Antitrust Law Daily Wrap Up, RICO—N.D. Ala.: Trucking company, mill may have perpetrated kickback scheme against African-American truckers, (Jul 6, 2016)

By Mark Engstrom, J.D.

The victims of an alleged scheme to extort money from African-American truckers could pursue RICO claims against a trucking company and other participants in the scheme, a magistrate judge for the federal district court in Birmingham, Alabama, has ruled. Because the plaintiffs adequately alleged a RICO enterprise and the predicate act of extortion, the defendants’ motion to dismiss was denied (Jones v. Scott Davis Chip Mill, Inc., June 30, 2016, Putnam, T.).

The plaintiffs asked the court to reconsider their RICO claims and other causes of action that were rejected when the court denied their second amended complaint. The court found that it had mistakenly struck the second amended complaint as having been filed without leave. To correct that mistake, the court granted, in part, the plaintiffs’ motion for clarification.

The plaintiffs alleged that Brett Davis, the owner and operator of Scott Davis Chip Mill, perpetrated a scheme in which an employee of McMillian Trucking would demand $100 kickbacks from African-American truckers—but not Caucasian truckers. If the truckers refused to pay the kickbacks that were being demanded, they were not given the opportunity to deliver the mill’s "wood chip" loads for McMillan Trucking.

Although the plaintiffs failed to allege the predicate acts of mail fraud and wire fraud by not identifying any misrepresentation by the defendants, they did allege the predicate act of extortion. Specifically, they alleged that the mill’s loads were not assigned to them if they refused to pay the kickbacks that were being demanded by McMillan’s employee.

Extortion ordinarily involved the acquisition of money or something of value, from another person, through the wrongful use of actual or threatened "force, violence, or fear," or under "color of official right," the court observed, but neither an "official right" nor "force, violence, or fear" was alleged in the plaintiff’s complaint. Nevertheless, at least one court—the Southern District of Florida—had recognized the possibility of "economic coercion" as a form of extortion. See In re Managed Care Litigation, 135 F. Supp.2d 1253 (2001).

In this case, the same theory was being advanced by the plaintiffs, who alleged that the defendants used "economic coercion" to force them to pay kickbacks. That allegation was supported by the plaintiffs’ assertion that, after refusing to pay the kickbacks, they were "cut off" from further load assignments, which resulted in economic distress to their trucking businesses. In the court’s view, those allegations were sufficient to survive a motion to dismiss.

The plaintiffs also alleged sufficient facts to support an inference of a RICO enterprise. They alleged that McMillan Trucking and its owner were aware of the kickback scheme, allowed one of their employees to further the scheme, and benefitted economically from the scheme. Further, the plaintiffs alleged a joint effort to engage in the kickback scheme—and to cover up its illegal character—because all of the defendants derived an economic benefit from it.

According to the plaintiffs, Brett Davis and Scott Davis Chip Mill benefited by not having to hire a dispatcher to assign their trucking loads; a MacMillan Trucking employee benefited from the cash that he received from the kickback payments, and McMillan and its owner benefited by receiving a preferential positon in the assignment of loads by one of its employees, who was acting on behalf of Davis and Scott Davis Chip Mill.

For all of those reasons, the plaintiffs were allowed to file a second amended complaint to plead a civil RICO claim against all of the defendants.

The case is No. 7:15-cv-00661-TMP.

Attorneys: Henry Sanders (Chestnut Sanders Sanders & Pettaway LLC) for Christopher Jones. Joseph L. Leak (Leak & Douglas PC) for Scott Davis Chip Mill, Inc.

Companies: Scott Davis Chip Mill, Inc.; McMillan Trucking

Cases: RICO AlabamaNews