United States District Court, S.D. Texas, Houston Division
MEMORANDUM OPINION & ORDER
H. Miller, United States District Judge
before the court is a Memorandum and Recommendation
(“M&R”) in which the Magistrate Judge
recommends that the defendants Oprona, Inc.
(“Oprona”) and Chris F. Yoxall's motion to
dismiss (Dkt. 35) plaintiff Erika Arroyo's RICO claims
should be granted and that Arroyo's state law claim
should be remanded. Dkt. 53. Arroyo filed timely objections
to the M&R and moved for leave to amend her complaint.
Dkt. 56. Having considered the M&R, objections, response,
reply, and surreply, the court is of the opinion that
Arroyo's objections (Dkt. 56) should be OVERRULED and the
M&R (Dkt. 53) should be ADOPTED IN FULL.
alleges that she was terminated by defendants Oprona, Rosen
Swiss AG, and Yoxall because of her refusal to participate in
an alleged tax fraud scheme. Dkt. 34 at 4. Arroyo alleges
that after she reported Yoxall, the chief operations officer
of Oprona, to his management at Rosen Swiss AG for the misuse
of company funds to pay for his personal income taxes, her
employment was terminated as a result. Dkt. 34 at 7-11.
March 3, 2016, Arroyo filed suit against the defendants in
the 269th Judicial District Court of Harris County. Dkt. 1,
Ex. B. Arroyo sued the defendants for violations of the
Racketeer Influenced and Corrupt Organizations Act
(“RICO”), 18 U.S.C. §§ 1961-1968, and
for discharge contrary to public policy under Texas common
law. Id.; Dkt. 35 at 38 (citing Sabine Pilot
Serv., Inc. v. Hauck, 687 S.W.2d 733, 735 (Tex. 1985)).
On November 1, 2016, Arroyo amended her complaint. Dkt. 34.
On November 7, 2016, the defendants filed a motion to
dismiss. Dkt. 35. Arroyo responded, the defendants replied,
and Arroyo filed a surreply. Dkts. 36, 39, 40. On March 24,
2017, the court dismissed the claims against defendant Rosen
Swiss AG due to improper service. Dkt. 51. On April 11, 2017,
the Magistrate Judge issued an M&R recommending that the
court grant the defendants' motion to dismiss
Arroyo's RICO claims and remand her Texas common law
claim to state court. Dkt. 53. Arroyo filed objections and a
motion to amend her complaint. Dkt. 56. The defendants
responded to the objections, Arroyo replied, and the
defendants filed a surreply. Dkts. 61, 63, 66.
Review of an M&R
dispositive matters, the court “determine(s) de novo
any part of the magistrate judge's disposition that has
been properly objected to.” See Fed. R. Civ.
P. 72(b)(3). “The district judge may accept, reject, or
modify the recommended disposition; receive further evidence;
or return the matter to the magistrate judge with
instructions.” Id. “When no timely
objection is filed, the court need only satisfy itself that
there is no clear error on the face of the record in order to
accept the recommendation.” Fed.R.Civ.P. 72(b),
Advisory Comm. Note (1983). For non-dispositive matters, the
court may set aside the magistrate judge's order only to
the extent that it is “clearly erroneous or contrary to
law.” Fed.R.Civ.P. 72(a).
Motion to Dismiss
Rule of Civil Procedure 8(a)(2) requires only ‘a short
and plain statement of the claim showing that the pleader is
entitled to relief, ' in order to ‘give the
defendant fair notice of what the . . . claim is and the
grounds upon which it rests.'” Bell Atlantic
Corp. v. Twombly, 127 S.Ct. 1955, 1964-65 (2007)
(quoting Conley v. Gibson, 355 U.S. 41, 47, 78 S.Ct.
99 (1957)). In considering 12(b)(6) motions, courts generally
must accept the factual allegations contained in the
complaint as true. Kaiser Aluminum & Chem. Sales,
Inc. v. Avondale Shipyards, Inc., 677 F.2d 1045, 1050
(5th Cir. 1982). The court does not look beyond the face of
the pleadings when determining whether the plaintiff has
stated a claim under Rule 12(b)(6). Spivey v.
Robertson, 197 F.3d 772, 774 (5th Cir. 1999). “[A]
complaint attacked by a Rule 12(b)(6) motion to dismiss does
not need detailed factual allegations, [but] a
plaintiff's obligation to provide the ‘grounds'
of his ‘entitle[ment] to relief' requires more than
labels and conclusions, and a formulaic recitation of the
elements of a cause of action will not do.”
Twombly, 127 S.Ct. at 1964-65 (citing Sanjuan v.
Am. Bd. of Psychiatry and Neurology, Inc., 40 F.3d 247,
251 (7th Cir. 1994)) (internal citations omitted). And,
“[f]actual allegations must be enough to raise a right
to relief above the speculative level.” Id. at
1965 (supporting facts must be plausible-enough to raise a
M&R, the Magistrate Judge recommended that the court
grant the defendants' motion to dismiss Arroyo's RICO
claims brought under sections 1962(c) and 1962(d). Dkt. 53.
To bring a RICO claim under section 1962(c), a plaintiff must
establish that a person or entity has engaged in (1) a
pattern of racketeering activity that is (2) connected to an
“enterprise.” Abraham v. Singh, 480 F.3d
351, 355 (5th Cir. 2007). Section 1961(d) makes it unlawful
to conspire to violate the RICO statute. 18 U.S.C. §
1961(d). The substantive requirements for proving a RICO
claim are the same for a criminal case or civil suit. St.
Paul Mercury Ins. Co. v. Williamson, 224 F.3d 425, 446
n.15 (5th Cir. 2000).
Magistrate Judge recommend dismissing Arroyo's RICO
claims for three independent reasons: (1) Arroyo did not
allege the required predicate acts, (2) Arroyo did not show
that she was proximately harmed by the alleged fraud, and (3)
Arroyo failed to establish the continuity of the racketeering
activity. Dkt. 53. Arroyo objects to each of these grounds
for dismissal. Dkt. 56. Because each reason for dismissal is
individually sufficient to dismiss Arroyo's RICO claims,
the court need only address one of the Magistrate Judge's
grounds for dismissal and Arroyo's corresponding
objections. The court will first address Arroyo's
objections with regard to the predicate acts and then turn to
Arroyo's motion for leave to amend.