Riding Center RICO Claim Dismissed

A woman who operated a riding center and alleges she and two other women were defrauded by defendant, who represented he was a banker and used multiple entities to gain control of their assets, has not stated a federal racketeering claim under RICO that will allow her to keep her suit in federal court; the Lynchburg U.S. District Court says the few instances of bank fraud and wire fraud alleged do not amount to long-term, habitual criminal conduct to support a RICO claim.

Despite the tangle of allegations in the amended complaint, it is clear the threshold issue at this juncture is whether CVLR has stated a claim under the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. §§ 1961-1968. The RICO claim is the only basis for federal subject matter jurisdiction, given that the citizenship of the parties is not completely diverse.

Plaintiff is suing John Wynne, 1650 Partners and Rivermont Banking Company under § 1964(c) for violating § 1962(c). A violation of § 1962(c) requires conduct of an enterprise through a pattern of racketeering activity. CVLR alleges Wynne, through the operation of the entities he controls, has committed racketeering acts and preyed upon women in financial distress who relied upon his purported expertise as a banker. The object of Wynne’s racketeering scheme, according to CVLR, is obtaining money and property by illegal means for the purpose of Wynne’s financial enrichment.

Plaintiff has alleged multiple predicate acts: bank fraud in purchasing the Serene Creek Riding Center property; Wire fraud in obtaining proceeds of CVLR’s insurance policy; wire fraud and bank fraud in obtaining a loan for a truck purchase; wire fraud in obtaining auto insurance policy benefits; bank fraud in presenting a forged check and bank fraud in foreclosure of Karen Foster’s home.

CVLR alleges 1650 Partners, Rivermont and Southgate Leigh Wynne Trust to be the enterprises and Wynne to be the person who controlled them and conducted their business. Under 4^th Circuit precedent, it is clear CVLR has adequately alleged a RICO defendant (Wynne) and RICO enterprises (1650 Partners and Rivermont), notwithstanding the fact that they have the appearance of being mere alter egos.

The “pattern” requirement uses a “continuity plus relationship” test. As far as the relatedness component of the pattern requirement is concerned, CVLR has alleged adequate facts to nudge its RICO claim across the line from conceivable to plausible. However, relatedness alone is not sufficient to satisfy the pattern requirement. Plaintiff has failed to demonstrate the requisite continuity. There is no allegation the predicate acts were being committed continuously during the relevant three-to-four-year time span. Plaintiff has not alleged a wide variety of predicate acts; it has only asserted a few instances of wire fraud and a few instances of bank fraud. Finally, multiple schemes are alleged. Plaintiff has failed to plead either closed-ended continuity or open-ended continuity. Thus, the pattern requirement has not been satisfied.

I will dismiss plaintiff’s RICO claim. Absent a surviving RICO claim, CVLR is left only with state law claims for breach of contract, tortious interference with the performance of a contract and business conspiracy in violation of Va. Code § 18.2-499. I exercise my discretion to dismiss a case in which all federal claims have been dismissed and only state law claims remain.

CVLR Performance Horses Inc. v. Wynne (Moon) (Published) No. 6:11cv00035, April 2, 2012; USDC at Lynchburg, Va. VLW 012-3-134, 33 pp.