Antitrust Law Daily Wrap Up, RICO—W.D. Pa.: Oil contractor fails to state RICO claims against subcontractor over alleged kickback scheme, (Jul 11, 2013)

By Tobias J. Gillett, J.D., LL.M.

An oilfield contractor failed to plead RICO claims against one of its subcontractors and two of the subcontractor’s alleged executives over an alleged kickback scheme involving two of its former employees, the federal district court in Pittsburgh has ruled (5J Oilfield Services, LLC v. Pecha, July 9, 2013, McVerry, T.).

5J Oilfield Services, LLC provides services to oil companies. 5J alleged that two of its former employees, Chad Pecha and Meredith Boyd, had authority to approve invoices for services from subcontractors, and abused that power by engaging in a kickback scheme with subcontractor Ultimate Landscaping & Contracting, LLC. The employees would approve inflated invoices from Ultimate Landscaping in exchange for payments and other financial benefits from Ultimate Landscaping and two alleged executives of the company, Autumn Andreis and Gary Andreis. Pecha and Boyd allegedly formed CPMB Consulting, LLC for the purpose of implementing the scheme.

5J filed suit against Pecha, Boyd, CPMB Consulting, Autumn Andreis, Gary Andreis, and Ultimate Landscaping, asserting a wide variety of state law claims and claims under the RICO Act. Ultimate Landscaping and its executives filed a motion to dismiss.

The court explained that a RICO plaintiff must allege “(1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity.” To adequately plead the “conduct” element, a plaintiff must plead how each defendant had “some part in directing” the affairs of the enterprise. RICO allegations based on fraud, such as the ones in the present case, must be pled with the particularity demanded by Federal Rule of Civil Procedure 9(b).

Enterprise. Here, 5J did not sufficiently plead its RICO allegations against the Ultimate Landscaping defendants, in the court’s view. 5J alleged an enterprise consisting of CPMB Consulting, with Pecha and Boyd constituting its members. However, 5J “merely allege[d] conclusorily that Autumn Andreis, Gary Andreis and Ultimate Landscaping [were] employed by or associated with the enterprise,” according to the court. 5J failed to allege how Ultimate Landscaping or its executives “directed the affairs of CPMB or of the alleged ‘association in fact’ or otherwise managed or operated the enterprise.”

The reasoning applied to Autumn Andreis, even though she had filed an answer to the complaint, unlike the other Ultimate Landscaping defendants. 5J had “had a full opportunity to respond to the arguments regarding the lack of particularity,” but the court was still unable “to discern from the pleading that Autumn Andreis [was] not an entirely uninvolved spouse.” The court found no facts in the complaint that would show “what she allegedly did.”

Conspiracy. Since 5J failed to state a RICO claim under Section 1962(c), it also failed to state a RICO conspiracy claim under Section 1962(d), according to the court.

As RICO claims were the only claims over which the court could exercise its original jurisdiction, and as the court declined to exercise its supplemental jurisdiction, the court elected to remove the Ultimate Landscaping defendants as parties to the case.

The case is No. 2:13-cv-283.

Attorneys: Frank C. Botta (Eckert Seamans Cherin & Mellott, LLC) for 5J Oilfield Services, LLC. John A. Schwab (Pietragallo Gordon Alfano Bosick & Raspanti) for Meredith Boyd.

Companies: 5J Oilfield Services, LLC; CPMB Consulting, LLC; Ultimate Landscaping & Contracting, LLC.

Cases: RICO PennsylvaniaNews