Court Opinion

ID: 2666206
Source: CourtListenerOpinion
Date Created: 2014-04-04 08:43:01.16787+00
Date Added: 2024-06-11T13:01:56.289588
License: Public Domain

UNITED STATES DISTRICT COURT
                            FOR THE DISTRICT OF COLUMBIA

   LAURA MURRAY,

                           Plaintiff,

                      v.

   GARY MULGREW                                           Civil Action 08-01541 (HHK)

          and

   ROYAL BANK OF SCOTLAND
   GROUP PLC,

                           Defendants.

                                  MEMORANDUM OPINION

       Laura Murray brings this action against Gary Mulgrew, her ex-husband, and the Royal

Bank of Scotland Group PLC (“RBS Group”), which is now the parent company of Mulgrew’s

former employer, National Westminster Bank (“NatWest”). The case arises from Mulgrew’s

alleged mistreatment of Murray during their marriage as well as his alleged concealment from

her of funds he illegally obtained during his employment with NatWest. Murray alleges two

counts of violations of the Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18

U.S.C. § 1961 et seq., against Mulgrew and thirteen additional counts, each against Mulgrew,

RBS Group, or both, of violations of various laws of the United Kingdom.

       Before the Court are motions to dismiss filed by Mulgrew and RBS Group, respectively

[##20, 13]. Upon consideration of the motions, the oppositions thereto, and the record of this

case, the Court concludes that Murray’s complaint should be dismissed.
                                       I. BACKGROUND

       Laura Murray, a United States citizen, was married to Gary Mulgrew in the United

Kingdom in July 1991. Compl. ¶ 1.1 Murray and Mulgrew separated in October 2003 and were

divorced in February 2006. Id. Murray alleges that during their marriage, Mulgrew both

physically and emotionally abused her by striking, shaking, throwing objects at, and insulting

her. Id. ¶¶ 2, 27-32. She also alleges that Mulgrew opened bank accounts and created liabilities

in her name without her knowledge and consent and that he has failed to make required child

support payments to her. Id. ¶¶ 23-25.

       During Murray and Mulgrew’s marriage, Mulgrew was employed by NatWest, which is

now a part of RBS Group. Id. ¶ 4. In 2000, Mulgrew and two co-workers (“the NatWest Three”)

defrauded RBS Group of funds it held in a company known as LJM Swap Sub, L.P. Id. ¶¶ 4-5.

In part through a series of wire communications, the NatWest Three converted and divided

equally amongst themselves approximately $7.5 million. Id. ¶¶ 6-12. Mulgrew concealed the

proceeds of the scheme throughout his marriage to, and divorce from, Murray. Id. ¶ 13. In

November 2007, Mulgrew and the other two members of the NatWest Three pled guilty to one

count each of wire fraud in the United States District Court for the Southern District of Texas.

Id. ¶ 14. As a part of his plea, Mulgrew agreed that he and his two co-workers were jointly and

severally liable to RBS Group and would pay full restitution. Id. ¶ 18.

       Murray filed this action on September 5, 2008.2 Counts I and II of her complaint allege

that Mulgrew violated RICO sections 1962(c) and 1962(d) by engaging in wire fraud to execute

       1
               All citations herein to Murray’s complaint refer to the First Amended Complaint.
       2
               Murray amended her complaint on October 1, 2008.

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the NatWest Three’s scheme and then concealing from her the funds he held as a result when the

couple divided their property upon divorce. Counts III through XV allege various violations of

United Kingdom law. Murray asserts claims of assault, battery, intentional infliction of

emotional distress, breach of contract, deceit, fraudulent concealment, intentional

misrepresentation, negligent misrepresentation, and breach of fiduciary duty by Mulgrew based

on his alleged abuse of Murray during their marriage as well as his concealment of funds and

failure to pay child support. Against RBS Group, she alleges negligent failure to supervise and

breach of fiduciary duty for failing to prevent Mulgrew’s participation in the NatWest Three’s

scheme and for allowing him to open bank accounts in her name. She also asserts claims of civil

conspiracy and negligence by both defendants.

                                     II. LEGAL STANDARD

       Under Rule 12(b)(6) of the Federal Rules of Civil Procedure, a court may dismiss a

complaint, or any portion of it, for failure to state a claim upon which relief may be granted. Fed.

R. Civ. P. 12(b)(6). A court considering a motion to dismiss on this ground must assume that all

factual allegations in the complaint are true, even if they are doubtful. Bell Atl. Corp. v.

Twombly, 550 U.S. 544, 555 (2007). “[A] plaintiff’s obligation to provide the ‘grounds’ of [her]

‘entitle[ment] to relief,’” however, “requires more than labels and conclusions . . . . Factual

allegations must be enough to raise a right to relief above the speculative level.” Id. (internal

citations omitted). A “pleading that offers ‘labels and conclusions’ or ‘a formulaic recitation of

the elements of a cause of action will not do.’” Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009)

(quoting Twombly, 550 U.S. at 555).

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                                          III. ANALYSIS

A.     Murray’s RICO Claims Must Be Dismissed Because She Has Not Alleged Facts to
       Support the Contention That the RICO Violation Was a Proximate Cause of Her
       Injuries.

       The Racketeer Influenced and Corrupt Organizations Act provides, in relevant part, that:

       (c) It shall be unlawful for any person employed by or associated with any
       enterprise engaged in, or the activities of which affect, interstate or foreign
       commerce, to conduct or participate, directly or indirectly, in the conduct of such
       enterprise’s affairs through a pattern of racketeering activity or collection of
       unlawful debt.

       (d) It shall be unlawful for any person to conspire to violate any of the provisions
       of subsection (a), (b), or (c) of this section.

18 U.S.C. § 1962. RICO permits private plaintiffs to bring civil actions to collect damages for

injuries arising from violations of section 1962. 18 U.S.C. § 1964(c) (“Any person injured in

[her] business or property by reason of a violation of section 1962 . . . may sue therefor . . . and

shall recover threefold the damages [s]he sustains and the cost of the suit, including a reasonable

attorney’s fee.”). The Supreme Court has interpreted section 1964(c) not to allow “all factually

injured plaintiffs to recover” but to instead require that a plaintiff show that the RICO violation

was a proximate cause of the injuries for which she seeks redress. Holmes v. Sec. Investor Prot.

Corp., 503 U.S. 258, 266-68 (1992).

       Mulgrew argues that Murray’s RICO claims must be dismissed because she has not

alleged facts sufficient to show the proximate cause necessary to maintain them. Mulgrew Mot.

to Dismiss at 3-4. Specifically, he asserts that Murray was not a victim of his alleged RICO

violations—the fraud against NatWest to which Mulgrew pled guilty—and that any injury she

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may have suffered was “entirely distinct from the alleged RICO violation.” Id. at 3, 6 (quoting

Anza v. Ideal Steel Supply Corp., 547 U.S. 451, 458 (2006)).

       Murray responds that she has made “numerous proximate-cause allegations that more

than adequately state claims for relief under RICO.” Opp’n to Mulgrew’s Mot. to Dismiss at 11.

Murray contends that Mulgrew’s concealment of his activities were “part and parcel of

Mulgrew’s racketeering activity that was the proximate cause of Plaintiff’s injuries to her

property,” and that she has “more than sufficiently alleged” a “‘direct relation’ between [her]

injury and Mulgrew’s ‘injurious conduct.’” Id. at 15-16. Murray’s argument is without merit.

        The Supreme Court held in Holmes v. Securities Investor Protection Corp., 503 U.S. 258

(1992), that to satisfy the proximate cause requirement, a plaintiff in a civil RICO action must

show “some direct relation between the injury asserted and the injurious conduct alleged.” Id. at

268. The Court has repeatedly and recently reiterated this proximate cause requirement. See

Hemi Group, LLC v. City of New York, N.Y., 130 S. Ct. 983, 989 (2010) (explaining that Holmes

set forth the proximate cause requirement in civil RICO actions and made clear that “[a] link that

is ‘too remote,’ ‘purely contingent,’ or ‘indirec[t]’ is insufficient” (quoting Holmes, 503 U.S. at

271) (alteration in original)); Bridge v. Phoenix Bond & Indemnity Co., 128 S. Ct. 2131, 2142

(2008) (describing the conclusion from Holmes that “§ 1964(c) . . . requires the plaintiff to

establish proximate cause in order to show injury ‘by reason of’ a RICO violation” (quoting

Holmes, 503 U.S. at 268)); Anza v. Ideal Steel Supply Corp., 547 U.S. 451, 460, 461 (2006)

(holding that in evaluating whether the proximate causation element established in Holmes is

met, “the central question [a court] must ask is whether the alleged violation led directly to the

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plaintiff’s injuries,” and declining to “broaden the universe of actionable harms to permit RICO

suits by parties who have been injured only indirectly”).

           Here, Murray has failed to allege any facts sufficient to support a finding of proximate

causation. Murray asserted in her complaint that “[a]s a direct and proximate result” of

Mulgrew’s fraud and concealment, she “suffered damage to her property.” Compl. ¶¶ 48, 53.

Although it is less than certain to what damage Murray refers, the Court can only infer that she

means to indicate she suffered a loss because she did not receive a share of Mulgrew’s

fraudulently obtained funds in the couple’s divorce settlement. A claim for relief “requires more

than labels and conclusions,” Twombly, 550 U.S. at 555, and Murray’s complaint does not

explain the alleged causal link between Mulgrew’s actions (stealing money from NatWest) and

her alleged injury (a reduced award in the couple’s divorce agreement). Murray’s complaint

contains no facts that could lead this Court to find that Mulgrew’s fraud directly harmed Murray,

and the Court notes the obvious conclusion that—assuming harm occurred—Mulgrew’s

concealment of the success of his scheme, rather than the theft itself, was the cause of Murray’s

injury.3

           3
                 Murray also relies on Bridge v. Phoenix Bond & Indemnity Co., 128 S. Ct. 2131
(2008), to support the proposition that a plaintiff need not be the primary and intended victim of
a scheme to defraud, but rather need only have suffered a real injury as a result of the fraud, in
order to sustain a civil RICO claim. Opp’n to Mulgrew’s Mot. to Dismiss at 15. Although
Murray’s understanding of Bridge is correct, the holding of that case has no bearing on the
outcome here. In Bridge, the plaintiffs, bidders in a county tax lien auction, suffered harm as a
direct result of a competitor’s fraudulent misrepresentation to the county. 128 S. Ct. at 2136,
2138-39. As a result of this fraud against the county, the competitor was able to acquire more
liens than would otherwise have been possible. Id. The competitor’s acquisitions therefore
directly caused a real injury to the plaintiffs, who lost the opportunity to obtain some liens, even
though the plaintiffs were not the intended victims. Id. In this case, Murray was similarly not
the intended victim of the relevant fraudulent scheme; because of Bridge, that fact does not
exclude her as a possible civil RICO plaintiff. But Bridge did not relax the requirement that a

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        Because Murray has failed to allege facts that demonstrate that Mulgrew’s alleged RICO

violation proximately caused her injuries, she may not bring a civil RICO action. The Court

therefore concludes that Counts I and II of Murray’s complaint must be dismissed.

B.      Murray’s Remaining Claims Shall Be Dismissed Because the Claims Over Which
        the Court Had Original Jurisdiction Have Been Dismissed.

        The Court next turns to Counts III through XV of Murray’s complaint. These remaining

claims, of which nine are alleged against Mulgrew, two against RBS Group, and two against

both, arise under the laws of the United Kingdom. Compl. ¶¶ 56-118.

        The Court had original jurisdiction over Murray’s civil RICO claims because they arise

under a federal statute. See 28 U.S.C. § 1331 (“The district courts shall have original jurisdiction

of all civil actions arising under the Constitution, laws, or treaties of the United States.”).

Murray has not alleged that this Court has original jurisdiction over her other claims. See Compl.

¶ 40 (alleging federal question jurisdiction under 28 U.S.C. § 1331, referencing the RICO statute,

and alleging supplemental jurisdiction under 28 U.S.C. § 1367). Were the RICO claims viable,

the Court may have been able to exercise supplemental jurisdiction over the additional claims

provided those claims were “so related to claims in the action within [the Court’s] original

jurisdiction that they form part of the same case or controversy.” 28 U.S.C. § 1367(a). If a court

“has dismissed all claims over which it had original jurisdiction,” however, it “may decline to

exercise supplemental jurisdiction” over remaining claims. Id. at § 1367(c)(3); see also

Carlsbad Tech., Inc. v. HIF Bio, Inc., 129 S. Ct. 1862, 1866 (2009) (“A district court’s decision

civil RICO plaintiff show proximate cause, see id. at 2141-42, and Murray has not shown how
Mulgrew’s conversion of NatWest’s financial interests in LJM Swap Sub directly caused her to
suffer any harm.

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whether to exercise [supplemental] jurisdiction after dismissing every claim over which it had

original jurisdiction is purely discretionary.”). In particular, if “the federal claims are dismissed

before trial,” the Supreme Court has suggested that “the state claims should be dismissed as

well.” United Mine Workers of America v. Gibbs, 383 U.S. 715, 726 (1966). Dismissal is

appropriate in this case because the claims over which this Court had original jurisdiction have

been dismissed and the parties have not even begun to conduct discovery, let alone prepare for

trial. Cf. Empagran, S.A. v. F. Hoffman-La Roche Ltd., 453 F. Supp. 2d 1, 12 (D.D.C. 2006)

(declining to exercise supplemental jurisdiction over foreign-law claims where all federal claims

over which court had original jurisdiction had been dismissed before trial). Accordingly, the

Court dismisses the remaining counts of Murray’s complaint.4

                                        IV. CONCLUSION

       For the foregoing reasons, the Court concludes that Murray’s complaint should be

dismissed in its entirety. An appropriate order accompanies this memorandum opinion.

                                                               Henry H. Kennedy, Jr.
                                                               United States District Judge

       4
                Because the Court dismisses Murray’s complaint in its entirety for the reasons
described herein, the Court will not address in depth either defendant’s various additional
arguments for dismissal on alternative grounds. The Court notes, however, that it appears that
this Court is unable to exercise in personam jurisdiction over RBS Group or Mulgrew for the
reasons they state in their papers.

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