W. Town Bank & Tr. v. Forman

West Town Bank & Trust, Rabon & Rabon, Inc.,and MB Boardwalk Entertainment, LLC, Plaintiffs, v. Burr Forman f/k/a McNair Law Firm, P.A.,Lane Jefferies, David Hicks, andHenrietta Golding, Defendants.

Civil Action No. 2:19-3203-BHH

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF SOUTH CAROLINA CHARLESTON DIVISION

November 9, 2020

ORDER

This matter is before the Court upon the motion to dismiss filed by Defendants Burr Forman ("Burr Forman") f/k/a McNair Law Firm, P.A. ("the McNair Firm"), Lane Jefferies ("Jefferies"), and Henrietta Golding ("Golding") (collectively referred to as "the McNair Defendants").¹ In their motion to dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, the McNair Defendants assert that the complaint filed by Plaintiffs West Town Bank & Trust ("West Town"), Rabon & Rabon, Inc. ("Rabon"), and MB Boardwalk Entertainment, LLC ("MB Boardwalk") (collectively referred to as "Plaintiffs") fails to state plausible claims against the McNair Defendants for violations of the Racketeer-Influenced and Corrupt Organizations Act ("RICO"). Specifically, the McNair Defendants assert that Plaintiffs fail to allege a pattern of racketeering activity by any of the McNair Defendants; that the alleged predicate acts are not related in any way and do not exhibit the same or similar purposes, results, participants, victims, or methods of commission; that Plaintiffs failto adequately allege a RICO enterprise; that Plaintiffs' second cause of action (against the McNair firm) fails because the RICO enterprise that Plaintiffs identify is identical to the allegedly criminal RICO enterprise that Plaintiffs identify in their other RICO causes of action; that Plaintiffs' first cause of action (against Golding and Jefferies) fails to allege an enterprise distinct from the individuals themselves; that Plaintiffs' third cause of action (against Golding and Jefferies) fails because the underlying claim fails, and because Plaintiffs have failed to allege an agreement between the individuals; that the RICO claims are untimely under the four-year statute of limitations; that the Court should decline to exercise supplemental jurisdiction over the state law claims; and that Defendant Burr Forman should be dismissed because it is a distinct corporate entity from the McNair firm and is not a South Carolina professional association. Finally, the McNair Defendants assert that if the Court declines to dismiss Plaintiffs' complaint with prejudice, then it should abstain under the Colorado River abstention doctrine based on the four other substantially similar lawsuits currently pending in state court. Plaintiffs oppose Defendants motion on all grounds but assert that they would agree to staying this matter until the trial of the initial case filed in Horry County, South Carolina.

After a thorough review of the parties' briefs and consideration of the issues presented, the Court agrees with the McNair Defendants that the allegations of Plaintiffs' complaint fail to state plausible RICO claims. Stated plainly, Plaintiffs' complaint simply cobbles together a number of unrelated discrete acts and lacks sufficient factual allegations to show the coordination or common purpose necessary to set forth a pattern of racketeering activity or to allege a RICO associated-in-fact enterprise. Accordingly, for the reasons set forth below, the Court grants the McNair Defendants' motion to dismissPlaintiffs' RICO causes of action, and the Court declines to exercise supplemental jurisdiction over Plaintiffs' state law claims.

BACKGROUND

Plaintiff Rabon is a South Carolina corporation with its principal place of business in Horry County, South Carolina, and Plaintiff MB Boardwalk is a South Carolina limited liability company with its principal place of business in Horry County, South Carolina. (ECF No. 1 ¶¶ 2-3.) Prior to the events alleged in Plaintiffs' complaint, the Rabon family, which consists of mother, Peggy Jo Hardee Rabon ("Peggy"); Peggy's son, Jack Rabon ("Jack"); Jack's wife, Nichole Rabon; daughter, Karon Mitchell; and Karon Mitchell's husband, Kyle Mitchell, owned eleven properties in Myrtle Beach, South Carolina. (Id. ¶¶ 10-11.) Various banks held mortgages on certain of the properties, including the following: (1) BB&T held a first mortgage in the amount of $462,000.00 on Sea Palms #3; (2) Plaintiff West Town held a first mortgage on Shark Attack and Hammerhead Grill, a second mortgage on Sea Palms #3, and a second mortgage on Sea Palms #4, securing a $3,600,000.00 loan; and (3) TD Bank held a first mortgage on Sea Palms #1, Sea Palms #2, and Sea Palms #4 to secure a $260,000.00 loan. (Id. ¶¶ 16-19.)

In April of 2014, before the McNair Defendants were involved in this matter, TD Bank refused to renew its loan and called the note secured by Sea Palms #1, Sea Palms #2, and Sea Palms #4. (Id. ¶ 20.) Rabon could not pay the full balance, and TD Bank filed a foreclosure action in May of 2014. (Id. ¶¶ 21-22.) Peggy and Jack met with Defendant Golding, who agreed to represent them upon the payment of a retainer fee. (Id. ¶¶ 23-25.)

In early 2015, Rabon was in negotiations with an investor to purchase all of the Rabon properties. (Id. ¶ 38.) On February 11, 2015, Defendant Jefferies sent a proposalto counsel for Rabon, specifying how the proceeds of the sale would be split and specifying "how much would be left to negotiate with West Town." (Id. ¶ 40.) According to Plaintiffs, Jefferies and counsel for Rabon agreed to send this proposal to West Town on February 11, 2015, but on February 12, 2015, Golding sent a different proposal to West Town, which "intentionally concealed" the fact that "the shareholders, all of whom were personal guarantors on the West Town note, were going to receive cash from the proposed disbursement." (Id. ¶ 44.) West Town did not accept the offer, and no transaction took place.

Instead, West Town filed a foreclosure action on its loan in April of 2015, seeking to foreclose on Sea Palms #3 and Sea Palms #4. (Id. ¶ 52.) Plaintiffs allege that Jack Rabon informed the McNair Firm in August of 2015 that an offer had been made for Sea Palms #3 and Brick House in the form of two separate contracts, and Jack Rabon stated that he wanted to conceal the sales price of the Brick House from the banks because it was unencumbered and he needed the money. (Id. ¶ 53.) Jefferies allegedly agreed to this strategy and copied Golding on the email chain. (Id. ¶ 54.) Plaintiffs allege that Jefferies and Golding never disclosed to West Town that Brick House was being sold, and Plaintiffs assert that the concealment of this and other information resulted in West Town agreeing to accept $7,500.00 for the release of its $3,600,000.00 mortgage on Sea Palms #3. (Id. ¶¶ 55-56.)

Plaintiffs allege that the separate contracts for the sale of Sea Palms #3 and the Brick House were made by a local nonprofit in the name of Friends of LBS, LLC, and that the value of both written contracts was a total price of $542,000.00 when the actual deal was for a total of $777,000.00 because $235,000.00 was to be paid to Jack Rabon andothers via a wire transfer and cash. (Id. ¶¶ 61-65.) Plaintiffs allege that Jefferies sent an email to the lawyer representing West Town, indicating the false sales price, and that Jefferies also made false representations to the Horry County Probate Court and to Plaintiffs in connection with the sales price. (Id. ¶¶ 68-70.) Plaintiffs also allege that Jefferies received a $10,000.00 kickback in connection with this scheme. (Id. ¶ 85.)

According to Plaintiffs, in March of 2016, Jefferies indicated to Jack Rabon that the firm held $42,144.70 in its trust account on behalf of Rabon, but seven months later, Golding represented that only $38,725.95 remained in the trust account at the firm. (Id. ¶¶ 192-93.) Thus, Plaintiffs allege improper billing and management of trust funds by Defendants, and Plaintiffs claim that in 2019, the McNair firm finally provided them with a portion of the billing records from the time period between 2014 and 2017. According to Plaintiffs, the billing records demonstrate that Defendant Golding perpetrated a cover up of the misappropriation of funds from Rabon.

Plaintiffs also allege that Jefferies threatened witnesses to keep them quiet about the alleged kickback scheme. (Id. ¶¶ 195-210.)

Overall, Plaintiffs allege that West Town was the victim of two instances of bank fraud and two instances of attempted bank fraud, orchestrated by Defendants, and that Rabon and MB Boardwalk were secondary victims of the alleged bank fraud. Plaintiffs further allege that MB Boardwalk was victimized by Defendants through the alleged improper withholding of escrow funds by Defendants and that Rabon was also victimized through Defendants' alleged improper billing and management of trust funds. (Id. at pp. 1-3.) Plaintiffs contend that these alleged predicate acts of racketeering activity "are related through their ultimate goal: enriching the Firm and other Defendants through thevarious fraudulent schemes and illegal activity designed to conceal assets from creditors in order to convert the client's assets to their own use." (ECF No. 1 ¶ 213.) Plaintiffs further contend that the behavior of Defendants is not new or isolated, and Plaintiffs refer to an alleged Ponzi scheme orchestrated in 2009 by a partner at the McNair Firm, Mark McAdams, as well as a separate alleged scheme to defraud McNair clients, which occurred in 2015 and 2017 and was allegedly orchestrated by another partner at the McNair Firm, Frannie Heizer.²

Plaintiffs assert the following causes of action in their complaint: (1) conducting the affairs of the enterprise through a pattern of racketeering activity pursuant to 18 U.S.C. §§ 1962(c) and 1964(c) against Defendants Golding, Jefferies, and Hicks³; (2) investment and/or use of proceeds derived from a pattern of racketeering activity into an enterprise engaged in interstate commerce...