Court Denies Defendants’ Motions for Summary Judgment of Civil RICO Claims Sending Case to the Jury

Hyundai Motor America v. West Palm Motor Sales, Inc., 2022 WL 1696846 (S.D. Fla., Nov. 16, 2022)

Defendants filed motions for summary judgment asserting that Plaintiffs failed to sufficiently allege facts which would render identify specific facts showing there is a genuine issue for trial.   Defendants allegedly made an agreement to defraud HMA by intentionally damaging engines and submitting fraudulent warranty repairs.

RICO Association in Fact Enterprise

To assert a RICO claim, a plaintiff must prove “that the defendants (1) operated or managed (2) an enterprise (3) through a pattern (4) of racketeering activity that included at least two predicate acts of racketeering, which (5) caused (6) injury to the business or property of the plaintiff.” Cisneros v. Petland, Inc., 972 F.3d 1204, 1211 (11th Cir. 2020) (citing Ray v. Spirit Airlines, Inc., 836 F.3d 1340, 1348 (11th Cir. 2016)).

Section 1961(4) broadly defines “enterprise” to include “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). “[A] RICO enterprise need not possess an ‘ascertainable structure’ distinct from the associations necessary to conduct the pattern of racketeering activity.” United States v. Goldin Indus., Inc., 219 F.3d 1271, 1274-75 (11th Cir. 2000). The existence of an enterprise “is proved by evidence of an ongoing organization, formal or informal, and by evidence that the various associates function as a continuing unit.” United States v. Turkette, 452 U.S. 576, 583 (1981). Therefore, “the definitive factor in determining the existence of a RICO enterprise is the existence of an association of individual entities, however loose or informal, that furnishes a vehicle for the commission of two or more predicate crimes, that is, the pattern of racketeering activity requisite to the RICO violation.” Goldin Indus., Inc., 219 F.3d at 1275.

An enterprise, as defined within the RICO statute, includes associations in fact. Boyle v. United States, 556 U.S. 938, 944 (2009). “[T]he Supreme Court has ‘succinctly’ defined an association-in-fact enterprise as any ‘group of persons associated together for a common purpose of engaging in a course of conduct.’ ” Al-Rayes v. Willingham, 914 F.3d 1302, 1307 (11th Cir. 2019) (citing Boyle, 556 U.S. at 944Turkette, 452 U.S. at 583). While the “ ‘concept of an association in fact is expansive,’ the Supreme Court has nevertheless found that an association-in-fact enterprise must have three ‘structural features’: (1) a ‘purpose,’ (2) ‘relationships among those associated with the enterprise,’ and (3) ‘longevity sufficient to permit these associates to pursue the enterprise’s purpose.’ ” Almanza v. United Airlines, Inc., 851 F.3d 1060, 1067 (11th Cir. 2017) (quoting Boyle, 556 U.S. at 944). In order for a plaintiff to establish the “common purpose” requirement for a RICO enterprise, the plaintiff must establish “not only that there was some commonly shared purpose among [the alleged associates], but also that they associated together for that purpose.” Lockheed Martin Corp. v. Boeing Co., 357 F. Supp. 2d 1350, 1362 (M.D. Fla. 2005).

In order to prove an associated-in-fact enterprise, “the group must function as a continuing unit,” not merely through independent, parallel conduct. Boyle, 556 U.S. at 948 (emphasis added); Almanza, 851 F.3d at 1068Aim Recycling of Fla., LLC v. Metals USA, Inc., No. 18-CV-60292, 2020 WL 209860, at *15 (S.D. Fla. Jan. 13, 2020).

Enterprise- Distinctness

In a 1962(c) case, a party cannot be both the defendant “person” and the enterprise. Goldin Indus.., Inc., 219 F.3d at 1271. Since a corporation is included in the statutory definition of “person” under 18 U.S.C. 1961(3), a bone of contention in 1962(c) cases is often whether the corporate person is separate and distinct from individuals who operate the corporation. In the instant case, the parties vigorously dispute the distinctiveness issue. Defendants argue that HMA has failed to show how West Palm is distinct from its employees, officers or agents for purposes of a RICO enterprise. The Court has carefully considered this issue and notes that the parties seem to agree that the requisite distinctness here hinges primarily on Edward W. Napleton, who is undisputedly not an employee or officer of West Palm. However, the parties make diametrically opposed arguments as to whether Napleton is an agent of West Palm and rely on different evidence to support their positions. The Court cannot decide this issue on summary judgment as there exist material issues of fact which must be resolved by a jury.

Enterprise-   Separate and Apart

Further, “[a]n enterprise is not, for instance, the same as a pattern of racketeering activity. Instead, an enterprise “is an entity separate and apart from the pattern of activity in which it engages.” Catano v. Capuano, No. 18-20223-CIV, 2019 WL 3035752, at *6 (S.D. Fla. July 11, 2019) (citing Turkette, 452 U.S. at 580) (“The existence of an enterprise at all times remains a separate element which must be proved.”)). The Court finds that there are genuine issues of material fact in this case as to the existence of an enterprise and whether the enterprise is an entity separate and apart from the pattern of activity in which it engages. *7.

In sum, the court found that there are genuine issues of material fact as to the existence of an enterprise-in-fact—a common purpose, relationships among those associated with the enterprise, longevity sufficient to permit these associates to pursue the enterprise’s purpose—so summary judgment must be denied on this issue. In light of the foregoing, the Court finds that the enterprise-in-fact issue is one that must go to a jury.

Pattern of Racketeering

“A plaintiff in a civil RICO action must identify and prove a pattern of racketeering activity, defined as at least two ‘predicate acts’ of racketeering activity, the last of which occurred within the last ten years.” Tucker v. Morris State Bank, 154 F. App’x 183, 185 (11th Cir. 2005) (citing 18 U.S.C. § 1961(5)). “An act of racketeering activity, commonly known as a ‘predicate act,’ includes any of a long list of state and federal crimes.” Cisneros, 972 F.3d at 1215 (citing 18 U.S.C. § 1961(1)). “To successfully allege a pattern of racketeering activity, plaintiffs must charge that: (1) the defendants committed two or more predicate acts within a ten-year time span; (2) the predicate acts were related to one another; and (3) the predicate acts demonstrated criminal conduct of a continuing nature.” Trump v. Clinton, No. 22-CV-14102, 2022 WL 4119433, at *19 (S.D. Fla. Sept. 8, 2022) (quoting Jackson v. BellSouth Telecommunications, 372 F.3d 1250, 1264 (11th Cir. 2004) (citations omitted)).

Defendants argue that there is no evidence that Defendants committed predicate acts of mail and wire fraud or that each specific defendant participated in the purported enterprise’s affairs. However, the Court found that there are genuine issues of material fact regarding each of these elements of civil RICO.

Defendants argued that there is a lack of evidence that the defendants acted together to accomplish a fraudulent purpose. The Court disagreed and finds that the record evidence, discussed above, sufficiently establishes genuine issues of material fact that each defendant (or member of the enterprise) was aware of, and worked toward, defrauding HMA to financially enrich himself or itself. HMA has also presented evidence that the common purpose here is independent from the enterprise’s legitimate business activities, which are to lease and sell cars and perform legitimate repairs.

“Garden-Variety” Disputes

As other courts have noted, it is an abuse of the RICO statute to try to squeeze garden-variety business disputes into civil RICO actions. The claims made here by HMA are quite serious and the allegations involve much more than just a business dispute—or a dealership dispute—gone sour.

The Court disagreed with Defendants’ assessment that the evidence, at best, establishes garden variety fraud amongst low-level employees. HMA has provided direct and circumstantial evidence in its Statement of Material Facts and filings that Defendants operated or managed an enterprise through a pattern of racketeering activity that included at least two predicate acts of racketeering (mail or wire fraud), which caused injury to the business or property of HMA. While Defendants argue that HMA’s RICO claim is insufficient as a matter of fact and law, the Court is required to consider the facts in the light most favorable to HMA. After doing so, and considering the applicable law, the Court simply cannot grant summary judgment in Defendants’ favor on HMA’s civil RICO count. Any doubts this Court has regarding whether a trial is necessary must be resolved against the moving party.  Thus, in light of the genuine issues of material fact that exist as to Count II, the Court finds that a jury should consider and determine whether HMA can prove its civil RICO claim. HMA has met its burden to show affirmative evidence to support its RICO claim, and it will be up the jury to accept or reject HMA’s civil RICO claim.

Accordingly, the Motion was denied as to Count II, the substantive RICO claim.

RICO Conspiracy- Count Three

Defendants argue in their Motion that, since HMA’s underlying substantive RICO claim (Count II) is without merit, the RICO conspiracy claim (Count III) necessarily fails.*9.  Section 1962(d) makes it “unlawful for any person to conspire to violate any of the [RICO] provisions.” 18 U.S.C. § 1962(d). “A plaintiff can establish a RICO conspiracy claim in one of two ways: (1) by showing that the defendant agreed to the overall objective of the conspiracy; or (2) by showing that the defendant agreed to commit two predicate acts.” *10, citing cases.  “In addition to predicate crimes, a RICO conspiracy charge requires proof of an enterprise, of the continuity of racketeering activity, and of the defendant’s knowledge of, agreement to, and participation in the conspiracy.” 

Counsel for Plaintiffs and for Defendants agreed that the RICO conspiracy count (Count III) rises and falls with the substantive RICO count (Count II). The applicable law cited above states this as well. The Court found that there are material issues of fact which preclude a grant of summary judgment in Defendants’ favor as to Count III. Just as Defendants’ Motion is being denied as to Count II in light of the genuine issues of material fact that have been presented, Defendants’ Motion was denied as to Count III of the Second Amended Complaint for the same reasons.

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