Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-almd-2_09-cv-00192/USCOURTS-almd-2_09-cv-00192-1/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1332 Diversity-Breach of Contract

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IN THE DISTRICT COURT OF THE UNITED STATES FOR THE

MIDDLE DISTRICT OF ALABAMA, NORTHERN DIVISION

DANNY LYNN ELECTRICAL & )

PLUMBING, LLC, )

et al., )

)

Plaintiffs, )

) CIVIL ACTION NO.

v. ) 2:09cv192-MHT

) (WO)

VEOLIA ES SOLID WASTE )

SOUTHEAST, INC., et al., )

)

Defendants. )

OPINION AND ORDER

Relying on Bell Atlantic Corp. v. Twombly, 550 U.S.

544 (2007) and Ashcroft v. Iqbal, 556 U.S. ___, 129 S.Ct.

1937 (2009), it is ORDERED that the defendants’ motion to

dismiss (Doc. No. 177) is:

(1) Granted as to the plaintiffs’ RICO claims, as

explained below.

(2) Denied as to the plaintiffs’ breach-of-contract

claim, as explained below.

(3) Granted in part and denied in part as to the

plaintiffs’ unjust-enrichment claim, as explained below.

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***

The plaintiffs’ RICO claims, alleged pursuant to 18

U.S.C.A. § 1962 et seq.: After the court previously

dismissed the plaintiffs’ first RICO claims, the

plaintiffs filed a third amended complaint, reasserting

claims under RICO. They have alleged three separate

enterprises each of which is “legally separate, although,

to the extent necessary, they are each pled in the

alternative.” 3d Am. Comp. ¶ 123 (Doc. No. 163). The

court finds, however, that none of these alleged

enterprises constitutes a valid RICO enterprise and, as

such, the plaintiffs’ RICO claims are due to be

dismissed.

The first enterprise alleged by the plaintiffs is:

“[A]n association in fact consisting of:

Defendant Richard Burke, Defendant

Jeffrey Adix, Defendant Paul Jenks,

Defendant Matthew Gunnelson, Defendant

James Long, an outside third-party

‘consultant(s)’ (whose role and

existence is known, but whose name has

not been discovered yet), along with

Defendant Veolia ES Solid Waste, Inc.

(‘VES’), Defendant Veolia Environmental

Services North America Corp. (‘VESNA’),

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Defendant Veolia ES Solid Waste

Southeast Inc., Veolia ES Solid Waste of

New Jersey, Inc., Veolia ES Solid Waste

of Pennsylvania, Inc., Superior Waste

Services of New York City, Inc., and/or

Veolia ES Solid Waste Midwest, LLC.

Each of these individuals and entities

are ‘persons’ within the meaning of 18

U.S.C. § 1961(4) and 18 U.S.C.

§ 1962(c).” 

3d Am. Comp. ¶ 124. VESNA is the parent company of VES;

and Veolia Southeast, Veolia of New Jersey, Veolia of

Pennsylvania, Superior Waste Services of New York City,

and Veolia Midwest are all wholly-owned subsidiaries of

VES. Of the five individuals named, all are or were

officers of VES or VESNA. 

The defendants argue that this is an invalid

enterprise because “the individuals and entities that

comprise the enterprise[] are the exact same individuals

and entities named as RICO persons.” Mot. at 20 (Doc.

No. 177). Thus, the RICO “persons” and enterprise are

not distinct, as required in this circuit. See United

States v. Goldin Industries, Inc., 219 F.3d 1268, 1271

(11th Cir. 2000) (en banc) (holding that for purposes of

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18 U.S.C. § 1962(c), there must be a RICO person distinct

from the RICO enterprise alleged). 

The plaintiffs claim that the Supreme Court’s ruling

in Cedric Kushner Promotions, Ltd. v. King, 533 U.S. 158

(2001), forecloses the defendants’ argument. In Kushner,

the Court held that the defendant individual, who was the

president and sole share-holder of a corporation, was a

“person” sufficiently distinct from the alleged

enterprise, the corporation itself. The Court found that

“The corporate owner/employee, a natural person, is

distinct from the corporation itself, a legally different

entity with different rights and responsibilities due to

its different legal status.” Id. at 163. Therefore,

“[a] corporate employee who conducts the corporation’s

affairs through an unlawful RICO ‘pattern ... of

activity,’ § 1962(c), uses that corporation as a

‘vehicle’ whether he is, or is not, its sole owner.” Id.

at 164-65. On the basis of the Court’s reasoning, the

plaintiffs argue that corporate employees are distinct

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from the corporations for which they work for the

purposes of RICO, such that they have stated a valid RICO

claim.

However, the Supreme Court distinguished the facts in

Kushner from a case in which “a corporation was the

‘person’ and the corporation, together with all its

employees and agents, were the ‘enterprise.’” Id. at 164

(discussing Riverwoods Chappaqua Corp. v. Marine Midland

Bank, N. A., 30 F.3d 339, 344 (2d Cir. 1994)). The Court

noted that “It is less natural to speak of a corporation

as ‘employed by’ or ‘associated with’ this latter oddly

constructed entity.” Id. Furthermore, Kushner’s holding

was limited to situations where “a corporate employee

unlawfully conducts the affairs of the corporation of

which he is the sole owner--whether he conducts those

affairs within the scope, or beyond the scope, of

corporate authority.” Id. at 166.

Here, the plaintiffs have alleged an enterprise

comprised of parent companies and their subsidiaries,

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along with officers and agents of those corporations. As

the Court said in Kushner, it is awkward to conceive of

a corporation as “employed by” or “associated with” an

entity composed of itself and its related corporations

and employees. See 18 U.S.C. § 1962(c) (forbidding the

conduct of an enterprise through a pattern of

racketeering activity by “any person employed by or

associated with” the enterprise). In addition to the

Second Circuit, cited in Kushner, many other courts of

appeal have refused to find a valid RICO claim where the

alleged enterprise consists only of a corporation and its

employees. See, e.g., Khurana v. Innovative Health Care

Sys., 130 F.3d 143, 155 (5th Cir. 1997), vacated on other

grounds, Teel v. Khurana, 525 U.S. 979 (1998) (“The

distinctiveness requirement may not be avoided by

alleging a RICO enterprise that consists merely of a

corporation defendant associated with its own employees

or agents carrying on the regular affairs of the

defendants.”) (internal quotation marks and citation

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omitted) (quoted in ISystems v. Spark Networks, Ltd.,

2011 WL 2342523, *4 (5th Cir. 2011)); Bessette v. Avco

Financial Services, Inc., 230 F.3d 439, 449 (1st Cir.

2000) (“employees acting solely in the interest of their

employer, carrying on the regular affairs of the

corporate enterprise, are not distinct from that

enterprise.”); Bachman v. Bear, Stearns & Co., Inc., 178

F.3d 930, 932 (7th Cir. 1999) (“A firm and its employees,

or a parent and its subsidiaries, are not an enterprise

separate from the firm itself.”); Riverwoods Chappaqua

Corp. v. Marine Midland Bank, N.A., 30 F.3d 339, 344 (2d

Cir. 1994) (distinguished and left intact by Kushner, 533

U.S. at 164) (“Nevertheless, by alleging a RICO

enterprise that consists merely of a corporate defendant

associated with its own employees or agents carrying on

the regular affairs of the defendant, the distinctness

requirement may not be circumvented.”); Davis v. Mutual

Life Ins. Co. of New York, 6 F.3d 367, 377 (6th Cir.

1993) (“Under the ‘non-identity’ or ‘distinctness’

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requirement, a corporation may not be liable under

section 1962(c) for participating in the affairs of an

enterprise that consists only of its own subdivisions,

agents, or members. An organization cannot join with its

own members to undertake regular corporate activity and

thereby become an enterprise distinct from itself.”).

As the cited cases recognize, a corporation and its

associated subsidiaries, employees and agents do not form

an enterprise that satisfies the distinctness requirement

under RICO. Moreover, the plaintiffs have alleged no

acts on the part of any of the defendants that fall

outside the normal business of the Veolia corporations.

The plaintiffs claim their injuries are the result of

alleged fraud committed through misrepresentations in

invoices and letters sent to the defendants’ customers,

and published on the defendants’ websites, made in an

attempt to increase the profits of the Veolia

corporations by charging unwarranted fees. Sending

invoices is the normal business of a waste-collection

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corporation, as is maximizing profits. Indeed, had the

corporate officers not tried to increase profits, they

would have been remiss in their duties. The plaintiffs

do not allege that the defendants conspired to take over

a legitimate business in order to commit illegal acts

(the prototypical RICO scenario), nor do they allege that

the Veolia corporations and their employees were

associating as an enterprise to do anything other than

what the corporations normally do, that is, mail invoices

to collect for services rendered and maximize profits.

See Atkinson v. Anadarko Bank and Trust Co., 808 F.2d

438, 441 (5th Cir. 1987) (holding that a bank, its

holding company, and three employees did not form an

association-in-fact enterprise, and that the alleged

predicate act-“mailing of false statements requesting

payment of interest in excess of the agreed amount”-was

a normal activity of the bank). 

As the Supreme Court has stated, “liability depends

on showing that the defendants conducted or participated

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in the conduct of the ‘enterprise’s affairs,’ not just

their own affairs.” Reves v. Ernst & Young, 507 U.S.

170, 185 (1993) (emphasis original). Here, there is no

allegation that the members of the first enterprise were

doing anything but conducting their normal affairs,

rather than the specific affairs of the enterprise.

Therefore, the plaintiffs have failed to state a claim

through their first alleged RICO enterprise.

The court similarly finds that the second enterprise

put forth by the plaintiffs, as well as the alternative

second, or third, enterprise, do not constitute valid

RICO enterprises. As described by the plaintiffs,

“The second enterprise is an association

in fact consisting of at least five

individuals: Richard Burke, Jeffrey

Adix, Matthew Gunnelson, James Long, and

Paul Jenks, along with an outside thirdparty ‘consultant(s),’ whose role and

existence is known, but whose names have

not been discovered yet. These

individuals are ‘persons’ within the

meaning of 18 U.S.C. § 1961(4) and 18

U.S.C. § 1962(c). These individuals used

their positions at various Veolia

entities to create, misrepresent,

implement, charge, and collect the

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improper fees and further desiminate

[sic] half truths to customers as set

out herein. By doing so, they profited

directly apart from the profit their

employers received. In the alternative,

this enterprise is a legal entity known

as Veolia Environmental Services North

America Corp. (‘VESNA’) or Veolia ES

Solid Waste, Inc. (‘VES’), with the same

individuals constituting the ‘persons’

(Richard Burke, Jeffrey Adix, Matthew

Gunnelson, James Long, Paul Jenks, and

an outside third-party ‘consultant(s)’)

as that term is used in 18 U.S.C.

§ 1961(4) and 18 U.S.C. § 1962(c).”

3d Am. Comp. ¶ 144. The defendants argue that a RICO

enterprise cannot consist solely of the named RICO

persons, and cite a series of district court cases

supporting that proposition. However, the Eleventh

Circuit in Goldin cautioned that “The prohibition against

the unity of person and enterprise applies only when the

singular person or entity is defined as both the person

and the only entity comprising the enterprise.” 219 F.3d

at 1275. That is not the case with the described second

enterprise. However, it is difficult to conceive of

these five individuals as a distinct entity, because they

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are associated only by virtue of their positions at the

Veolia corporations. What appears to bring them together

is not their common purpose to commit fraud, but their

common employment by VESNA and its subsidiaries. 

Furthermore, the named enterprise should provide a

vehicle for the commission of RICO predicate acts.

Goldin, 219 F.3d at 1275 (stating that “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”). It is unclear how an enterprise consisting of

the five named individuals formed a vehicle for the

alleged racketeering acts, that is, charging and

collecting fraudulent fees. While the named individuals

may have helped to come up with the idea of charging

customers extra fees and figured out how to do so, they

did not complete the acts themselves. Instead, it is the

Veolia companies-and ultimately the local divisions that

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actually have contracts with customers-that committed the

alleged racketeering acts. None of the individual

defendants personally charged or collected a fraudulent

fee, either alone or in concert with the other

individuals, so their association does not provide any

sort of vehicle for the fraud alleged. At most, they may

have conspired to commit fraud, but RICO requires more

than allegations of a conspiracy. See Boyle v. United

States, 129 S.Ct. 2237, 2246 (2009) (noting that “Section

1962(c) demands much more [than does proof of a

conspiracy]: the creation of an ‘enterprise’-a group with

a common purpose and course of conduct-and the actual

commission of a pattern of predicate offenses.”);

Fitzgerald v. Chrysler Corp., 116 F.3d 225, 228 (7th Cir.

1997) (“RICO, however, is not a conspiracy statute. Its

draconian penalties are not triggered just by proving

conspiracy. ‘Enterprise’ connotes more.”). 

As for the alleged third enterprise, the defendants

state that the plaintiffs “failed to provide any details

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regarding the enterprise, its purpose, structure, or

duration.” Mot. at 16 (Doc. No. 178). The plaintiffs

counter that the defendants have mischaracterized their

complaint and that, “The allegations regarding this

enterprise are clearly set forth in the ensuing fifteen

paragraphs.” Resp. at 19 (Doc. No. 196). 

The court agrees with the defendants that the

plaintiffs have failed to plead adequately the third

enterprise. The paragraphs following the description of

the second and third enterprises give no indication of

how the third enterprise functioned differently from that

of the second enterprise, comprised of the five named

individuals. Furthermore, later paragraphs repeatedly

refer to the named individuals as the members of the

enterprise, yet for the third enterprise, they are only

the RICO “persons.” See, e.g., Comp. ¶ 153 (“the members

of the enterprise met regularly”); ¶ 154 (“the members of

the enterprise have communicated regularly”); ¶ 158 (“the

association of [the individuals] together furnished a

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vehicle for the commission of multiple predicate acts”).

To satisfy Federal Rule of Civil Procedure 8(a), the

plaintiffs’ claim must be “plausible on its face,” Iqbal,

129 S.Ct. 1937, 1949 (2009), and Rule 9(b) requires that

fraud be pled with particularity. Fed. R. Civ. P. 9(b);

see also American Dental Ass'n v. Cigna Corp., 605 F.3d

1283, 1291 (11th Cir. 2010). The facts constituting

fraud must be alleged “with respect to each defendant's

participation in the fraud.” Id. Since here the third

enterprise is not fully set out, how VES or VESNA

constitutes the enterprise itself in order to provide a

vehicle for the fraud (as opposed to the first

enterprise, where the corporations work in concert) is

not apparent. 

In addition, by alleging that the third enterprise

could be either VESNA or VES, the plaintiffs have failed

to clearly describe said enterprise. This appears to be

an instance of artful pleading, wherein the plaintiffs

have alleged that the enterprise is either VES or VESNA

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in an effort to avoid a recurrence of the court’s

previous holding that a parent corporation and its

subsidiaries may not form a valid RICO enterprise.

However, it is unclear how only one of the Veolia

corporations could constitute the entire RICO enterprise,

when the gravamen of the plaintiffs’ claim is that all of

the Veolia companies, with their employees, acted

together to perpetrate this scheme. Therefore, the third

enterprise also fails.

The plaintiffs’ breach-of-contract claim: Defendants

have again attempted to provide evidence that the

contract clauses at issue are not identical, as claimed

by plaintiffs, this time citing an Eleventh Circuit case

for the premise that “where the plaintiff refers to

certain documents in the complaint and those documents

are central to the plaintiff's claim, then the Court may

consider the documents part of the pleadings for purposes

of Rule 12(b)(6) dismissal, and the defendant's attaching

such documents to the motion to dismiss will not require

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conversion of the motion into a motion for summary

judgment.” Brooks v. Blue Cross and Blue Shield of

Florida, Inc., 116 F.3d 1364, 1369 (11th Cir. 1997).

However, the documents submitted by the defendants are

not yet “central to the plaintiff[s’] claim,” because the

plaintiffs have reproduced the alleged contract language

in their complaint, rather than simply refer to the

contracts at issue. Therefore, the court repeats that

“[t]he scope of ... review must be limited to the four

corners of the complaint” when ruling on a motion to

dismiss. St. George v. Pinellas County, 285 F.3d 1334,

1337 (11th Cir. 2002). The court must “accept[] the

facts alleged in the complaint as true and draw[] all

reasonable inferences in the plaintiff’s favor.” Id.

Based on plaintiffs’ allegations in the complaint, a

valid breach-of-contract claim has been pled. 

The plaintiffs’ unjust-enrichment claim: The court

will allow the plaintiffs to plead unjust enrichment and

breach of contract as alternative theories of recovery.

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See Fed. R. Civ. P. 8(e); Wagner v. First Horizon

Pharmaceutical Corp., 464 F.3d 1273, 1277-78 (11th Cir.

2006) (“Federal Rule of Civil Procedure 8(e) allows a

plaintiff to plead in the alternative ... separate counts

of the complaint must be read separately.”)

The court agrees, however, that the plaintiffs’

unjust-enrichment claim should be dismissed as to the

individual defendants because the plaintiffs did not

confer a direct benefit on those individuals. In

Alabama, “the essence of ... unjust enrichment ... is

that a plaintiff can prove facts showing that defendant

holds money which, in equity and good conscience, belongs

to plaintiff or holds money which was improperly paid to

defendant because of mistake or fraud.” Hancock-Hazlett

General Const. Co., Inc. v. Trane Co., 499 So.2d 1385,

1387 (Ala. 1986) (emphasis original). Under Florida law,

“the essential elements of a claim for unjust enrichment

are: (1) a benefit conferred upon a defendant by the

plaintiff, (2) the defendant’s appreciation of the

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benefit, and (3) the defendant’s acceptance and retention

of the benefit under circumstances that would make it

inequitable for him to retain it without paying the value

thereof.” Vega v. T–Mobile USA, Inc., 564 F.3d 1256,

1274 (11th Cir. 2009) (quotation marks and citation

omitted). Here, the plaintiffs allege that the fees

Veolia Southeast charged for waste removal were

intentionally inflated, such that the Veolia companies’

profits increased. The named individuals’ yearly bonuses

were tied to profits, and thus their compensation

increased, as well. However, there was no money paid by

the plaintiffs to the named individuals. Similarly,

there was no benefit conferred upon the individual

defendants by the plaintiffs. 

Ultimately, any benefit the individual defendants

received came from their corporate employers, who paid

their bonuses. No direct line has been established

between the money paid by the plaintiffs and the

compensation received by the individuals, such that it

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could be determined what portion of their compensation

resulted from the allegedly fraudulent fees. Since the

individual defendants enjoyed no direct benefit, the

unjust enrichment claim against them is due to be

dismissed.

Finally, the plaintiffs have requested leave to

amend, should their claims be dismissed. While it is

true that a court should give leave to amend “when

justice so requires,” Fed. R. Civ. P. 159a)(2), a court

may also deny such a motion as futile. Coventry First,

LLC v. McCarty, 605 F.3d 865, 870 (11th Cir. 2010).

Here, the plaintiffs have already had three bites at the

apple. Their case was removed to this court on March 6,

2009. They first amended their complaint and added the

RICO claims on November 17, 2009. The court then granted

leave for the plaintiffs to file a second amended

complaint, which they did on September 15, 2010. After

the plaintiffs’ RICO claims in the second amended

complaint were dismissed, the court again granted leave

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for them to file the third amended complaint currently

under consideration, filed December 22, 2010. Thus, the

plaintiffs have attempted to plead a valid RICO claim in

three of their complaints, and have yet to succeed.

Their theory of the case has not changed with each

pleading, but only the individuals and entities who form

the alleged RICO enterprises. The court does not see

how, based on the allegations, the plaintiffs can state

a RICO claim that will withstand scrutiny. It would thus

be futile to grant the plaintiffs leave to amend their

complaint a fourth time. Moreover, regardless as to

issue of futility, the plaintiffs have been given many

times to amend their complaint, and there comes a time

when enough is enough. The plaintiffs’ request to amend

their complaint again is denied.

DONE, this the 19th day of July, 2011.

 /s/ Myron H. Thompson 

UNITED STATES DISTRICT JUDGE 

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