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Egana v. Blair's Bail Bonds, Inc.

United States District Court, E.D. Louisiana

June 1, 2018

RONALD EGANA ET AL.
v.
BLAIR'S BAIL BONDS INC. ET AL.

         SECTION “H”

          ORDER AND REASONS

          JANE TRICHE MILAZZO UNITED STATES DISTRICT JUDGE

         Before the Court are a Motion to Dismiss filed by Bankers Insurance Company, Inc., Bankers Surety Services, Inc., and Bankers Underwriters, Inc. (the “Bankers Defendants”) (Doc. 43); a Motion to Dismiss filed by Blair's Bail Bonds, Inc. and New Orleans Bail Bonds, LLC (the “Blair's Defendants”) (Doc. 44); and a Motion to Dismiss filed by A2i LLC, Alternative to Incarceration NOLA, Inc., and Alternative to Incarceration, Inc. (the “A2i Defendants”) (Doc. 45). For the following reasons, the Motions are GRANTED IN PART.

         BACKGROUND

         In June 2016, Plaintiffs, Ronald Egana, his close friend Tiffany Brown, and his mother Samantha Egana, signed a contract and payment agreement with the Blair's Defendants in order to secure bail for Mr. Egana. The agreement provided that the Blair's Defendants would post bail in exchange for a $3, 275.00 premium to be loaned to Plaintiffs and paid back in installments. Plaintiffs were also required to consent to having their payments applied to the preexisting balance that Mr. Egana owed to Defendants, which amounted to about $3, 800.00. The Bankers Defendants acted as surety on the bonding agreement.

         As a condition of the loan, Defendants required Mr. Egana to wear an ankle monitor, and he was charged a fee of $10 per day by the A2i Defendants in connection with the use of the ankle monitor. Although Plaintiffs allege that they were initially told that the ankle monitor would be removed after they paid $3, 000.00, they were later told that the insurance company, the Bankers Defendants, had “changed its mind” and would require that Mr. Egana wear the ankle monitor longer.

         Plaintiffs' First Amended Complaint (hereinafter “Complaint”) alleges that following the agreement, Defendants threatened, harassed, and kidnapped Mr. Egana in an effort to extort payments from him and the other Plaintiffs. They allege that Defendants employed bounty hunters to threaten and coerce payments of bail bonding fees and ankle monitoring fees. For instance, Plaintiffs allege that on three seperate occasions, bounty hunters picked Mr. Egana up, handcuffed him, brought him to the Blair's office, and called his mother threatening that he would be brought to jail if she did not immediately bring payment of some amount owed pursuant to the bonding agreement. Plaintiffs allege that Mr. Egana would not be released by the bounty hunters until his mother tendered payment. Plaintiffs allege that Mr. Egana was even detained on his way to a court hearing in an unrelated criminal matter. Plaintiffs ultimately paid more than $6, 000 to the Defendants, and Mr. Egana was nonetheless surrendered to the court. Plaintiffs allege that they were told that Mr. Egana was surrendered because “the insurance company decided they [didn't] want to have anything to do with [Mr. Egana] anymore.”

         Plaintiffs contend that the bonding agreement violated state and federal law by failing to disclose key terms of the loan and charging above the limit allowed by state law on bail bond premiums. Plaintiffs bring claims for violations of the Truth in Lending Act (“TILA”), the Racketeer Influenced and Corrupt Organizations Act (“RICO”), the Louisiana Racketeering Act, and for false imprisonment, conversion, breach of state contract laws, and violation of state consumer credit laws. Plaintiffs seek to represent others who are similarly situated and to obtain damages, equitable relief, attorneys' fees, and costs.

         The Blair's Defendants have moved for dismissal of Plaintiffs' RICO, Louisiana Racketeering, and TILA claims against them. The Bankers Defendants and A2i Defendants separately move for dismissal of all claims against them. This Court will consider each cause of action in turn.

         LEGAL STANDARD

         To survive a Rule 12(b)(6) motion to dismiss, a plaintiff must plead enough facts “to state a claim for relief that is plausible on its face.”[1] A claim is “plausible on its face” when the pleaded facts allow the court to “draw reasonable inference that the defendant is liable for the misconduct alleged.”[2]A court must accept the complaint's factual allegations as true and must “draw all reasonable inferences in the plaintiff's favor.”[3] The court need not, however, accept as true legal conclusions couched as factual allegations.[4] To be legally sufficient, a complaint must establish more than a “sheer possibility” that the plaintiff's claims are true.[5] If it is apparent from the face of the complaint that an insurmountable bar to relief exists and the plaintiff is not entitled to relief, the court must dismiss the claim.[6] The court's review is limited to the complaint and any documents attached to the motion to dismiss that are central to the claim and referenced by the complaint.[8]

         LAW AND ANALYSIS

         A. RICO Claims

         Plaintiffs bring three claims alleging violations of RICO and Louisiana's racketeering laws: (1) a RICO claim based on collection of unlawful debt, (2) a RICO claim based on kidnapping, extortion, and extortionate extension of credit, and (3) a racketeering claim under Louisiana law. “In order to state a claim under 18 U.S.C. § 1962, a plaintiff must allege: 1) the conduct; 2) of an enterprise; 3) through a pattern; 4) of racketeering activity.”[9] All Defendants allege that Plaintiffs' Complaint fails to establish an enterprise or a pattern of racketeering activity.

         1. An Enterprise

         RICO defines “enterprise” as “any individual, partnership, corporation, association, or other legal entity, and any union or group of individuals associated in fact although not a legal entity.”[10] Therefore, “a RICO ‘enterprise' can be either a legal entity or an ‘association in fact' enterprise.”[11] Plaintiffs allege that Defendants have formed an association-in-fact enterprise. The Supreme Court has held that, “From the terms of RICO, it is apparent that an association-in-fact enterprise must have at least three structural features: a purpose, relationships among those associated with the enterprise, and longevity sufficient to permit these associates to pursue the enterprise's purpose.”[12] It reiterated that “an association-in-fact enterprise is ‘a group of persons associated together for a common purpose of engaging in a course of conduct.'”[13]

         Defendants argue that Plaintiffs' Complaint fails to allege sufficient facts to establish an association-in-fact enterprise among the Blair's Defendants, Bankers Defendants, and A2i Defendants. Specifically, they complain that Plaintiffs have failed to identify the hierarchical structure of the enterprise. The Supreme Court has, however, expressly held that RICO does not require such. An association-in-fact enterprise “need not have a hierarchical structure or a ‘chain of command'; decisions may be made on an ad hoc basis and by any number of methods-by majority vote, consensus, a show of strength, etc.”[14]Plaintiffs' Complaint alleges that:

118. Blair's meets with potential clients to extend bail bonds and credit for bail bonding fees. Working in part through its alter ego New Orleans Bail Bonds, Blair's requires principals and indemnitors to sign the contract documents, and requires principals to wear and sign contracts for ankle monitors. Blair's employs and/or contracts with bounty hunters who seize and detain principals to coerce payment of bail bonding fees and ankle monitoring fees in violation of state law and regulation. Blair's communicates how much money is necessary to secure their release, tells them to call friends and family to bring the money, collects the money, and releases the person once it is paid. Blair's then distributes the money to the other enterprise members and others. . . .
120. Bankers provides the insurance used to secure the bond with the court. It participates in setting the terms of the contracts signed by principals and indemnitors, identifying individuals who are behind in payments and need to pay, deciding how much money must be collected from individuals to avoid jail, deciding when to install or remove ankle monitors, and determining when to surrender principals to jail. . . .
122. A2i provides the GPS ankle monitoring services used to monitor the location of defendants and find them to be seized. It also determines the ankle monitoring fees that will be collected by Blair's and A2i and employs and/or contracts with bounty hunters who seize and detain principals to coerce payment of ankle monitoring fees in violation of state and federal law.[15]

         Plaintiffs' allegations are sufficient to allege an association-in-fact between the Defendants. The facts alleged support a continuing relationship with the common purpose of providing bail bonds and collecting exorbitant fees through threats and coercion. The Bankers Defendants are alleged to participate in the decision-making of the enterprise, while the Blair's Defendants, with the help of the ankle monitors supplied by the A2i Defendants, kidnap and hold clients to extort payments owed to both the Blair's and A2i Defendants. These allegations, viewed in a light most favorable to the Plaintiffs, are sufficient to establish an enterprise under RICO.

         2. A Pattern

         Defendants next argue that Plaintiffs have failed to establish a pattern of racketeering activity or threat of future conduct. In support of this argument, Defendants point out that Plaintiffs' Complaint only details the facts relating to one bail bond issued for Ronald Egana. In order to establish a pattern of racketeering activity, Plaintiff must show “two or more predicate criminal acts that are (1) related and (2) amount to or pose a threat of continued criminal activity.”[16]

         Plaintiffs have alleged that the Bankers Defendants, directly and through their agent the Blair's Defendants, and the A2i Defendants have engaged in the predicate acts of kidnapping, extortion, and the collection of an unlawful debt. Defendants argue, however, that Plaintiffs' allegations fail to show continuity. “Continuity is both a closed- and open-ended concept, referring either to a closed period of repeated conduct, or to past conduct that by its nature projects into the future with a threat of repetition.”[17] “A party alleging a RICO violation may demonstrate continuity over a closed period by proving a series of related predicates extending over a substantial period of time. Predicate acts extending over a few weeks or months and threatening no future criminal conduct do not satisfy this requirement.”[18] If a substantial period of time cannot be established, “liability depends on whether the threat of continuity is demonstrated.”[19] “[T]he threat of continuity may be established by showing that the predicate acts or offenses are part of an ongoing entity's regular way of doing business.”[20]

         All of the predicate acts alleged by Plaintiffs occurred in relation to a single bail bond for Plaintiff Ronald Egana and took place over only six months.[21]This time frame is insufficient to establish continuity. Plaintiffs' Complaint also fails to establish a threat of continuity. There is no continued threat as to Mr. Egana, as the Complaint alleges that he was surrendered to jail. Despite making conclusory allegations, Plaintiffs have also not alleged any facts that would suggest that the predicate acts are a regular way of conducting business or that any other customers of Defendants were subjected to similar acts of kidnapping, extortion, or collection of unlawful debts. Accordingly, Plaintiffs have not sufficiently alleged an element of their RICO and Louisiana Racketeering law claims against the Defendants, and those claims are dismissed.

         B. TILA Claims

         Plaintiffs next bring claims under the Truth in Lending Act against the Blair's Defendants and the Bankers Defendants. These Defendants move for dismissal of Plaintiffs' TILA claims under several theories. First, they argue that Plaintiffs' TILA claims are preempted by the McCarran-Ferguson Act. Second, they argue that TILA does not apply to the transaction at issue here. Finally, the Bankers Defendants argue that they are not a “creditor” under the terms of TILA.

         1. MFA Preemption

         Defendants argue that Plaintiffs' TILA claims should be dismissed because they are preempted by the McCarran-Ferguson Act (“MFA”). TILA is a disclosure statute requiring the disclosure of certain credit terms in credit transactions.[22] The MFA is a federal law that exempts the business of insurance from federal regulation.[23] The MFA states that “[n]o Act of Congress shall be construed to invalidate, impair, or supersede any law enacted by any State for the purpose of regulating the business of insurance.”[24] The parties agree that under the MFA, “a state law reverse preempts federal law only if: (1) the federal statute does not specifically relate to the ‘business of insurance;' (2) the state law was enacted for the ‘purpose of regulating the business of insurance;' and (3) the federal statute operates to ‘invalidate, impair, or supersede' the state law.”[25]

         The parties agree that it is well-settled that TILA does not specifically relate to the business of insurance.[26] They disagree, however, as to the second two prongs. The fundamental disagreement here is whether Defendants' activities constitute the “business of insurance.” Defendants argue that Louisiana law provides a comprehensive statutory scheme regulating the business of bail bonding in its insurance code. They therefore argue that the bail bonding business is the “business of insurance, ” and the MFA therefore preempts TILA's application. Plaintiffs argue that Defendants' activities at issue here-namely the extension of credit for the bail bonding premium-do not constitute the “business of insurance, ” and rather, constitute the financing of insurance premiums.

         The Fifth Circuit has held that “premium financing by an insurance company in connection with the sale of an insurance policy is not the ‘business of insurance' for McCarran Act purposes, and that TIL is thus applicable to such a loan transaction.”[27] Defendants argue that this holding is inapplicable here where they are not in the business of financing or extending credit.[28] The Fifth Circuit also expressly stated, however, that “[t]he appropriate focus is . . . the nature of the activity itself, not the type of business that is conducting it.”[29] It further noted that, “It would be anomalous to hold that [an insurance company's] premium financing activities are the ‘business of insurance' but that the identical activities of the finance company . . . are not.”[30] Here too, it does not make sense that Defendants' financing activities should be immune from TILA merely because they are conducted in the context of bail bonding. Further, Defendants have pointed to no provision in Louisiana's bail bond regulations that governs the financing of bail bond premiums or the extension of credit in bail bond transactions. Therefore, no law would be “invalidated, impaired, or superseded” by the application of TILA's disclosure requirements. Accordingly, the MFA does not preempt Plaintiffs' claims under TILA.

         2. ...


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