The opinion
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
ROBERT W. SCHEFFY JR., ET AL. * CIVIL ACTION NO. 23-565
*
* DIVISION 1
VERSUS *
* MAGISTRATE JUDGE
* JANIS VAN MEERVELD
JOEL LYONS, ET AL. *
*
*********************************** *
ORDER AND REASONS
This lawsuit arises out of a business deal for the purchase, renovation, and sale of certain
buildings in New Orleans. Before the Court are Chandelier Development Inc.’s Motion to Dismiss
Plaintiffs’ Complaint Pursuant to Rule 12(b)(2) (Rec. Doc. 17); Joel Lyons, Chandelier
Development Inc., and Chandelier Development NOLA LLC’s Partial Motion to Dismiss
Plaintiffs’ Complaint Pursuant to Rule 12(b)(6) (Rec. Doc. 18); and Mark Larimore and RAM
Enterprises, Inc.’s Motion to Dismiss Plaintiffs’ Complaint (Rec. Doc. 19).
Plaintiffs have failed to allege sufficient facts to state a claim under the federal Racketeer
Influenced and Corrupt Organizations Act or Louisiana’s Racketeering Law. These claims must
be dismissed. Plaintiffs’ claims for civil conspiracy, fraudulent inducement, conversion, and
detrimental reliance are prescribed because plaintiffs knew or should have known by March 2021
of their potential tort claims. These claims must be dismissed with prejudice. Plaintiffs’ suit on
open account is also prescribed because it was filed more than three years after payment was due.
This claim must be dismissed with prejudice. Plaintiffs have failed to plead sufficient facts to state
a claim for bad faith breach of contract. This claim must be dismissed. Plaintiffs have failed to
state a claim for unjust enrichment because they have other remedies available. These claims must
be dismissed with prejudice. Plaintiffs have failed to plead sufficient facts to establish liability of
Chandelier Development Inc. as part of a single business enterprise or the liability of Lyons as an
alter ego of Chandelier Development NOLA, LLC, or Chandelier Development Inc. These claims
must be dismissed.
Accordingly and for the following reasons, the Chandelier Defendants’ Partial Motion to
Dismiss (Rec. Doc. 18) is GRANTED; Chandelier Development, Inc.’s Motion to Dismiss
Pursuant to Rule 12(b)(2) (Rec. Doc. 17) is DENIED as moot; and the Larimore Defendants’
Motion to Dismiss (Rec. Doc. 19) is GRANTED.
Background
As noted, this lawsuit arises out of a business deal to purchase, renovate, and sell real estate
for profit. Plaintiffs Robert W. Scheffy, Jr. (“Rob Jr.”), Robert W. Scheffy III (“Robert III”), and
Scheffy Construction, LLC allege they were defrauded by the defendants—Joel Lyons, Chandelier
Development Inc. (“Chandelier TN”), Chandelier Development NOLA LLC (“Chandelier
NOLA”), Mark Larimore, and RAM Enterprises, Inc., d/b/a RAM Floors—into investing in the
project. Despite defendants’ promises, the plaintiffs say they were only paid a portion of the sums
due for their construction and maintenance work. And Rob Jr. was never returned his $125,000
investment or the interest purportedly due thereon. Further, plaintiffs say that none of them have
seen the share of profits they are allegedly owed. It appears that only one part of the deal—
construction and renovation of the property at 628 Esplanade by Scheffy Construction—was ever
made subject to a formal, written contract.
According to the plaintiffs, the deal between the parties was presented to Robert III and/or
Scheffy Construction by email on July 8, 2016.1 It was suggested that a limited liability company
would be set up to obtain financing from a bank, purchase the property, and contract with Scheffy
1 The Complaint does not identify who sent the email, but Plaintiff’s RICO Case Statement, filed in accordance with
this Court’s Standing RICO Order, asserts that Lyons was the author of the email.
Construction for the construction work. This contract would include an agreement “for profit share
on the performance of the project.” Rob Jr. and the sender of the email “would have a separate
agreement with each investor and agreement on return on their investments.” Two properties
across the street from each other at 625 and 628 Esplanade Avenue would be purchased, although
the Complaint does not indicate how or when this was communicated or who was involved in the
communication. Plaintiffs also say that defendants estimated profits of between $2.8 million and
$3.2 million in an effort to induce them to agree to the deal, although again, they do not specify
who provided the estimate, or when or how it was provided.2
Plaintiffs allege that Robert III agreed to provide construction services in return for 25%
of the profits and revenue. A draft of the operating agreement provided that Robert III would get
27.5% of the net profits and 12% interest on any capital contribution, although plaintiffs admit that
this operating agreement was never executed.
In August 2017, Lyons reported that cash flow was good but that they would soon need to
obtain additional capital sources. In December 2017, the defendants reached out to Rob Jr. to
discuss an investment of $125,000 into the deal. Defendants agreed to prepare documentation.
Although no such documentation was ever provided, Rob Jr. provided a check for $125,000 to the
defendants. He claims he was supposed to receive 25% of the profits and revenue or, at the very
least, the payment back of his contribution with interest. The Complaint does not allege who agreed
to this return on investment, when, or how. According to plaintiffs’ RICO Case Statement, Lyons
told Rob Jr. a year later in December 2018 that he considered the investment a capital contribution,
and in a June 2019 email, Lyons stated that the investment earns 12% annually.
2 Around the same time—March 2017—plaintiffs assert in their RICO Case Statement that Lyons began pushing
Robert III to bring his father, Rob Jr., into the deal.
Plaintiffs allege that Chandelier NOLA purchased 625 Esplanade in August 2016 for
$300,000 with the intent of having Scheffy Construction renovate and/or construct condominiums
in the building for re-sale and profit. Instead, Chandelier NOLA sold the building prior to any
construction or renovation in December 2019 for $500,000. Plaintiffs allege that prior to the sale,
they and the defendants entered into a sharing agreement3 pursuant to which Robert III/Scheffy
Construction would receive $50,000 in profit, Rob Jr., would receive $50,000 in profit, and the
remaining $100,000 in profit would go to the defendants. But defendants have never paid the
amounts due to “Scheffy.”4
Plaintiffs allege that Chandelier NOLA purchased 628 Esplanade in August 2016 for
$1,527,800 with the intent of having Scheffy Construction renovate and/or construct
condominiums in the building for re-sale and profit. Scheffy Construction executed a contract with
Chandelier NOLA to perform construction work on 628 Esplanade (the “Construction Contract”).
Plaintiffs say that Robert III reduced Scheffy’s fee on the Construction Contract from 15% to 12%
to reduce costs.
According to plaintiffs’ RICO Case Statement, Chandelier NOLA issued twelve checks to
Scheffy Construction between July 2017 and September 2018, for payments totaling
approximately $950,000. Scheffy Construction submitted its Final Payment Application in
September 2018, and the final inspection was completed in December 2018. Rob Jr.—an
attorney—allegedly provided legal services in connection with subdividing 628 Esplanade into
condominiums. Robert III and/or Scheffy Construction allege they provided property management
services in an effort to prepare 628 Esplanade for development, construction, and maintenance.
3 Plaintiffs do not allege whether the alleged sharing agreement was reached orally or in writing.
4 It is unclear whether plaintiffs mean all of the plaintiffs by “Scheffy” or whether they mean only Scheffy
Construction.
On April 30, 2020, Scheffy Construction provided the defendants with a written demand
for payment of the Final Payment Application. Yet no payment has been made. Plaintiffs allege a
balance of $240,642, plus interest, remains outstanding.5
Plaintiffs allege further that the defendants did not sell 628 Esplanade as they had promised.
Instead, they leased out the four condominium units beginning in October 2019. Plaintiffs believe
rents of $700,000 have been collected to date. Plaintiffs insist that they are entitled to 50% of the
revenues or profits from the leases. But they have not been paid any portion.
Plaintiffs filed this lawsuit on February 14, 2023. Plaintiffs attempt to assert claims against
all defendants under the Racketeer Influenced and Corrupt Organization Act (“RICO”), 18 U.S.C.
§ 1964(c). They allege that defendants fraudulently induced them to contribute money, legal
services, property management services, and construction services to the defendants’ scheme.
Plaintiffs allege that they would press the defendants for paperwork to evidence the parties’
agreements, but they were ignored. They say that every promise and agreement between plaintiffs
and defendants was broken, obfuscated, or breached. They claim $240,642 plus interest at an
annual rate of 12% remains owing under the Construction Contract. They claim the defendants
failed to pay Robert III $25,000 for property management services. And they say that the
defendants failed to pay profits from the sale of 625 Esplanade and from the leases on 628
Esplanade to Scheffy and failed to return $125,000 to Rob Jr. They say that the defendants
continued to promise plaintiffs they would be paid for their work and investments until March
2021.
Scheffy Construction also asserts a claim for breach of contract against Chandelier NOLA,
along with a bad faith breach of contract claim. It also asserts a suit on open account against
5 Robert III and/or Scheffy Construction allege they have received payments of $1,040,646.29 for their work on both
properties.
Chandelier NOLA for a past due balance of $240,642, plus interest. All plaintiffs assert a claim
for unjust enrichment and a claim for detrimental reliance against all defendants. They also allege
that Chandelier NOLA and Chandelier TN constitute a single business enterprise. They allege
further that Chandelier NOLA and/or Chandelier TN are the alter egos of Lyons. Rob Jr. also
asserts, in the alternative, a claim for breach of contract against Chandelier NOLA arising out of
his alleged $125,000 loan.
Plaintiffs allege that as a result of defendants’ fraudulent acts, breaches of contract, and
RICO violations, defendants are liable to plaintiffs for approximately $715,642.
On March 30, 2023, defendants appeared and filed motions to dismiss. Chandelier TN
seeks dismissal under Rule 12(b)(2) for lack of personal jurisdiction. Lyons, Chandelier
Development and Chandelier NOLA (collectively the “Chandelier Defendants”) seek dismissal of
all plaintiffs’ claims against them, except for the claim for breach of the Construction Contract,
pursuant to Rule 12(b)(6).6 Defendants Larimore and RAM Enterprises (collectively the “Larimore
Defendants”) seek dismissal of all claims against them pursuant to Rule 12(b)(6).
Law and Analysis
1. Rule 12(b)(6) Motion to Dismiss
a. Standard
“[W]hen the allegations in a complaint, however true, could not raise a claim of entitlement
to relief, this basic deficiency should be exposed at the point of minimum expenditure of time and
money by the parties and the court.” Cuvillier v. Taylor, 503 F.3d 397, 401 (5th Cir.
2007) (quotation marks and ellipsis omitted). Accordingly, Rule 12(b)(6) allows a defendant to
6 The Chandelier Defendants argue “this is a breach of contract action, plain and simple” and “recognizing what this
suit is, the Chandelier Defendants do not seek dismissal of plaintiff’s breach of contact claims against Chandelier
NOLA.” Rather, they “seek dismissal of all the absurd or extraneous or untimely claims asserted in Counts I-III and
V-XII of plaintiffs’ complaint.” They advise they will be filing a counterclaim themselves, against the plaintiffs.
move for expeditious dismissal when a plaintiff fails to state a claim upon which relief can be
granted. In ruling on a 12(b)(6) motion, “[t]he court accepts all well-pleaded facts as true, viewing
them in the light most favorable to the plaintiff.” In re Katrina Canal Breaches Litigation, 495 F.3d
191, 205 (5th Cir. 2007) (internal quotation marks omitted). Further, “[t]o survive a Rule
12(b)(6) motion to dismiss, the plaintiff must plead enough facts to state a claim to relief that is
plausible on its face. Factual allegations must be enough to raise a right to relief above the
speculative level.” Id. (citation, footnote, and quotation marks omitted). On that point, the United
States Supreme Court has explained:
A claim has facial plausibility when the plaintiff pleads factual content that allows
the court to draw the reasonable inference that the defendant is liable for the
misconduct alleged. The plausibility standard is not akin to a “probability
requirement,” but it asks for more than a sheer possibility that a defendant has acted
unlawfully. Where a complaint pleads facts that are merely consistent with a
defendant's liability, it stops short of the line between possibility and plausibility of
entitlement to relief.
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citations and quotation marks omitted).
“In considering a motion to dismiss for failure to state a claim, a district court must limit
itself to the contents of the pleadings, including attachments thereto.”
Collins v. Morgan Stanley Dean Witter, 224 F.3d 496, 498 (5th Cir. 2000). The Fifth Circuit has
recognized that the court may also consider documents attached to a motion to dismiss by the
defendant if they are referred to in the plaintiff’s complaint and central to her claim. Id. at 498-
99; see Villarreal v. Wells Fargo Bank, N.A., 814 F.3d 763, 766 (5th Cir. 2016).
In addition, Federal Rule of Civil Procedure 9(b) requires that “[i]n alleging fraud or
mistake, a party must state with particularity the circumstances constituting fraud or mistake.”
However, “[m]alice, intent, knowledge, and other conditions of a person's mind may be alleged
generally.” Id. “The particularity standard of Rule 9(b) generally requires the plaintiff to plead the
time, place, and contents of the false representation and the identity of the person making the
representation.” United States v. Bollinger Shipyards, Inc., 775 F.3d 255, 260 (5th Cir. 2014). This
standard “ensures the complaint ‘provides defendants with fair notice of the plaintiffs’ claims,
protects defendants from harm to their reputation and goodwill, reduces the number of strike suits,
and prevents plaintiffs from filing baseless claims then attempting to discover unknown wrongs.’”
U.S. ex rel. Grubbs v. Kanneganti, 565 F.3d 180, 190 (5th Cir. 2009) (quoting Melder v. Morris,
27 F.3d 1097, 1100 (5th Cir. 1994)).
b. RICO
“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.” Elliott v. Foufas, 867 F.2d
877, 880 (5th Cir. 1989). “[A] RICO plaintiff must plead the specified facts as to each defendant.
It cannot avoid Rule 12(b)(6) by ‘lumping together the defendants.’” In re Mastercard Int'l Inc.,
132 F. Supp. 2d 468, 476 (E.D. La. 2001) (quoting Goren v. New Vision Int'l, 156 F.3d 721, 730
(7th Cir. 1998)).
Here, defendants challenge the sufficiency of plaintiffs’ complaint as to racketeering
activity, pattern, and the existence of an enterprise. The Larimore Defendants also argue that the
complaint fails to allege sufficient facts to implicate them at all.
i. Racketeering Activity: Predicate Acts
Predicate acts are the criminal acts listed in the statute’s definition of “racketeering
activity,” 18 U.S.C. 1961(1), which serve as the predicate for a RICO violation. See 1 Civil RICO
¶ 2.01 (2023) Lexis Nexis. Here, the alleged predicate acts are mail fraud (18 U.S.C. §13417) and
7 Mail fraud is when “Whoever, having devised or intending to devise any scheme or artifice to defraud, or for
obtaining money or property by means of false or fraudulent pretenses, representations, or promises, or to sell, dispose
of, loan, exchange, alter, give away, distribute, supply, or furnish or procure for unlawful use any counterfeit or
spurious coin, obligation, security, or other article, or anything represented to be or intimated or held out to be such
wire fraud (18 U.S.C. § 13438). To establish these offenses, the plaintiff must show a scheme to
defraud, specific intent to defraud, and the use of the mails or wire communications, respectively,
to execute the scheme. Robinson v. Standard Mortg. Corp., 191 F. Supp. 3d 630, 639 (E.D. La.
2016). The Rule 9(b) pleading standard, requiring particularity of the circumstances constituting
the fraud, applies to the predicate acts in a RICO claim. Tel-Phonic Servs., Inc. v. TBS Int'l, Inc.,
975 F.2d 1134, 1138 (5th Cir. 1992). For example, in Tel-phonic, the Fifth Circuit found
sufficiently particular the allegation that defendant wrote a letter on April 27, 1983 “with false
representations inducing plaintiffs to change the agreement to allow [defendant] to sell two new
systems to the Bell subsidiary falsely representing that [defendant] would buy back two systems
from plaintiff.” Id. at 1139. But the court found that the plaintiff’s allegations that defendants had
used the phone or mails to refuse to send personnel despite an agreement to provide technical
assistance, to “coerece payments” from the plaintiffs under an agreement that did not exist, and to
“coerce plaintiff out of its contractual benefits if plaintiff would agree to eliminate ‘certain
ambiguities,’” did not state a claim for wire fraud because they failed to identify any specific
misrepresentation of fact or false promises. Id. at 1139 n. 3.
In In re Burzynski, a doctor alleged a RICO claim against an insurer, its law firm, and its
litigation consultant arising out of the defendants’ efforts to avoid reimbursing the doctor for non-
FDA approved cancer treatment based on anti-neoplastins. 989 F.2d 733, 737 (5th Cir. 1993). Id.
counterfeit or spurious article, for the purpose of executing such scheme or artifice or attempting so to do, places in
any post office or authorized depository for mail matter, any matter or thing whatever to be sent or delivered by the
Postal Service, or deposits or causes to be deposited any matter or thing whatever to be sent or delivered by any private
or commercial interstate carrier, or takes or receives therefrom, any such matter or thing, or knowingly causes to be
delivered by mail or such carrier according to the direction thereon, or at the place at which it is directed to be delivered
by the person to whom it is addressed, any such matter or thing . . . .” 18 U.S.C. § 1341.
8 Wire fraud is when “Whoever, having devised or intending to devise any scheme or artifice to defraud, or for
obtaining money or property by means of false or fraudulent pretenses, representations, or promises, transmits or
causes to be transmitted by means of wire, radio, or television communication in interstate or foreign commerce, any
writings, signs, signals, pictures, or sounds for the purpose of executing such scheme or artifice . . . .” 18 U.S.C. §
1343.
at 737. The Fifth Circuit held the following allegations of fraud were sufficient to satisfy the
predicate acts of a RICO claim: the insurer’s letter to other insurers urging them not to reimburse
the doctor for the anti-neoplastin treatment, the law firms’ allegedly fraudulent pleadings in the
litigation to obtain reimbursement, the consultant’s false federal grant applications for a company
allegedly created to generate negative reviews for the doctor’s treatment, the provision of false
information about the doctor to federal investigators to try to initiate an investigation, and the
insurer’s denial of coverage to its own insureds for the doctor’s treatment. Id. at 742.
But certain allegations in Robinson v. Standard Mortgage Corp. were found insufficient by
the district court. 191 F. Supp. 3d 630, 639 (E.D. La. 2016). There, the plaintiff alleged RICO
claims against her mortgage company, the insurer on the insurance policy the mortgage company
force placed, and their affiliates arising out of an alleged scheme to defraud borrowers by
overcharging them for force-placed insurance. Id. at 636-37. The court found that allegations that
the defendants initiated certain mail and/or wire communications that were materially false and
misleading, without any further detail about the contents of the alleged documents, lacked the
specificity demanded by Rule 9(b). Id. at 639. The court further found that although the plaintiff
provided additional detail about other communications, the disclosures included in those
communications defeated any claim of fraud or misrepresentation therein. Id. at 640.
Here, the Chandelier Defendants argue that plaintiffs have failed to state the circumstances
constituting fraud with particularity. They argue that plaintiffs merely allege general use of email,
telephone, mail, and fax and fail to include the time, place, and contents of any false
representations. They allege that plaintiffs fail to allege which defendants made
misrepresentations. They insist that even considering the additional facts alleged in the RICO Case
Statement, it is clear that the Chandelier Defendants’ email and telephone correspondence was
nothing more than routine business communication and that their use of the mail was almost
exclusively to provide payments to Scheffy Construction. Similarly, the Larimore Defendants
argue that plaintiffs failed to allege any specific actions by either Larimore Defendant.
In response, plaintiffs insist that the allegations of their complaint meet the heightened
pleading requirements of Rule 9 because they have included the date and subject and/or contents
of several communications. They say they have alleged these communications were made by the
defendants as part of a scheme to defraud the plaintiffs and to deprive them of money and property
rights. They argue that they should not be required to detail every email, text message, and phone
call over a period of seven years. They note that it is not reasonable to expect plaintiffs to have
information or details about chain of custody of funds flowing between and among the defendants
because this information is in the hands of the defendants themselves.
Plaintiffs cite the following as establishing the necessary predicate acts:
• The July 8, 2016, email from the defendants laying out the deal.
• The defendants provided an estimate of profits to be between $2.8 and $3.2 million.
• The circulation of the draft Operating Agreement in November 2016 that included an
addendum stating that the deal entailed purchasing, renovating, and selling the properties.
• The August 11, 2017, email from Lyons to Robert III and Larimore stating that while cash
flow was good, they would soon need to obtain additional capital sources.
• On December 19, 2017, the defendants reached back out to Rob Jr. to discuss a $125,000
investment in the deal.
• On December 21, 2017, Rob Jr. responded back and discussed the contribution. The
defendants agreed that documentation would be prepared as Rob Jr. requested, but no such
documentation was ever provided.
• On December 22, 2017, Rob Jr. provided a check written out to Chandelier NOLA for
$125,000.
The Court finds these allegations are insufficient to show the necessary predicate acts. Not
one identifies a fraud or misrepresentation. Instead, they can only reasonably be interpreted as
preliminary negotiations of a legitimate business deal (e.g., the July 2016 email laying out the
structure of the deal is clearly a suggestion of what “we” may “feel like the best set up is;” the
estimate of profits is by its own description an estimate; and the email stating that cash flow was
good but additional capital would be needed contemplates some further investment). At best, the
December 2017 communications (by an unnamed defendant via an unidentified medium) to Rob
Jr. to discuss the $125,000 “investment” and representing that documentation would be provided
may amount to a breached promise as to documentation (though the plaintiffs themselves are
uncertain as to what the terms of the “investment” were meant to be). But no facts alleged could
lead to the conclusion that any of these communications were made fraudulently: even if the
statements about future documentation, future profits, and future capital needs—by their nature
not knowable with certainty—could be found false or misleading statements, there are no facts
alleged from which to conclude that such statements were intentionally so. Furthermore, not one
cited allegation mentions the Larimore Defendants with particularity and most do not identify any
specific defendant at all. The general reference to communications by “defendants” is the kind of
“lumping together” of defendants that cannot defeat a motion to dismiss. See In re Mastercard,
132 F. Supp. at 476.
The Court finds that plaintiffs have failed to allege predicate acts of its RICO claim with
sufficient particularity to survive a motion to dismiss as to any of the defendants.
ii. “Pattern” of Racketeering Activity
While the failure to allege predicate acts would, on its own, result in dismissal of the RICO
claim, plaintiffs also fail to state a “pattern” of any such predicate acts. “To prove a ‘pattern of
racketeering activity,’ a plaintiff must show at least two predicate acts of racketeering that are
related and amount to or pose a threat of continued criminal activity.” Tel-Phonic Servs., Inc. v.
TBS Int'l, Inc., 975 F.2d 1134, 1139–40 (5th Cir. 1992). Not only must plaintiff show the minimum
number of predicate acts, but plaintiff must also show the acts are “related and amount to or pose
a threat of continued criminal activity.” Id. “Predicate acts are ‘related’ if they ‘have the same or
similar purposes, results, participants, victims, or methods of commission, or otherwise are
interrelated by distinguishing characteristics and are not isolated events.’” Burzynski, 989 F.2d at
742 (quoting H.J. Inc. v. Nw. Bell Tel. Co., 492 U.S. 229, 240 (1989)).
“‘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.” H.J. Inc. v. Nw. Bell Tel. Co., 492 U.S. 229, 241 (1989). To satisfy a closed period of
continuity, the criminal acts must extend over a substantial period of time: a few weeks or months
is not enough. Id. at 242. An open period of continuity may be established where there is a specific
threat of repetition or where the predicate acts are part of an entity’s regular way of doing business.
Id. at 242-43.
For example, in World of Faith World Outreach Center Church, Inc. v. Sawyer, the plaintiff
church sued the individuals and companies involved with broadcasting a television report highly
critical of the church’s televangelist’s fundraising practices. 90 F.3d 118, 120 (5th Cir. 1996). The
report asserted that the televangelist collected millions of dollars in donations but never prayed
over the thousands of prayer requests. Id. at 121. After the broadcast, the church’s membership
and financial giving dropped sharply and numerous local, state, and federal investigations were
initiated. Id. The church alleged that the defendants sought to drive the church out of business
through a pattern of racketeering acts. Id. According to the court:
The alleged racketeering acts included interstate transportation of stolen computer
disks; theft of donations, Church mail, and other Church property by certain
defendants or by bank, mail-handling, or Church employees who had been
persuaded to help the defendants; wire fraud in the form of false statements made
during broadcasts; a scheme to deprive the Church, its bank, its mail-handling
contractor, and its law firm of the honest services of its loyal employees; and
obstruction of justice.
Id. The Fifth Circuit held that a pattern had not been shown because “[t]he alleged acts were all
part of a single, lawful endeavor—namely the production of television news reports concerning a
particular subject.” Id. at 123. Further the court rejected plaintiffs’ argument that examples from
news reports and other lawsuits by other people dissatisfied with how the defendants had portrayed
them in other news programs did not demonstrate predicate illegal acts as the defendant’s regular
way of doing business. Id. at 123-24.
Similarly, the court in Buryznski found that a pattern could not be established where a
single, otherwise lawful transaction was at issue. Id. at 742-43. As discussed above, that case
involved an alleged fraudulent scheme to put a doctor out of business. Id. at 737. The alleged acts
were found related because they concerned an alleged pattern of activity for the purpose of
avoiding paying the insurance claims for the doctor’s treatment and to put the doctor out of
business. Id. at 742. However, the court of appeals found plaintiffs had not shown continuity
because all of the acts took place over the course of the doctor’s litigation to obtain payment and
that litigation had ended. Id. at 742-43.
Here the Chandelier Defendants argue that plaintiffs have failed to allege a pattern of
racketeering activity because there are no facts alleged showing that defendants’ acts constitute or
threaten long term criminal activity. Instead, they insist that the issues raised by plaintiffs in their
complaint concern an agreement that was limited in scope—to purchase, renovate, and sell two
properties. They argue there is no specific threat of repetition. They argue further that the mere
allegation that the defendants’ plan was “likely” to shift profits into similar projects throughout
the country is conclusory and insufficient.
Similarly the Larimore Defendants argue that the actions plaintiffs complain of constitute
a legitimate and singular commercial endeavor which, like in World of Faith and Burzynski, does
not amount to a “pattern” of racketeering activity.
Plaintiffs argue that they have plead more than two predicate acts within the requisite ten
year period and that they have alleged sufficient details to establish a future threat of repetition.
They argue that the instances of alleged fraud were related, went on for several years, and showed
a regular way of doing business. They argue further that RICO liability is not limited to traditional
organized crime and extends to garden variety fraud cases. They say they have sufficiently shown
fraud occurring over several years, including multiple interrelated fraudulent real estate schemes
across multiple states.
As discussed above, the Court has already found that plaintiffs have not plead the required
predicate acts with sufficient particularity. Even if their allegations were adequately specific, no
facts alleged amount to a specific threat of repetition or could show that the acts alleged amount
to the defendants’ regular way of doing business. As defendants argue, all facts alleged here
concern a single business deal with a beginning and a certain end. This is similar to World of Faith,
where the Fifth Circuit found a pattern had not been established because the alleged acts were part
of the production of a single news program.9 90 F.3d at 123.
9 Although the plaintiffs here allege that the debts remain outstanding, the alleged bad acts of fraudulently inducing
the plaintiffs to enter the business deal have completed.
In their RICO Case statement, plaintiffs say that the defendants’ purpose was to profit off
of the services and money of the plaintiffs and “likely to invest/shift the profits in/to similar ‘deals’
and/or other companies, including Chandelier TN and RAM Floors, to flip/develop additional
properties throughout the country.” This vague allegation is not sufficient to show a pattern. In
World of Faith, the plaintiffs also sought to establish a pattern by citing news reports about and
lawsuits by other subjects of television programs created by the defendants who also complained
about how they had been portrayed. Id. at 123-24. As in World of Faith, plaintiffs’ conclusory
allegation (not even contained in the Complaint) that the defendants likely funneled money into
similar property development deals (which may or may not have involved fraud) is not sufficient
to establish continuity. Id.
iii. Enterprise
The statute defines “enterprise” as including “any individual, partnership, corporation,
association, or other legal entity, and any union or group of individuals associated in fact although
not a legal entity.” 18 U.S.C. § 1961(4). An “association in fact” must have a structure, that is “a
purpose, relationships among those associated with the enterprise, and longevity sufficient to
permit these associates to pursue the enterprise's purpose.” Boyle v. United States, 556 U.S. 938,
945-46 (2009). But further structural attributes like a hierarchy, a chain of command, membership
dues, rules, and regulations, or regular meetings regarding the enterprise’s affairs are not required.
Id. at 948. Moreover, the requirement that the enterprise exist long enough to pursue a course may
be satisfied by “an enterprise whose associates engage in spurts of activity punctuated by periods
of quiescence.” Id. The concept of an enterprise under RICO has been described as “expansive.”
Id.
The Chandelier Defendants argue that plaintiffs have failed to establish the existence of an
enterprise because they have not alleged any organizational characteristics of an association in
fact. They say that the plaintiffs have not provided details about the structure, purpose, roles,
function, or course of conduct of the alleged enterprise. They argue that plaintiffs have failed to
plead continuity.
The Larimore Defendants argue that even if plaintiffs have adequately alleged the existence
of an enterprise, they have failed to allege facts to establish that the Larimore Defendants
participated in any alleged conduct of the enterprise. Instead, they argue, plaintiffs have lumped
defendants together and alleged that they fraudulently induced the plaintiffs to contribute money,
legal services, property management services, and construction services to defendants’ scheme.
But they have plead no specific facts as to the Larimore Defendants.
Plaintiffs oppose, arguing that to establish an association-in-fact enterprise, they must only
allege that the association-in-fact functioned as a continuing unit and remained in existence long
enough to pursue a course of conduct. They argue that it is sufficient to have alleged that the
Larimore Defendants are partners to the deal. They say that Larimore was copied on numerous
correspondence and participated in numerous phone calls, but the Larimore Defendants never
objected to any of the information provided by the other defendants to the plaintiffs. Plaintiffs
argue that if this was a routine business dispute, then the Larimore Defendants would also be
seeking to collect money owed to them. Because they do not appear to be a victim, plaintiffs insist,
they must be part of the alleged enterprise.
The plaintiffs accurately state the standard that they must meet to show an association-in-
fact enterprise. It is not necessary to show the kinds of structural attributes that the Chandelier
Defendants seem to suggest. Nonetheless, the Court does not need to address whether the facts
alleged are sufficient to establish an enterprise, because plaintiffs have failed to establish two other
essential elements to state a RICO claim.
iv. Conclusion
Because the Court finds that plaintiffs have failed to plead facts sufficient to establish any
racketeering activity, let alone a “pattern” of racketeering activity, plaintiffs’ RICO claims against
all defendants must be dismissed.
c. Louisiana Racketeering
“Because of the parallel between the RICO and Louisiana's statutes, federal decisions in
this area are persuasive.” State v. Touchet, 1999-1416 (La. App. 3 Cir. 4/5/00), 759 So. 2d 194,
197; see CamSoft Data Sys., Inc. v. S. Elecs. Supply, Inc., 2019-0745 (La. App. 1 Cir. 7/2/19),
2019 WL 2865256. Defendants here raise the same deficiencies as to plaintiffs’ claims under
Louisiana’s Racketeering Act (failure to plead a “pattern,” failure to plead “racketeering activity,”
and failure to plead an “enterprise”) as they do for the federal RICO claim discussed above.
Plaintiffs concede that the same standard applies.
Accordingly, for the same reasons that the Court finds that plaintiffs’ federal RICO claims
must be dismissed, the Court finds that plaintiffs’ claims under the Louisiana Racketeering Act
must be dismissed.
d. Prescription of Tort Claims
Defendants argue that certain tort claims against them have prescribed. Specifically, they
allege that plaintiffs’ claims for civil conspiracy, fraudulent inducement,10 conversion, unjust
enrichment,11 and detrimental reliance have prescribed.
10 The fraudulent inducement claim is only asserted against the Chandelier Defendants and only they seek to dismiss
it.
11 Only the Larimore Defendants assert that the unjust enrichment claim has prescribed.
“Louisiana law provides a one- year prescriptive period for civil conspiracy claims as they
are delictual actions.” Horn v. Transdev Servs., Inc., No. CV 20-3323, 2021 WL 4312694, at *7
(E.D. La. July 29, 2021), report and recommendation adopted, No. CV 20-3323, 2021 WL
4311050 (E.D. La. Sept. 22, 2021); see AGEM Mgmt. Servs., LLC v. First Tennessee Bank Nat.
Ass'n, 942 F. Supp. 2d 611, 619–20 (E.D. La. 2013). Similarly, claims for fraud, negligent
misrepresentation, intentional misrepresentation, and fraudulent inducement are subject to a
prescriptive period of “one year from the date plaintiff knew or reasonably should have known of
a defendant's fraudulent act.” AR Factoring, LLC v. Commonwealth Applied Silica Techs., LLC,
No. CV 19-1906, 2020 WL 5889311, at *2 (E.D. La. Oct. 5, 2020). The “injury” that triggers the
prescriptive period on a fraudulent inducement claim “occurs at least by the time the victim
consents to the contract.” Bertrand, 2022 WL 1235469, at *4. “Like other delictual actions,
conversion has a one year prescriptive period.” Richard v. Wal-Mart Stores, Inc., 559 F.3d 341,
345 (5th Cir. 2009) (footnote omitted). Claims for detrimental reliance have been subject to a one
or ten year prescriptive period. See Copeland v. Wasserstein, Perella & Co., 278 F.3d 472, 479
(5th Cir. 2002). Defendants contend that a one year prescriptive period applies here because
plaintiffs’ claim is based on alleged misrepresentations and misfeasance. See Ames v. Ohle, 2011-
1540 (La. App. 4 Cir. 5/23/12), 97 So. 3d 386, 393, decision clarified on reh'g (July 11, 2012),
writ denied, 2012-1832 (La. 11/9/12), 100 So. 3d 837. Plaintiffs do not contest this characterization
and the Court finds the one year prescriptive period applicable.
The Larimore Defendants argue that plaintiffs’ state law tort claims have prescribed
because prescription began to run, at the latest, in March 2021, when the defendants allegedly
stopped promising the plaintiffs would be paid for their work and investments. This was more than
one year before plaintiffs filed suit on February 14, 2023. The Chandelier Defendants argue that
alleged injuries occurred before then, at the time of the September 2018 payment application, the
rental of the 628 Esplanade apartments in October 2019, the sale of 625 Esplanade in December
2019, and Rob Jr.’s investment in 2017.
Plaintiffs respond that the prescriptive period does not begin to run until they knew or
should have known that they were the victim of fraud. Plaintiffs argue that they only gradually
became aware of the possibility of injury. They say that when they inquired about the
representations that induced them to undertake the business arrangement, defendants took steps to
prevent or defer the plaintiffs from learning of the misrepresentations. They add that when they
demanded payment, defendants would string them along with promises of phone calls to discuss a
payment plan.
As the Larimore Defendants point out, plaintiffs have alleged that “the Enterprise
continued to promise to Scheffy that they would be paid for their work and the investments until
March 2021.” (Rec. Doc. 1, at 11). On the face of the complaint, plaintiffs knew or should have
known by March 2021 that they may have been the victims of a civil conspiracy, fraudulent
inducement, conversion, or detrimental reliance. The explanation they offer up in opposition has
not been plead. Moreover, the explanation is entirely unspecific—what did defendants do to
prevent plaintiffs from learning of the alleged misrepresentations and, importantly, when did they
do it? How could defendants have been making promises of a payment plan after February 14,
2022, when plaintiffs allege that they continued to promise payment until March 2021? Plaintiffs
have not shown that facts could be plead to defeat prescription.
The court finds that plaintiffs’ claims for civil conspiracy, fraudulent inducement,
conversion, and detrimental reliance must be dismissed as prescribed.
The prescriptive period for an unjust enrichment claim, however, is ten years. Richard, 559
F.3d at 345. Plaintiffs’ unjust enrichment claims have not prescribed.
e. Prescription of Suit on Open Account
A suit on open account is subject to a liberative prescriptive period of three years. La.
Civ. Code art. 3494. “This prescription commences to run from the day payment is exigible. It
accrues as to past due payments even if there is a continuation of labor, supplies, or other
services.” Id. art. 3495.
Here, plaintiffs allege that they submitted their Final Pay Application in September 2018.
They allege that the final inspection was completed in December 2018. Plaintiffs did not file suit
until more than four years later on February 14, 2023. Plaintiffs do not separately address
defendants’ claim that their suit on open account has prescribed by, for example, explaining that
payment was due on a later date. Instead, they appear to rely on their tolling arguments above,
which the Court has already found insufficient.
Plaintiffs’ suit on open account must be dismissed as prescribed.
f. Bad Faith Breach of Contract
If an obligor breaches a contract in bad faith, it is “is liable for all the damages, foreseeable
or not, that are a direct consequence of his failure to perform.” La. Civ. Code art. 1997. “Bad faith
is not ‘mere bad judgment or negligence[;] it implies the conscious doing of a wrong for dishonest
or morally questionable motives.’” Hi-Tech Elec., Inc. of Delaware v. T&B Constr. & Elec. Servs.,
Inc., No. CV 15-3034, 2018 WL 2268168, at *7 (E.D. La. May 17, 2018) (quoting Volentine v.
Raeford Farms of La., LLC, 201 So. 3d 325, 338 (La. App. 2 Cir. 2016)). Thus, “to hold a
defendant liable for bad faith breach of a contract, a plaintiff must show that (1) the defendant
consciously breached the contract (2) for dishonest or morally questionable motives.” Brown v.
Phoenix Life Ins. Co., 843 F. App’x 533, 543 (5th Cir. 2021). For example, in Hi-Tech, the district
court dismissed plaintiff’s bad faith breach of contract claim where plaintiff alleged that defendant
had intentionally breached the memorandum of understanding and misrepresented its reasons for
doing so, but had not alleged that the breach was malicious. 2018 WL 2268168, at *7.
The Chandelier Defendants do not seek dismissal of plaintiffs’ breach of contract claim.
But they argue that plaintiffs’ bad faith breach of contract claim must be dismissed because
plaintiffs do not sufficiently allege bad faith. They insist that plaintiffs fail to allege any facts to
support finding that any breach of contract was malicious. The Chandelier Defendants argue
further that plaintiffs’ bad faith breach of contract claim must be dismissed because plaintiffs’
allegations that payments were made on the contract cannot be reconciled with the allegations of
bad faith.
Sheffy Construction argues that it has sufficiently alleged defendants’ bad faith because
the alleged RICO scheme is based on defendants’ dishonest and immoral behavior. It also points
to the numerous references to “fraud,” “misrepresentation,” “specific intent to deceive,” etc. It
admits that it has received payments, but insists this does not preclude a claim for bad faith breach
because—they contend—Chandelier NOLA never intended to pay the debt in full. It claims that
Chandelier NOLA used the initial payments to keep Scheffy Construction working and invested
in the deal.
In reply, the Chandelier Defendants argue that just as plaintiffs have failed to meet the Rule
9(b) pleading standard as to their RICO claims, they have failed to allege sufficient factual matter
to support their claim for bad faith breach of contract. They submit that plaintiffs’ numerous
references to fraud, misrepresentations, etc., are merely a formulaic recitation of the elements.
The Court finds that Scheffy Construction has failed to state a claim for bad faith breach
of contract. Although it may be plausible to infer from the facts alleged that Chandelier NOLA
intentionally breached the Construction Contract by failing to pay the Final Pay Application, no
facts alleged could support finding that this alleged breach was malicious. No fact alleged could
support finding that Chandelier NOLA never intended to pay the debt in full as Scheffy
Construction argues in opposition. If one could infer a plausible claim for bad faith breach of
contract from non-performance of a contractual obligation alone, every single breach of contract
claim would also state a bad faith breach of contract claim. That is not the case. Plaintiffs’ claim
for bad faith breach of contract must be dismissed.
g. Unjust Enrichment
“A person who has been enriched without cause at the expense of another person is bound
to compensate that person.” La. Civ. Code art. 2298. This remedy “is subsidiary and shall not be
available if the law provides another remedy for the impoverishment or declares a contrary rule.”
Id. “The mere fact that a plaintiff does not successfully pursue another available remedy does not
give the plaintiff the right to recover under the theory of unjust enrichment.” Walters v. MedSouth
Rec. Mgmt., LLC, 2010-0353 (La. 6/4/10), 38 So. 3d 243, 244
Thus, a plaintiff who has pled a delictual action “is precluded from seeking to recover under
unjust enrichment.” Id. The Louisiana Supreme Court in Walters reversed the district court and
granted the exception of no cause of action as to plaintiffs’ unjust enrichment claim, even where
plaintiff’s tort claim was held prescribed. Id. Citing Walters, courts have held that this same rule
applies where plaintiff has alleged a breach of contract action.12 Westbrook v. Pike Elec., L.L.C.,
12 In one 2014 case cited by plaintiffs here, the Middle District of Louisiana allowed plaintiff to plead an unjust
enrichment claim in the alternative to a breach of contract claim. Cent. Facilities Operating Co. v. Cinemark USA,
Inc., 36 F. Supp. 3d 700, 708 (M.D. La. 2014). But that court did not cite Walters. Instead, it cited two pre-Walters
decisions from Louisiana courts of appeals.
799 F. Supp. 2d 665, 672 (E.D. La. 2011); Gen. Acc. Ins. Co. of Am. V. Aggreko, LLC, No. 11-
CV-1682, 2012 WL 6738217, at *2 (W.D. La. Dec. 28, 2012).
The Chandelier Defendants argue that plaintiffs’ unjust enrichment claims must be
dismissed because plaintiffs have other remedies available—their breach of contract claim.
Similarly, the Larimore Defendants argue that the unjust enrichment claim must be dismissed
because plaintiffs have other remedies available because plaintiffs have plead other causes of
action against the Larimore Defendants. They insist that the fact that plaintiffs fail to successfully
pursue their other claims does not give rise to a claim for unjust enrichment.
Plaintiffs argue that the defendants here refuse to acknowledge their contractual
obligations. They argue that they should be allowed to plead their unjust enrichment claim in the
alternative.
Plaintiffs’ unjust enrichment theory is that defendants retained the benefit of the
investment, materials, equipment, labor, and services provided by the plaintiffs’ without paying
for them. As to the materials, equipment, labor and services provided pursuant to the Construction
Contract, plaintiffs cannot state a claim because their remedy is their breach of contract action. By
“investment,” it appears that the plaintiffs are referring to Rob Jr.’s $125,000 payment to
Chandelier NOLA, which has been described by plaintiffs as an investment and/or a loan. This
injury, too, is subject to other remedies: Rob Jr.’s claim for breach of contract against Chandelier
NOLA. Plaintiffs’ unjust enrichment claims must be dismissed because they are subject to other
remedies.
h. Single Business Enterprise
“[T]he legal fiction that a corporation is a distinct legal entity separate from the individuals
who comprise it may be disregarded when a corporation is organized and controlled in such a way
that it is merely an adjunct of another corporation.” Lee v. Clinical Rsch. Ctr. Of Fla., L.C., 2004-
0428 (La. App. 4 Cir. 11/17/04), 889 So. 2d 317, 323, writ denied, 2004-3002 (La. 2/18/05), 896
So. 2d 33. “The ‘single business enterprise’ doctrine is essentially a theory for imposing liability
where two or more business entities act as one.” Brown v. ANA Ins. Grp., 2007-2116 (La.
10/14/08), 994 So. 2d 1265, 1272. “Generally, under the doctrine, when corporations integrate
their resources in operations to achieve a common business purpose, each business may be held
liable for wrongful acts done in pursuit of that purpose.” Id. 1267 n. 2.
Louisiana courts consider the following non-exhaustive list of factors in determining
whether to treat a group of entities as a single business enterprise:
1. corporations with identity or substantial identity of ownership, that is, ownership
of sufficient stock to give actual working control;
2. common directors or officers;
3. unified administrative control of corporations whose business functions are
similar or supplementary;
4. directors and officers of one corporation act independently in the interest of that
corporation;
5. corporation financing another corporation;
6. inadequate capitalization (“thin incorporation”);
7. corporation causing the incorporation of another affiliated corporation;
8. corporation paying the salaries and other expenses or losses of another
corporation;
9. receiving no business other than that given to it by its affiliated corporations;
10. corporation using the property of another corporation as its own;
11. noncompliance with corporate formalities;
12. common employees;
13. services rendered by the employees of one corporation on behalf of another
corporation;
14. common offices;
15. centralized accounting;
16. undocumented transfers of funds between corporations;
17. unclear allocation of profits and losses between corporations; and
18. excessive fragmentation of a single enterprise into separate corporations.
Lee v. Clinical Rsch. Ctr. Of Fla., L.C., 2004-0428 (La. App. 4 Cir. 11/17/04), 889 So. 2d 317,
322, writ denied, 2004-3002 (La. 2/18/05), 896 So. 2d 33; see Bona Fide Demolition & Recovery,
LLC v. Crosby Const. Co. of Louisiana, 690 F. Supp. 2d 435, 444 (E.D. La. 2010).
Of note, “some of the factors are perfectly consistent with legitimate, efficient business
operations, such as common control, common employees, officers, and directors, shared offices,
and some form of centralized accounting.” Id. 445. In Bona Fide Demolition, the district court
considered whether, using the single business enterprise theory, it could “fuse” companies that did
not have minimum contacts with Louisiana together with a company with sufficient contacts for
purposes of exercising personal jurisdiction. Id. 446–47 (E.D. La. 2010). Factors weighing in
favor of applying the single business enterprise theory to exercise personal jurisdiction over one
of the companies included that the companies used the same office space and shared resources,
including servers and email accounts; the same individual controlled the financial operations of
both companies; the finances of the companies were intermingled, including via undocumented
interest-free “handshake loans” that were never repaid, withdrawal of funds from one company’s
account by the other company, and a joint bank account; and the company did not observe
corporate formalities like the issuance of stock, annual shareholder meetings, formal board
meetings, and corporate authorization for major transactions. Id. at 446-47.
In Shell Offshore Inc. v. Eni Petroleum US LLC, the district court focused on the
allegations of the complaint alone and found that plaintiff had pleaded sufficient facts to state a
claim for breach of contract against an entity related to the contracting party under the single
business enterprise theory. No. CV 16-15537, 2017 WL 4812409, at *5 (E.D. La. Oct. 25, 2017).
The factors in favor of doing so included: the related entity and the contracting party were both
wholly owned subsidiaries of the same company; the related entity and the contracting party
allegedly shared a common board of directors and the president of the related entity allegedly
directed non-payment of certain expenses at issue; the related entity and contracting party allegedly
commingled funds; the companies were allegedly undercapitalized; the related entity allegedly
paid the salaries of the contracting party; the related entity allegedly failed to provide separate
bank accounts and failed to hold regular, separate director meetings; the related entity allegedly
provided extensive services on behalf of the contracting party, including handling the day to day
operations and carrying out administrative and clerical functions for the contracting party; and the
companies shared the same headquarters. Id. at *4-5.
But in Andretti Sports Marketing Louisiana, LLC v. Nola Motorsports Host Committee,
Inc., the court held that the plaintiff had failed to sufficiently plead that the contracting party and
race-track owner were a single business enterprise for purposes of asserting a claim for breach of
a racing services agreement. 147 F. Supp. 3d 537, 561 (E.D. La. 2015). The plaintiff alleged that
almost every officer of the contracting party was a member or agent of the race-track owner, that
the two companies shared a corporate office, that they shared an accountant, that the contracting
party was controlled by the race-track owner, and that the contracting party was undercapitalized.
Id. at 558. But the court found the allegation of unified control to be conclusory and unsupported
by any factual allegations. Id. It similarly found no factual support for the allegation of inadequate
capitalization and the allegation that the distinction between the individuals in their roles as
directors of the contracting party and their roles as employees of the race-track owner were a legal
fiction. Id. at 558-59. The court also considered that the racing services agreement included a
provision acknowledging that the contracting party and the race-track owner were not affiliated.
Id. at 558. The court found the complaint insufficient to establish the applicability of the single
enterprise theory. Id. at 561.
Here, plaintiffs contend that Chandelier TN and Chandelier NOLA are a single business
enterprise. They point out that they have alleged that Lyons is the owner of both entities, that both
entities have a principal place of business in Nashville, Tennessee, and all the Chandelier
defendants worked together towards a common goal—the business deal and the RICO scheme.
The Chandelier Defendants argue that plaintiffs have failed to identify the common owners,
directors, officers, or employees or explained how either of these entities are administratively
controlled. Nor have they pointed to any commingled assets, identified any centralized accounting,
or showed any undocumented fund transfers.
The Court finds that the allegations in the complaint are wholly insufficient to state a claim
for liability of Chandelier TN under a single business enterprise theory. The mere allegation of
shared ownership and a shared principal business location is simply not enough. Countless
legitimately separate entities meet these criteria. There is not a single specific factual allegation
implicating Chandelier TN. Plaintiffs offer no factual basis to conclude that it was involved in the
deal, the Construction Contract, or the alleged promises. Plaintiffs’ claims against Chandelier TN
are dismissed without prejudice.
i. Alter Ego
“There are limited exceptions to the rule of non-liability of shareholders for the debts of a
corporation, where the court may ignore the corporate fiction and hold the individual shareholders
liable. Generally, that is done where the corporation is found to be simply the “alter ego” of the
shareholder.” Riggins v. Dixie Shoring Co., 590 So. 2d 1164, 1168 (La. 1991). This may occur
“when the shareholders disregard the requisite corporate formalities to the extent that the
corporation ceases to be distinguishable from its shareholders.” Id. Courts consider the following
non-exclusive list of factors: “1) commingling of corporate and shareholder funds; 2) failure to
follow statutory formalities for incorporating and transacting corporate affairs; 3)
undercapitalization; 4) failure to provide separate bank accounts and bookkeeping records; and 5)
failure to hold regular shareholder and director meetings.” Id. “Louisiana courts are reluctant to
hold a shareholder, officer, or director of a corporation personally liable for corporate obligations,
in the absence of fraud, malfeasance, or criminal wrongdoing.” Id. at 1168.
Courts have held that “where fraud or deceit is absent, other circumstances must be so
strong as to clearly indicate that the corporation and shareholder operated as one.” Harris v. Best
of Am. Inc., 466 So. 2d 1309, 1315 (La. Ct. App. 1985). In Harris, the court of appeals reversed
the trial court’s finding that a sole shareholder was personally liable, observing that “Plaintiff had
the heavy burden of producing clear and convincing evidence to show that [the owner] was the
‘alter ego’ of [the company]. The factors cited by plaintiff are not frequent, serious, or exceptional
so as to warrant piercing the corporate veil to hold [the owner] liable on [the company’s] contract
with plaintiff.” Id. at 1316. But in Louisiana Newpack Shrimp, Inc. v. Ocean Feast of China, Ltd.,
the court found that plaintiff alleged sufficient facts to support an alter ego claim where the owner
had written a letter suggesting that the company was undercapitalized and he had comingled his
personal funds with those of the company. No. CV 19-12948-WBV-KWR, 2021 WL 516631, at
*9 (E.D. La. Feb. 11, 2021).
Plaintiffs contend that Lyons is the alter ego of Chandelier TN and/or Chandelier NOLA
because Lyons used his status as the sole member and manager of these entities to commit fraud
against plaintiffs. They argue that the test for application of the alter ego doctrine has been met
here because they have alleged the Chandelier Defendants’ fraudulent behavior in handling the
deal and their continuous attempts to avoid paying plaintiffs for their money, time, and services
invested. They say that because Chandelier TN has moved to dismiss the case against it for lack
of personal jurisdiction, the Court can conclude that the Chandelier Defendants are working to
block a just result.
The Chandelier Defendants argue that plaintiffs have failed to state a claim for Lyons’
liability as an alter ego of Chandelier TN and/or Chandelier NOLA. They say plaintiffs have
alleged merely that Lyons used his status as sole member of Chandelier TN and sole member and
manager of Chandelier NOLA to commit fraud against plaintiffs and that Chandelier TN and
Chandelier NOLA are the instrumentalities employed by Lyons to attempt to ensure personal
insulation from the debts, damages, and deceitful acts of Lyons against the plaintiffs. They argue
these allegations lack the requisite specificity to apply the alter ego doctrine.
The Court finds that plaintiffs have failed to allege sufficient facts to support a plausible
claim against Lyons as an alter ego of the entities. There is no allegation of commingling of funds,
failure to follow statutory formalities, or undercapitalization. The allegations of fraud are vague
and non-specific. As discussed in the RICO section, although plaintiffs may have alleged broken
promises, they have not alleged any facts sufficient to conclude that defendants intentionally made
false statements. Moreover, the allegations of the Complaint fail to specifically describe any fraud
by Lyons as an individual under the cloak of an entity he controls. Plaintiffs’ claims against Lyons
are dismissed without prejudice.
2. Rule 12(b)(2) Motion to Dismiss
Chandelier TN argues that the claims against it must be dismissed for lack of personal
jurisdiction. Plaintiffs argue that jurisdiction is established via the nationwide service of process
provisions of RICO. Because plaintiffs have failed to state a RICO claim, it cannot serve as a basis
for personal jurisdiction. Nor have plaintiffs stated a claim against Chandelier TN under a single
business enterprise theory to the extent this theory can be used to impute contacts of Chandelier
NOLA to Chandelier TN. And, in any event, as discussed above, plaintiffs have failed to state any
claim against Chandelier TN. The Rule 12(b)(2) Motion to Dismiss is DENIED as moot.
Conclusion
As discussed above, plaintiffs have failed to allege sufficient facts to state a claim under
the federal RICO statute or Louisiana’s Racketeering Law. These claims are dismissed. Plaintiffs’
claims for civil conspiracy, fraudulent inducement, conversion, and detrimental reliance are
prescribed because plaintiffs knew or should have known by March 2021 of their potential tort
claims. These claims are dismissed with prejudice. Plaintiffs’ suit on open account is also
prescribed because it was filed more than three years after payment was due. This claim is
dismissed with prejudice. Plaintiffs have failed to plead sufficient facts to state a claim for bad
faith breach of contract. This claim is dismissed. Plaintiffs have failed to state a claim for unjust
enrichment because they have other remedies available. These claims are dismissed with prejudice.
Plaintiffs have failed to plead sufficient facts to establish liability of Chandelier TN as part of a
single business enterprise or the liability of Lyons as an alter ego of Chandelier NOLA or
Chandelier TN. These claims are dismissed. Accordingly,
IT IS ORDERED that the Chandelier Defendants’ Partial Motion to Dismiss (Rec. Doc.
18) is GRANTED; Chandelier TN’s Motion to Dismiss Pursuant to Rule 12(b)(2) (Rec. Doc. 17)
is DENIED as moot; and the Larimore Defendants’ Motion to Dismiss (Rec. Doc. 19) is
GRANTED. Only Scheffy Construction and Rob Jr.’s breach of contract claims against Chandelier
NOLA remain.
New Orleans, Louisiana, this 28th day of February, 2024.
\ ame Vow Moe. vod by
Janis van Meerveld
United States Magistrate Judge
32