
with motion to dismiss), and Katen v. Katen, No. 5:97-CV-275-BR, 1998 U.S. Dist. LEXIS 11592
*4 (E.D.N.C. Feb. 28, 1998) (concluding that "costs" as used in Rule 41(d) includes attorney's fees,
but declining to award fees associated with work that would be useful in second action), with Irons,

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LLC v. Brandes, No. 06-0904, 2007 WL 495802, at *1 (D.D.C. Feb. 15, 2007) (declining to award
attorney's fees, because they are not explicitly provided for under Rule 41(d)), and Lawson v. Toney,
169 F. Supp. 2d 456, 466 (M.D.N.C. 2001) (same).
The plain language of Rule 41(d) provides only for an award of "costs," and "the law
generally recognizes a difference between the terms 'costs' and 'attorney fees' . . . ." Rogers, 230
F.3d at 874. Many of the Federal Rules expressly provide for an award of attorney's fees, see, e.g.,
Fed. R. Civ. P. 16(f)(2), 26(g)(3), 30(g), 37(a)(5), 56(h), which indicates that the absence of such
provision in Rule 41(d) is purposeful. Id. at 875. In Marek v. Chesny, 473 U.S. 1 (1985), the court
considered whether costs included attorney's fees for purposes of Rule 68, Offer of Judgment, which
expressly provided for an award of "costs" but neither defined the term, nor was it discussed in the
Rule's history. Id. at 7-8. The court first acknowledged the "American Rule," that each party bear
its own attorney's fees and recognized certain exceptions, such as where Congress had provided for
an award of attorney's fees by statute. Id. at 8. The court then reasoned that "given the importance
of 'costs' to the Rule, it is very unlikely that this omission was mere oversight" and concluded that
"the most reasonable inference is that the term "costs" in Rule 68 was intended to refer to all costs
properly awardable under the relevant substantive statute or other authority." Id. at 9. This court
finds that the reasoning of Marek naturally extends to Rule 41(d), where the award of costs is an
important component of the Rule, and yet the term "costs" was left undefined in the Rule itself. See
Esposito, 223 F.3d 500-01.
While some courts have declined to extend Marek to Rule 41(d), based on, among other
things, a subsequent amendment to Rule 54(d) that distinguished "costs other than attorney's fees"
and "attorney's fees," Cadle Co. v. Beury, 242 F.R.D. 695, 697-98 (S.D.Ga. 2007), this court is not

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persuaded by such reasoning where neither Rule 68, at issue in Marek, nor Rule 41(d) has been
amended in the same manner as Rule 54(d) and there is no indication that the drafters intended a
broader application of the amendment beyond Rule 54(d) itself. To award attorney's fees under Rule
41(d), only when a party would be entitled to recover them as costs in the cause of action underlying
the first dismissed suit, serves the remedial purpose of the Rule without offense to the long standing
principle that, absent Congressional intent, attorney's fees are not recoverable costs.
These defendants have not claimed that attorney's fees are recoverable under the North
Carolina Uniform Fraudulent Transfer Act or that fees were awarded by the state court, and the court
has found no provision for attorney's fees within the act itself. See N.C. Gen. Stat. §§ 39-23.1 to
39-23.12. Accordingly, because attorney's fees are not expressly provided for under Rule 41(d) and
are not provided for by the underlying statute that formed the basis of the state court action, these
defendants are not entitled to recover their attorney's fees pursuant to Rule 41(d).
In sum, the court will award $53.40 in costs plus the actual costs expended and reimbursed
to the non-testifying witnesses, not to exceed $1,265.00, as set forth in this order. Plaintiff is
ordered to satisfy its obligation within fourteen (14) days of entry of this order. In the event the
parties are unable to reach agreement with respect to the costs associated with the non-testifying
witnesses, plaintiff may defer payment of the $53.40 until the court rules on the Bill of Costs. The
court, in its discretion, declines to stay this proceeding pending payment of the awarded costs.
2.

Rule 12(f) Motion to Strike

Anderson defendants contend that paragraphs 63, 66 through 76, 120 and 123 are "irrelevant,
immaterial and inadmissible pursuant to Rules 402, 403, and 404" of the Federal Rules of Civil
Procedure and should be stricken. (Mot. for Costs and to Strike at 3). Rule 12(f) permits a district

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court, on motion of a party or on its own initiative, to strike from a pleading "redundant, immaterial,
impertinent, or scandalous matter." Fed. R. Civ. P. 12(f). "Rule 12(f) motions are generally viewed
with disfavor because striking a portion of a pleading is a drastic remedy and because it is often
sought by the movant simply as a dilatory tactic." Waste Mgmt. Holdings, Inc. v. Gilmore, 252 F.3d
316, 347 (4th Cir. 2001) (citations omitted). Therefore, motions to strike are rather strictly
considered and a showing of prejudice is often required to obtain relief. See Godfredson v. JBC
Legal Group, P.C., 387 F. Supp. 2d 543, 547-48 (E.D.N.C. 2005). The court is required to "view
the pleading under attack in a light most favorable to the pleader." Racick v. Dominion Law
Assocs., 270 F.R.D. 228, 232 (E.D.N.C. 2010).
The allegations at issue concern Andersons' alleged failure to report certain transactions on
their tax returns and financial records, (Compl. ¶¶ 63, 120, 123), and the alleged circumstances
surrounding state court contempt proceedings against Andersons in the prior fraudulent conveyance
action. (Id. 66-76). It is not clear to the court that the subject matter of these allegations is irrelevant
to the claims in this case. These defendants will have the opportunity to challenge the admissibility
of evidence related to these allegations in due course, which alleviates the alleged danger of
prejudice. See Milliken & Co. v. CNA Holdings, Inc., No. 3:08-CV-578, 2011 WL 3444013, at *15
(W.D.N.C. Aug. 8, 2011). Accordingly, these defendants have failed to carry the heavy burden of
Rule 12(f), and the motion to strike is denied.
C.

Motion for Extension of Time for Service and to Conduct Discovery

Plaintiff seeks a 120-day extension of time to serve defendant Paris Faschette (“Faschette”)
and to conduct non-party discovery to ascertain his whereabouts for the purpose of effecting service.
No response to the motion has been filed. Plaintiff contends that despite its diligence in attempting

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to locate Faschette, it has been unable to identify any such person and, thus, proposes to depose two
alleged associates of Faschette in order to obtain information to aide in effecting service.
Rule 4(m) allows the court to extend the time for service, Fed. R. Civ. P. 4(m), and Rule
26(d) provides that a party may seek discovery prior to the Rule 26(f) conference when authorized
by court order, Fed. R. Civ. P. 26(d)(1). The court finds good cause to grant both requests. Plaintiff
shall have sixty (60) days from entry of this order to conduct limited third-party discovery with
respect to Faschette and one hundred twenty (120) days from entry of this order to effect service on
Faschette. Failure to achieve service within this time period will result in the dismissal of defendant
Faschette.
CONCLUSION
The Desibia defendants' motion to dismiss (DE # 48) is GRANTED IN PART as to the
RICO claims and DENIED IN PART as to lack of personal jurisdiction. Other defendants' first
motion for costs and to strike (DE # 50) is DENIED AS MOOT and the second motion for costs
and to strike (DE # 55) is GRANTED IN PART AND DENIED IN PART as to the request for
costs, as set forth in this order, and DENIED as to the request to strike certain allegations from the
complaint. Plaintiff's motion for extension of time for service and to conduct discovery (DE # 60)
is GRANTED.
SO ORDERED, this the 26th day of September, 2012.

____________________________
LOUISE W. FLANAGAN
United States District Judge

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