Opinion ID: 622342
Heading Depth: 4
Heading Rank: 1

Heading: Mail and Wire Fraud Allegations

Text: Mail fraud consists of (1) a scheme to defraud, and (2) use of the mails in furtherance of the scheme. United States v. Jamieson, 427 F.3d 394, 402 (6th Cir.2005). The elements of wire fraud are essentially the same except that one must use the wires in furtherance of the scheme to defraud. United States v. Daniel, 329 F.3d 480, 486 n. 1 (6th Cir. 2003) (noting that the statutes share the same relevant language and the same analysis should be used for each). A scheme to defraud includes any plan or course of action by which someone uses false, deceptive, or fraudulent pretenses, representations, or promises to deprive someone else of money. Jamieson, 427 F.3d at 402. A plaintiff must also demonstrate scienter to establish a scheme to defraud, which is satisfied by showing the defendant acted either with a specific intent to defraud or with recklessness with respect to potentially misleading information. United States v. DeSantis, 134 F.3d 760, 764 (6th Cir.1998). When pleading predicate acts of mail or wire fraud, in order to satisfy the heightened pleading requirements of Rule 9(b), a plaintiff must (1) specify the statements that the plaintiff contends were fraudulent, (2) identify the speaker, (3) state where and when the statements were made, and (4) explain why the statements were fraudulent. Frank v. Dana Corp., 547 F.3d 564, 570 (6th Cir.2008) (quoting Gupta v. Terra Nitrogen Corp., 10 F.Supp.2d 879, 883 (N.D.Ohio 1998)). A RICO plaintiff is not required to plead or prove first-party reliance on an allegedly false statement. See Bridge v. Phoenix Bond & Indem. Co., 553 U.S. 639, 648, 128 S.Ct. 2131, 170 L.Ed.2d 1012 (2008). To allege a valid RICO claim, however, a plaintiff must show not only that the predicate act was a but for cause of plaintiff's injuries, but also that it was a proximate cause. Holmes v. Sec. Investor Prot. Corp., 503 U.S. 258, 268, 112 S.Ct. 1311, 117 L.Ed.2d 532 (1992). A plaintiff must show some direct relation between the injury asserted and the injurious conduct alleged. Id. First, plaintiffs argue that the district court erred in disregarding allegedly fraudulent emails sent by the defendants in May 2005. To support their claim, the plaintiffs point to documents gathered in the state criminal prosecution of Boraggina and Beauvais and included in the plaintiffs' response to the second motion to dismiss. These documents reveal an incident where, in a request for references, Boraggina sent prospective clients, Jeff and Cheryl Smith, (who are not parties to this lawsuit) an email containing the names of purported former clients Tony and Carol Vitale and their email address. This email address was actually owned and controlled by Beauvais. A few days later, the Smiths received an email from the Vitales that gave Waiting Angels a positive review. Plaintiff Amanda Heinrich also claims that when she was considering contracting with Waiting Angels, she relied upon positive references which she received from an email address later discovered to be owned by the defendants. The plaintiffs argue that these fraudulent communications violate the wire fraud statute and should be included as an additional predicate act. These allegations, however, were not included in the plaintiffs' third amended complaint, and the plaintiffs never requested that the defendants' motion for judgment on the pleadings be converted into a motion for summary judgment. A district court generally may only consider matters outside the pleadings if they treat the motion as one for summary judgment under Rule 56. Fed.R.Civ.P. 12(d). See Jones v. City of Cincinnati, 521 F.3d 555, 562 (6th Cir.2008). Because the district court did not convert the defendants' motion into a motion for summary judgment, it properly ruled on the motion without considering these additional allegations of wire fraud. See Patterson v. Novartis Pharm. Corp., ___ Fed.Appx. ___, ___, No. 10-5886, 2011 WL 3701884, at  (6th Cir. August 23, 2011) (unpublished opinion). Furthermore, even if the district court should have considered these additional allegations, the Heinrich plaintiffs have still failed to allege wire fraud with the required particularity since Amanda Heinrich's affidavit does not include the date she received the allegedly fraudulent email from the defendants. The Heinriches have also failed to show how the misrepresentation of the true author of these emails was a proximate cause of any injury to their business or property. Their alleged injuries are too attenuated from the alleged fraud. Their argument appears to be that the positive references served as an inducement to do business with Waiting Angels. But any injuries they may have suffered were not the direct result of the alleged fraudulent conduct. Rather, the false references helped put the Heinriches in a position to be defrauded by other, unrelated representations concerning the availability of specific children or how adoption fees will be spent. The false references, while perhaps a but for cause of the Heinriches' injuries, did not proximately result in any harm to their business or property. Thus, the plaintiffs have not adequately alleged any additional predicate acts of wire fraud resulting from emails containing fraudulent positive references about Waiting Angels. The plaintiffs also argue that the district court improperly failed to include claims arising from alleged misrepresentations on the defendants' website as predicate acts of racketeering activity. The plaintiffs claim that the defendants frequently advertised children on their website who they knew, or should have known, were unavailable for adoption. They argue that the promise of ample children available for adoption induced them to pay non-refundable fees to facilitate adoptions that the defendants knew would be impossible to achieve. This argument is also without merit because the plaintiffs have not adequately alleged that the person making these representations acted with knowledge or reckless disregard of their falsity. Rule 9(b) requires not only specifying the false statements and by whom they were made but also identifying the basis for inferring scienter. North Am. Catholic Educ. Programming Found., Inc. v. Cardinale, 567 F.3d 8, 13 (1st Cir.2009). The courts have uniformly held inadequate a complaint's general averment of the defendant's `knowledge' of material falsity, unless the complaint also sets forth specific facts that make it reasonable to believe that defendant knew that a statement was materially false or misleading. Greenstone v. Cambex Corp., 975 F.2d 22, 25 (1st Cir.1992). While the plaintiffs have alleged in a general and conclusory fashion that the defendants knew that children they were advertising as available for adoption were not actually available, they have failed to set forth specific facts that would support a reasonable inference that (1) the children were actually unavailable and (2) the defendants knew they were not available. For example, after an attempted adoption of a set of twins was unsuccessful, the Casassas alleged that they contacted the defendants and stated that the couple was aware of many new baby and toddler photos being offered for adoption on the Waiting Angels website. They alleged that defendants informed them that the couple was not sent any referrals because the children pictured on the website were being handled by a different Guatemalan attorney than the attorney handling the twins' adoptions. The couple further alleged that they were told later that the defendants could not get birth certificates for the babies they were displaying on the website. The complaint does not specify who told the couple that the defendants could not get the birth certificates for the babies advertised on the website. More importantly, the complaint does not provide sufficient facts from which it would be reasonable to infer that the children advertised were actually unavailable. Merely labeling the defendants' responses as suspicious does not suffice. Furthermore, the plaintiffs fail to allege any specific facts that would allow us to infer that at the time the defendants advertised children as available on their website, they made this promise of availability with knowledge of its falsity. These allegations raise only the mere possibility of misconduct and do not show the plaintiffs' entitlement to relief. Iqbal, 129 S.Ct. at 1950. In summary, the plaintiffs have failed to adequately allege any additional predicate acts of mail or wire fraud.