Co-authored by Jason F. Clouser.
A Colorado federal district court dismissed RICO claims in a case involving a property owner and a homeowners’ association, finding that the plaintiffs failed to plead specific instances of fraud necessary to sustain the claims.
Plaintiff Western States Enterprises agreed to build homes for resale and to be the record owner of the lots until ownership was transferred to purchasers of the homes. Defendant Lloyd Land, president of the local homeowners’ association (HOA), filed Notice of Assessment liens and instructed HOA attorneys to send debt collection letters to plaintiff and other local homeowners, asserting that they owed past due amounts.
The plaintiffs asserted claims under the federal RICO statute and its state equivalent, alleging that Land used “coercive tactics and fraudulent information” to force the property owners to pay amounts they did not owe, and also engaged in a conspiracy to defraud. The complaint disputed only the specific amounts due, not that delinquencies existed. The defendants moved to dismiss on multiple grounds, including failure to state a claim.
A civil RICO claim requires four elements: (i) conduct (ii) of an enterprise (iii) through a pattern (iv) of racketeering activity. Two or more predicate acts are necessary to demonstrate the requisite pattern of the third element. The plaintiffs alleged mail fraud as the predicate acts. However, the court ruled that the complaint failed to plead fraud with the necessary particularity. The plaintiffs did not allege specific information to show any material false representation in the debt collection letters, and only conclusorily alleged a conspiracy without alleging facts to show that a scheme was devised. In light of these pleading failures, the court granted the motion to dismiss.
Western States Enterprises, Inc. v. Land, 2011 WL 5882181 (D.Colo. Nov. 22, 2011).