Constructive Trust oxymoron in Wilson v Scruggs as Eastland dismantles RICO claim

oxymoron [oksee maw ron] expression with contradictory words; a phrase in which two words of contradictory meaning are used together for special effect

First, there was the vision of Roberts Wilson and his attorney Charles Merkel sitting ringside when Dick Scruggs is in court reminding me of my overly eager former mother-in-law —  although, to her credit, a trip to Piccadilly would satisfy her desire for a free lunch.  A vision of constructive trust that is not.

Then, there is the matter of mind-boggling dispute reported last week in the Clarion Ledger creating a vision of  “granny Bobs” and “nanny” Merkel each with purse in hand.  A vision of constructive trust that is not:

The federal government that prosecuted multimillionaire Dickie Scruggs and a former law partner who says he’s owed millions are battling over money paid to sway a judge in Scruggs’ favor.

Defendant Steve Patterson’s Motion to Dismiss, filed by Greenwood attorney Hiram Eastland,, thoroughly dismantles Wilson’s RICO case.  Any vision Wilson had of RICO pouring Scruggs’ money in his purse and Merkel’s had to have been, instead, a hallucination.

A vision of “constructive trust”  that is not:

A constructive trust is not a trust, in the true meaning of the word… but rather it is a passive, temporary arrangement, in which the trustee’s sole duty is to transfer the title and possession to the beneficiary…

Because a constructive trust is an equitable device, the defendant can raise all of the available equitable defenses against it – including unclean hands…

There’s been nothing passive about Wilson and Merkel’s relentless pursuit of Scruggs.  Yet, even while jailed in Merkel’s magic jurisdiction, Mississippi’s Northern District Federal Court, Scruggs provided the two an Answer neither wanted to hear.

Some or all of Plaintiffs’ claims are barred, in whole or in part, by their

unclean hands.

Asbestos dust must be hard to spot because Wilson and Merkel can’t wash off the past.

What are the fee arrangements with Merkel in the Scott case? It appears from the enclosed materials that there is a 1/3 attorney[‘s] fee contract to be split equally between Merkel and us….It appears so far that Bob [Wilson] has taken 50% of our 50%. Please explain.

February 26, 1991,  memo Scruggs to Luckey

However, Merkel’s hands may not give him as much problem as his mouth and his “friendship circle“.

In 1970, Charlie returned to Mississippi, beginning private practice with the firm of Sullivan Dunbar & Smith in Clarksdale, Mississippi. In 1972 he was a founding member of the law firm of Holcomb Dunbar Connell Merkel & Tollison and continued his litigation practice there until 1982 when he formed the Clarksdale firm Merkel & Cocke.

Ah, the mouth –  the always available for comment team of Wilson and Merkel have become the darlings of the Scruggs bashing media and heroes to a local bar that thinks Scruggs in a weakened position is fair game.

Unfortunately, mistaking the strength of their media presence for the strength of their case, Merkel and Wilson  dug up a RICO Complaint.  RICO is a difficult case to make under the best of circumstances.  Filing RICO charges against someone represented by the nationally recognized RICO expert Hiram Eastland is hardly the best of circumstances:

Siegelman, represented by…..Greenwood attorney Hiram Eastland… was acquitted on 25 charges, including the indictment’s allegations of a widespread RICO conspiracy.

Eastland’s  work for former Alabama Governor Don Siegelman and former Mississippi attorney Paul Minor shows he’s a team player – and the Memorandum supporting Patterson’s Motion to Dismiss is a home run for team Scruggs with Patterson leading and the bases loaded.

Eastland shows an impressive command of State law and federal RICO statues and moves with ease as he demonstrates the interplay of the two and how they work together to negate claim after claim in Wilson’s  Amended Complaint.

Plaintiff Does Not Adequately Plead a Cause of Action for Fraud by Omission, as He Cannot Show a Fiduciary Duty on Behalf of Mr. Patterson and Does Not Allege an Agreement Between Mr. Patterson and Judge Delaughter

Black’s Law Dictionary defines a “fraudulent misrepresentation” as: “[a] false statement that is known to be false . . .” whereas an “omission” is defined as: “[s]omething that is left out.” BLACK’S LAW DICTIONARY 452, 500 (2d pocket ed. 1996)(emphasis added).

None of the actions cited by Wilson amount to “representations.” If anything, Plaintiff’s assertions must be characterized as “omissions,” as the “affirmative acts of fraud against Wilson” listed in paragraph 34 of the Amended Complaint all concern a lack of knowledge. See, Shell Oil Co. v. Mills Oil Co., Inc., 717 F.2d 208, 214 (5th Cir. 1983).

In Mississippi, an omission can constitute fraud only where the defendant owes the plaintiff a fiduciary duty. Taylor v. Southern Farm Bureau Cas. Co., 954 So.2d 1045, 1049 (Miss. App. 2007) (holding that, in Mississippi, defendant must have a duty to disclose fact omitted for fraud by omission).

Plaintiff concedes in paragraphs 35-36 that Mr. Patterson was not an officer of the Court, and specifically excepted Mr. Patterson from alleged fraud of concealment or omission. Plaintiff’s Amended Complaint, pg. 9 paragraph 35(a). Claims for fraud against Mr. Patterson must therefore be dismissed, as he had no affirmative duty to disclose anything to Wilson. Indeed, as adverse counsel, no named defendant owed Wilson a fiduciary duty. See James v. Chase Manhattan Bank, 173 F.Supp.2d 544, 550 (N.D. Miss. 2001)(holding that attorneys owe no duty, fiduciary or otherwise, to an adverse party in a case he is litigating); see also Roussel v. Robbins, 688 So.2d 714, 725 n. 4 (Miss. 1996).

Additionally, Plaintiff’s conclusory allegations that Mr. Patterson engaged in common law fraud through conspiracy does not sufficiently state a claim for relief, as a Plaintiff “must allege ‘more than labels and conclusions.’” Norris, 500 F.3d at 464; Twombly, 127 S.Ct. at 19  66.

Judge Delaughter is the only person who could be said to have had a fiduciary duty to Wilson; however, the Complaint alleges that the only parties with knowledge of any rulings- for-recommendation trade-off were Mr. Scruggs and Mr. Langston.

Plaintiff’s Amended Complaint, pg. 7 paragraph 27. At most, the Amended Complaint accuses Mr. Patterson of being involved in the hiring of Ed Peters. Such allegations do not establish a conspiracy to commit fraud—Peters, as a practicing attorney, could certainly participate in legal matters. Wilson further acknowledges that Mr. Patterson has never been admitted to the Mississippi Bar, and does not make any allegations that Mr. Patterson knew that ex-parte communications were being conducted. As no facts have been pled that sufficiently establish an agreement for purposes of a conspiracy to defraud, Count One against Mr. Patterson should be dismissed. See Southwest Louisiana Healthcare System v. MBIA Ins. Corp., 2006 WL 1228903, *3 (W.D. La. 2006); Guidry v. U.S. Tobacco Co., Inc., 188 F.3d 619, 632 (5th Cir. 1999)….

He hits full stride when dismantles the elements of Wilson’s attempt at creating a cause of action under Civil RICO and provides a compelling example of Eastland’s team-player approach to complex litigation:

To state a cause of action under civil RICO, a plaintiff must sufficiently allege
that the defendant was: 1) a person, 2) who was engaged in a pattern of racketeering activity, 3) in connection with the acquisition, establishment, conduct or control of an enterprise. Whelan v. Winchester Production Co., 319 F.3d 225, 229 (5th Cir. 2003).

Wilson’s Amended Complaint appears to allege two separate RICO claims—the first brought under 1962(c) only against Defendant Scruggs, and the second under1962(d) against the remaining defendants, including Defendant Patterson.

The § 1962(c)claim is fatally deficient and should be dismissed, as Plaintiff fails to plead a valid enterprise, a sufficient pattern of predicate acts, or adequate continuity. Wilson’s dependent 1962(d) claim must be dismissed, as claims of a RICO conspiracy can only exist alongside a valid substantive RICO violation. See Johnston v. Wilbourn, 760 F.Supp. 578, 589 (S.D.Miss. 1991); Bonton v. Archer Chrysler Plymouth, Inc., 889 F. Supp. 995, 1005 (S.D. Tex. 1995)(dismissing § 1962(d) claim for lack of substantive RICO violation).

Plaintiff’s 1962(d) claim against Defendant Patterson should additionally be dismissed as the Amended Complaint is completely devoid of any allegation that Patterson even knew of, much less agreed to, any conspiracy to bribe Judge DeLaughter. Finally, all claims based upon civil RICO should be rejected by this Court due to the fact that Plaintiff does not and indeed cannot prove proximate causation, a necessary element to any civil claim.

The next section of the brief  is worthy of a tutorial on the required elements of Civil RICO

Plaintiffs Failed to Plead Sufficient Civil RICO Claims

1. The Required Elements of Civil RICO

To state a cause of action under civil RICO, a plaintiff must sufficiently allege that the defendant was: 1) a person, 2) who was engaged in a pattern of racketeering activity, 3) in connection with the acquisition, establishment, conduct or control of an enterprise. Whelan v. Winchester Production Co., 319 F.3d 225, 229 (5th Cir. 2003). Wilson’s Amended Complaint appears to allege two separate RICO claims—the first brought under 1962(c) only against Defendant Scruggs, and the second under 1962(d) against the remaining defendants, including Defendant Patterson.

The § 1962(c) claim is fatally deficient and should be dismissed, as Plaintiff fails to plead a valid enterprise, a sufficient pattern of predicate acts, or adequate continuity. Wilson’s dependent 1962(d) claim must be dismissed, as claims of a RICO conspiracy can only exist alongside a valid substantive RICO violation. See Johnston v. Wilbourn, 760 F.Supp. 578, 589 (S.D.Miss. 1991); Bonton v. Archer Chrysler Plymouth, Inc., 889 F.Supp. 995, 1005 (S.D. Tex. 1995)(dismissing § 1962(d) claim for lack of substantive RICO violation).

Plaintiff’s 1962(d) claim against Defendant Patterson should additionally be dismissed as the Amended Complaint is completely devoid of any allegation that Patterson even knew of, much less agreed to, any conspiracy to bribe Judge DeLaughter. Finally, all claims based upon civil RICO should be rejected by this Court due to the fact that Plaintiff does not and indeed cannot prove proximate causation, a necessary element to any civil claim.

2. Wilson’s § 1962(c) Claim Against Defendant Scruggs is Deficient

i. Plaintiff Fails to Allege a Valid Enterprise Under 1962(4)

The Amended Complaint names Defendant SMBD, Inc., a corporate entity, as the RICO enterprise. Plaintiff’s Amended Complaint, pg. 15 paragraph 48. Specifically, the Complaint reads that: “Defendant SMBD is an ‘enterprise’ within the meaning of § 1961(4) of the Racketeering Influenced and Corrupt Organizations Act …” Id. Based upon this language, it appears that Wilson is attempting to bring a 1962(c) claim against SMBD and Mr. Scruggs. If this is indeed the case, his effort to plead a valid enterprise fails, as the corporation cannot be both the Defendant and the enterprise. See Abraham v. Singh, 480 F.3d 351, 357 (5th Cir. 2007)(holding that defendant must be distinguishable from enterprise).

The brief is a very full 18 pages and I’m including one last section in this post because the subject is Causation.

iv. Plaintiff Fails to Show Proximate Causation

The federal RICO statutes applicable to §§ 1962(c) and 1962(d) require a plaintiff
to plead and prove that the defendant’s actions were the “but for” and proximate cause of his injuries. Holmes v. Sec. Investor Prot. Corp., 503 U.S. 258, 268 (1992); Anza v. Ideal Steel Supply Corp., 547 U.S. 451, 457-58, 126 S.Ct. 1991, 164 L.Ed.2d 720 (2006).

The Fifth Circuit has held that a person will be considered injured “by reason of” a RICO violation if the predicate acts alleged in the Complaint constitute 1) factual (but for) causation and 2) legal (proximate) causation of the alleged injury. Ocean Energy II, Inc. v. Alexander and Alexander, Inc., 868 F.2d 740, 744 (5th Cir. 1989)(emphasis added).

To withstand a motion to dismiss, “a complaint must allege ‘more than labels and conclusions.’” Norris v. Hearst Trust, 500 F.3d 454, 464 (5th Cir. 2007)(quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 1966, 167 L.Ed.2d 929 (2007)). Additionally, ‘[f]actual allegations must be enough to raise a right of relief above a speculative level’. Id.

For Wilson to prove causation, he must show that, “but for” the alleged promise of a judgeship, Delaughter would have ruled in Wilson’s favor. This assumption is fatally problematic, as it would require this Court to engage in psychic guesswork.

Causation cannot be premised upon such weak inferences in the Fifth Circuit. See Johnson v. Sawyer, 4 F.3d 369, 398 (5th Cir. 1993)(stating that “it is settled law in this Court that a finding of causation ‘may not rest on speculation and conjecture.’”)(quoting Nichols Const. Corp. v. Cessna Aircraft Co., 808 F.2d 340, 346 (5th Cir. 1985).

Traditional tort principles dictate that if the wrongful act did not cause the injury, the wrongdoer cannot be liable. See Prosser & Keeton on Torts, § 41 at 263 (5th ed. 1984). Even if all of Wilson’s assertions are true, the Amended Complaint does not allege that DeLaughter agreed to render a different verdict in exchange for a judgeship consideration. Nor does it assert that DeLaughter ruled in a way that conflicted with existing precedent. Such inferences are simply too speculative to establish causation in a civil RICO case.

Eastland’s RICO arguments in Governor Siegelman’s brief singled out by legal writers.  I would expect similar recognition of this work.

At the same time, I have no expectation the Court will give it full and fair consideration.

The defendants face a mindfield of bias.  I find it somewhat incredible, although it may not be unusual, that a judge can preside over a defendant’s criminal trial and then preside over a similar action in a civil trials. Judge Biggers is further compromised by circumstance because the Luckey trial on this same matter was conducted by one of his Magistrate judges.

In that case Magistrate Judge Davis gave no consideration to the equity that defines constructive trust.  Luckey lacked the clean hands and never denied Scruggs had fired him for cause directly related to the asbestos litigation.

When it comes to just treatment of Dick Scruggs by our judicial systems, I’ve yet to see a clean hand although some may only have a smudge.

I care because what happens to one of us can happen to all of us.  Consequently, insisting on justice for all is the best insurance any of us can buy.

12 thoughts on “Constructive Trust oxymoron in Wilson v Scruggs as Eastland dismantles RICO claim”

  1. Greetings Nowdy. It is VERY INCREDIBLE, UNUSUAL, UNFAIR, and a host of other horrible adjectives that the SAME JUDGE would (and apparently is) presiding over BOTH Mr. Scruggs’ CRMINAL TRIAL and CIVIL LITIGATION that will ultinately end up as a CIVIL TRIAL. Even if there is no CIVIL TRIAL, THE CRIMINAL JUDGE SHOULD NOT BE CONSIDERING A CRIMINAL DEFENDANT’S (the same defendant that stood before him) CIVIL CASE!! TALK ABOUT BIASED AND BEING DENIED THE RIGHT TO A FAIR AND IMPARTIAL PROCEEDING….THIS IS INSANE!! DOES IT EVER END WHERE YOU ARE?

    Indeed, if there is a CRIMINAL MATTER which leads to CIVIL LITIGATION (just like we have in this matter) there are matters from the CRIMINAL CASE that SHOULD NOT EVEN BE CONSIDERED BY THE CIVIL JUDGE – LET ALONE THE CIVIL JURY!! Usually, attorneys file a “Motion in Limine” to keep something out of a proceeding, but how can you file such a motion asking the CIVIL COURT/JUDGE not to consider something in the CRIMINAL CASE IF THAT VERY SAME JUDGE PRESIDED OVER THE CRIMINAL CASE? YOU CAN’T!!! Judge Biggers cannot say “Oh, ok, I won’t consider [i.e., remember – yeah, right] what occurred in the CRIMINAL CASE in the CIVIL CASE – IT’S IMPOSSIBLE FOR THE COURT (Jdg. Biggers) to ignore. He should recuse himself. And even then, yall have such a small community, all the Judges are aware of what’s going on and what transpired, BUT AT LEAST THEY DIDN’T PRESIDE OVER THE CRIMINAL CASE AND CRIMINAL PROCEEDINGS OF ATTY. SCRUGGS!! There’s a BIG DIFFERENCE between “hearing rumors about a case” as opposed to hearing SWORN TESTIMONY IN A CASE!! THIS IS CRAZY!!

    Here (in Tampa, FL, and most the of U.S.) there is a CRIMINAL COURT (consisting of as many Judges as are necessary to serve our population), a CIVIL COURT (consisting of the same # of Judges). We have “CIRCUIT CIVIL CRIMINAL” (felonies), COUNTY CRIMINAL (misdemeanors), CIRCUIT CIVIL (actions over $15,000.00), COUNTY CIVIL (actions less than $15,000), FAMILY COURT, PROBATE COURT, JUVENILE COURT, etc., et al.

    Atty. Scruggs’ counsel, Attorney Hirman Eastland, who, as you point out is a renowned Attorney, is very intelligent and writes brillantly. Mr. Scruggs is in capable hands and I’m sure Mr. Eastland will move for a “change of venue” seeking to get this case moved to another city, or at the very least, transferred to a DIFFERENT JUDGE! One doesn’t have to be a legal scholar to know that Mr. Scruggs is ENTITLED, by virtue of our CONSTITUTION, to a fair and impartial JUDGE and/or JURY OF HIS PEERS (good luck on the “peers” part though).

    And you’re so right, Nowdy, when you say:

    “I care because what happens to one of us can happen to all of us. Consequently, insisting on justice for all is the best insurance any of us can buy.”

    THIS IS SO TRUE! One can be at the wrong place at the wrong time and suffer the wrong consequences just by being somewhere — the old “guilt by association” phrase. Someone (or a group of powerful people) can “have it out for you” and seek to “put you in your place,” “give you a hard time,” or a host of other things – WE MUST INSIST ON JUSTICE – IT IS A RIGHT…..NOT A PRIVILEGE!!!!!!!!!!

    SHIRLEY HEFLIN

  2. I really think Nowdy and Shirley are “off-the-mark” on this one. Maybe Biggers SHOULD recuse himself, but who gives a “rat’s ass” about whether Scruggs, who “gamed” the System for decades, is getting “quality representation”? Give him a fair trial, and then take 100% of his ill-gotten wealth from him, and never let me hear his rotten name again. the “enterprise” or scheme which deprived Mr. Wilson to that to which he was entitled was, I believe, “Classic RICO”. All that changed in the Wilson matter, which had no doubt been employed by Scruggs (the God-Father) against others previously to deprivre them of valuable property rights, were the identities of the “Capos”, ie. the Soldiers. The goals and the methodology of the criminal enterprise remained the same, so much so that, at sentencing, Biggers said to Scruggs that he was amazed at the ease with which Scruggs entered into bribing a Judge, just as he had, no doubt, done so many times before. It galls me to think of Scruggs doing his time and then retiring to a beach somewhere to “clip his coupons” until the grim reaper issues him a subpoena.

  3. Poor Wilson, Poor Charlie. We’ll see how Biggers rules but any person with a 5th grade reading education can see that the Merkel bunch are fishing for money they didn’t earn and don’t deserve. Ahh the egos…

  4. Dear Ashton: Tx for at least recognizing that Jdg. Biggers should recuse himself – you being a billant attorney yourself, must realize how inappropriate , prejudiced and a conflict of interest it is for the same Judge to preside over BOTH a criminal case and a civil case involving the same party.

    I don’t even know Mr. Scruggs and didn’t know of him until I started reading this website and until I became aware that my former boss here in Florida (Plaintiff’s ins. atty.) allegedly inherited alot of State Farm cases that the SCRUGGS KATRINA GROUP (think that’s what it was called) had to “let go” after the instant criminal activities came to light….and, in addition to “letting go” of those particular files, they no doubt had to “give up” their fees for work performed to date. Maybe, maybe not – I’m sure State Farm and the latest Plaintiff attys. involved will seek to have that information marked “CONFIDENTIAL” (though the $26 million + fee is public record) – it’s amazing how much in attys. fees a carrier will pay, but balk at a policy limit residential claim (i.e., Katrina “Slabbed” cases).

    But I get what you’re saying: ATTY. SCRUGGS WAS/IS GREEDY. Well, Ashton, I haven’t met an atty. that his reached his level of success, status and wealth who ISN’T GREEDY. THEY GET TO THAT POINT AND THEY BECOME GREEDIER – MILLIONS IS NOT ENOUGH ANY MORE – IT HAS TO BE BILLIONS and, yes, if that means cutting your fellow attys. out of their fees, violating “Agreements,” becoming DISLOYAL TO THOSE THAT HAVE BEEN LOYAL TO YOU…then that’s what they do. Mr. Scruggs IS NOT A PIONEER IN THIS REGARD. THERE ARE LOTS OF ATTYS. IN THE WORLD JUST LIKE HIM – HE JUST HAPPENED TO GET CAUGHT. He let his EGO do his thinking for him – he felt he was “immune” to the law – superior to the law – didn’t have to answer to anyone – “Why, I’m RICHARD SCRUGGS – didn’t you know?” HE’S “PAYING” FOR THAT WAY OF THINKING IN PRISON RIGHT NOW.

    I know attys. w/egos so BIG that I don’t know how they clear a doorframe. Their bank accts. are just as BIG and before they became “rich and famous,” they used to be nice, appreciative individuals who REALLY CARED about helping people. There are a select few who haven’t forgotten “where they came from,” but, again, they’re a “select few.”

    Finally, I obviously missed something, but I don’t recall seeing anything that said Atty. Scruggs was complaining about not having “quality representation.”

    MONEY – PEOPLE WISH THEY HAD IT – THEN THEY GET IT – THEY WANT MORE – AND THEN IT’S NEVER ENOUGH – NEVER!!

    SHIRLEY HEFLIN

  5. Biggers should recuse himself from this case. This is a bias judge who works with self-absorbed prosecutors who lock away top Democratic backers. Testimony shows Biggers was infuriated when non-lawyers were making 10 times his yearly salary in a single case. His friend Judge Lackey took five months to set these idiots up.

    Merkel, the “brilliant” shaker, news maker and baker, and his greedy ilk should be warned: you’re next you Scruggs-wannabes. Live by the dollar; die by the dollar.

  6. Rove Racket:

    Excellent points….I forgot about the (obvious) political aspects of the case…they’re in every case, really. “Scrugg Wannabes” – that’s a perfect name for them. If they’re not chasing the almight dollar, then what are they after? IT CERTAINLY ISN’T JUSTICE!! Justice is supposed to prevail, but in these kind of cases GREED WILL PREVAIL. Like you said, “they’re next.”

    Have a great day!

    SHIRLEY HEFLIN

  7. It appears Judge Biggers may read this blog. He recused himself from this crazy circus earlier today. Get ready for a dismissal.

  8. Sunshine is a wonderful disinfectant no? Kudos to Nowdy for a very well researched post.

    As time goes by the true extent of how Dickie Scruggs was railroaded by his greed driven brethern in the bar such as Charlie Merkel will continue to surface.

    And of course we’re still wondering why John Jones has not been reported to the bar for leaking privledged info from his SKG work to State Farm.

    Can’t condone bribing a judge even if it looks like entrapment. What I hate worse is how homeless policyholders were used as pawns by unethical lawyers fighting over fees or lawyers turned bloggers looking to make a name for themselves from the Scruggs scandal.

    sop

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