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Wilson v. Landers McLarty Olathe KS, LLC

United States District Court, D. Kansas

October 29, 2018




         Plaintiff Melvin Wilson brings this putative class action against Defendants Landers McLarty Olathe KS, LLC, d/b/a Olathe Dodge Chrysler Jeep Ram (“Olathe Dodge”) and Hopkins and Raines, Inc. (“HRI”), relating to advertising mailers Olathe Dodge sent to Plaintiff and other similarly situated consumers. Plaintiff alleges claims under the Racketeer Influenced and Corrupt Organizations Act (“RICO”), [1] and Kansas Consumer Protection Act (“KCPA”).[2]This matter comes before the Court on Defendants' Motion to Dismiss Plaintiff's First Amended Class Action Complaint and to Strike Plaintiff's Class Action Allegations from the First Amended Class Action Complaint (Doc. 18). Defendant moves to dismiss the RICO claim for failure to state a claim upon which relief may be granted, to strike the class action allegations, and asks the Court to decline to exercise supplemental jurisdiction over the remaining KCPA claim. The motion is fully briefed and the Court is prepared to rule. As described more fully below, Defendants' motion to dismiss the RICO claim for failure to state a claim is granted, their motion to dismiss the KCPA claim for lack of supplemental jurisdiction is denied, and their motion to strike the class action allegations is denied.

         I. Background and Procedural History

         The following facts are taken as true from Plaintiff's First Amended Class Action Complaint (“Amended Complaint”). Defendant Olathe Dodge operates a car dealership in Olathe, Kansas. It is an LLC with one known member: RLJ McLarty Landers Automotive Holdings (“RLJ McLarty”). RLJ McLarty is domiciled in Arkansas. Defendant HRI is an advertising company domiciled in Texas that creates advertisement campaigns for its clients. Plaintiff is domiciled in Kansas. Plaintiff asserts jurisdiction in the First Amended Complaint under “28 U.S.C. §§ 1332(a)(1) and 1367.”

         On March 12, 2010, Olathe Dodge entered into a Consent Order to pay fines stemming from a KCPA lawsuit filed by the Johnson County, Kansas District Attorney's Office. The Consent Order establishes that Olathe Dodge sent a direct mailer to consumers in violation of the KCPA.[3]

         In the summer of 2017, Plaintiff received a direct mailer from Olathe Dodge that was produced by HRI.[4] The mailer was operative from July 13 through July 22, 2017. It was entitled “Scratch, Match & Win!” and advertised “THE BIG WIN SAVINGS EVENT” connected to Olathe Dodge. The mailer offered various ways to save money or win prizes. First, it included a scratch off game representing “IF YOU HAVE 3 LIKE SYMBOLS, YOU WIN!!!!” Second, the mailer arrived with a key attached while stating “IF YOUR KEY UNLOCKS THE VEHICLE OR YOUR CONFIRMATION NUMBER MATCHES, IT'S YOURS!” Third, the mailer stated, “IF YOUR NUMBER MATCHES THE NUMBER ON THE INSIDE PAGE, YOU WIN A VEGAS VACATION CERTIFICATE!” Fourth, the mailer stated, “RECEIVE A RESTAURANT CERTIFICATE JUST FOR COMING IN!” Fifth, the mailer included “FREE SMART WATCH WITH A TEST DRIVE!” Finally, it represented that the odds of winning an MP3 player were 1:1. HRI has produced mailers identical to the one described above.

         Plaintiff's scratch-off number matched the number inside the packet, leading Plaintiff to believe that he won a vacation certificate to Las Vegas. Plaintiff also played the scratch-off game which revealed three matching symbols, leading him to believe that he had won a prize. Plaintiff drove to Olathe Dodge to claim his prizes. Upon arriving, Plaintiff was greeted by an employee of Olathe Dodge. Plaintiff indicated that he was there to see if the key attached to his mailer fit any vehicle. The Olathe Dodge employee asked Plaintiff for general information, including his social security number and occupation.

         At some point thereafter, the employee represented to Plaintiff that he would receive a restaurant certificate, a smart watch, and an MP3 player in accordance with the mailer. However, the employee told Plaintiff that because Olathe Dodge was out of stock on prizes, they would give Plaintiff double the prize amounts at another time. After a while, Plaintiff asked the employee if he could test the key that came with his mailer to see if he would win a vehicle. The employee informed him that Olathe Dodge generally does not check to see if the keys match any vehicle. When Plaintiff told him that such a policy was false advertising, the employee responded that it was not because “it had been approved by the Attorney General.”[5]

         Plaintiff then asked if the dealer was checking his credit, and the employee responded affirmatively. Plaintiff was concerned that his credit score would go down as a result and alleges that he never gave consent for the employee to run his score. The employee eventually told Plaintiff that he would call Plaintiff the following day to look at a new shipment of cars. Plaintiff left Olathe Dodge and never heard back from the dealer or its employee.

         A few days later, Plaintiff received an email confirming that his credit had been checked by Olathe Dodge. Plaintiff has not received any of the prizes indicated on the mailer. To the best of Plaintiff's knowledge, no Kansan received the prizes listed on the mailer.

         The First Amended Complaint proposes Plaintiff represent three alternative classes:

Class A:
All persons that received the Scam and did not receive any MP3 player, restaurant certificates and/or any prize identified within the Scam.
In the alternative to Class A, Class B:
All persons that received the Scam, test drove a vehicle from July 13th to 22nd, 2017, but did not buy or lease a vehicle from Defendants and did not receive a smart watch.
In the alternative to Classes A and B, Class C:
All persons that received a Scam with matching numbers and did not receive a Vegas Vacation Certificate.[6]

         Plaintiff alleges two causes of action: (1) Count One, for deceptive acts and practices and for unconscionable acts and practices, in violation of the KCPA; and (2) Count Two, for violating RICO. He seeks damages in excess of $75, 000.

         II. Motion to Dismiss RICO Claim for Failure to State a Claim

         A. Standard

         To survive a motion to dismiss brought under Fed.R.Civ.P. 12(b)(6), a complaint must contain factual allegations that, assumed to be true, “raise a right to relief above the speculative level” and must include “enough facts to state a claim for relief that is plausible on its face.”[7]Under this standard, “the complaint must give the court reason to believe that this plaintiff has a reasonable likelihood of mustering factual support for these claims.”[8] The plausibility standard does not require a showing of probability that “a defendant has acted unlawfully, ” but requires more than “a sheer possibility.”[9] “[M]ere ‘labels and conclusions,' and ‘a formulaic recitation of the elements of a cause of action' will not suffice; a plaintiff must offer specific factual allegations to support each claim.”[10] Finally, the court must accept the nonmoving party's factual allegations as true and may not dismiss on the ground that it appears unlikely the allegations can be proven.[11]

         The Supreme Court has explained the analysis as a two-step process. For purposes of a motion to dismiss, the court “must take all the factual allegations in the complaint as true, [but is] ‘not bound to accept as true a legal conclusion couched as a factual allegation.'”[12] Thus, the court must first determine if the allegations are factual and entitled to an assumption of truth, or merely legal conclusions that are not entitled to an assumption of truth.[13] Second, the court must determine whether the factual allegations, when assumed true, “plausibly give rise to an entitlement to relief.”[14] “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.”[15]

         B. Discussion

         RICO created a private right of action to vindicate a person's right to avoid injury to business or property caused by a pattern of racketeering activity.[16] To maintain a private cause of action under 18 U.S.C. § 1964(c), a plaintiff must plead and ultimately prove, inter alia, that the defendant violated § 1962.[17] Section 1962(c) “makes it unlawful for a person employed by or associated with an enterprise to conduct the enterprise's affairs through a pattern of racketeering activity.”[18] To maintain a private right of action based on a violation of § 1962(c), the plaintiff “‛must plausibly allege' that the defendants ‘each (1) conducted the affairs (2) of an enterprise (3) through a pattern (4) of racketeering activity.'”[19]

         Here, Plaintiff alleges that under § 1962(c), Defendants belong to an association-in-fact enterprise that has engaged in a scheme to defraud consumers for purposes of enriching themselves by sending out mailers purporting to guarantee prizes and other consumer prizes on Olathe Dodge's property. As to the pattern element of his RICO claim, Plaintiff alleges as follows:

87. Specifically, Defendants engaged in an intentional scheme to defraud consumers, most recently from July 13 to 22, 2017, by creating and executing an advertising campaign with fraudulent and false promises on a mailer for a sale at Defendant Landers (as described in specificity in Paragraphs 19-29 of this Amended Complaint).
88. Defendants engaged in a series of similar schemes to defraud or deceive consumers from at least March, 2010 (when the Johnson County District Attorney sued Defendant Landers over a deceptive mailer) to July 22, 2017, which establishes a pattern of racketeering activity and mail fraud.[20]

         Defendants argue these facts do not plausibly allege the pattern element of Plaintiff's RICO claim.[21] “A pattern of racketeering activity must include commission of at least two predicate acts.'”[22] The plaintiff “must show that the racketeering predicates are related, and that they amount to or pose a threat of continued criminal activity.”[23] ‚ÄúCongress intended to take a flexible approach [to establishing a pattern of racketeering], and envisaged that a pattern might be ...

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