Court Opinion

ID: 873177
Source: CourtListenerOpinion
Date Created: 2013-05-30 00:00:53.054396+00
Date Added: 2024-06-11T09:07:01.340532
License: Public Domain

UNPUBLISHED

                  UNITED STATES COURT OF APPEALS
                      FOR THE FOURTH CIRCUIT

                              No. 12-1591

CVLR PERFORMANCE HORSES, INC.,

                Plaintiff – Appellant,

          v.

JOHN L. WYNNE; 1650 PARTNERS, LLC; RIVERMONT CONSULTANTS,
INC., f/k/a The Rivermont Banking Co., Inc.,

                Defendants – Appellees,

          and

OLD DOMINION NATIONAL BANK; ADVANTAGE TITLE & CLOSING LLC;
S & R FARM, LLC; RALPH BECK; SHANA LESTER, f/k/a Shana Beck,

                Defendants.

                              No. 12-1787

CVLR PERFORMANCE HORSES, INC.,

                Plaintiff – Appellant,

          v.

JOHN L. WYNNE; 1650 PARTNERS, LLC; RIVERMONT CONSULTANTS,
INC., f/k/a The Rivermont Banking Co., Inc.,

                Defendants – Appellees,

          and
OLD DOMINION NATIONAL BANK; ADVANTAGE TITLE & CLOSING LLC;
S & R FARM, LLC; RALPH BECK; SHANA LESTER, f/k/a Shana Beck,

                Defendants.

Appeals from the United States District Court for the Western
District of Virginia, at Lynchburg.    Norman K. Moon, Senior
District Judge. (6:11-cv-00035-NKM)

Argued:   March 21, 2013                  Decided:   May 29, 2013

Before TRAXLER, Chief Judge, SHEDD, Circuit Judge, and David A.
FABER, Senior United States District Judge for the Southern
District of West Virginia, sitting by designation.

Reversed in part, dismissed in part, and remanded by unpublished
opinion.   Judge Shedd wrote the opinion, in which Chief Judge
Traxler and Senior Judge Faber joined.

ARGUED: Gary M. Bowman, Roanoke, Virginia, for Appellant. Chad
Allan Mooney, PETTY, LIVINGSTON, DAWSON & RICHARDS, PC,
Lynchburg, Virginia, for Appellees. ON BRIEF: John E. Falcone,
PETTY, LIVINGSTON, DAWSON & RICHARDS, PC, Lynchburg, Virginia,
for Appellees.

Unpublished opinions are not binding precedent in this circuit.

                                2
SHEDD, Circuit Judge:

       CVLR Performance Horses, Inc. appeals the district court’s

order dismissing its claims against John Wynne, 1650 Partners,

LLC, and Rivermont Consultants, Inc. pursuant to Federal Rule of

Civil Procedure 12(b)(6).                For the reasons explained below, we

reverse       the    district      court’s      order          and    remand      for     further

proceedings. 1

                                               I.

       Because       this    appeal     stems       from       a     dismissal     under       Rule

12(b)(6),      we    accept       the   facts       as    alleged         in    CVLR’s    Amended

Complaint.          See Martin Marietta v. Int’l. Tel. Satellite Org.,

991 F.2d 94, 97 (4th Cir. 1992).                          Wynne is the sole owner of

Rivermont and 1650 Partners, both of which Wynne used in his

fraudulent schemes.               Although Rivermont was not authorized at

any relevant time to engage in banking activities under Virginia

law,       Wynne    held    out    Rivermont         as    a       bank    as    part     of    his

enterprise and used this entity in various ways to facilitate

his    fraudulent          schemes,     many       of     which       “targeted      women      in

financial distress, who thought he was a banker.”                                        J.A. 57.

Wynne “continues to advertise [Rivermont] on the internet as a

       1
       CVLR also appeals the district court’s                              order denying its
motion for relief from the order granting the                              Appellees’ motion
to dismiss.   Because we reverse the district                              court’s dismissal
of CVLR’s complaint, we dismiss this portion                               of the appeal as
moot.

                                               3
bank, providing mortgage loans, construction loans, and reverse

mortgages.”      J.A. 57 (internal quotation marks omitted).

      We   first      discuss   the    schemes      that    involved     CVLR     or    its

President,      Crystal      Rivers.        In    late    2006,    Wynne    advertised

pasture land for rent, and Rivers responded to the advertisement

on    behalf    of     CVLR.        After    Rivers       contacted      Wynne,        Wynne

convinced her to purchase a horseback riding center for CVLR.

Wynne told Rivers that Rivermont was a bank that would finance

the purchase.         However, because Rivermont was not a bank, Wynne

arranged       for     Old   Dominion       National       Bank    to    provide        the

financing.           Wynne   then     proceeded      to    cut    CVLR    out     of    the

transaction      and     arranged     for    1650    Partners      to    purchase       the

riding center with Rivers serving as a guarantor on the loan

from Old Dominion to 1650 Partners.                  Even after the transaction

was complete, Rivers incorrectly believed that CVLR owned the

riding center.

      In February 2007, Wynne worked with Rivers to purchase and

finance a truck for CVLR’s use.                  However, unbeknownst to Rivers,

Wynne engaged in a series of acts over the next seven months

that left Rivermont owning the truck and CVLR obligated to repay

the   loan.          Wynne   also   told    the     financing      institution         that

Rivermont would purchase insurance on the truck, but he arranged

for Rivers to insure it instead.

                                            4
        Also in February 2007, Wynne purchased another truck in

Rivermont’s      name   but    added     it    to    Rivers’     insurance    policy

without    her   knowledge.          Thereafter,     Wynne’s     son   totaled     the

truck.     At that point, Wynne convinced Rivers’ insurance company

that Rivers was not the insured party and that the insurance

company should pay Wynne the value of the truck.                         Thus, the

insurance company paid Wynne $10,630.

        Wynne proceeded to divert more insurance funds from CVLR to

Rivermont over the first several months of 2008.                   Because Rivers

believed that CVLR owned the riding center, she insured it, and,

when high winds damaged the riding center’s barn, CVLR filed an

insurance claim.        The insurance company approved the claim and

issued checks jointly to CVLR and Old Dominion, the bank that

held the mortgage on the riding center.                Wynne then asked an Old

Dominion employee to transfer the funds into the account of 1650

Partners, telling the employee that he would use the money to

repair    the    wind   damage   and    make     “capital      additions”     to   the

riding center.      J.A. 21 (internal quotation marks omitted).                    The

Amended Complaint does not indicate whether the Old Dominion

employee complied.            However, it alleges that Wynne submitted

false      invoices      to      the     insurance         company      and        made

misrepresentations       to    Old    Dominion      that   led   Old   Dominion     to

believe that one of Wynne’s employees had repaired the barn,

which, in fact, remained unrepaired.                  Old Dominion then issued

                                          5
checks     to     Wynne’s      employee,         who    endorsed     the     checks    to

Rivermont.

      By     October     2008,      Rivers    had      become   a    member    of     1650

Partners.       Wynne exploited Rivers’ status as a member by forging

her signature on a 1650 Partners check to himself for $3000.

      Wynne also used Rivermont and 1650 Partners in schemes that

did not involve CVLR or Rivers.                  For example, Karen Foster, who

believed       that    Rivermont      was    a    bank,    sought     financing       from

Rivermont in early 2006.               Over time, Wynne loaned Foster small

amounts of money, and Foster came to consider Wynne a friend.

In    August     2006,      Wynne    convinced         Foster   to   execute    a     note

agreeing to repay him $40,000 for the series of small loans he

had made and to secure the note with Foster’s home.                                 Wynne

listed Foster’s home as an asset on a financial statement he

submitted to a bank in conjunction with a loan he sought for

1650 Partners.         On that financing statement, Wynne stated that

the   home      was   not    subject    to    any      mortgage,     which    was   false

because Bank of America held a mortgage on the home.                           The bank

made the loan in April 2009 based, in part, on Wynne’s false

representation in the financial statement.

       Finally, Wynne used Rivermont in a scheme against another

acquaintance, Vicki Marsh.                  In November 2006, Wynne bought a

certificate of deposit for Rivermont from First Bank and Trust

Company.       He then used his status as a customer of First Bank to

                                             6
convince     the     bank    to       open    a       credit    line    for       Marsh,       which

increased      her    credit          score.            With        Marsh’s       credit       score

increased, another bank was willing to loan her approximately

$500,000,     secured       by    a    mortgage        on     her    property       on   Pawley’s

Island,      South    Carolina.              However,          Wynne    arranged         for    the

$500,000 to be paid to him, not Marsh.                              Wynne made payments on

the   loan    for    approximately           18       months    until       he    ceased   making

payments in September 2008.                   Once the payments had fallen into

arrears, Wynne attempted to purchase Marsh’s interest in the

home from the mortgage holder for a reduced price.

                                              II.

      CVLR sued the Appellees and several other defendants in

federal      court,     asserting             one        claim        for        violating       the

Racketeering and Corrupt Organizations Act (“RICO”), 18 U.S.C. §

1962, and three state-law claims.

      The Appellees moved to dismiss under Rule 12(b)(6), arguing

that the Amended Complaint failed to state a claim upon which

relief may be granted as to each count asserted against the

Appellees.      The district court granted the motion as to the RICO

claim.       Because no federal claims remained in the litigation,

the      district      court          declined           to      exercise          supplemental

jurisdiction and dismissed the action.                          CVLR filed a Rule 60(b)

motion for relief from the dismissal, which the district court

denied.

                                                  7
                                        III.

     We review the district court's dismissal of CVLR’s RICO

claim de novo.        Wag More Dogs, Ltd. Liab. Corp. v. Cozart, 680

F.3d 359, 364–65 (4th Cir. 2012).                      To survive the Appellees’

Rule 12(b)(6) motion, CVLR’s Amended Complaint must establish

“facial plausibility” by pleading “factual content that allows

the court to draw the reasonable inference that [the Appellees

are] liable for the misconduct alleged.”                       Ashcroft v. Iqbal, 556

U.S. 662, 678 (2009).

     RICO    imposes      civil        liability         for      various       types    of

“racketeering    activity,”            18   U.S.C.       §     1962,    and    should    be

“liberally    construed     to     effectuate            its     remedial      purposes.”

Boyle   v.   United    States,    556       U.S.       938,    944    (2009)    (internal

citations    omitted).      Although            “[t]he    occasion       for    Congress’

action [when it passed RICO] was the perceived need to combat

organized    crime,”     RICO     is    “not          limited    in     application      to

organized crime.” H.J. Inc. v. Nw. Bell Tel. Co., 492 U.S. 229,

248 (1989).      Courts have thus applied RICO in a variety of

contexts outside the realm of traditional organized crime.                              See,

e.g.,   United   States   v.     Pryba,         900    F.2d     748    (4th    Cir.   1990)

(applying RICO against pornographers); Northeast Women’s Ctr.,

Inc. v. McMonagle, 868 F.2d 1342 (3d Cir. 1989) (applying RICO

against antiabortion activists).

                                            8
       Among other things, RICO prohibits being “associated with

any enterprise . . . [and] conduct[ing] or participat[ing] . . .

in the conduct of such enterprise’s affairs through a pattern of

racketeering activity.”                18 U.S.C. § 1962(c).            To allege “a

pattern of racketeering activity,” a plaintiff must allege acts

of racketeering that are both related and continuous.                       GE Inv.

Private Placement Partners II v. Parker, 247 F.3d 543, 549 (4th

Cir. 2001).         The district court found that the racketeering acts

alleged       in     the    Amended      Complaint      were     not    sufficiently

continuous to support a RICO claim. 2                We disagree.

       Two types of continuity can support a RICO claim: “closed-

ended” or “open-ended.”           Id.     Although, the district court found

that the Amended Complaint did not plead sufficient facts to

show       either    type   of   continuity,         CVLR   only    challenges     the

district court’s conclusion that the Amended Complaint fails to

support an inference of open-ended continuity.                         We find that

facts pled in the Amended Complaint do support an inference of

open-ended         continuity    and    that   the    district     court   erred    by

concluding otherwise.

       2
       RICO defines “racketeering activity” as “‘any act or
threat   involving’  specified   state-law   crimes,  any   ‘act’
indictable under various specified federal statutes, and certain
federal ‘offenses.’”    H.J. Inc., 492 U.S. at 232 (quoting 18
U.S.C. § 1961(1)). The Appellees do not argue that the Amended
Complaint failed to allege “racketeering activity” within the
meaning of RICO or that the acts of racketeering were unrelated.

                                           9
       In H.J. Inc., 492 U.S. at 241, the Supreme Court stated

that a plaintiff establishes open-ended continuity by showing

“past conduct that by its nature projects into the future with a

threat of repetition.”               The Court gave several examples—that

were     illustrative        but    not     exhaustive—of            facts   that     would

establish       open-ended         continuity.             One       example       involved

racketeering acts that, on their face, pose “a distinct threat

of long-term racketeering activity,” such as where a hoodlum

demands payment from storekeepers not to break their windows and

states    that    he    will       return    each       month     demanding     the       same

payment.         Id.    at   242.         The     two     other      examples      involved

situations      where    racketeering           acts     are    “part   of    an    ongoing

entity’s regular way of doing business.”                       Id.

       The district court’s analysis focused on the first example

from H.J. Inc. and concluded that CVLR failed to plead open-

ended continuity because each racketeering act did not, on its

face, threaten to continue long term.                          However, the district

court’s    analysis      overlooked         the   more     general      point      that    the

Appellees’ conduct “projects into the future with a threat of

repetition.”       Id. at 241.            The Amended Complaint alleges that

Wynne used Rivermont and 1650 Partners for over three years in a

series     of    racketeering        acts.          In     particular,       Rivermont’s

function as a bank was an integral part of the RICO operation

because Wynne lured victims into the scheme by holding Rivermont

                                             10
out as a bank or otherwise used Rivermont to facilitate his

scheme.     CVLR also alleges that Rivermont continues to advertise

as a bank, and the Amended Complaint creates no inference that

Rivermont has ended its fraudulent activities.                       Therefore, the

allegations     in    the    complaint        support    an   inference      that   the

activity “projects into the future with a threat of repetition”

and that racketeering acts are the Appellees’ “regular way of

doing business.”           Id. 241, 242; see also EPlus Technology Inc.

v. Aboud, 313 F.3d 166, 182-83 (4th Cir. 2002) (three examples

of looting companies of assets prior to filing for bankruptcy

established open-ended continuity).

      The    district       court      also     concluded     that     the    Amended

Complaint     fails    to     plead    open-ended        continuity    because       the

Appellees’      racketeering        activity       had    a    “‘built-in         ending

point’.”    J.A.     104    (quoting    GE    Investment,     247    F.3d    at   549).

Specifically, the district court found it implausible that the

racketeering acts would continue into the future because all of

the   victims      identified    in     the    Amended     Complaint    “have       been

bilked” and, presumably, know better than to do more business

with Appellees.        J.A. 105.       Again, we disagree.           “The lack of a

threat of continuity of racketeering activity cannot be asserted

merely by showing a fortuitous interruption of that activity.”

United States v. Busacca, 936 F.2d 232, 238 (6th Cir. 1991).

Instead, “the threat of continuity must be viewed at the time

                                          11
the racketeering activity occurred.”                   Id.        Here, as explained

above, at the time the Appellees’ acts occurred, the conduct

“project[ed] into the future with a threat of repetition,” H.J.

Inc., 492 U.S. at 241, and there was no other indication that

Wynne’s    conduct    was     to   be    limited       to    only      the    identified

victims.      Thus,     the    victims’        discovery          of   the    Appellees’

misconduct does not prevent CVLR from establishing open-ended

continuity.

     In sum, we conclude that the Amended Complaint pleads open-

ended     continuity.         Because        the    district       court      based    its

dismissal    on   a   conclusion        to    the    contrary,         we    reverse   the

district court’s order granting the motion to dismiss.

                                         IV.

     For    the   reasons      explained           above,    we     (1)     reverse    the

district court’s order granting Appellees’ motion to dismiss,

(2) dismiss as moot CVLR’s Rule 60(b) motion, and (3) remand for

further proceedings in the district court.

                                                                    REVERSED IN PART,
                                                                   DISMISSED IN PART,
                                                                         AND REMANDED

                                         12