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Smith v. First Century Bank

March 29, 2007

BOYD SMITH, NANCY SMITH, JOEY SMITH, JEFFREY SMITH, JILL SMITH, BESSIE HACKNEY, WILLIAM GRAY, PEGGY GRAY, GREGORY HOUSTON, ERNEST NICELY, AND PATRICIA NICELY, PLAINTIFFS
v.
FIRST CENTURY BANK, CONNIE DYER, SHERI LAWSON, AND DELORIS GRAVES, DEFENDANTS AND FIRST CENTURY BANK, COUNTER-PLAINTIFF
v.
BOYD SMITH, NANCY SMITH, JOEY SMITH AND JEFFREY SMITH, COUNTER-DEFENDANTS



The opinion of the court was delivered by: James H. Jarvis United States District Judge

MEMORANDUM OPINION

This now consolidated action was filed as the result of allegedly fraudulent activity by defendant First Century Bank (FCB) and four of its former employees, defendants Connie Dyer, Sheri Lawson, Deloris Graves, and Karen Williams*fn1 [see Doc. 193]. Very generally, plaintiffs allege that these defendants, without permission, used plaintiffs' identities and/or financial information to issue loans, obtain credit, transfer funds, transfer property interests, and undertook other financial transactions during the period from early 1992 through early 2004. This action seeks compensatory, punitive and statutory damages, as well as injunctive and equitable relief, pursuant to federal and state law as follows:

(1) Violation of the Racketeer Influenced and Corrupt Organizations Act (civil RICO), 18 U.S.C. §§ 1961, et seq. (Count I);

(2) Violation of the federal Consumer Credit Protection Act, 15 U.S.C. § 1681s-2 (Count II);

(3) Violation of federal statutes and regulations to protect the confidentiality of consumer information (Count III);

(4) Violation of the Tennessee Identity Theft Deterrence Act of 1999, Tennessee Code Annotated §§ 47-18-2001, et seq. (Count IV);

(5) Violation of the Tennessee Consumer Protection Act, Tennessee Code Annotated §§ 47-18-101, et seq. (Count V);

(6) Violation of the Tennessee Financial Records Privacy Act, Tennessee Code Annotated §§ 45-10-101, et seq. (Count VI);

(7) Breach of fiduciary duty (Count VII);

(8) Conversion (Count VIII);

(9) Negligence (Count IX); and

(10) Violation of the federal Consumer Credit Protection Act, 15 U.S.C. §§ 1601, et seq. (Count XI).*fn2

This matter is presently before the court on FCB's motion for partial summary judgment with respect to the civil RICO counts (Counts I) of the [corrected] consolidated amended complaints (amended complaints).*fn3 The issues raised have been well briefed by the parties [see Docs. 206-1, 222, 230, 233 (filed under seal), and 234; see also Docs. 223, 224, and 225 (all filed under seal)]. For the reasons that follow, FCB's motion will be granted, the court finding that there is no genuine issue of material fact regarding the existence of a RICO enterprise or RICO conspiracy set forth in this record so that summary judgment must be entered not only in favor of FCB but also in favor of all other defendants with respect to the civil RICO cause of action brought by plaintiffs. Moreover, because there are no other federal causes of action pending against the individual defendants aside from civil RICO, this court will decline to exercise supplemental jurisdiction over plaintiffs' state law claims against the individual defendants and those claims will be dismissed without prejudice.

I.

Boiled down to its essential elements, the civil RICO count in both amended complaints is that defendants Connie Dyer, Sheri Lawson and Deloris Graves, along with former defendant Karen Williams and other unknown FCB employees, constituted an "association-in-fact" enterprise under RICO and together controlled and operated the Maynardville Branch of FCB as a RICO enterprise. Plaintiffs also allege that FCB itself is a RICO enterprise. More specifically, plaintiffs allege that a hierarchy existed in which defendant Dyer was the leader, defendant Graves was second-in-command, and defendant Lawson and former defendant Williams had control of some activities of the enterprise, but primarily followed the lead of Dyer and Graves. Plaintiffs further allege that defendants Dyer, Graves, and Lawson obtained funds from their racketeering activity and invested them in "their enterprise" [see Doc. 193, pp. 86 and 135]; that through their pattern of racketeering activity, they acquired or maintained an interest in or control of FCB, as well as their association-in-fact enterprise; that defendants Graves, Dyer, and Lawson controlled and operated the Maynardville Branch of FCB through a pattern of racketeering activity, along with their association-in-fact enterprise; and that defendants Dyer, Graves and Lawson, along with other FCB representatives including Karen Williams, conspired to engage in racketeering activity and to commit other RICO violations. Plaintiffs allege that FCB, through its managing agents Graves and Dyer, operated its Maynardville Branch through a pattern of racketeering activity, and that FCB became a participant in the RICO enterprise by attempting to conceal all of this fraudulent activity after it was discovered in the summer of 2004.

In Counts I of the amended complaints, plaintiffs bring a cause of action against all defendants based on violations of 18 U.S.C. §§ 1962(a)-(d) pursuant to 18 U.S.C. §1964(c)*fn4 . Sections 1962(a)-(d), entitled "Prohibited activities" provide:

(a) It shall be unlawful for any person who has received any income derived, directly or indirectly, from a pattern of racketeering activity ... to use or invest, directly or indirectly, any part of such income, or the proceeds of such income, in acquisition of any interest in, or the establishment or operation of, any enterprise which is engaged in, or the activities of which affect, interstate or foreign commerce. ...

(b) It shall be unlawful for any person through a pattern of racketeering activity ... to acquire or maintain,

directly or indirectly, any interest in or control of any enterprise which is engaged in, or the activities of which affect, interstate or foreign commerce.

(c) It shall be unlawful for any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise's affairs through a pattern of racketeering activity ... .

(d) It shall be unlawful for any person to conspire to violate any of the provisions of subsection (a), ...


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