United States District Court, W.D. Missouri, Western Division
Fernando J. Gaitan, Jr. United States District Judge.
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).
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 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
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
Elements of 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).
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).
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 ...