Antitrust Law Daily Wrap Up, RICO—D.P.R.: Buyer of liquid asphalt failed to allege seller’s racketeering activity, (Feb 18, 2021)

By Sheri A. Wattles-Miller, J.D.

Although the buyer provided four emails as evidence of wire fraud, it did not provide details about the hundreds of emails that it claimed showed a pattern of racketeering activity.

Puerto Rico Asphalt, LLC (PRA), a buyer of liquid asphalt, failed to allege a pattern of racketeering activity by Bituven Puerto Rico, LLC, and, thus, its RICO claims were dismissed by the federal district court in San Juan, Puerto Rico. The court also granted Bituven’s motion to dismiss PRA's abuse of process claims, but denied Bituven's motion to dismiss PRA's breach of contract claim. According to PRA, Bituven planned to misrepresent Poten liquid asphalt prices, shipping prices, and the payment PRA was making to pay down debt. Then, Bituven would artificially raise these costs, and invoice PRA via e-mail with a bundled sale price, making it difficult to detect that the price was inflated. However, despite claiming to have hundreds of emails to back up its claims, PRA produced only four such emails, and did not provide enough details from the other emails to support its RICO claims (Asphaltos Trade, S.A v. Bituven Puerto Rico, LLC, February 16, 2021, McGiverin, B.).

Background. This multi-party case began when Asphaltos Trade, S.A. filed suit against Bituven claiming that Bituven breached a contract when it sold liquid asphalt owned by Asphaltos without notifying or paying Asphaltos. After Bituven filed a third-party complaint against PRA and Jorge Arturo Diaz Mayoral (Diaz), alleging that PRA and Diaz had taken that liquid asphalt without Bituven's permission, PRA counterclaimed. According to PRA, Bituven was defrauding both PRA and Asphaltos by selling asphalt to PRA at a fraudulently high price without telling Asphaltos.

RICO claims. Bituven filed a motion to dismiss PRA's counterclaims for failure to state a claim. In support of its motion, Bituven argued that PRA failed to plead fraud with the requisite particularity, and that the allegations did not show a pattern of racketeering activity. In regard to PRA's statement that there were hundreds of emails seeking payment for the liquid asphalt, the details related to the emails were too vague, the court said. PRA did not explain when the emails were sent or who sent them. Moreover, since the emails were presumably within PRA's possession, PRA should have been able to provide those specific details. PRA did provide four specific examples of allegedly fraudulent emails in which there was sufficient information regarding time, place and content of the wire communications, but the four emails were not enough to show a pattern of racketeering activity.

Based on PRA's allegations, Bituven was engaged in a limited scheme to trick PRA into overpaying for liquid asphalt. PRA attempted to make the scheme look more extensive by mentioning other instances of fraud, but in those situations, it did not refer to RICO. The court noted that mere common law fraud was not racketeering activity under RICO. The handful of alleged acts were narrowly targeted at a single victim, barely spanned one year, and concentrated primarily over one month, the court found, and this did not amount to closed-ended continuity for purposes of RICO.

PRA's allegations that Bituven continues to demand overpayment for liquid asphalt did not establish open-ended continuity. PRA could not establish a threat of continued criminal activity for purposes of RICO merely by demonstrating that Bituven was engaging in ongoing fraud or that it regularly conducted its business by means of deception. In addition, the court noted that RICO claims premised on mail or wire fraud must be closely scrutinized because of the ease of making such claims. PRA's RICO conspiracy claim was also dismissed because without a substantive RICO claim, there was no RICO conspiracy.

Breach of contract. PRA alleged that it and Bituven entered an agreement whereby Bituven would sell PRA liquid asphalt on the same basic terms as Bituven had established with another buyer. Under those terms, Bituven was selling liquid asphalt at the weekly Poten price, plus $40.00 per standard ton for transport, plus an additional payment of $0.30 per gallon, which was a financing fee. These allegations, the court said, were sufficient at this stage to show a valid contract. Bituven's arguments to dismiss the breach of contract claims focused on the counterclaim complaint, which was inappropriate at this stage of litigation. Here, the court said, the facts alleged in the counterclaim complaint, taken in the light most favorable to PRA, stated a claim for breach of contract.

Abuse of process. PRA alleged that Bituven filed three lawsuits against it to cover up its own bad acts. However, filing a lawsuit is a regular use of process, and therefore, does not on its own fulfill the requirement of an abusive act, even if the decision to sue was influenced by a wrongful motive, purpose, or intent. Because PRA did not identify an abusive act such as an improper subpoena or discovery request, PRA did not state a valid claim for abuse of process.

This case is No. 3:18-cv-01876-BJM.

Attorneys: Mirelis Valle-Cancel (Adsuar Muniz Goyco Seda & Perez-Ochoa PSC) for Asphaltos Trade, S.A. Enrique M. Lopez (Gunster, Yoakley & Stewart, P.A.) for Bituven Puerto Rico, LLC.

Companies: Asphaltos Trade, S.A.; Bituven Puerto Rico, LLC

Cases: RICO PuertoRicoNews