Farmers Texas County Mutual Insurance Company, et al v. 1st Choice Accident & Injury, LLC, et al

Filing 85

ORDER ADOPTING MAGISTRATE JUDGE'S 83 MEMORANDUM AND RECOMMENDATION granting Defendants' MOTION to Dismiss (Dkts. 54 , 58 , 60 , 61 , and 62 ).(Signed by Judge George C Hanks, Jr) Parties notified. (KimberlyPicota, 4)

United States District Court
Southern District of Texas

ENTERED
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION

March 27, 2024
Nathan Ochsner, Clerk

§
FARMERS TEXAS COUNTY
MUTUAL INSURANCE COMPANY, §
§
et al.,
§
§
Plaintiffs.
§
§ CIVIL ACTION NO. 4:22-CV-02061
V.
§
§
1ST CHOICE ACCIDENT &
§
INJURY, LLC, et al.,
§
§
Defendants.
ORDER ADOPTING MAGISTRATE JUDGE’S
MEMORANDUM AND RECOMMENDATION
On November 9, 2023, all pretrial matters in this case were referred to United States
Magistrate Judge Andrew M. Edison under 28 U.S.C. § 636(b)(1). Dkt. 79. Judge Edison
filed a Memorandum and Recommendation on March 12, 2024, recommending that the
Defendants’ Motions to Dismiss (Dkts. 54, 58, 60, 61, 62) be GRANTED. See Dkt. 83.
On March 26, 2024, Plaintiffs filed their Objections. See Dkt. 84. In accordance
with 28 U.S.C. § 636(b)(1)(C), this Court is required to “make a de novo determination of
those portions of the [magistrate judge’s] report or specified proposed findings or
recommendations to which objection [has been] made.” After conducting this de novo
review, the Court may “accept, reject, or modify, in whole or in part, the findings or
recommendations made by the magistrate judge.” Id.; see also FED. R. CIV. P. 72(b)(3).

The Court has carefully considered the Objections, the Memorandum and
Recommendation, the pleadings, and the record. As explained below, the Court ACCEPTS
in part and REJECTS in part Judge Edison’s Memorandum and Recommendation.
Judge Edison recommended that Defendants’ Motions to Dismiss be granted
because Plaintiffs failed to sufficiently allege enterprise status. In reaching this conclusion,
Judge Edison identified two independent reasons for dismissal. First, he held that Plaintiffs
had failed to sufficiently allege that the purported association-in-fact enterprise had a
purpose separate and apart from the pattern of activity in which it engages. Second, Judge
Edison concluded that Plaintiffs had failed to sufficiently plead that the members of the
alleged association-in-fact enterprise function as a continuing unit as shown by a
consensual, decision-making structure.
In objecting to Judge Edison’s “separate purpose” finding, Plaintiffs argue that there
is no requirement that a RICO plaintiff plead a “separate purpose.” The Court observes that
the first time Plaintiffs argued that there is no “special purpose” requirement was in its
recent objections to Judge Edison’s Memorandum and Recommendation. Until then,
Plaintiffs actually took the position that there was a “special purpose” requirement. Indeed,
at the February 6, 2024 hearing on the Motions to Dismiss before Judge Edison, Plaintiffs’
counsel expressly represented that there is a “separate purpose” requirement in a RICO
cause of action:
Judge Edison: You’ve got to be able to plead that there is an entity separate
and apart—in other words, an entity that exists for purposes other than to
commit the predicate acts, right?
Plaintiffs’ counsel: Yes, sir.
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It is unclear why Plaintiffs waited until after Judge Edison issued his Memorandum and
Recommendation to completely reverse course and take the position that there is no
“special purpose” requirement. It sure would have been helpful--and appreciated--for
Plaintiffs to raise this argument at an earlier date.
In arguing for the first time in their Objections that there is no “special purpose”
requirement, Plaintiffs focus on the Fifth Circuit case, Allstate Insurance Co. v. Plambeck,
802 F.3d 665 (5th Cir. 2015). Plambeck states:
The defendants point to no binding authority that an enterprise must
have a purpose besides committing racketeering activity. Instead, they assert
that there must be a different purpose because a RICO enterprise cannot be
the pattern of racketeering itself. But in [United States v. Turkette, 452 U.S.
576, 583 (1981)], the Court rejected a similar challenge that would have
excluded from “enterprise” those entities pursuing solely unlawful ends.
Even with “wholly illegitimate enterprises such as an illegal gambling
business or a loan-sharking operation” the [plaintiff] must still satisfy
different legal standards to show the existence of the existence of the
enterprise and the pattern of racketeering. Id. at 583–85. . . . The Sixth
Circuit examined [Boyle v. United States, 556 U.S. 938 (2009)] and held that
an association can satisfy the enterprise requirement under RICO even if its
sole purpose is to carry out a pattern of racketeering. Ouwinga v. Benistar
419 Plan Servs., Inc., 694 F.3d 783, 794–95 (6th Cir. 2012).
Id. at 674. This binding case law from the Fifth Circuit convinces the Court that a so-called
“separate purpose” requirement is not an element of a RICO cause of action. As such, the
Court REJECTS the portion of the Memorandum and Recommendation that requires
Plaintiffs to plausibly allege a “separate purpose” of a RICO enterprise.

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However, the Court ACCEPTS the remainder of the Memorandum and
Recommendation—particularly, insofar as it explains why Plaintiffs have not adequately
alleged that the RICO enterprise functions as a consensual, decision-making structure. The
Court also agrees with Judge Edison’s conclusion that this Court should decline to exercise
supplemental jurisdiction over Plaintiffs’ state law claim for money had and received.
It is therefore ORDERED that:
(1)

Judge Edison’s Memorandum and Recommendation (Dkt. 83) is
ACCEPTED in part and REJECTED in part. With the express exception
of Section B(1), Judge Edison’s Memorandum and Recommendation is
ADOPTED as the holding of the Court; and

(2)

Defendants’ Motions to Dismiss (Dkts. 54, 58, 60, 61, 62) are GRANTED.

It is so ORDERED.
SIGNED and ENTERED this 27th day of March 2024.

______________________________
_
_____
______________________________________
GEOR
RGE C.
C HANKS,
HANKS JR.
JR
GEORGE
UNITED STATES DISTRICT JUDGE

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