Scruggs files a nothing here, move on Motion to Dismiss Young v Scruggs

After reading Eastland’s response for Patterson in the Wilson v Scruggs RICO case, it is difficult to disagree with the legal arguments of the Motion to Dismiss that Dick Scruggs filed in  Young v Scruggs; for example:

Plaintiffs’ pleadings fail to state a claim upon which relief can be granted under the Racketeer Influenced and Corrupt Organizations Act (“RICO”). Plaintiffs have failed to allege that Defendants engaged in a pattern of racketeering activity. Even if proven, Plaintiff’s allegations could not establish that any predicate acts posed a threat of continued criminal activity, as all of the alleged predicate acts mentioned in Plaintiffs’ Complaint are related to a single, discrete, otherwise lawful transaction.

The Memorandum Brief in Support of Motion to Dismiss provides background and more about the basis for the Motion:

This case relates to Plaintiffs’ demands for money from Defendants Richard F. Scruggs and SMBD, Inc., their employer, under an attorney fee agreement signed in July 1999. Plaintiffs seek damages for Defendants’ decision in July 2005 to charge Plaintiffs with responsibility for satisfying a portion of a federal court judgment rendered against Defendants. Plaintiffs also seek damages for the residual effect of Defendants’ payment of certain legal fees to a law firm which represented Defendants in another litigated matter.

Plaintiffs pursue their quests for money under a variety of legal theories, including RICO, breach of contract and breach of fiduciary duty. This Court should dismiss some or all of Plaintiffs’ claims. First, Plaintiffs have failed to sufficiently serve process on Richard Scruggs. Second, Plaintiffs have failed to state a RICO claim upon which relief can be granted. With dismissal of the RICO claims, this Court should decline to retain supplemental jurisdiction over the remaining state law claims. Even if this Court does retain jurisdiction, the applicable statute of limitations bars Plaintiffs’ claims related to the July 2005 decision to allocate responsibility to Plaintiffs for satisfying a portion of the federal court judgment.

Plaintiffs, who are both attorneys, worked for Scruggs, Millette, Bozeman and Dent, P.A, a law firm and predecessor to Defendant SMBD.Plaintiffs were employees of and not shareholders in the firm. As part of their compensation for services rendered in certain tobacco litigation, SMBD agreed to pay each Plaintiff five percent of the net attorney fees the firm received from the tobacco litigation. See Ex. “A” to Complaint. Their agreement calculated “net fees” after certain deductions from gross proceeds, including fees due to other associated attorneys and “any other obligations by [the] firm in connection with tobacco litigation other than obligations to firm shareholders.” Id. SMBD paid Plaintiffs through regular quarterly payments.

During and after the tobacco litigation, Defendants were involved in attorney fee disputes with Alwyn Luckey and William Roberts Wilson, both of whom claimed damages from fees earned in earlier asbestos litigation. Luckey and Wilson also both sought a portion of Defendants’ tobacco attorney fees under a constructive trust theory, i.e., they should recover a portion of Defendants’ tobacco attorney fees because (they claimed) Scruggs and SMBD used asbestos fees due them to finance the tobacco litigation. See Compl., at ¶¶ 14 and 22. Without dispute, attorney fees and expenses incurred in defense of these suits which sought recovery of Defendants’ tobacco funds constituted “obligations by [the] firm in connection with tobacco litigation” properly deducted from the gross tobacco fees received by SMBD to calculate “net fees” due Plaintiffs. Id., at ¶ 14.

In July 2005, the United States District Court for the Northern District of Mississippi resolved the Luckey litigation by entering a $19.5 million judgment in favor of Luckey and againstDefendants and other entities. Id., at ¶ 15. To satisfy the judgment, SMBD obtained a loan and allocated responsibility for repaying that loan to various persons who received quarterly attorney fee payments from SMBD, including Plaintiffs. SMBD advised Plaintiffs in 2005 that it would deduct an equal amount ($31,155.00) from each payment for the next twenty quarters. Id., at ¶ 16.

Richard Scruggs and SMBD retained Joey Langston, an attorney, as one of their legalcounsel in the Wilson litigation. According to Plaintiffs, Langston used a portion of the attorney fees paid to him by SMBD in 2006 to compensate Ed Peters, another attorney, for improperly influencing Judge Bobby DeLaughter, the state circuit court judge presiding in the Wilson litigation. Id., at ¶¶ 22 and 26. SMBD deducted the Langston attorney fees from the gross tobacco fees before calculating Plaintiffs’ net quarterly payment. Id. at ¶ 27.

In September, Plaintiffs filed their Complaint seeking, among other things, compensatory and punitive damages for the 2005 Luckey allocation and for the attorney fees paid to the Langston Law Firm in 2006…

With that background as context, the Memorandum addresses the basis for moving to dismiss the RICO claim:

Plaintiffs attempt to turn a breach of contract claim (“You failed to pay me money that you owed me.”) into predicate acts of mail or wire fraud (“You committed mail fraud because the amount you did pay me fraudulently implied that you didn’t owe me anything else.”). Plaintiffs’ RICO Statement, which baldly claims that predicate acts were committed when “funds were wrongfully withheld from the Plaintiffs and instead paid to Joey Langston for the bribery of public officials”, further illustrates this problem. RICO Statement, at ¶ 5(C). In the end, Plaintiffs merely claim that Defendants failed to pay all the monies due them. Plaintiffs may have a contract remedy, but not a RICO remedy.

Notably, although Plaintiffs allege that they objected to the amount that was paid to Langston, they do not deny that Langston provided legal services in the Wilson matter or that attorney fees and expenses incurred in the defense of the Wilson matter were tobacco-related obligations. Compl., at ¶ 22. Simply put, Plaintiffs’ indignant protestations ignore the fact that all legal services rendered in defense of tobacco settlement funds, no matter the manner in which those services were provided, inured to their benefit and they had a direct pecuniary interest in protecting those funds. At best, Plaintiffs allege that Defendants engaged in bad acts of which Plaintiffs were beneficiaries, but that, because Plaintiffs lacked knowledge of those alleged bad acts, they were injured by them. Because Plaintiffs have failed to allege that they were injured by any predicate act, they lack standing to maintain their RICO claims against Defendants. This Court should dismiss Plaintiffs’ RICO claims…

Scruggs then points out that the federal Court’s jurisdiction is based on the RICO claim and that claims under State law are subject to the Statue of Limitations:

This Court’s original federal subject matter jurisdiction over this matter is founded upon Plaintiffs’ federal RICO claims. See 28 U.S.C. § 1331. This Court’s jurisdiction over the rest of Plaintiffs’ claims is based solely upon supplemental jurisdiction under 28 U.S.C. § 1367. If the Court dismisses Plaintiffs’ federal law claims, this Court should also decline to exercise jurisdiction over and should instead dismiss Plaintiffs’ state law claims against Defendants…the Fifth Circuit’s “general rule” is to decline jurisdiction when all federal claims are dismissed prior to trial.

… The applicable statute of limitations for Plaintiffs’ claims related to allocation of responsibility for the Luckey judgment is three years. MISS. CODE ANN. § 15-1-49; see also Weathers v. Metropolitan Life Ins. Co., 14 So. 3d 688 at 691-92, ¶ 14 (Miss. 2009). A claim accrues on “the date the facts occurred which enable the Plaintiffs to bring a cause of action.” CitiFinancial Mortg. Co., Inc. v. Washington, 967 So. 2d 16, 19 (Miss. 2007). The statute of limitations begins to run when all the elements of a cause of action are present. Weathers, 14 So. 3d 688, at 691-92, ¶ 14. Specifically, for breach of contract, the claim accrues “at the time of breach regardless of when damages resulting from the breach occur.  First Trust Nat. Ass’n v. First Nat’l Bank of Commerce, 220 F.3d 331, 334 (5th Cir. 2000). The same rule applies to a tort claim (such as a claim for breach of fiduciary duty) which arises from the same source and the same incidents as the breach of contract claim. Id. at 335-36.

For example, in a matter where the plaintiffs complained about the terms of an installment loan agreement with a balloon payment, the statute of limitations on the plaintiffs’ contract and tort claims commenced when the plaintiffs had notice of the terms of the contract and not as each payment came due. Washington, 967 So. 2d at 19. Similarly, the continued ill effects of a breach of duty based on a single distinct event do not cause new limitations periods to commence as those effects occur. Each separate act over a period of time of withholding monies allegedly due does not constitute a separate and independent breach or cause of action if the withholdings are merely damages deriving from a single earlier event. See, e.g., Brown Park Estates-Fairfield Development Co. v. U.S., 127 F.3d 1449, 1456-57 (Fed. Cir. 1997); see also Oenga v. U.S., 83 Fed. Cl. 594, 615-16 (2008) (“series of deleterious effects” from single event does not give rise to independent damages creating new claims).

In the present case, Plaintiffs admit knowing unequivocally in July 2005 that Defendants had allocated to them responsibility for satisfying a portion of the Luckey judgment. Plaintiffs protested the allocation as a breach of the terms of their written agreement for payment of attorney fees from the tobacco litigation and demanded that Defendants cure the breach. Defendants refused and advised Plaintiffs that the only manner by which Plaintiffs could resolve the issue was litigation. Defendants then wrote Plaintiffs in November 2005, again advising of Defendants’ analysis of the Luckey judgment and their interpretation of the written agreement. Defendants provided Plaintiffs with an accounting which reflected the continued deduction from Plaintiffs’ next twenty quarterly payments to satisfying their portion of the Luckey judgment. There was only one act of alleged breach – – – the decision to charge Plaintiffs with a portion of the Luckey judgment and the loan obtained to satisfy that judgment.

This alleged breach occurred in July 2005. Defendants clearly and plainly advised Plaintiffs by oral and written statements of the conflicting interpretation of the fee agreement and of the “continued ill effects” which would occur each quarter until 2010. Defendants confirmed their position each quarter when they deducted $31,155.00 from each of Plaintiffs’ quarterly payments through 2006, 2007 and 2008.

The statute of limitations commenced running in July 2005 and certainly no later than November 2005. Under Mississippi law, November 2008 was the latest possible deadline for commencing Plaintiffs’ claims related to allocation of responsibility for the Luckey judgment. Plaintiffs’ claims stated in their Complaint in this action (filed on September 9, 2009) are time barred. This Court should dismiss Plaintiffs’ claims related to the Luckey judgment.

The practice of law is subject to twists and turns unanticipated by those of us who are not attorneys.  Yet, even without the Motion to Dismiss to consider, an untrained eye could see  the “factual basis” of the lawsuit filed by the attorney-plaintiffs in this case was nothing more than the greed of two lottery winners unprepared for windfall wealth.