United States District Court, D. South Carolina, Greenville Division
Charlotte McFerren, Billie Lee Green, Augustus Bostick, Jr., Mark Adragna, and Courtney Koepf, Plaintiffs,
BAIC, Inc., VFG, Inc., SoBell Ridge Corp., Financial Products Distributors, LLC, Performance Arbitrage Company, Life Funding Options, Inc., Andrew Gamber, Mark Corbett, Katharine Snyder, Michelle Plant, David Woodard, Candy Kern-Fuller, and Upstate Law Group, Defendants.
REPORT OF MAGISTRATE JUDGE
F. MCDONALD UNITED STATES MAGISTRATE JUDGE
matter is before the court on the motions to dismiss of
defendants Candy Kern-Fuller and Upstate Law Group
(“Upstate”) (collectively, “the Upstate
defendants”) (doc. 45); pro se defendant Mark
Corbett (doc. 52); and defendants Performance Arbitrage
Company, Inc. (“PAC”), Life Funding Options, Inc.
(“LFO”), Katharine Snyder, and Michelle Plant
(collectively, “the PAC defendants”) (doc. 78).
Pursuant to the provisions of Title 28, United States Code,
Section 636(b)(1)(A) and Local Civil Rule 73.02(B)(2)(e)
(D.S.C.), all pretrial matters in cases involving pro
se litigants are referred to a United States Magistrate
Judge for consideration.
10, 2018, the plaintiffs filed a complaint alleging causes of
action for a declaratory judgment that the defendants'
conduct violates the Federal Anti-Assignments Acts; for
violation of the Racketeer Influenced Corrupt Organizations
Act (“RICO”) against individual defendants
Gamber, Corbett, Snyder, Plant, Woodard, and Kern-Fuller; and
for common law civil conspiracy against all defendants (doc.
1). On August 3, 2018, the Upstate defendants filed a motion
to dismiss for failure to state a claim pursuant to Federal
Rule of Civil Procedure 12(b)(6) (doc. 45). On August 21,
2018, the plaintiffs filed a response in opposition (doc. 51)
to the motion. On August 22, 2018, defendant Corbett, who was
at that time represented by counsel,  filed a motion to dismiss
(doc. 52) based on the legal analysis and arguments set forth
in the motion and memorandum filed by the Upstate defendants.
On August 28, 2018, the Upstate defendants filed a reply in
support of their motion (doc. 53). On September 5, 2018, the
plaintiffs file a response in opposition (doc. 57) to
defendant Corbett's motion to dismiss. On November 9,
2018, the PAC defendants filed a motion to dismiss for
failure to state a claim (doc. 78). On December 10, 2018, the
plaintiffs filed their response (doc. 94). On December 19,
2018, a hearing was held on the pending motions in this case
and those pending in two related cases: Lyons v.
BAIC, 6:17-cv-2362-DCC-KFM (“the Lyons
case”), and Life Funding Options, Inc. v.
Blunt, 6:18-cv-944-DCC-KFM (“the Blunt
five plaintiffs in this case are military veterans who were
honorably discharged from the United States Army or Navy.
They receive either military retirement pay subject to 37
U.S.C. § 701 or military disability benefits subject to
38 U.S.C. § 5301. The plaintiffs contracted to sell
portions of their fixed income streams of retirement or
disability benefits over a period of months or years in
exchange for lump sum payments from willing buyers. The
plaintiffs allege that the defendants operated a coordinated
scheme in which websites are used to generate leads on
veterans who may need money. Thereafter, brokers and
salespeople, such as defendant Corbett, follow up with the
leads, sending forms for the veteran to complete. The Upstate
defendants make inquiries about the veteran's
financial circumstances, benefits, and physical health after
receiving the appropriate authorizations. The defendants
compile a list of the veteran's creditors and require the
veteran to pay off those debts with his or her lump sum
payment. The defendants facilitate the payments to the
creditors. The veteran either obtains a life insurance policy
or executes an “Option to Purchase Source Defaulted
Structured Asset Agreement” (“Option
Agreement”) with defendant PAC, which is operated by
defendants Snyder and Plant. The life insurance policy, if
any, pays off the veteran's loan contract in the event of
the veteran's death. The Option Agreement also pays off
the veteran's loan contract in the event of the
veteran's death. The veteran is told by defendants
Corbett, BAIC, Inc., VFG, Inc., or SoBell Ridge Corp. that a
purchaser has been found to buy his or her benefits. The
veteran and the purchaser execute a contract for sale of
payments and security agreement, using form contracts
supplied by the defendants. The purchaser wires a lump sum to
defendant Upstate's IOLTA account. The Upstate defendants
then deduct 40-50% of the lump sum as a “commission,
” which is distributed among the defendants. The
Upstate defendants then pay the veteran's existing
creditors, deduct other fees and costs, and remit the
remainder to the veteran via wire transfer. If the veteran
stops making payments under his or her contract, defendants
PAC, LFO, Financial Products Distributors, Kern-Fuller,
and/or Upstate send collection notices to the veteran. If the
purchaser has executed a default buyback agreement with
defendant PAC, then PAC or its successor in interest, i.e.,
LFO (whose agent for service is Kern-Fuller), may sue the
veteran (doc.1, comp. ¶¶ 40-49).
LAW AND ANALYSIS Rule 12(b)(6)
purpose of a Rule 12(b)(6) motion is to test the sufficiency
of a complaint.” Williams v. Preiss-Wal Pat III,
LLC, 17 F.Supp.3d 528, 531 (D.S.C. 2014) (quoting
Edwards v. City of Goldsboro, 178 F.3d 231, 243 (4th
Cir. 1999)). Rule 8(a) sets forth a liberal pleading
standard, which requires only a" ‘short and plain
statement of the claim showing the pleader is entitled to
relief,' in order to ‘give the defendant fair
notice of what . . . the claim is and the grounds upon which
it rests.'" Bell Atlantic Corp. v. Twombly,
550 U.S. 544, 555 (2007) (quoting Conley v. Gibson,
355 U.S. 41, 47 (1957)). “[T]he facts alleged
‘must be enough to raise a right to relief above the
speculative level' and must provide ‘enough facts
to state a claim to relief that is plausible on its
face.'" Robinson v. American Honda Motor Co.,
Inc., 551 F.3d 218, 222 (4th Cir. 2009) (quoting
Twombly, 550 U.S. at 555, 570). “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.” Ashcroft v.
Iqbal, 556 U.S. 662, 678 (2009) (internal quotation
deciding whether a complaint will survive a motion to
dismiss, a court evaluates the complaint in its entirety, as
well as documents attached or incorporated into the
complaint.” E.I. du Pont de Nemours & Co. v.
Kolon Indus., Inc., 637 F.3d 435, 448 (4th Cir. 2011).
The court may consider such a document, even if it is not
attached to the complaint, if the document “was
integral to and explicitly relied on in the complaint,
” and there is no authenticity challenge. Id.
at 448 (quoting Phillips v. LCI Int'l, Inc., 190
F.3d 609, 618 (4th Cir. 1999)). See also Int'l
Ass'n of Machinists & Aerospace Workers v.
Haley, 832 F.Supp.2d 612, 622 (D.S.C. 2011) (“In
evaluating a motion to dismiss under Rule 12(b)(6), the Court
. . . may also ‘consider documents attached to . . .
the motion to dismiss, so long as they are integral to the
complaint and authentic.'”) (quoting Sec'y
of State for Def. v. Trimble Navigation Ltd., 484 F.3d
700, 705 (4th Cir. 2007)).
“[m]alice, intent, knowledge, and other conditions of a
person's mind may be alleged generally, ” when a
party alleges “fraud or mistake, ” he or she
“must state with particularity the circumstances
constituting fraud or mistake.” Fed.R.Civ.P. 9(b).
Particularity requires that the claimant state “the
time, place, and contents of the false representations, as
well as the identity of the person making the
misrepresentation and what he obtained thereby.”
Harrison v. Westinghouse Savannah River Co., 176
F.3d 776, 784 (4th Cir. 1999) (quoting 5 Charles Alan Wright
and Arthur R. Miller, Federal Practice and Procedure:
Civil § 1297 at 590 (2d 1990)). A primary purpose
of Rule 9(b) is to ensure “that the defendant has
sufficient information to formulate a defense by putting it
on notice of the conduct complained of.” Id.
(internal citations omitted). Lack of compliance with Rule
9(b)'s pleading requirements is treated as a failure to
state a claim under Rule 12(b)(6). See United States ex
rel. Thompson v. Columbia/HCA Healthcare Corp., 125 F.3d
899, 901 (5th Cir. 1997).
in the Lyons Case
noted above, this case is related to two other cases, the
Lyons case and the Blunt case, which are
also pending before the Honorable Donald C. Coggins, Jr.,
United States District Judge. In Lyons, another
group of veterans made substantially similar allegations and
brought the same causes of action as those alleged in this
case. Also, many of the same defendants are named in the
Lyons case. See Lyons, C.A. No.
6:17-cv-2362-DCC-KFM, doc. 1. On April 12, 2018, Judge
Coggins denied the motions to dismiss filed by the Upstate
defendants and Corbett in the Lyons case. See
Lyons, 2018 WL 1762550 (D.S.C. Apr. 12, 2018). As set
out below, the motions to dismiss filed in the instant case
should be denied for the same reasons found by Judge Coggins
in Lyons. See id.
I of the plaintiffs' complaint seeks a declaratory
judgment under 28 U.S.C. § 2201 and Federal Rule of
Civil Procedure 57 that the defendants' conduct violates
38 U.S.C. § 5301 and 37 U.S.C. § 701, collectively
referred to as the Federal Anti-Assignment Acts (doc. 1,
comp. ¶¶ 130-135). Specifically, 38 U.S.C. §
5301(a)(1) states, “Payments of benefits due or to
become due under any law administered by the Secretary shall
not be assignable except to the extent specifically
authorized by law . . . .” The complaint alleges that
plaintiffs McFerren, Bostick, Adragna, and Koepf receive
disability benefits subject to this provision (doc. 1, comp.
¶ 36). Similarly, 37 U.S.C. § 701(a) states,
“[A] commissioned officer of the Army, Navy, Air Force,
or Marine Corps may transfer or assign his pay account, when
due and payable.” The Fourth Circuit Court of Appeals
has held that this use of the phrase “when due and
payable” means that a series of retirement payments
cannot be sold or assigned in advance. See In re
Moorhous, 108 F.3d 51, 54-56 (4th Cir. 1997).The
complaint alleges that plaintiff Green receives retirement
pay subject to this provision (doc. 1, comp. ¶ 37).
Also, 37 U.S.C. § 701(c) states, “An enlisted
member of the Army, Navy, Air Force, or Marine Corps may not
assign his pay, and if he does so, the assignment is
void.” The complaint alleges that plaintiff Bostick