Waldner v. North American Truck & Trailer, Inc. et al

Filing 364

ORDER granting 357 Motion for Judgment on the Pleadings for Defendants Galley W. SMith, Bradley Hartke, and Douglas Hartke. Signed by U. S. District Judge Lawrence L. Piersol on 7/10/13. (SLW)

FILED
UNITED STATES DISTRICT COURT

JUL 1 0 2013

DISTRICT OF SOUTH DAKOTA

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SOUTHERN DIVISION

ROGER D. WALDNER,
Plaintiff,
vs.
ALLISON BOADE, M.D.;
KAREN SNOW;
WARNER TRUCK CENTER OF UTAH;
ACTION CARRIER, INC.;
MICHAEL L. WALSH;
WENDY L. WALSH;
GALLEY W. SMITH;
BRADLEY HARTKE;
DOUGLAS HARTKE;
JACK MAKLER;
RICHARD D'MARTINI;
JANE DOES 1-14;
JOHN DOES 1-14;
ROBERT THOMAS MOORE; and
A. THOMAS POKELA,
Defendants.

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Civ. 10-4056-LLP

ORDER GRANTING DEFENDANTS
GALLEY W. SMITH, BRADLEY
HARTKE, AND DOUGLAS HARTKE'S
MOTION FOR JUDGMENT ON THE
PLEADINGS

Plaintiff Roger D. Waldner is an irunate at the Federal Prison Camp in Duluth,
Minnesota. Docket 1 at 1. On May 20, 201 0, Waldner filed a pro se lawsuit against more than
sixty named defendants, alleging that defendants engaged in a broad conspiracy to defraud him
in violation of the Racketeer Influenced and Corrupt Organizations Act ("RICO").ld. On
September 23,2011, after receiving and considering various dispositive motions, the Court
dismissed Waldner's claims against the majority of the named defendants. Docket 281. The
Court dismissed two more defendants on May 25, 2012 (Docket 344), and another defendant on
March 15,2013 (Docket 362). Waldner's claims against Galley W. Smith, Bradley Hartke, and

Douglas Hartke, however, remain. Accordingly, Smith, B. Hartke, and D. Hartke move for
judgment on the pleadings (Docket 357) and assert that Waldner not only failed to state a claim
upon which relief may be granted, but failed to do so in a timely manner (Docket 358). Waldner
opposes the motion. Docket 360. For the reasons set forth herein, the Court grants defendants'
motion for judgment on the pleadings.

FACTUAL BACKGROUND
In the light most favorable to Waldner, the facts are as follows:
In 2002, Waldner initiated bankruptcy proceedings on behalf ofH&W Motor Express
Company, his solely owned corporation. See In re H & W Motor Express Co., 343 B.R. 208
(Bankr. N.D. Iowa 2006). After the close of the bankruptcy proceedings, numerous creditors
filed state-court lawsuits against Waldner in Iowa and South Dakota alleging that Waldner
violated various contracts. In 2007, Waldner pleaded guilty to having made false statements
during the federal bankruptcy proceedings. See United States v. Waldner, 564 F. Supp. 2d 911
(N.D. Iowa 2008). Consequently, Waldner was sentenced to ten years in prison.
The instant case arose out of a dispute between Waldner, William Rush, and their
respective business entities. Rush is the majority shareholder and chief executive officer of
North American Truck & Trailer, Inc. ("NATT"), and at the outset of this case, Waldner
accused Rush of conspiring with a multitude of lawyers, accountants, financial institutions,
corporations, and federal prisoners to defraud Waldner. Docket 9. Galley Smith, Bradly Hartke,
and Douglas Hartke are three such individuals accused of conspiring with Rush to defraud
Waldner. Each of these defendants worked with or for Waldner-Smith was the President of

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H&W; Smith and B. Hartke served on the board of directors ofH&W; and D. Hartke was a
dispatcher for Solace Transfer, a company owned by Waldner. Docket 9 at mr 50-52.
Waldner alleges that Smith, B. Hartke, and D. Hartke "were former business associates
with William R. Rush and the Rush Criminal Enterprise Companies prior to their meeting and
become [sic] involved with Waldner." Docket 9 at ~ 225. According to Waldner, defendants
"agreed to join to 'bleed out' Waldner's business assets by falsifying checks and wire transfers l
in interstate commerce drawn on Waldner's and H&W accounts as a apart [sic] of the Rush
Criminal Enterprise Companies conspiracy to destroy H&W and Waldner." ld. at ~ 227. A
portion of the monies from such transactions were paid to the Rush Criminal Enterprise
Companies, and some of the monies "were paid to unknown, fake, dummy persons or
corporations, or accounts, set up by [Smith, B. Hartke, and D. Hartke]." ld. at ~ 228. Therefore,
because Smith, B. Hartke, and D. Hartke "were aware of the existence of the Rush Criminal
Enterprise Companies and its plan to destroy H&W and Waldner's business reputation,"
Waldner asserts that defendants conspired to and did engage in a pattern of racketeering
activities in violation of 18 U.S.C. §§ 1962(c) and (d). ld. atmr 1,226.
STANDARD OF REVIEW
Since defendants have not relied on materials outside the pleadings, e.g. depositions,
answers to interrogatories, admissions on file, or affidavits, the Court will treat the pending
motion as a motion for judgment on the pleadings. "The applicable standard of review on a
motion for judgment on the pleadings pursuant to Fed. R. Civ. P. 12(c) is the same as that on a

1 None of the defendants had signature authority to authorize the transfer of funds from
Waldner's or H&W's accounts at Community Bank in Winslow, Illinois. Docket 9 at ~ 229.

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motion to dismiss under Fed. R. Civ. P. 12(b)(6)." Cain v. Ark. Dep 't a/Carr., No.
5:05CV00053HLJ, 2006 WL 2547401, at *1 (E.D. Ark. Sept. 1,2006) (citations omitted); see
also Westcott v. City ofOmaha, 901 F.2d 1486, 1488 (8th Cir. 1990) (noting that courts review
a 12(c) motion under the same standard that governs a 12(b)(6) motion (citations omitted)).
"Judgment on the pleadings is appropriate when there are no material facts to resolve and the
moving party is entitled to judgment as a matter oflaw." Mills v. City a/Grand Forks, 614 F.3d
495, 497-98 (8th Cir. 2010) (citation omitted). "The facts pleaded by the non-moving party
must be accepted as true and all reasonable inferences from the pleadings should be taken in
favor of the non-moving party." Id. (citation omitted). ''The court may consider the pleadings
themselves, materials embraced by the pleadings, exhibits attached to the pleadings, and matters
of public record." Id. (citation omitted); see also Charles Alan Wright & Arthur R. Miller,
Federal Practice and Procedure § 1371, at 276 (2004) ("Conversion ... will not occur with
regard to all matters subject to judicial notice and things that are central or integral to the
nonmoving party's pleading.").
Pro se complaints, " 'however inartfully pleaded,' [are] held to 'less stringent standards
than formal pleadings drafted by lawyers.' " Estelle v. Gamble, 429 U.S. 97, 106 (1976)
(quoting Haines v. Kerner, 404 U.S. 519,520 (1972)). Nonetheless, a pro se complaint must
comply with the minimal requirements set forth in the Federal Rules of Civil Procedure, which
specifically require pleadings to contain "a short and plain statement of the claim showing that
the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). Although a pro se complaint need not
contain detailed factual allegations, it must contain "more than labels and conclusions, and a
formulaic recitation of the elements of a cause of action will not do." Bell Atl. Corp. v.
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Twombly, 550 U.S. 544,555 (2007). A pro se complaint must "allege facts sufficient to support
the claims advanced." Stone v. Harry, 364 F.3d 912, 914 (8th Cir. 2004). The Court is not
required to "supply additional facts, nor will [it] construct a legal theory that assumes facts that
have not been pleaded." Id. (citing Dunn v. White, 880 F.2d 1188, 1197 (lOth Cir. 1989)). If the
complaint does not contain these bare essentials, dismissal is appropriate. Beavers v. Lockhart,
755 F.2d 657,663 (8th Cir. 1985).
DISCUSSION

''To recover in a civil suit for a violation of RICO, a plaintiff must prove: (1) that the
defendant violated 18 U.S.C. § 1962; (2) that the plaintiff suffered injury to business or
property; and (3) that the plaintiffs injury was proximately caused by the defendant's RICO
violation." Fogie v. THORN Americas, Inc., 190 F.3d 889,894 (8th Cir. 1999) (citations
omitted). In the instant case, Waldner has alleged that Smith, B. Hartke, and D. Hartke violated
subsections (c) and (d) of 18 U.S.c. § 1962. Docket 1 at" 1,230.
Under subsection (c), it is "unlawful for any person employed by or associated with any
enterprise engaged in, or the activities of which affect, 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." To state a claim under § 1962(c),
"a plaintiff must establish (1) the existence of an enterprise; (2) defendant's association with the
enterprise; (3) defendant's participation in predicate acts of racketeering; and (4) defendant's
actions constitute a pattern of racketeering activity." United Healthcare Corp. v. Am. Trade Ins.
Co., 88 F .3d 563, 570 (8th Cir. 1996). Moreover, "the plaintiff must demonstrate that 'he has

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been injured in his business or property by the conduct constituting the violation.' " Id. (quoting
Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479,496 (1985».

Subsection (d) incorporates the conduct prohibited in subsection (c) by making it
"unlawful for any person to conspire to violate any of the provisions of subsection (a), (b), or (c)
of [§ 1962]." To establish that a defendant engaged in a conspiracy to violate RICO, a plaintiff
must present "additional evidence2 that the defendant entered into an agreement to breach the
statute." Handeen v. Lemaire, 112 F.3d 1339, 1354 (8th Cir. 1997) (citations omitted).
Defendants Smith, B. Hartke, and D. Hartke assert that they are entitled to judgment in
their favor because Waldner has (1) failed to allege an "enterprise" within the meaning of §
1962(c); (2) failed to allege a continuous pattern of racketeering activity as required by §
1962(c); (3) failed to allege facts supporting a tacit understanding of the underlying § 1962
violation; and (4) failed to file his RICO claim within the applicable statute of limitations.
Docket 358. The Court will address each of defendants' arguments in tum.

I.

Waldner Has Failed to Allege the Requisite Elements of a Civil RICO Claim.
To state a claim pursuant to § 1962(c), a plaintiff must first allege the existence of an

enterprise. An enterprise must possess three characteristics: "[a] common or shared purpose,
some continuity of structure3 and personnel, and an ascertainable structure distinct from that

The additional evidence required to show a RICO conspiracy" 'need only establish a
tacit understanding between the parties, and ... may be shown wholly through the circumstantial
evidence of [each defendant's] actions.''' Handeen v. Lemaire, 112 F.3d 1339, 1355 (8th Cir.
1997) (quoting United States v. Darden, 70 F.3d 1507, 1518 (8th Cir. 1995».
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The Eighth Circuit has defined "continuity of structure" as " 'an organizational pattern
or system of authority that provides a mechanism for directing the group's affairs on a
continuing, rather than an ad hoc basis.' " Rolfes v. MBNA Am. Bank N.A., 416 F. Supp. 2d 745,
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inherent in a pattern of racketeering." McDonough v. Nat 'I Home Ins. Co., 108 F.3d 174, 177
(8th Cir. 1997) (internal citations omitted). To establish the third characteristic-a distinct
structure-a plaintiff must show "that the common activities of the enterprise extend beyond the
minimal association necessary to sustain the pattern of racketeering." Id. at 177 (internal
citations omitted). " 'Th[e] distinct structure might be demonstrated by proof that a group
engaged in a diverse pattern of crimes or that it has an organizational pattern or system of
authority beyond what was necessary to perpetrate the predicate crimes.' " Diamonds Plus, Inc.

v. Kolber, 960 F.2d 765, 770 (8th Cir. 1992) (quoting United States v. Bledsoe, 674 F.2d 647,
665 (8th Cir. 1982»; see also Handeen, 112 F.3d at 1352 ("In assessing whether an alleged
enterprise has an ascertainable structure distinct from that inherent in a pattern of racketeering, it
is our normal practice to determine if the enterprise would still exist were the predicate acts
removed from the equation.").
Defendants argue that Waldner has failed to satisfy the enterprise requirement because
he has not alleged the existence of a structure distinct from the minimal association necessary to
defraud him. Docket 358 at 6-7. In response to this assertion, Waldner contends that
defendants' mutual ''management of Transportation Companies" links the three defendants to
one another independent of the predicate acts-"their oversight and coordination of activities,
family ties, and the actions taken to protect and conceal their illegal activities show a Distinct
Structure of a common enterprise between these Defendants as well as other Defendants.'>4

751 (D.S.D. 2005) (quoting United States v. Kragness, 830 F.2d 842,856 (8th Cir. 1987».
Waldner also filed a response to defendants' reply brief, wherein he further alleges that
the defendants "engage in numerous activities beyond the Predicate Acts that support the
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Docket 360 at 4. Waldner does not, however, allege facts to suggest that defendants were
associated with William R. Rush and/or the Rush Criminal Enterprises for any other purpose
than to defraud Waldner. It therefore appears that defendants would not be associated with Rush
Criminal Enterprises were the alleged predicate acts removed from the equation. Consequently,
the Court finds that Waldner has failed to establish the existence of an enterprise within the
meaning of § 1962(c), and his RICO claim must fail. s

II.

Waldner Has Failed to Allege Facts Supporting a RICO Conspiracy.
To state a RICO conspiracy claim under § 1962(d), a plaintiff must provide evidence

that defendants" 'manifested an agreement to participate directly or indirectly in the affairs of
an enterprise through the commission of two or more predicate crimes.' " United States v.
Bennett, 44 F.3d 1364, 1374 (8th Cir. 1995) (quoting United States v. Phillips, 664 F.2d 971,

1012 (5th Cir. Unit B 1981)). "A civil RICO conspiracy claim under 18 U.S.C. § 1962(d) cannot
survive if ... the plaintiff has failed to allege the requisite substantive elements of RICO."
Rolfes v. MBNA American Bank N.A., 416 F.Supp.2d 745, 754 (D.S.D. 2005) (citation omitted).

Because Waldner has failed to allege facts sufficient to support a RICO claim, he has similarly
failed to allege facts sufficient to support a RICO conspiracy claim.

allegation of a Criminal Structure." Docket 363 at 3. More specifically, Waldner alleges that the
defendants "set up whole businesses, both legitimate and fraudulent, to help conceal their theft."
Id. "They opened Bank Accounts, engaged in Money Laundering and Money Structuring
Activities, evaded State and Federal Taxes, and generally operated a RICO Criminal Enterprise
in the guise of legitimate Transportation Businesses." Id.
Because a RICO claim cannot survive absent the existence of an enterprise, the Court
need not decide whether Waldner alleged a continuous pattern of racketeering activity.
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III.

Waldner's RICO Claim is Time Barred.
Even if Waldner had sufficiently alleged the requisite elements of a RICO claim, his

action is time barred. As the Court has previously stated, the Supreme Court has ruled that civil
RICO actions are subject to a four-year statute oflimitations. Agency Holding Corp. v. MalleyDuff & Assocs., 483 U.S. 143, 156 (1987). Under the injury discovery rule,6 "the civil RICO

limitations period 'begins to run when a plaintiff knows or should know of the injury that
underlies his cause of action.' " Grimmett v. Brown, 75 F3d 506, 510 (9th Cir. 1996) (quoting
Pocahontas Supreme Coal Co. v. Bethlehem Steel Corp., 828 F.2d 211,220 (4th Cir. ]987»;
see also Bendzak v. Midland Nat 'I Life Ins. Co., 440 F .Supp.2d 970, 980 (S.D. Iowa 2006)

("The court must ask whether the plaintiff actually knew of her injury, and also, using a
reasonable person standard, whether she should have known." (citation omitted». "The second
part of the 'injury discovery' rule is the 'separate accrual rule,' which provides that a new cause
of action accrues for each new and independent injury, even if the RICO violation causing the
injury happened more than four years before." Grimmett, 75 F.3d at 510 (citation omitted). Nonindependent injuries, however, will not result in a new limitations period. Misischia v. St. John's
Mercy Health Sys., No. 4:04CV1161CEJ, 2005 WL 1875035, at *7 (E.D. Mo. Aug. 5,2005)

(citation omitted).
Waldner filed this action on May 20,2010, more than nine years after defendants began
making allegedly fraudulent transfers. See Docket 1; Docket 360-8; Docket 360-9; Docket 360­
10; Docket 360-11. Waldner argues, however, that the applicable statute oflimitations on his

The Court adopted the injury discovery rule rather than the injury occurrence rule in its
Order dated September 23, 2011. Docket 281 at 7.
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RICO claim against Smith, B. Hartke, and D. Hartke did not accrue until 2008 when he
"[d]iscovered the nefarious doings of the Defendants." Docket 360 at 3. According to Waldner,
he discovered defendants' conspiracy to defraud him when he undertook a complete audit of all
checking account transactions, as requested by the bankruptcy trustee. !d. Prior to this audit,
Waldner was apparently unable to discover irregular transactions in his checking account, so
Waldner maintains that he filed this action well within the applicable statute oflimitations.
The Court, however, cannot agree. The exhibits attached to Waldner's response brief as
evidence of defendants' alleged wrongdoing represent the very types of information a
reasonable person would have discovered well before 2008. 7 Therefore, the Court finds that the
first part of the injury discovery rule dictates that the statute of limitations began to run in 2001.
Secondly, although the transactions in question span a six-year period, Waldner has not
provided evidence that he suffered new, independent injuries as a result of each fraudulent
transfer. Consequently, the Court finds that the separate accrual rule does not apply to
Waldner's action against Smith, B. Hartke, and D. Hartke. The statute of limitations in this
scenario began to run in 2001, and Waldner's action is therefore time barred.
Because Waldner failed to allege the requisite elements of a civil RICO claim, and
because his action is time barred, Smith, B. Hartke, and D. Hartke are entitled to judgment as a
matter oflaw. Accordingly, it is
ORDERED that defendants' motion for judgment on the pleadings (Docket 357) is
granted.

A reasonable person would notice if, for several years, unauthorized persons were
transferring large sums of money out of the person's bank account.
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IT IS FURTHER ORDERED that plaintiffs requests for leave to file an amended RICO
complaint are denied, ...
Dated this

\O'day of July, 2013.
BY THE COURT:

t£

~~PIER~~
UNITED STATES DISTRICT JUDGE

ATTEST:

JOSE~ HAAS, CLE~

BY:
J.iV\!l'1QA \
DEPUTY

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