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Diamond Consortium, Inc. v. Manookian

United States District Court, E.D. Texas, Sherman Division

April 26, 2017




         Pending before the Court is Defendants Mark Hammervold and Hammervold, PLC's Amended Motion to Dismiss (Dkt. #137). Having considered the pleadings, the Court finds that the motion should be denied.


         Plaintiff Diamond Consortium, Inc. d/b/a The Diamond Doctor (“The Diamond Doctor”) is a retailer and wholesaler of diamonds and other jewelry. Plaintiff David Blank (“Blank”) owns The Diamond Doctor (collectively, “Plaintiffs”). Plaintiffs allege that Defendant Brian Manookian (“Manookian”) and his law firm, Defendant Cummings Manookian, PLC (“Cummings Manookian”) engaged in a scheme to defame and extort Plaintiffs. According to Plaintiffs, Manookian created websites and distributed fliers falsely accusing The Diamond Doctor of having committed “diamond fraud” and “cheating customers through the sale of over-graded diamonds.” Plaintiffs allege that Manookian threatened Plaintiffs with several diamond over-grading lawsuits, unless Plaintiffs retained Cummings Manookian as counsel and paid a $25, 000 monthly retainer fee for a period of 120 months, totaling three million dollars. Plaintiffs state that Manookian told Blank that if Cummings Manookian represented The Diamond Doctor, Manookian would be conflicted out of continuing any negative advertising campaigns. The Diamond Doctor did not retain Cummings Manookian. Plaintiffs allege that Manookian continued to defame Plaintiffs utilizing websites, Facebook posts, YouTube videos, fliers, and door hangers accusing Blank and The Diamond Doctor of being “fraudsters” and “stealing customers cash.” Plaintiffs allege that Manookian has threatened several other jewelers with similar “smear campaigns” to extort the jewelers into paying Cummings Manookian large retainer fees.

         Plaintiffs further allege that Defendant Mark Hammervold and his law firm, Defendant Hammervold, PLC (collectively, the “Hammervold Defendants”) “are necessary to Manookian's illegal acts . . . because Manookian solicits clients to sue the targeted jewelers and then refers those cases to Hammervold and/or Hammervold, PLC to prosecute, thereby avoiding the appearance of a conflict when Manookian subsequently enters into ‘engagement agreements' to represent the targeted jewelers as part of his extortion scheme.” Plaintiffs allege that Cummings Manookian, and the Hammervold Defendants are members of an association-in-fact enterprise because they “together function as a unit with a common purpose: extorting millions of their victims.” Plaintiffs bring claims against the Hammervold Defendants for violations of the Racketeer Influenced Corrupt Organizations Act, 18 U.S.C. § 1962(c) (the “RICO Act”) and for civil conspiracy.

         On October 26, 2016, Plaintiffs filed a Consolidated Amended Complaint (Dkt. #131). On November 9, 2016, the Hammervold Defendants filed the pending amended motion to dismiss (Dkt. #137). On December 9, 2016, Plaintiffs filed a response (Dkt. #147). On December 23, 2016, the Hammervold Defendants filed a reply (Dkt. #151). On December 30, 2016, Plaintiffs filed a sur-reply (Dkt. #153).


         The Federal Rules of Civil Procedure require that each claim in a complaint include a “short and plain statement . . . showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). Each claim must include enough factual allegations “to raise a right to relief above the speculative level.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007).

         A Rule 12(b)(6) motion allows a party to move for dismissal of an action when the complaint fails to state a claim upon which relief can be granted. Fed.R.Civ.P. 12(b)(6). When considering a motion to dismiss under Rule 12(b)(6), the Court must accept as true all well-pleaded facts in plaintiff's complaint and view those facts in the light most favorable to the plaintiff. Bowlby v. City of Aberdeen, 681 F.3d 215, 219 (5th Cir. 2012). The Court may consider “the complaint, any documents attached to the complaint, and any documents attached to the motion to dismiss that are central to the claim and referenced by the complaint.” Lone Star Fund V (U.S.), L.P. v. Barclays Bank PLC, 594 F.3d 383, 387 (5th Cir. 2010). The Court must then determine whether the complaint states a claim for relief that is plausible on its face. ‘“A claim has facial plausibility when the plaintiff pleads factual content that allows the [C]ourt to draw the reasonable inference that the defendant is liable for the misconduct alleged.'” Gonzalez v. Kay, 577 F.3d 600, 603 (5th Cir. 2009) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). “But where the well-pleaded facts do not permit the [C]ourt to infer more than the mere possibility of misconduct, the complaint has alleged-but it has not ‘show[n]'-‘that the pleader is entitled to relief.'” Iqbal, 556 U.S. at 679 (quoting Fed.R.Civ.P. 8(a)(2)).

         In Iqbal, the Supreme Court established a two-step approach for assessing the sufficiency of a complaint in the context of a Rule 12(b)(6) motion. First, the Court should identify and disregard conclusory allegations, for they are “not entitled to the assumption of truth.” Iqbal, 556 U.S. at 664. Second, the Court “consider[s] the factual allegations in [the complaint] to determine if they plausibly suggest an entitlement to relief.” Id. “This standard ‘simply calls for enough facts to raise a reasonable expectation that discovery will reveal evidence of the necessary claims or elements.'” Morgan v. Hubert, 335 F. App'x 466, 470 (5th Cir. 2009) (citation omitted). This evaluation will “be a context-specific task that requires the reviewing [C]ourt to draw on its judicial experience and common sense.” Iqbal, 556 U.S. at 679.

         Thus, “[t]o survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.”' Id. at 678 (quoting Twombly, 550 U.S. at 570).


         Act Claims

         To state a claim for a RICO Act violation, Plaintiffs must allege each of the following elements: “(1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity.” Manax v. McNamara, 842 F.2d 808, 811 (5th Cir. 1988) (citing 18 U.S.C § 1962(c)). The Hammervold Defendants move for dismissal pursuant to Rule 12(b)(6) arguing Plaintiffs have not pleaded sufficient facts showing the requisite predicate acts of racketeering activity and the existence of a RICO Act enterprise. The Court finds Plaintiffs have pleaded sufficient facts to state plausible claims of Rico Act violations. Requisite Predicate Acts of Racketeering Activity The Hammervold Defendants first argue that Plaintiffs have not pleaded the requisite predicate acts of racketeering activity required for a RICO Act claim. “A pattern of racketeering activity requires two or more predicate acts and a demonstration that the racketeering predicates are related and amount to or pose a threat of continued criminal activity.” Brown v. Protective Life Ins. Co., 353 F.3d 405, 407 (5th Cir. 2003). Plaintiffs allege that Manookian engaged in a pattern of racketeering activity consisting of violations of four federal criminal statutes: 18 U.S.C.ยง 1341 (mail ...

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