United States District Court, E.D. Pennsylvania
RICHARD F. KLINEBURGER, III, Plaintiff,
TINA M. TIERNEY KELL, JAMES R. WOLSKY, MAKR STAFFING INC., and VERSATILE CONCEPTS, Defendants.
F. KELLY, Sr. J.
before the Court is Defendants, James R. Wolsky
(“Wolsky”), MAKR Staffing Inc.
(“MAKR”), and Versatile Concepts'
“Defendants”) Motion to Dismiss Plaintiff's
Amended Complaint, Plaintiff, Richard Klineburger, III.'s
(“Plaintiff”) Response in Opposition thereto, and
Defendants' Reply Brief. For the reasons set forth below,
Defendants' Motion is granted in part and denied in part.
commenced this action against Tina M. Tierney Kell
(“Kell”), MAKR, Wolsky, and Versatile by filing a
Complaint on October 27, 2016. (Doc. No. 1.) On December 27,
2016, Defendants filed a motion to dismiss the Complaint.
(Doc. No. 4.) Subsequently, Plaintiff filed an Amended
Complaint on January 13, 2017. (Doc. No. 7.) Plaintiff's
Amended Complaint is comprised of six counts against all
Defendants including: both a substantive and inchoate count
under the Racketeer Influenced and Corrupt Organizations Act
(“RICO”) (Counts I and II), Fraud (Count III),
Unjust Enrichment (Count IV), Intentional Misrepresentation
(Count V) and Breach of Contract (Count VI).
appears to be a legitimate business entity specializing in
staffing in the Commonwealth of Pennsylvania as well as other
states. (Am. Compl. ¶ 15.) Versatile is a legitimate
business entity specializing in software engineering, IT
consulting, web development and ecommerce in the Commonwealth
of Pennsylvania. (Id. ¶ 17.) Both MAKR and
Versatile share the same business address but do not
advertise their business relationship or the financial
interests of Wolsky in both companies. (Id. ¶
about March 1, 2010, Plaintiff and Kell entered into a
General Partnership Agreement for the company that became
known as MAKR. (Id. ¶ 22.) Based on alleged
representations made by Kell, Plaintiff contends that he was
under the impression that Kell was running MAKR in a proper
manner that would be profitable. (Id. ¶ 23.)
Plaintiff alleges that he loaned Kell and MAKR tens of
thousands of dollars over the course of many years without
any receipt of profits and sporadic repayment. (Id.
¶ 24.) Plaintiff “began to wonder about the
profits and/or lack thereof and it became apparent that
[Kell] was utilizing [MAKR] as a clearinghouse for her own
expenses and was not properly running same company.”
(Id. ¶ 25.) As a result thereof, in April of
2014, the parties entered into a “CONSENT ORDER AND
FINAL JUDGMENT BY WAY OF SETTLEMENT AGREEMENT”
(“Agreement”) under which Plaintiff was to be
paid $108, 000. (Id.) Plaintiff alleges that in
return for this agreement, he executed a Release and
Redemption (“Release”) of his stock in MAKR.
(Id. ¶ 28.) Not explained by Plaintiff is why
the Release was signed in December of 2013 - nearly four
months earlier than the date of the Agreement. (Id.,
Exs. A & B.)
alleges that Kell approached Wolsky about Plaintiff's 49
% interest in MAKR, and Wolsky expressed
“excitement.” (Id. ¶¶ 29-30.)
Plaintiff contends that Wolsky did not inform Kell that he
was a competing business owner seeking MAKR's lucrative
accounts. (Id. ¶ 31.) Plaintiff alleges that
“[a]t all times Wolsky was aware of the obligations
that went with purchasing [Plaintiff]'s 49% ownership in
MAKR and, in fact, was being specifically brought in by Kell
to provide the capital MAKR needed to pay [Plaintiff] that
which he is admittedly owed.” (Id. ¶ 32.)
According to the Shareholders' Agreement, Wolsky paid
$142, 000 for the shares in MAKR. (Id. ¶ 33,
alleges that Kell assured him that he would be paid
particularly since Wolsky was responsible for the debt as per
paragraph 3 of the Agreement that stated it would bind
“Tina M. Kell, MAKR Staffing, Inc. it's owners,
partners, successor owners and/or assigns (if transferred
prior to repayment), and in the event of death prior to
repayment, her estate.” (Id. ¶ 35.)
However, from the onset of acquiring the shares, Wolsky began
“muscling” Kell. (Id. ¶ 36.)
Plaintiff contends that Wolsky apparently unilaterally
determined that his “investment” would not be to
purchase Plaintiff's shares; rather, he merely booked his
obligation to remit these monies as “capital” of
the corporation. (Id. ¶ 37.)
February 16, 2015, Plaintiff had only received back $20, 000
of the $108, 000 owed to him according to the Agreement.
(Id. ¶ 38.) On February 19, 2015, Kell,
allegedly at Wolsky's insistence, proposed a new
Repayment Plan. (Id. ¶ 40, Ex. D.) The
Repayment Plan would begin on April 1, 2015 and end by
January 30, 2016 and would repay Plaintiff his remaining
balance of $88, 000. (Id.) It is worth noting that
Wolsky's name is not mentioned anywhere in the Repayment
alleges that Wolsky was in control of the finances at all
times and maintained total dominion and control over all of
MAKR's accounts. (Id. ¶¶ 41-43.)
Plaintiff further alleges that Wolsky denied Kell signature
authority and mandated that she obtain his approval and
signature for every check issued. (Id.) After
several complaints regarding not receiving his payments,
Plaintiff ended up collecting four checks from Defendants
totaling $40, 000. (Id. ¶¶ 44-48.)
alleges that Wolsky used this absolute dominion and control
over Kell to strip MAKR of its most valuable assets - its
client base - and fold all of its contracts into
Versatile. (Id. ¶ 50.) In September of
2014, Versatile, with Wolsky allegedly operating MAKR as its
own, entered a master service agreement with Kelly
Services. (Id. ¶ 54.) Plaintiff
alleges that “Wolsky was adamant that he wanted all
MAKR contracts to go through Versatile because he did not:
‘want to pay that Jew lawyer [referring to Plaintiff
Klineburger] a penny!'” (Id. ¶ 57.)
Specifically, Plaintiff contends that “Wolsky also
specifically instructed Kell that so long as [Plaintiff] was
owed any monies, ALL MAKR business was to be booked to . . .
Versatile.” (Id. ¶ 60.)
Plaintiff alleges that after agreeing to purchase
Plaintiff's shares, Wolsky used Versatile to usurp all of
MAKR's assets (its valued client list especially) for
himself and his partners therein, and he did so specifically
to avoid remitting to Plaintiff the monies that he is owed.
(Id. ¶ 61.) In February 2016, Wolsky sent a
letter to Kell informing her that he was not putting any more
working capital into MAKR. (Id. ¶ 63, Ex. I.)
Plaintiff alleges that Kell claims to have been completely
locked out of all of MAKR's records as of May of 2016.
(Id. ¶ 64.) Once Wolsky demanded that all of
MAKR's business be run through Versatile and not MAKR,
Plaintiff contends that this put MAKR out of business.
(Id. ¶ 75.) To date, Plaintiff alleges that he
has not received his remaining monies owed by the Defendants
in the amount of $58, 000.00. (Id. ¶ 77.)
contend that Plaintiff's Amended Complaint should be
dismissed with prejudice for several reasons. Regarding Count
I alleging a civil RICO claim, Defendants argue that
Plaintiff's Amended Complaint has fatal flaws, which
include failing to adequately allege both an
“enterprise” and a “pattern” of
racketeering activity. (Defs.' Mot. to Dismiss at 7-39.)
Defendants then contend that, since the substantive RICO
claim in Count I fails, the conspiracy to commit a RICO
violation in Count II must fail as a matter of law.
(Id. at 39.) In addition, Defendants argue that the
remaining state law claims fail as a matter of law.
(Id. at 39-50.) For the reasons set forth below, we
agree with Defendants that Plaintiff's Amended Complaint
fails to adequately allege a claim under Section 1962(c) of
the RICO statute. In light of this finding, we will decline
to exercise supplemental jurisdiction over the remaining
state law claims.
STANDARD OF REVIEW
motion to dismiss under Federal Rule of Civil Procedure
12(b)(6) tests the sufficiency of a complaint. Kost v.
Kozakiewicz, 1 F.3d 176, 183 (3d Cir. 1993). Pursuant to
Rule 12(b)(6), the defendant bears the burden of
demonstrating that the plaintiff has failed to set forth a
claim from which relief may be granted. Fed.R.Civ.P.
12(b)(6); see also Lucas v. City of Phila., No.
11-4376, 2012 WL 1555430, at *2 (E.D. Pa. May 2, 2012)
(citing Hedges v. U.S., 404 F.3d 744, 750 (3d Cir.
2005)). In evaluating a motion to dismiss, the court must
view any reasonable inferences from the factual allegations
in a light most favorable to the plaintiff. Buck v.
Hamilton Twp. Sch. Dist., 452 F.3d 256, 260 (3d Cir.
United States Supreme Court (“Supreme Court”) set
forth in Twombly, and further defined in
Iqbal, a two-part test to determine whether to grant
or deny a motion to dismiss. See Ashcroft v. Iqbal,
556 U.S. 662, 679 (2009); Bell Atlantic Corp. v.
Twombly, 550 U.S. 544, 555 (2007). The United States
Court of Appeals for the Third Circuit (“Third
Circuit”) has noted that these cases signify the
progression from liberal pleading requirements to more
“exacting scrutiny” of the complaint. Wilson
v. City of Phila., 415 F. App'x 434, 436 (3d Cir.
the court must ascertain whether the complaint is supported
by well-pleaded factual allegations. Iqbal, 556 U.S.
at 679. “Threadbare recitals of the elements of a cause
of action, supported by mere conclusory statements, do not
suffice.” Twombly, 550 U.S. at 555.
Conclusions of law can serve as the foundation of a
complaint, but to survive dismissal they must be supported by
factual allegations. Iqbal, 556 U.S. at 679. These
factual allegations must be explicated sufficiently to
provide a defendant the type of notice that is contemplated
by Rule 8. See Fed.R.Civ.P. 8(a)(2) (requiring a
short and plain statement of the claim showing that the
pleader is entitled to relief); see also Phillips v.
County of Allegheny, 515 F.3d 224, 233 (3d Cir. 2008).
Where there are well-pleaded facts, courts must assume their
truthfulness. Iqbal, 556 U.S. at 679.
finding of a well-pleaded complaint, the court must then
determine whether these allegations “plausibly”
give rise to an entitlement to relief. Id. at 679.
This is a “context specific task that requires the
reviewing court to draw on its judicial experience and common
sense.” Id. Plausibility compels the pleadings
to contain enough factual content to allow a court to make
“a reasonable inference that the defendant is liable
for the misconduct alleged.” Id. (citing
Twombly, 550 U.S. 544 at 570). This is not a
probability requirement; rather plausibility necessitates
“more than a sheer possibility that a defendant has
acted unlawfully.” Iqbal, 556 U.S. at 678.
“Where a complaint pleads facts that are ‘merely
consistent with' a defendant's liability, it
‘stops short of the line between possibility and
plausibility.'” Id. (quoting
Twombly, 550 U.S. at 557). In other words, a
complaint must not only allege entitlement to relief, but
must demonstrate such entitlement with sufficient facts to
nudge the claim “across the line from conceivable to
plausible.” Id. at 683; see also Holmes v.
Gates, 403 F. App'x 670, 673 (3d Cir. 2010).
general rule is that “a district court ruling on a
motion to dismiss may not consider matters extraneous to the
pleadings.” W. Penn Allegheny Health Sys., Inc. v.
UPMC, 627 F.3d 85, 97 n.6 (3d Cir. 2010) (citing In
re Burlington Coat Factory Sec. Litig., 114 F.3d 1410,
1426 (3d Cir. 1997)). “However, an exception to the
general rule is that a ‘document integral to or
explicitly relied upon in the complaint' may be
considered ‘without converting the motion [to dismiss]
into one for summary judgment.'”
Burlington, 114 F.3d at 1426 (citing Shaw v.
Digital Equip. Corp., 82 F.3d 1194, 1220 (1st
Cir. 1996)); see also Pension Benefit Guar. Corp. v.
White Consol. Indus., 998 F.2d 1192, 1196 (3d
Cir. 1993) (“[A] court may consider an undisputedly
authentic document that a defendant attaches as an exhibit to
a motion to dismiss if the plaintiff's claims are based
on the document.”). The Third Circuit explained:
The reason that a court must convert a motion to dismiss to a
summary judgment motion if it considers extraneous evidence
submitted by the defense is to afford the plaintiff an
opportunity to respond. When a complaint relies on a
document, however, the plaintiff obviously is on notice of
the contents of the document, and the need for a chance to
refute evidence is greatly diminished.
Pension Benefit, 998 F.2d at 1196-97 (citations
first address the RICO claims in Counts I and II over which
we have original jurisdiction. The RICO statute, 18 U.S.C.
§ 1962, provides, in relevant part, as follows:
(b) It shall be unlawful for any person through a pattern of
racketeering activity or through collection of an unlawful
debt to acquire or maintain, directly or indirectly, any
interest in or control of any enterprise which is engaged in,
or the ...