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Bevand v. BF Labs Inc.

United States District Court, W.D. Missouri, Western Division

September 26, 2017

MARC BEVAND, Plaintiff,
v.
BF LABS INC., ET AL., Defendants.

          ORDER

          Fernando J. Gaitan, Jr. United States District Judge.

         Currently pending before the Court is Defendant BF Labs Inc., Sonny Vleisides, Darla Drake, Jeff Ownby and Joshua Zerlan's Motion to Dismiss (Doc. # 17) and plaintiff's Motion for Leave to File Sur-Reply in Opposition to Motion to Dismiss (Doc. # 21).

         I. BACKGROUND

         Plaintiff's complaint asserts causes of action against BF Labs, Inc. d/b/a Butterfly Labs, Sonny Vleisides, Darla Drake, Jeff Ownby and Joshua Zerlan for violations of the Racketeering Influenced and Corrupt Organizations Act (“RICO”), Breach of Contract, violations of the Missouri Merchandising Practices Act, Conversion and Unjust Enrichment. Plaintiff alleges that the defendants manufacture and sell Bitcoin[1] mining machines and services that consumers can use to generate bitcoins. Plaintiff is seeking recovery of the purchase price that he paid for the machines he ordered, plus consequential damages for Bitcoin mining machines that he pre-ordered but never received and for which no refund was given. Plaintiff also alleges that the defendants profited from Bitcoin mining for their own benefit by using plaintiff's machines without his permission or authorization.

         II. II. STANDARD

         To survive a motion to dismiss under 12(b)(6), "a complaint must contain sufficient factual matter, accepted as true, to state a claim for relief that is plausible on its face." Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). A pleading that merely pleads "labels and conclusions" or a "formulaic recitation" of the elements of a cause of action, or "naked assertions" devoid of "further factual enhancement" will not suffice. Id. (quoting Twombly). "Determining whether a complaint states a plausible claim for relief will . . . be a context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Id. at 1950. Under Fed.R.Civ.P. 12(b)(6) we must accept the plaintiff's factual allegations as true and grant all reasonable inferences in the plaintiff's favor. Phipps v. FDIC, 417 F.3d 1006, 1010 (8th Cir. 2005).

         III. DISCUSSION

         A. RICO Claim

         1. Elements of RICO

         RICO states, “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.” 18 U.S.C. §1962(c). “Any person injured in his business or property by reason of a violation of section 1962 of this chapter may sue therefor in any appropriate United States district court and shall recover threefold the damages he sustains and the cost of the suit, including a reasonable attorney's fee . . ..” 18 U.S.C.§ 1964(c). “RICO, however, does not cover all instances of wrongdoing. Rather, it is a unique cause of action that is concerned with eradicating organized, long-term, habitual criminal activity.” H&Q Properties, Inc. v. Doll, 793 F.3d 852, 855 (8th Cir. 2015)(internal citations and quotations omitted). “We have in the past rejected attempts to convert ordinary civil disputes into RICO cases . . .RICO was not intended to apply to ‘ordinary commercial fraud.'” Craig Outdoor Advertising, Inc. v. Viacom Outdoor, Inc., 528 F.3d 1001 (8th Cir. 2008), cert. denied, 555 U.S. 1136 (2009)(quoting Terry A. Lambert Plumbing, Inc. v. Western Sec. Bank, 934 F.2d 976, 981 (8th Cir.1991)). “Racketeering activity includes a host of so-called predicate acts, . . .including those indictable under [18 U.S.C.] section 1341 (relating to mail fraud) [and] section 1343 (relating to wire fraud), 18 U.S.C. § 1961(1)(B).” Stonebridge Collection, Inc. v. Carmichael, 791 F.3d 811, 822 (8th Cir. 2015)(internal citations and quotations omitted). “A violation of § 1962(c) requires [plaintiffs] to show (1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity.” Id. Plaintiff has asserted the RICO claim only against the individual defendants. “The requirements of §1962(c) must be established as to each individual defendant.” Craig Outdoor Advertising, Inc., 528 F.3d at 1027(emphasis added).

         2. Predicate Acts

         Plaintiff alleges that the two predicate acts that the individual defendants committed were mail fraud and wire fraud. “When pled as RICO predicate acts, mail and wire fraud require a showing of: (1) a plan or scheme to defraud, (2) intent to defraud, (3) reasonable foreseeability that the mail or wires will be used, and (4) actual use of the mail or wires to further the scheme.” Wisdom v. First Midwest Bank of Poplar Bluff, 167 F.3d 402, 406 (8th Cir.1999). “Under Crest Construction II, Inc. v. Doe, 660 F.3d 346, 358 (8th Cir. 2011), to state a RICO claim based on wire and mail fraud, plaintiffs under Rule 9(b) must allege the who, what, when, where, and how of wire and mail fraud.” GSAA Home Equity Trust 2006-2 ex rel. LL Funds LLC v. Wells Fargo Bank, N.A., 133 F.Supp.3d 1203, 1225 (D.S.D. 2015).

         In the Complaint, plaintiff alleges:

96. The Individual Defendants agreed to and did conduct and participate in the conduct of the enterprises' affairs through a pattern of racketeering activity and for the unlawful purpose of ...

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