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Gt Roofing Company I, LLC v. Killion

United States District Court, E.D. Missouri, Eastern Division

July 13, 2015

GT ROOFING COMPANY I, LLC, Plaintiffs,
v.
MICHAEL R. KILLION, et al., Defendants.

MEMORANDUM AND ORDER

CHARLES A. SHAW, District Judge.

This matter is before the Court on defendants' motion to dismiss plaintiff's complaint for failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6). The motion is fully briefed and ripe for review. For the following reasons, the Court grants defendants' motion to dismiss.

I. Background

Plaintiffs GT Roofing Company I LLC, GT Roofing Company II LLC, GT Roofing Company III LLC, GT Roofing Company IV LLC (collectively known as the "Turner Companies") and George Turner bring their complaint against defendants Michael R. Killion and David L. Killion (collectively "the Killions" or "defendants") for violations of the Racketeering Influenced Corrupt Organizations Act, 18 U.S.C. §§ 1961, et seq. ("RICO") and for fraud under state law.

The allegations in the Complaint arise from a purchase agreement for the sale of Mr. Turner's roofing business to the Killions. Plaintiffs allege, among other things, that defendants have failed from the beginning to make the requisite payments under the purchase agreement, and that defendants have misrepresented their sales figures in tax returns and in payment statements mailed to plaintiffs.

Plaintiffs bring three claims against the Killions for: conduct and participation in a RICO enterprise through a pattern of racketeering activity, 18 U.S.C. § 1962© ("Count I"); conspiracy in a RICO enterprise through a pattern of racketeering activity, 18 U.S.C. § 1962(d) (Count II); and state law fraud ("Count III").

In the motion before the Court, defendants move to dismiss all three claims on the grounds that the claims are not alleged with the requisite specificity, and that the Complaint fails to allege the required elements of the claims. Plaintiffs oppose the motion.

II. Standard

The purpose of a motion to dismiss for failure to state a claim is to test the legal sufficiency of the complaint. To survive a motion to dismiss pursuant to Rule 12(b)(6) for failure to state a claim upon which relief can be granted, "a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A plaintiff need not provide specific facts in support of its allegations, Erickson v. Pardus, 551 U.S. 89, 93 (2007) (per curiam), but "must include sufficient factual information to provide the grounds' on which the claim rests, and to raise a right to relief above a speculative level." Schaaf v. Residential Funding Corp., 517 F.3d 544, 549 (8th Cir.) (citing Twombly, 550 U.S. at 555 & n.3). This obligation requires a plaintiff to plead "more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Twombly, 550 U.S. at 555. A complaint "must contain either direct or inferential allegations respecting all the material elements necessary to sustain recovery under some viable legal theory." Id. at 562 (quoted case omitted). This standard "simply calls for enough fact to raise a reasonable expectation that discovery will reveal evidence of [the claim or element]." Id. at 556.

"In alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake." Rule 9(b), Fed.R.Civ.P. The Eighth Circuit has also held that a RICO claim must be pleaded with particularity under Rule 9(b). Crest Const. II, Inc. v. Doe, 660 F.3d 346, 353 (8th Cir. 2011) (citing Nitro Distrib., Inc. v. Alticor, Inc., 565 F.3d 417, 428 (8th Cir. 2009)). Rule 9(b)'s "particularity requirement demands a higher degree of notice than that required for other claims." United States ex rel. Costner v. URS Consultants, Inc., 317 F.3d 883, 888 (8th Cir. 2003) (cited case omitted). "Under Rule 9(b), a plaintiff must plead such matters as the time, place and contents of false representations, as well as the identity of the person making the misrepresentation and what was obtained or given up thereby. In other words, the party must typically identify the who, what, where, when, and how' of the alleged fraud." BJC Health Sys. v. Columbia Cas. Co. 478 F.3d 908, 917 (8th Cir. 2007) (internal quotation marks and quoted cases omitted). See also Commercial Prop. Inv. v. Quality Inns Int'l, 61 F.3d 639, 644 (8th Cir. 1995). "Where multiple defendants are asked to respond to allegations of fraud, the complaint should inform each defendant of the nature of his [or her] alleged participation in the fraud." Steambend Props II, LLC v. Ivy Tower Minneapolis, LLC, 781 F.3d 1003, 1013 (8th Cir. 2015) (quoting DiVittorio v. Equidyne Extractive Indus., 822 F.2d 1242, 1247 (2d Cir. 1987)).

On a motion to dismiss, the Court accepts as true all of the factual allegations contained in the complaint, even if it appears that "actual proof of those facts is improbable, " Twombly, 550 U.S. at 556, and reviews the complaint to determine whether its allegations show that the pleader is entitled to relief. Id; Fed.R.Civ.P. 8(a)(2). Materials attached to the complaint as exhibits may be considered in construing the sufficiency of the complaint. Morton v. Becker, 793 F.2d 185, 187 (8th Cir. 1986).

III. Allegations in the Complaint

According to the Complaint, Mr. Turner and the Killions entered into negotiations sometime in 2012. As a result of the negotiations, the Killions agreed to purchase the assets of the Turner Companies from Mr. Turner. The Killions created a number of companies for purposes of acquiring of the Turner Companies, including South Side Roofing Company Acquisition, Inc. ("SSRCA"), Afton Roofing, LLC, South Side Roofing and Sheetmetal LLC, South Side Roofing Company, LLC, South St. Louis and Afton Roofing Company, LLC, and South Side Roofing Company, Inc. (collectively known as the "SSRCA Companies"). On November 20, 2012, the Turner Companies and SSRCA entered into a "Purchase Agreement, " a copy of which was attached to the Complaint. Under the terms of the Purchase Agreement, SSRCA agreed to pay Mr. Turner and the Turner Companies under a ten-year payment plan. Payments under the plan would be based on the sales generated by the operation of the purchased roofing business. In general, SSRCA was to pay Turner and Turner Companies 15% of sales payable on a quarterly basis until it had paid $2, 250, 000.00. Plaintiffs allege that from the beginning defendants failed to make the requisite payments under the Purchase Agreement. They ...


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