The opinion of the court was delivered by: Judge James M. Munley United States District Court
(Magistrate Judge Blewitt)
Before the court are plaintiffs' objections to the report and recommendation of Magistrate Judge William T. Prince (Doc. 64), which proposes the court grant in part and deny in part defendants' motions to dismiss the complaint.
This case arises out of business disputes between the parties. Defendant RCMP Enterprises, LLC ("RCMP") is a limited liability company located in Pennsylvania. (Amended Complaint (Doc. 16) (hereinafter "Amend. Complt.") at ¶ 5). The individual defendants are allegedly "members" of RCMP and hold themselves out to members of Defendant United Penn Investment Group ("United Penn"), a defunct corporation. (Id. at ¶ 14). Plaintiffs allege that RCMP was--and remains--undercapitalized. (Id. at ¶ 17). Defendant Kretchik continually provided RCMP with funding, money without which the company would not have been able to operate. (Id. at ¶ 18). Plaintiffs contend that the purpose of this undercapitalization was for the individual defendants to avoid liability for RCMP's tortious actions, and for Kretchik to assert control over the rest of the members. (Id. at ¶ ¶ 19-21). Indeed, plaintiffs contend that RCMP's corporate existence as a limited liability entity should be ignored and the individual defendants made liable for the company's obligations. (Id. at ¶ 27). Likewise, plaintiffs allege that defendants knowingly used United Penn, a dissolved corporate entity, to enter into contracts and incur obligations. (Id. at ¶ 32). Plaintiffs allege that the individual defendants should be liable for any of United Penn's obligations. (Id. at ¶ 38).
Plaintiffs allege that in July 2007 Defendants Malinowski and Wartella, along with Franklind Lea, a consultant, traveled to Cincinnati, Ohio to meet with Plaintiff Christopher Hildebrandt. (Id. at ¶ 40). The purpose of this meeting was to solicit Hildebrant's services in the purchase and development of a marina and about thirty acres of land located in Estero, Florida. (Id.). This property is referred to by the litigants as the "Weeks Fish Camp." (Id.). Malinowski, Wartella and Lind solicited Hildebrant to act as a consultant for RCMP relative to the fishing camp. (Id. at ¶ 42). Plaintiffs allege that shortly after this meeting defendants breached their agreement with Franklind Lea and his company, Tactical Financial Consulting. (Id. at ¶ 41). This breach led to litigation and eventually a confidential settlement agreement. (Id. at ¶ 41).
Soon after the 2007 meeting, Malinowski learned that Hildebrant owned 2325-square-foot home near the Weeks Fishing Camp. (Id. at ¶ 42). Malinowski approached Hildebrant about renting this home while Malinowski was in Florida working on the sale and development of the fishing camp. (Id. at ¶ 43). Hildebrant and Malinowski entered into a written lease (the "Cypress Lease") for this property on September 10, 2007. (Id. at ¶ 44). Hildebrant was landlord and Malinowski tenant on the lease. (Id.). The lease covered property located at 8844 Cypress Preserve Place, Fort Meyers, Florida (the "Premises"). (Id.). Hildebrant leased the property because he believed Malinowski, who represented himself as the "managing member" of RCMP, to possess sound finances and good character.. (Id. at ¶¶ 45-46). The lease lasted from November 1, 2007 to December 31, 2008 and required Malinowski to pay rent in the amount of $2,000 per month if he paid before the 10th of the month and $2,100 per month if he paid later. (Id. at ¶ 47). While this contract was between Hildebrant and Malinowski, Malinowski expressly rented the Premises because of its proximity to the fishing camp. (Id. at ¶ 48). He intended to carry out his duties for RCMP related to the camp at the property. (Id.).
Soon after Malinowski took possession of the premises, Hildebrant became aware of certain "nefarious" and allegedly unlawful conduct by Malinowski at those premises. (Id. at ¶ 49). When Hildebrant confronted Malinowski and other RCMP members about this conduct, they told Hildebrant that Malinowski had "'personal problems'" which led to the behavior. (Id. at ¶ 50). During the term of the lease, however, RCMP and the individual defendants treated the rent payments as a business expense and not Malinowski's personal expense. (Id. at ¶ 51). They caused the lease payments to be made because they found use of the Premises beneficial in light of the proximity of the Premises to the Fishing Camp. (Id. at ¶ 52). The individual defendants used the Premises for those purposes. (Id. at ¶ 53). Indeed, RCMP became involved in issues related to the lease, sometimes making payments on that lease. (Id. at ¶ 54). One check written by RCMP on the lease was returned for insufficient funds. (Id. at ¶¶ 55-56). The defendants should have known this check would bounce. (Id. at ¶ 57). In the end, Malinowski breached the lease by failing to pay rent and other obligations from March 1, 2008 onward. (Id. at ¶¶ 59-60). Malinowski owes more than $21,000 in back rent and interest, as well as for substantial damage caused to the premises during his stay.*fn1 (Id. at ¶¶ 62-63)). Plaintiffs contend that Malinowski's damage to the property was intentional. (Id. at ¶ 70).
On March 24, 2008, the individual defendants caused Defendant United Penn to enter into a consulting agreement with Plaintiff Christopher Enterprize. (Id. at ¶ 74). Christopher Enterprize was to provide "'assistance and guidance for obtaining a loan in the name of United Penn.'" (Id.). United Penn was defunct at the time this agreement was made. (Id.). The defendants represented, however, that United Penn was a validly existing company, a representation that Christopher Enterprize relied upon. (Id. at ¶ 75). Defendants promised to pay Christopher Enterprize $100,000 for this assistance, in addition to a minimum payment of $5,000 for any consultations. (Id. at ¶ 76). Christopher Enterprize performed its obligation under the consulting contract, but defendants did not pay. (Id. at ¶ 77). Plaintiffs allege that the individual defendants convinced Christopher Enterprize to provide this assistance by using "false pretenses, misrepresentations and promises." (Id. at ¶ 82). Defendants used mail, e-mail and wires to advance this fraudulent scheme. (Id. at ¶ 83).
On October 17, 2007, Plaintiffs CRH Naples and Christopher Enterprize entered into a term sheet that provided the parameters of a consulting relationship to RCMP relative to the Fishing Camp. (Id. at ¶ 94). The $12,000 check defendants used to pay their obligations under this term sheet was returned for insufficient funds. (Id. at ¶¶ 95-96). On January 31, 2008 CRH Naples and Christopher Enterprize entered into a consulting agreement with RCMP that replaced the term sheet. (Id. at ¶¶ 97-98). The agreement provided that Christopher Enterprize would be paid $6,000 monthly for consulting services. (Id. at ¶¶ 98-99). The agreement was scheduled to last seven months, from January 31, 2008 to August 31, 2008. (Id. at ¶ 99). The parties signed an addendum to that agreement on August 14, 2008 that provided for an increase in compensation to $10,000 monthly. (Id. at ¶¶ 100, 102). The agreement was scheduled to last from September 1, 2008 to September 30, 2010. (Id. at ¶ 102). Additionally, Christopher Enterprize was to receive a ten-percent commission "for monetary value brought by the Christopher Enterprize to the benefit of RCMP or the project." (Id. at ¶ 103). RCMP paid Christopher Enterprize $10,000 on September 1, 2008 pursuant to the consulting agreement. (Id. at ¶ 108). This was the only payment RCMP ever made under the contract. (Id. at ¶ 109). RCMP currently owes Christopher Enterprize more than $240,000 under this contract, in addition to unspecified bonus payments. (Id. at ¶¶ 111-12).
Malinowski's alleged misconduct led to other changes in the consulting agreement. (Id. at ¶ 104). Malinowski was removed as managing member of RCMP and replaced by Defendant Kretchik. (Id. at ¶ 104). In addition, RCMP acceded to Christopher Enterprize's demand that a paragraph be added to the consulting agreement that held Christopher Enterprize harmless for "any claims that may arise from the actions previously taken by or reliance upon information/documentation provided by, [sic] RCMP's representative Stanley 'Rick' Malinowski." (Id. at ¶ 105).
Malinowski's poor performance also caused defendants to seek an expanded role for other consultants in the Fishing Camp project. (Id. at ¶ 114). Plaintiff Hildebrant concluded that he and the other plaintiffs would have to provide more services under their consulting contract than originally anticipated. (Id. at ¶ 115). On September 1, 2008, Plaintiff Morelia Consulting and RCMP and Thomas Kretchik entered into a consulting agreement. (Id. at ¶ 116). In exchange for a $10,000 monthly fee during the two-year period of the agreement, Plaintiff Morelia agreed to assist RCMP in financing and developing the fish camp project. (Id. at ¶ 118). Defendants also agreed to pay Morelia a ten percent commission on "'any monetary value that is a benefit to [RCMP]." (Id.). Defendant Christopher Wartella also replaced Malinowski under this agreement. (Id. at ¶ 119). The parties agreed that Morelia should be held harmless from any claims arising from Malinowski's conduct. (Id. at ¶ 120). RCMP and/or Kretchik made some payments under the consulting agreement with Morelia, but many of those payments were late. (Id. at ¶¶ 121-125). In addition, RCMP and Morelia continue to owe Morelia more than $90,000 under the consulting contract, in addition to consulting fees. (Id. at ¶¶ 129-31).
On November 24, 2009, an attorney for RCMP sent plaintiffs a letter. (Id. at ¶ 135). This letter describes an alleged agreement between RCMP and Morelia dated September 1, 2008. (Id. at ¶ 136). Plaintiffs insist that no such agreement existed. (Id. at ¶ 137). The letter claimed that plaintiffs were bound by a non-disclosure and non-competition agreement contained in the agreement, and threatened the plaintiffs with enforcement of such agreements. (Id. at ¶¶ 139-41). Plaintiffs allege that defendants threatened such enforcement even though they knew that no such agreements existed. (Id. at ¶¶ 141-42). The letter also referenced an escrow agreement between the parties that was no longer in effect. (Id. at ¶¶ 143-48)
The same attorney sent plaintiffs' counsel another letter on January 13, 2010. (Id. at ¶ 151). The letter quoted language from the agreement plaintiffs claim never existed that allegedly pledged plaintiffs to non-compete, non-disclosure, and survival agreements. (Id. at ¶ 152). Defendants threatened to use the Federal Bureau of Investigation to enforce this phony agreement, file civil and criminal actions, and seek injunctive relief. (Id. at ¶ 155).
Plaintiffs contend that defendants actions violated a variety of federal laws, and were pursued as apart of a conspiracy creating liability under the Racketeering Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. §§ 1961, et seq.
Plaintiffs initiated this action by filing suit in the Court of Common Pleas of Luzerne County, Pennsylvania. On February 26, 2010, defendants removed the case to this court. (See Doc. 1). Defendants then filed motions to dismiss the complaint. Plaintiffs responded by filing an amended complaint, which is the subject of the instant motions to dismiss. The amended complaint contains nineteen counts related to defendants' alleged fraud, breaches of contract, RICO conspiracy, and unjust enrichment. The magistrate judge issued a report and recommendation proposing that the motions be granted in part and denied in part, and the plaintiffs filed objections, bringing the case to its present posture.
Plaintiffs bring this suit pursuant to the RICO Act, 18 U.S.C. §§ 1961 et seq. The court therefore has jurisdiction pursuant to 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."). The court has ...