United States District Court, S.D. Florida
JULIAN FERNAU, FERNANDO MATEU, and MARIA DOLORES DE LUCAS, Plaintiffs,
ENCHANTE BEAUTY PRODUCTS, INC., RAUL LAMUS, AND MARIA FERNANDA REY, Defendants.
Honorable Robert N. Scola, Jr. Counsel of record.
REPORT AND RECOMMENDATION ON MOTION TO
MCALILEY, UNITED STATES MAGISTRATE JUDGE.
before the Court is Defendants' Consolidated Motion to
Dismiss (ECF No. 115). The motion has been fully-briefed,
(ECF Nos. 122, 125), and the Honorable Robert N. Scola, Jr.
has referred it to me for a report and recommendation, (ECF
careful review of the parties' legal memoranda and the
applicable law, for the reasons that follow I recommend that
the Court grant Defendants' Motion.
initiated this lawsuit on March 7, 2018. (ECF No. 1). Prior
to the filing of the operative Verified Second Amended
Complaint (“SAC”), (ECF No. 106), Defendants
filed two motions to dismiss earlier complaints. (ECF No. 17,
57). In both of those motions, the Defendants argued that
Plaintiff had failed to sufficiently allege continuity in
their Florida RICO claim. (ECF No. 17 at 6-7; ECF No. 57 at
4-8). Defendant Rey was not served until June 7,
2019. (ECF No. 98). As a result, the arguments asserted in
the pending Motion regarding the sufficiency of the
allegations against Rey are raised for the first time.
was filed on June 21, 2019 and asserts claims for violation
of state and federal securities statutes, common law fraud,
and Florida's Civil Remedies for Criminal Practices Act,
Fla. Stat. 772.101 et seq. (the “Florida RICO
Act”). (ECF No. 106) Defendants seek dismissal of the
Florida RICO claim and all claims against Maria Fernanda Rey.
(ECF No. 115). The facts set forth herein are taken from the
allegations of the SAC, which the Court assumes are true at
this stage of the proceedings. See Quality Foods de
Centro America S.A. v. Latin American Agribusiness Dev. Corp.
S.A., 711 F.2d 989, 944-95 (11th Cir. 1983) (when
considering whether to grant a motion to dismiss a complaint,
the court must assume the facts alleged are true and cast
them in the light most favorable to the non-moving party).
August 2015, Defendants Lamus and Rey sold Enchante securities to
Plaintiff Mateu and his wife Plaintiff Maria Dolores de
Lucas (together, the “Mateu
Plaintiffs”) for $100, 000.00. (ECF No. 106 at ¶
11; ECF No. 20-1). The sale was solicited using material
misstatements and omissions. (ECF No. 106 at ¶ 11). The
first misrepresentations and omissions occurred on or about
August 5, 2015, when Rey “presented the success of
Enchante and its cosmetics business to [the Mateu
Plaintiffs].” (Id. at ¶ 12). Lamus then
organized two in-person meetings with the Mateu Plaintiffs at
which the investment was further discussed. (Id.).
Lamus and Rey provided information regarding the
company's financial status, valuation, cash flows, and
business plans that was false and misleading and omitted to
disclose all material information. (Id. at
¶¶ 14, 15). Lamus and Rey also relied upon
documents, including an Investment Memo, Executive Summary
(the “Investment Memo”) which contained
materially false and misleading disclosures and/or contained
forecasts and assumptions which lacked any reasonable basis
in fact. (Id. at ¶¶ 16, 18).
December 2015, Lamus and Rey sold the Mateu Plaintiffs
additional securities in Enchante for $6, 000.00.
(Id. at ¶ 21; ECF No. 20-2). This sale was
again accomplished with material misstatements and omissions,
specifically the omission of the substantial losses Enchante
had incurred up to that time and Lamus and Rey's failure
to correct the misrepresentations and omissions made in
connection with the August 2015 sale of securities. (ECF No.
106 at ¶¶ 22, 23).
March 2017, Lamus sold Fernau securities in Enchante for $62,
500.00. (Id. at ¶ 24; ECF No. 20-3). Rey was
not involved in the sale of securities to Fernau. Lamus
provided Fernau with communications and documents which
contained materially false and misleading disclosures and/or
contained forecasts and assumptions which lacked any
reasonable basis in fact. (ECF No. 106 at ¶¶ 28,
30). A copy of the Investment Memo which was the same or
similar to the copy of that document that had been shared
with the Mateu Plaintiffs, was shared with Fernau in the
course of the sales solicitation. (Id. at
¶¶ 30, 244).
time of each sale, Lamus and/or Rey were aware of the poor
financial performance of Enchante, or were severely reckless
in not knowing this information, and failed to disclose the
risks and negative events that had already materialized.
(Id. at ¶¶ 20, 22, 32-33). This scheme to
defraud investors and a criminal enterprise, composed of
Enchante, Lamus, and Rey, was ongoing between approximately
2012 and 2017. (Id. at ¶ 34).
Standard of Review
of the Federal Rules requires that a pleading contain
“a short and plain statement of the claim showing that
the pleader is entitled to relief.” Fed.R.Civ.P.
8(a)(2). Although a complaint “does not need detailed
factual allegations, ” it must provide “more than
labels and conclusions, and a formulaic recitation of the
elements of a cause of action will not do. . . .”
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)
(citation omitted). “Factual allegations must be enough
to raise a right to relief above the speculative
level.” Id. And, they must present “more
than an unadorned, the-defendant-unlawfully-harmed-me
accusation.” Ashcroft v. Iqbal, 556 U.S. 662,
678 (2009) (citations omitted). When reviewing a motion under
Rule 12(b)(6), a court, as a general rule, must accept the
plaintiff's factual allegations as true and evaluate all
plausible inferences derived from those facts in favor of the
plaintiff. Am. Dental Ass'n v. Cigna Corp., 605
F.3d 1283, 1289 (11th Cir. 2010). However, courts “are
not bound to accept as true a legal conclusion couched as a
factual allegation.” Twombly, 550 U.S. at 555
(quoting Papasan v. Allain, 478 U.S. 265, 286
claims filed in federal court are additionally subject to
Fed.R.Civ.P. 9(b)'s heightened pleading requirements.
Rule 9(b) provides that “[i]n alleging fraud or
mistake, a party must state with particularity the
circumstances constituting fraud or mistake” but
“[m]alice, intent, knowledge, and other conditions of a
person's mind may be alleged generally.” The
Eleventh Circuit has stated that Rule 9(b)'s fraud
particularity requirement is met if the complaint sets forth
“(1) precisely what statements were made in what
documents or oral representations or what omissions were
made, and (2) the time and place of each such statement and
the person responsible for making (or, in the case of
omissions, not making) same, and (3) the content of such
statements and the manner in which they misled the plaintiff,
and (4) what the defendants obtained as a consequence of the
fraud.” Ziemba v. Cascade Int'l, Inc., 256
F.3d 1194, 1202 (11th Cir. 2001) (quotation marks and
Count 6, Plaintiffs sue all three Defendants under the Civil
Remedies for Criminal Practices Act. Fla. Stat. §
772.101. et. seq. “The Florida RICO Act,
patterned after the federal RICO Act, establishes civil
liability when an enterprise engages in a pattern of criminal
activity.” Arthur v. JP Morgan Chase Bank, NA,
569 Fed.Appx. 669, 679-80 (11th Cir. 2014) (citing Fla. Stat.
§ 772.103)). Courts that analyze Florida RICO claims
rely on cases that analyze federal RICO. Ferrell v.
Durbin, 311 Fed.Appx. 253, 256 n.5 (11th Cir. 2009)
(citing Jackson v. BellSouth Telecomm., 372 F.3d
1250, 1263-64 (11th Cir. 2004)).To state a claim, a civil
plaintiff must plead that a defendant “(1) operated or
managed (2) an enterprise (3) through a pattern (4) of
racketeering activity that included at least two racketeering
acts.” Ray v. Spirit Airlines, Inc., 836 F.3d
1340, 1348 (11th Cir. 2016) (citation omitted). “A
civil plaintiff must also show (1) the requisite injury to
business or property, and (2) that such injury was by reason
of' the substantive RICO violation.” Id.
(citation and quotation marks omitted).
contend the SAC to does not plead a Florida RICO claim
because it does not allege (1) the existence of a RICO
enterprise that is distinct from the RICO defendants; and (2)
a pattern of racketeering activity. (ECF No. 115 at 5-13).
Plaintiffs Have Failed to Allege a RICO Enterprise
Distinct from the RICO Defendants
are liable under RICO (“It is unlawful for any person.
. .”). Fla. Stat. § 772.103. To plead liability
under the Act, a plaintiff must allege the existence of two
distinct entities: (1) a “person”; and (2) an
enterprise (that engaged in the pattern of criminal
activity), that is not the same “person” referred
to by a different name. Cedric Kushner Productions, Ltd.
v. King, 533 U.S. 158, 161 (2001). The Supreme Court has
explained that “liability ‘depends on showing
that the defendants conducted or participated in the conduct
of the enterprise's affairs, not just their
own affairs.'” Id. quoting
Reves v. Ernst & Young, 507 U.S. 170, 185
(1993). See also Palmas Y Bambu, S.A. v. E.I. Dupont De
Nemours & Co., Inc., 881 So.2d 565, 574 (Fla. 3d DCA
2004) (“The words ‘employed by or associated
with,' as used in this provision anticipates an
enterprise separate and distinct from the person charged with
a civil RICO violation. . . .”). Defendants argue that
Plaintiffs have failed to allege the existence of a RICO
enterprise that is distinct from the RICO defendants. (ECF
No. 115 at 5-7). They are correct.
the “persons” are defendants Lamus, Rey and
Enchante. Plaintiffs then allege that those same persons are,
collectively, the criminal enterprise:
211. Defendants Lamus, Rey, and Enchante formed an
“enterprise” within the meaning of Fla. Stat.
772.102(3) because Lamus and Rey are individuals and Enchante
a corporation; which together associated in ...