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Arroyo v. Oprona, Inc.

United States District Court, S.D. Texas, Houston Division

September 5, 2017

Erika Arroyo, Plaintiff,
v.
Oprona, Inc., et al., Defendants.

          MEMORANDUM OPINION & ORDER

          Gray H. Miller, United States District Judge

         Pending 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.

         I. Background

         Arroyo 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.[1] Dkt. 34 at 7-11.

         On 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.

         II. Legal Standards

         A. Review of an M&R

         For 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).

         B. Motion to Dismiss

         “Federal 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 reasonable expectation).

         III. Analysis

         In the 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).

         The 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.

         A. ...


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