Collingsworth Scherer RICO Motion to Dismiss

FILED

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2015 Aug-12 PM 12:40 U.S. DISTRICT COURT N.D. OF ALABAMA

IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ALABAMA SOUTHERN DIVISION ) ) ) ) Plaintiffs ) vs. ) ) TERRENCE P. COLLINGSWORTH, individually ) ) and as agent of Conrad & Scherer, LLP, ) International Rights Advocates, Inc., and Albert ) van Bilderbeek; CONRAD & SCHERER, LLP; ) WILLIAM R. SCHERER, JR., individually and as ) agent of Conrad & Scherer, LLP; ) INTERNATIONAL RIGHTS ADVOCATES, ) INC.; IVAN ALFREDO OTERO MENDOZA; ) ) FRANCISCO RAMIREZ CUELLAR; and ) ALBERT VAN BILDERBEEK, ) ) Defendants. DRUMMOND COMPANY, INC. and DRUMMOND LTD.,

Case No. 2:15-cv-00506-RDP

DEFENDANTS CONRAD & SCHERER, LLP’S AND WILLIAM R. SCHERER, JR.’S MOTION TO DISMISS COMPLAINT

Robert K. Spotswood Michael T. Sansbury William T. Paulk SPOTSWOOD SANSOM & SANSBURY LLC One Federal Place 1819 Fifth Avenue North, Suite 1050 Birmingham, Alabama 35203 Tel: 205-986-3620 Fax: 205-986-3639 [email protected] [email protected] [email protected] [Counsel list continued on next page]

Attorneys for Conrad & Scherer, LLP and William R. Scherer, Jr.

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Of Counsel for Defendants Conrad & Scherer, LLP and William R. Scherer, Jr. Kenneth E. McNeil Pro Hac Vice to be filed Texas State Bar No. 13830900 Stuart V. Kusin Pro Hac Vice to be filed Texas State Bar No. 11770100 SUSMAN GODFREY LLP 1000 Louisiana Street, Suite 5100 Houston, Texas 77002-5096 Telephone: 713/651-9366 Facsimile: 713/654-6666 [email protected] [email protected] Lindsey Godfrey Eccles Pro Hac Vice to be filed WASB No. 33566 SUSMAN GODFREY LLP 1201 Third Avenue Suite 3800 Seattle, Washington 98101 Telephone: 206/516-3880 Facsimile: 206/516-3883 [email protected]

Christopher S. Niewoehner Pro Hac Vice to be filed Steptoe & Johnson LLP 115 South LaSalle Street, Suite 3100 Chicago, IL 60604 Tel: 312-577-1240 Fax: 312-577-1370 [email protected] Kendall R. Enyard Pro Hac Vice to be filed Steptoe & Johnson LLP 1330 Connecticut Avenue NW Washington, DC 20036 Tel: 202-429-6405 Fax: 202-429-3902 [email protected]

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TABLE OF CONTENTS TABLE OF AUTHORITIES ......................................................................................................... iii INTRODUCTION ...........................................................................................................................1 ARGUMENT ...................................................................................................................................5 I.

II.

III.

The First Amendment’s Petition Clause Prohibits RICO-based Collateral Attacks on Defendants’ Litigation Conduct ............................................5 A.

The Alleged RICO Predicate Acts Fail Basic Pleading Requirements and Are Entirely Limited to Protected Litigation Conduct ........................................................................................................6

B.

Defendants’ Litigation Conduct is Constitutionally Protected from Collateral Attack Based on Federal Statutory Law, Including RICO ..........................................................................................12

Even if Its Allegations of Litigation Misconduct are Accepted as True, Drummond Should not be Allowed to use RICO Predicate Acts to Collaterally Attack the Underlying Litigation .......................................................16 A.

Under Pendergraft, Even Blatant Litigation Misconduct Cannot Support the Predicate Acts of Extortion, Mail Fraud or Wire Fraud .................................................................................................16

B.

This Court Should Recognize that Pendergraft’s Reasoning Applies Equally to the Additional “Predicate Acts” Alleged Here ............................................................................................................21

C.

Any “Sham Litigation” Exception Does Not Apply ..................................24

D.

After Pendergraft, District Courts in the Eleventh Circuit Have Properly Characterized Claims Based on Litigation Misconduct as Malicious Prosecution, Not Extortion ...................................................26

E.

The Pendergraft Analysis Survives Even in States with NearAbsolute Litigation Immunity....................................................................27

F.

Despite Surface Similarities, This Case is Nothing Like Chevron v. Donziger ..................................................................................28

The Only Cognizable RICO Injury Drummond Alleges is Barred by RICO’s Four-Year Statute of Limitations, and it Therefore Lacks Standing to Sue ......................................................................................................31

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A.

Drummond’s “Reputational” and Intangible or Speculative “Business” Injuries are Insufficient to Confer RICO Standing .................32

B.

To the Extent Drummond’s RICO Claim Rests on Its “Legal Fees” Injury, it is Barred by the Injury Discovery Rule ............................35

IV.

Drummond’s RICO Conspiracy Claim Fails for the Same Reasons as Its RICO Claim ......................................................................................................43

V.

Drummond’s State Law Claims Also Fail .............................................................44 A.

Civil Conspiracy ........................................................................................44

B.

Willful Misrepresentation ..........................................................................44

C.

Fraudulent Concealment ............................................................................45

CONCLUSION ..............................................................................................................................46

ii

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TABLE OF AUTHORITIES CASES Adell v. Macon Cnty. Greyhound Park, Inc., 785 F. Supp. 2d 1226 (M.D. Ala. 2011) ....................................................................... 6, 34 Agency Holding Corp. v. Malley-Duff & Assocs., Inc., 483 U.S. 143 (1987) .......................................................................................................... 36 Am. Dental Ass'n v. Cigna Corp., 605 F.3d 1283 (11th Cir. 2010) .............................................................................. 9, 11, 44 Am. Nursing Care of Toledo, Inc. v. Leisure, 609 F.Supp. 419 (N.D.Ohio 1984) .............................................................................. 18, 19 Ambrosia Coal & Const. Co. v. Pages Morales, 482 F.3d 1309 (11th Cir. 2007) ........................................................................................ 10 Andrx Pharm., Inc. v. Elan Corp., PLC, 421 F.3d 1227 (11th Cir. 2005) ........................................................................................ 26 Ashcroft v. Iqbal, 556 U.S. 662 (2009) ...................................................................................................... 7, 11 Atico Intern. USA, Inc. v. LUV N'Care, Ltd., No. 09-60397-CIV-COHN, 2009 WL 2589148 (S.D. Fla. Aug. 19, 2009) ..................... 24 Auburn Med. Ctr., Inc. v. Andrus, 9 F.Supp.2d 1291 (M.D.Ala. 1998) ............................................................................ 19, 20 BE&K Construction Co. v. NLRB, 536 U.S. 516 (2002) .............................................................................................. 13, 14, 25 Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) ........................................................................................................ 7, 8 Blackburn v. Calhoun, No. 207CV166, 2008 WL 850191(N.D. Ala. Mar. 4, 2008) ...................................... 37, 38 Boothby Realty Co. v. Haygood, 114 So. 2d 555 (Ala. 1959) ........................................................................................... 6, 18 Brooks v. Blue Cross & Blue Shield of Fla., Inc., 116 F.3d 1364 (11th Cir.1997) ..................................................................................... 9, 10 Bryant v. Avado Brands, Inc., 187 F.3d 1271 (11th Cir. 1999) ........................................................................................ 39 iii

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California Motor Transport Co. v. Trucking Unlimited, 404 U.S. 508 (1972) .......................................................................................................... 13 Chevron Corp. v. Donziger, 974 F.Supp. 2d 362 (S.D.N.Y. 2014)................................................................................ 29 City of Chicago Heights, Ill. v. Lobue, 914 F. Supp. 279 (N.D. Ill. 1996) ..................................................................................... 33 Columbia Pictures Indus., Inc. v. Prof'l Real Estate Investors, Inc., 944 F.2d 1525 (9th Cir. 1991) .................................................................................... 14, 15 Daddona v. Gaudio, 156 F.Supp.2d 153 (D.Conn. 2000) .................................................................................. 19 Deck v. Engineered Laminates, 349 F.3d 1253 (10th Cir. 2003) ........................................................................................ 22 Driver v. W.E. Pegues, Inc., No. 7:11-CV-1374 LSC, 2012 WL 3042939 (N.D. Ala. July 19, 2012) .......................... 44 Dysart v. BankTrust, No. CV-11-RRA-1917-S, 2012 WL 2577534 (N.D. Ala. Apr. 12, 2012) ........................ 37 E. R. R. Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127 (1961) .......................................................................................................... 13 First Pacific Bancorp, Inc. v. Bro, 847 F.2d 542 (9th Cir. 1988) ............................................................................................ 18 Foremost Ins. Co. v. Parham, 693 So. 2d 409 (Ala. 1997) ............................................................................................... 45 G–I Holdings, Inc. v. Baron & Budd, 179 F.Supp.2d 233 (S.D.N.Y. 2001)................................................................................. 18 Green Leaf Nursery v. E.I. DuPont De Nemours & Co., 341 F.3d 1292 (11th Cir. 2003) .................................................................................. 28, 29 Grogan v. Platt, 835 F.2d 844 (11th Cir. 1988) .......................................................................................... 32 Gunn v. Palmieri, No. 87 CV 1418, 1989 WL 119519 (E.D.N.Y. Sept. 29, 1989) ....................................... 11 Hamm v. Rhone-Poulenc Rorer Pharm., Inc., 187 F.3d 941 (8th Cir. 1999) ............................................................................................ 33

iv

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Harrington v. Johnson–Rast & Hays Co., 577 So.2d 437 (Ala.1991) ................................................................................................. 45 Heights Cmty. Cong. v. Smythe, Cramer Co., 862 F.Supp. 204 (N.D.Ohio 1994) .................................................................................... 18 I.S. Joseph Co. v. J. Lauritzen A/S, 751 F.2d 265 (8th Cir. 1984) .................................................................................. 5, 18, 24 In re AndroGel Antitrust Litig. (No. II), 888 F. Supp. 2d 1336 (N.D. Ga. 2012) ............................................................................. 26 In re Terazosin Hydrochloride Antitrust Litig., 335 F. Supp. 2d 1336 (S.D. Fla. 2004) ............................................................................. 25 In re Towne Services, Inc. Securities Litigation, 184 F.Supp.2d 1308 (N.D. Ga. 2001) ................................................................................. 5 Jackson v. Bellsouth Tele., Inc., 181 F.Supp.2d 1345 (S.D. Fla. 2001) ............................................................................... 11 Jones v. BP Oil Co., Inc., 632 So.2d 435 (Ala.1993) ........................................................................................... 44, 45 Kimm v. Chang Hoon Lee & Champ, Inc., 196 F. App'x 14 (2d Cir. 2006) ......................................................................................... 34 Klehr v. A.O. Smith Corp., 521 U.S. 179, 117 S.Ct. 1984, 138 L.Ed.2d 373 (1997) ................................................... 38 Lawson v. Harris Culinary Enterprises, LLC, 83 So. 3d 483 (Ala. 2011) ................................................................................................. 46 Levin, Middlebrooks, Mabie, Thomas, Mayes & Mitchell, P.A. v. U.S. Fire Ins. Co., 639 So. 2d 606 (Fla. 1994)................................................................................................ 28 Levitan v. Patti, No. 3:09CV321 MCR MD, 2011 WL 1299947 (N.D. Fla. Feb. 8, 2011) ........................ 27 Livingston Downs Racing Ass'n, Inc. v. Jefferson Downs Corp., 257 F. Supp. 2d 819 (M.D. La. 2002) ......................................................................... 21, 27 Maio v. Aetna, Inc., 221 F.3d 472 (3d Cir. 2000)........................................................................................ 34, 35 Maiz v. Virani, 253 F.3d 641 (11th Cir. 2001) .......................................................................................... 37

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McCaleb v. A.O. Smith Corp., 200 F.3d 747 (11th Cir. 2000) .......................................................................................... 38 McGuire Oil Co. v. Mapco, Inc., 958 F.2d 1552 (11th Cir. 1992) .................................................................................. 13, 23 Oscar v. Univ. Students Co-op. Ass'n, 965 F.2d 783 (9th Cir. 1992) ............................................................................................ 35 Patterson v. Mobil Oil Corp., 335 F.3d 476 (5th Cir. 2003) ............................................................................................ 34 Paul S. Mullin & Assocs., Inc. v. Bassett, 632 F.Supp. 532 (D.Del. 1986) ......................................................................................... 19 Powell v. Gorham, No. 2:13-CV-0055-LSC, 2013 WL 3151632 (N.D. Ala. June 14, 2013) ......................... 36 Prof'l Real Estate Investors, Inc. v. Columbia Pictures Indus., Inc., 508 U.S. 49 (1993) ...................................................................................................... 24, 26 Raney v. Allstate Ins. Co., 370 F.3d 1086 (11th Cir. 2004) ........................................................................................ 22 Regions Bank v. J.R. Oil Co., LLC, 387 F.3d 721 (8th Cir. 2004) ............................................................................................ 34 Rogers v. Nacchio, 241 Fed.Appx. 602 (11th Cir. 2007) ................................................................................. 44 Rotella v. Wood, 528 U.S. 549 (2000) ........................................................................................ 36, 37, 38, 41 Simpson v. Sanderson Farms, Inc., 744 F.3d 702 (11th Cir. 2014) .............................................................................. 2, 3, 4, 34 Snyder v. Faget, 295 Ala. 197, 326 So. 2d 113 (1976) ................................................................................ 45 Sosa v. DIRECTV, Inc., 437 F.3d 923 (9th Cir. 2006) ...................................................................................... passim Special Purpose Accounts Receivable Co-op. Corp. v. Prime One Capital Co., 202 F. Supp. 2d 1339 (S.D. Fla. 2002) ............................................................................. 11 Steele v. Hosp. Corp. of Am., 36 F.3d 69 (9th Cir.1994) ............................................................................................... 6, 7

vi

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United Mine Workers v. Pennington, 381 U.S. 657 (1965) .......................................................................................................... 12 United States v. Pendergraft, 297 F.3d 1198 (11th Cir. 2002) ................................................................................. passim Vemco, Inc. v. Camardella, 23 F.3d 129 (6th Cir. 1994) .............................................................................................. 18 von Bulow v. von Bulow, 657 F.Supp. 1134 (S.D.N.Y. 1987) .................................................................................. 19 Warnock v. State Farm Mut. Auto. Ins. Co., 833 F. Supp. 2d 604 (S.D. Miss. 2011)............................................................................. 21 Williams v. Mohawk Indus., Inc., 465 F.3d 1277 (11th Cir. 2006) .................................................................................... 2, 32 STATUTES 18 U.S.C. § 1343 ....................................................................................................................... 3, 10 18 U.S.C. § 1503 ....................................................................................................................... 3, 10 18 U.S.C. § 1512 ....................................................................................................................... 3, 10 18 U.S.C. § 1951 ............................................................................................................................. 3 18 U.S.C. § 1956(a)(2)(A) ............................................................................................................ 10 18 U.S.C. § 1961 ............................................................................................................................. 1 18 U.S.C. § 1962 ................................................................................................................... 2, 8, 32 18 U.S.C. § 1962(c) and (d) .......................................................................................................... 21 18 U.S.C. § 1964(c) ...................................................................................................... 2, 32, 33, 35 18 U.S.C. § 1965(a)(2)(A) .............................................................................................................. 3 18 U.S.C. § 201 ......................................................................................................................... 3, 10 18 U.S.C.A. § 1951(a) .................................................................................................................... 9 18 U.S.C.A. § 1951(b)(2)................................................................................................................ 9 28 U.S.C. § 1927 ........................................................................................................................... 30 Alabama Code Section 6-5-101 .................................................................................................... 45 vii

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Alabama Code Section 6-5-102 .................................................................................................... 46 U.S. Const. Amend. I ...................................................................................................................... 5 RULES Fed. R. Civ. P. 12(b)(6)................................................................................................................... 1 Fed. R. Civ. P. 60(b)(3)................................................................................................................. 28 Fed. R. Civ. P. 9(b) ....................................................................................................... 9, 11, 45, 46 Fed. R. Evid. 201(b)(2) ................................................................................................................. 39 OTHER AUTHORITIES 54 C.J.S. Malicious Prosecution § 4 at 525 (1987) ....................................................................... 18

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Pursuant to Federal Rules of Civil Procedure 12(b)(6) and 9(b), Defendants William R. Scherer and Conrad & Scherer LLP (“Defendants”)1 respectfully move the Court to dismiss with prejudice the Complaint brought by Drummond Company, Inc. and Drummond Ltd. (“Plaintiffs” or “Drummond”) under the provisions of the Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. § 1961, et seq. INTRODUCTION At the outset of this 192-page Complaint, Drummond promises to prove that Defendants have targeted it with a massive “scheme to extort.” See, e.g., Compl. ¶ 1. But not a single one of the 228 “predicate acts” enumerated in the five Appendices alleges Hobbs Act extortion. Compl. ¶ 196, Appendices A-E. Indeed, a reader looking for predicate acts of “extortion” searches dozens and dozens of pages in vain, until one paragraph on page 70 alludes to a single phone call proposing settlement negotiations that never happened. Compl. ¶ 142. Drummond alleges no further Hobbs Act violations. Nor could it, because Defendants’ actions “targeting” Drummond, Compl. ¶¶ 50, 153, 198, are pure litigation conduct, and therefore protected by the First Amendment. This case is not about a “scheme to extort.” Here’s what it is about. 

Defendants William Scherer and Conrad & Scherer are a respected, experienced trial lawyer and his firm, who have brought several lawsuits (the “Underlying Litigation”)2 against Drummond based on its mining operations in Colombia. Compl. ¶ 1.

1

Defendants William R. Scherer and Conrad & Scherer LLP join in the arguments presented in Defendant Collingsworth’s concurrently-filed Motion to Dismiss. The “Underlying Litigation” consists of Juan Aquas Romero v. Drummond Company, Inc., et al., No. 7:03-cv00575-KOB, (N.D. Ala. March 13, 2003), (“Romero”); Freddy Locarno Baloco, et al., v. Drummond Company, Inc., et al., No. 7:09-cv-00557-RDP (N.D. Ala. March 20, 2009) (“Baloco”); Jane Doe 1, et al., v. Drummond Company, Inc., et al., No. 2:09-cv-01041-RDP (N.D. Ala. May 27, 2009) (“Balcero”); and Marisol Melo Penaloza, et al. v. Drummond Company, Inc., et al., No. 2:13-cv-00393-RDP (N.D. Ala. Feb. 26, 2013) (“Melo”). Of these four lawsuits, Melo alone survives, and the parties in Melo recently responded to an order from the Court to show cause why that case should not be dismissed as well. Melo, Dkt. Nos. 52, 53. 2

1

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

Over a fifteen year period, Defendants have lost every one of those cases – either on a dispositive motion or after a jury trial — except for certain remaining claims in one action. See supra n. 1.



Defendants have received nothing in settlement recoveries – much less “extorted” a single dime from Drummond. See id.



The “victim” of the alleged “extortionate” scheme is a company owned by what Forbes Magazine calls the richest man in Alabama who has virtually unlimited resources to throw at litigation against these human rights lawyers. See http://www.forbes.com/pictures/emlm45fedgm/alabama/ (visited Aug. 10, 2015).

To establish their alleged federal RICO civil violations Drummond “must satisfy four elements of proof: (1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity.… In civil cases … RICO plaintiffs must also satisfy the requirements of 18 U.S.C. § 1964(c) … (1) the requisite injury to ‘business or property,’ and (2) that such injury was ‘by reason of’ the substantive RICO violation.” Williams v. Mohawk Indus., Inc., 465 F.3d 1277, 1282-83 (11th Cir. 2006) (internal citations omitted). “Racketeering activity” is shown by alleging a pattern of “predicate acts under 18 U.S.C. § 1962.” Simpson v. Sanderson Farms, Inc., 744 F.3d 702, 705 (11th Cir. 2014). Those “predicate acts” must “proximately” cause the injury suffered by Drummond to its “business or property.” Id. In the Appendices to the Complaint, Drummond alleges no less than 228 “violations” of various federal criminal statutes. Compl., Apps. A-E. These are the alleged “predicate acts” that form the basis of Drummond’s RICO claims. Compl. ¶ 196. Appendices A, B and C deal with witness assistance payments made to the families of some of the witnesses who provided testimony in the Underlying Litigation, to promote their safety in what was becoming a very dangerous situation in Colombia. These three Appendices generally (and conclusorily) allege violations of “18 U.S.C. § 1343 (wire fraud); 18 U.S.C. § 201 (witness bribery); 18 U.S.C. §1965(a)(2)(A) (money laundering); 18 U.S.C. § 1503 (obstruction of justice); [and] 18 U.S.C. § 1512 (witness tampering).” See Compl., Apps. A-C. Appendix D provides a list of declarations, 2

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interrogatory responses and other litigation documents filed and/or served by some of the Defendants that allegedly “concealed” those witness assistance payments. Compl., App. D. Drummond alleges in a similarly conclusory fashion that these documents and other statements violated federal law against obstruction of justice and mail and wire fraud. Appendix E lists a number of equally conclusory “violations” of the federal wire and mail fraud statutes based on Defendants’ communications with the press, government officials, human rights organizations, and Defendant Albert van Bilderbeek. Compl., App. E. There is no Appendix F listing predicate acts for extortion. Although Drummond accuses Defendants of scheming to “extort” and recites the elements of Hobbs Act extortion, 18 U.S.C. § 1951, Compl. ¶¶ 183-88, not one of the 228 “violations” alleged in the Appendices is as alleged to be a predicate act of “extortion.”

The only clearly identified predicate allegation of

“extortion” is Defendant William Scherer’s unsuccessful settlement overture in June 2012. Compl. ¶ 142. This “extortionate” act consisted of a single phone call from Mr. Scherer, Managing Partner at the Conrad & Scherer law firm in Florida, to a lawyer at Akin Gump in Washington and fellow friend of President George W. Bush, who in turn called his friend William Jeffries at Baker Botts in Houston to see if there was a way to end this matter. He was told, “Hell no.” That is the “extortion” that is the cornerstone of this case. This overture was rejected, and thus, wrongful or not, caused no injury. See id. If they were true, which they are not, Drummond’s allegations might support a malicious prosecution or sanctions action. But the flaws in its RICO claim are fatal. 

The First Amendment’s Petition Clause protects Defendants’ litigation conduct, and the Eleventh Circuit explicitly rejects targeting litigation conduct with a RICO action based on extortion.



Drummond has been aware of its sole quantifiable “injury”—payment of attorney fees—since 2003, when the Underlying Litigation began. See Compl. ¶ 7; infra § 3

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III.B. As a result, its claims are time-barred under RICO’s injury discovery rule. Id. And of course, Drummond has known about the allegedly “fraudulent” and “false” allegations in the Underlying Litigation for just as long. 

And though Drummond does its best to shoehorn the facts of this case into the Southern District of New York’s Chevron v. Donziger case, Donziger was an attempt by Chevron to use the United States courts to remedy litigation misconduct—resulting in a fraudulently-obtained multibillion-dollar judgment— that the Ecuadorian judicial system seemed incapable of remedying itself. See infra ¶ II.F.3

Drummond’s RICO claim is, among other things, ridiculous. To the extent that Defendants have tried to extract any “windfall” from Drummond, extortionate or otherwise, that attempt has been a miserable, ongoing failure. See infra n. 1. As the Court is well aware, all but one of the suits in the Underlying Litigation have already resulted in dismissal or a loss at trial. Id. Drummond has already sued Defendants for defamation in this same Court, based on many of the same alleged acts that form the predicates of this so-called RICO claim. Drummond Co., Inc. v. Collingsworth, et al., No. 2:11-cv-03695-RDP (N.D. Ala. 2011). Defendants are prepared to continue to vigorously defend that defamation suit by proving the truth of the allegedly libelous statements. It has been reported that in late May 2015, a key Drummond executive, Alfredo Araujo, was detained by Colombian authorities in connection with

the

murders

in

2002

of

the

Drummond

union

officials.

See

http://colombiareports.com/drummond-executive-arrested-over-paramilitary-murder-charges/ (visited August 10, 2015). 4 The facts are finally starting to come out, and Drummond’s RICO allegations are nothing more than a desperate ploy to distract the court from the truth. Defendants respectfully urge the Court not to allow itself to be taken in. It should dismiss 3

Donziger is not, of course, precedential, and as argued below in Section II.F., it is not at all clear that the Eleventh Circuit would affirm its outcome if it were. The Donziger appeal was argued to a Second Circuit panel on April 20, 2015. Chevron Corp. v. Stephen Donziger, et al., No. 14-826 (2d Cir.). The Court may take judicial notice of press accounts “to establish that particular statements were made” if not necessarily for the truth of those statements. See In re Towne Services, Inc. Securities Litigation, 184 F.Supp.2d 1308, 1313 (N.D. Ga. 2001). 4

4

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Drummond’s frivolous claims and instead refocus its and the parties’ energies on Drummond’s libel suit, where Defendants eagerly await the opportunity to show the jury what has really been going on in Colombia for the last fourteen years. Defendants urge the Court to DISMISS Drummond’s RICO claims WITH PREJUDICE. ARGUMENT I.

The First Amendment’s Petition Clause Prohibits RICO-based Collateral Attacks on Defendants’ Litigation Conduct “Judges and lawyers often complain that the courts are inundated with a flood of

litigation, but the fact remains that litigation is as American as apple pie.” I.S. Joseph Co. v. J. Lauritzen A/S, 751 F.2d 265, 267–68 (8th Cir. 1984). Nothing is more “apple pie” than the First Amendment and our right to “petition the Government for a redress of grievances.” U.S. Const. Amend. I. Courts, including the Eleventh Circuit, routinely urge limits on the civil RICO action and caution against its misuse as a collateral attack on protected litigation conduct. See, e.g., United States v. Pendergraft, 297 F.3d 1198, 1207 (11th Cir. 2002) (“Sanctions for filing lawsuits … lead to collateral disputes and ‘a piling of litigation on litigation without end.’ Allowing litigants to be charged with extortion would open yet another collateral way for litigants to attack one another.”) (quoting Boothby Realty Co. v. Haygood, 114 So. 2d 555, 559 (Ala. 1959)).

See also Adell v. Macon Cnty. Greyhound Park, Inc., 785 F. Supp. 2d 1226, 1237

(M.D. Ala. 2011) (“[T]he statutory standing requirement ensures that “RICO is not expanded to provide a ‘federal cause of action and treble damages to every tort plaintiff.’”) (quoting Steele v. Hosp. Corp. of Am., 36 F.3d 69, 70 (9th Cir.1994)). Most courts focus on misuse of the RICO statute by disappointed litigants who would leverage RICO to undermine the finality of a judgment that did not go their way. See infra at II.D., E. By contrast, Drummond has mounted

5

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this collateral attack on a legal process in which it has been almost uniformly triumphant. See supra n. 1. A.

The Alleged RICO Predicate Acts Fail Basic Pleading Requirements and Are Entirely Limited to Protected Litigation Conduct

As explained in the Introduction, the alleged RICO predicate acts—aside from one phone call by Defendant Scherer, upon which rests the sole allegation of “extortion”—consist of 228 so-called “violations” that are listed in what might generously be described as a conclusory manner in the five Appendices to the Complaint. Most of these “violations” are alleged to be “wire” and/or “mail fraud,” as well as, in many cases, “witness bribery,” “money laundering,” “obstruction of justice,” and/or “witness tampering.”

Compl., Apps. A-E.

Each of the

“violations” in Appendices A through D,5 which generally deal with assistance payments to witnesses in the Underlying Litigation and statements regarding the same to opposing parties or the Court, is intimately related to and inseparable from the conduct of the Underlying Litigation against Drummond. Id. For this reason, as explained in Section II.B. below, Drummond’s RICO claim, if allowed, would impermissibly burden Defendants’ First Amendment rights to petition the courts. Drummond’s allegations must meet the basic Twombly/Iqbal standard and, where applicable, the more stringent requirements of Rule 9(b). “To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). “Determining whether a complaint states a plausible claim for relief [is] ... a context-specific task that requires the reviewing court to draw on its judicial experience and common sense.” Iqbal at 679 (citation omitted). “[F]acial plausibility” exists “when the 5

Appendix E is a reprise of the allegations in Drummond’s libel suit. See supra § I.A.2.

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plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal at 678 (citing Twombly, 550 U.S. at 556). The standard also “calls for enough facts to raise a reasonable expectation that discovery will reveal evidence” of the claim.” Twombly, 550 U.S. at 556. “Factual allegations must be enough to raise a right to relief above the speculative level.” Id. at 555. The descriptions of each individual “violation” fail to enumerate or, in most cases, even refer to the elements of the predicate acts listed. In Appendices A through C at the least, they utterly fail to explain how the information in the “Description” column is meant to inform the conclusory legal citations in the “Violations” column. None of these “Violations” plead a plausible claim for relief, and few of them provide sufficient notice—or indeed any notice—to Defendant Scherer or his law firm as to how they might go about defending against Drummond’s claims. 1.

Drummond’s Allegations as to Defendant William Scherer Fail to Meet Twombly Standards

As to Defendant William Scherer, Drummond entirely fails to meet the Twombly standard. In fact, Defendant Scherer is cited in the Appendices only one time, for signing an unidentified “filing” explaining why witness assistance payments were necessary in the Underlying Litigation. App. D, #18. Although Drummond implies that Mr. Scherer thereby committed obstruction of justice, mail, and wire fraud, it fails to explain how this “filing” allegedly met the requirements of any of those predicate acts. Aside from conclusory and implausible allegations that “Bill Scherer … knew of and approved” the witness assistance payments listed in the Appendices—and dozens more not listed—the Complaint entirely fails to explain how Mr. Scherer allegedly “conduct[ed] or participate[d],” whether “directly or indirectly, in the conduct of [the] enterprise's affairs through a pattern of racketeering activity.” 7

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18 U.S.C.A. § 1962 (West). See Compl. ¶¶ 77, 89, 116, 132. The Complaint does not contain a single factual allegation explaining how Mr. Scherer allegedly “approved” those payments or “conducted” the alleged payment scheme. Drummond’s only allegation focused on Mr. Scherer’s own conduct, dramatically entitled “The Ask,” describes an unsuccessful attempt to engage Drummond in preliminary settlement negotiations. Compl. ¶ 142. Mr. Scherer did not “ask” Drummond for anything; he simply “asked” a mutual friend whether Drummond might perhaps be willing to consider settlement discussions. Id. The “Ask” fails to plausibly state a claim pursuant to the Hobbs Act: Whoever in any way or degree obstructs, delays, or affects commerce or the movement of any article or commodity in commerce, by robbery or extortion or attempts or conspires so to do, or commits or threatens physical violence to any person or property in furtherance of a plan or purpose to do anything in violation of this section shall be fined under this title or imprisoned not more than twenty years, or both. 18 U.S.C.A. § 1951(a). “Extortion” as defined for Hobbs Act purposes requires “obtaining of property from another, with his consent, induced by wrongful use of actual or threatened force, violence, or fear, or under color of official right.” 18 U.S.C.A. § 1951(b)(2). The notion that Mr. Scherer’s attempt to engage Drummond in settlement negotiations via a mutual acquaintance somehow equates to “wrongful use of actual or threatened force, violence, or fear” is implausible under Twombly standards and would also be offensive were it not so thoroughly ridiculous. As to Mr. Scherer, Drummond’s allegations entirely fail to state a claim and should be dismissed. 2.

Drummond’s Mail and Wire Fraud Allegations Fail to Meet Rule 9(b) Standards

Predicate acts of mail and wire fraud must be pled in compliance “with Fed. R. Civ. P. 9(b)’s heightened pleading standard, which requires that ‘[i]n alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake.’” Am. Dental Ass'n v. Cigna Corp., 605 F.3d 1283, 1291 (11th Cir. 2010). “[P]ursuant to Rule 9(b), a plaintiff must 8

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allege: ‘(1) the precise statements, documents, or misrepresentations made; (2) the time, place, and person responsible for the statement; (3) the content and manner in which these statements misled the Plaintiffs; and (4) what the defendants gained by the alleged fraud.’”

Am. Dental,

605 F.3d at 1291 (citing Brooks v. Blue Cross & Blue Shield of Fla., Inc., 116 F.3d 1364, 1380– 81 (11th Cir.1997) “The plaintiff must allege facts with respect to each defendant’s participation in the fraud.” Am. Dental, 605 F.3d at 1291 (citing Brooks, 116 F.3d at 1381). Drummond fails to plead its mail and wire fraud predicate acts—which include almost every single “Violation” in each of the five Appendices—with particularity as required by Rule 9(b). Specifically, Drummond fails to allege for each act “(3) the content and manner in which these statements misled the Plaintiffs; and (4) what the defendants gained by the alleged fraud.” Id.at 1291 (emphasis added).

Drummond also fails to allege “facts with respect to each

defendant’s participation in the fraud.” Id. (emphasis added). To be clear, a civil RICO complaint based on mail or wire fraud must include “specific allegations with respect to each defendant.” Ambrosia Coal & Const. Co. v. Pages Morales, 482 F.3d 1309, 1316-17 (11th Cir. 2007) (citing Brooks, 116 F.3d at 1381) (noting that in Brooks “the plaintiffs lumped together all of the defendants in their allegations of fraud.”). “‘[I]n a case involving multiple defendants ... the complaint should inform each defendant of the nature of his alleged participation in the fraud.’” Ambrosia, 482 F.3d at 1317 (citing Brooks, 116 F.3d at 1381). Merely as an example, the first “violation,” typical of those listed in Appendices A through C, which deal with witness assistance payments, identifies an alleged payment to a woman named Mery Luz Molina Morales from a man named Ricardo Garzon, an alleged “co-

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conspirator.”6 Compl., App. A at p. 1. Ms. Molina is alleged to be a “member or friend of Charris’s family.” Id. The “Method” is alleged to be an “International wire followed by a cash deposit into Charris’ bank account.” Id. The “Description” explains that “Richard Gordon withdraws cash from Conrad & Scherer’s bank account in the United States and sends it via Western Union to Colombia to Ricardo Garzon, a member of Collingsworth’s litigation team and co-conspirator.

Garzon then deposits 3,000,000 Colombian pesos into Charris’ wife’s

Colombian bank account.” Id. And finally, the “Violations” column simply lists “18 U.S.C. § 1343 (wire fraud); 18 U.S.C. § 201 (witness bribery); 18 U.S.C. § 1956(a)(2)(A) (money laundering); 18 U.S.C. § 1503 (obstruction of justice); 18 U.S.C. § 1512 (witness tampering).” Id. This first “violation” fails to meet basic pleading requirements. Although Drummond assures the Court that each of the “violations” as alleged in Appendix A “includ[es] how it furthered the fraudulent scheme,” Compl. ¶ 180; in fact it does not. Compl., App. A at p. 1. The “violation” simply describes the fact of a payment by one alleged “non-party co-conspirator,” nothing more. “[T]he tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions. Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). The first “violation” also fails Rule 9(b)’s requirement that mail and wire fraud allegations be pleaded with particularity and show either how Drummond was misled by the alleged fraud or what any Defendant gained thereby. See Am. Dental, 605 F.3d at 1291. It also fails to allege specific facts with respect to each (or indeed, any) Defendant’s participation. Id.

6

Defendants include this discussion of alleged witness assistance payments to Ms. Molina subject to their objection that Drummond included this information in the Complaint in violation of this Court’s protective order. By doing so, Defendants do not waive any relevant objections to Drummond’s misuse of confidential information.

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The following 227 alleged “violations” are similarly deficient. As another example, each of the line items in Appendix D is alleged to be an “obstruction of justice.” See also Compl. ¶¶ 190-192. Appendix D is a list of “Court Filings and Sworn Testimony” in which Defendants allegedly “Fraudulently Conceal[ed]” the witness payments described in Appendices A through C. Compl., App. D. p. 1. Mere “acts of concealment,” however, may not be considered “predicate acts” under Eleventh Circuit law. Special Purpose Accounts Receivable Co-op. Corp. v. Prime One Capital Co., 202 F. Supp. 2d 1339, 1351 (S.D. Fla. 2002) (citing Jackson v. Bellsouth Tele., Inc., 181 F.Supp.2d 1345, 1360 (S.D. Fla. 2001) (noting that “[u]nder Eleventh Circuit law,” litigation activities that are nothing more than attempts to “cover up” other acts are “legally insufficient to establish predicate acts”)). In other words, to the extent that any obstruction of justice allegation depends on an alleged attempt to “conceal” another predicate act, that attempt may not form an independent predicate act.

See also Gunn v.

Palmieri, No. 87 CV 1418, 1989 WL 119519, at *1 (E.D.N.Y. Sept. 29, 1989) aff'd, 904 F.2d 33 (2d Cir. 1990) (“[O]ne of the predicate acts set forth in the RICO statute as pled here is ridiculous. If serving and filing an answer or a motion by any defendant in a federal action could be considered obstruction of justice, this Court would be flooded with motions to amend complaints by plaintiffs seeking to add RICO claims based upon mail fraud and obstruction of justice as soon as an answer was served. Such an interpretation of the RICO statute is untenable.”). Appendix E consists entirely of wire (and one mail) fraud “violations,” none of which alleges that any Defendant thereby “intended to deceive” the victim of the so-called fraud, Drummond. Compl., App. E. The title of the Appendix helpfully acknowledges that the target of each allegedly fraudulent communication is “the Media, the United States Department of

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Justice, and Other Third Parties.” Id. at p. 1. But the federal mail and wire fraud statutes do not criminalize fraudulent conduct aimed at “third parties” rather than the alleged victim of the crime. For that reason alone, each of the allegations in Appendix E fails to establish a predicate act. Appendix E in its entirety is nothing more than a cut-and-paste attempt by Drummond to import its defamation allegations wholesale into this lawsuit. In sum, none of the 228 “violations” alleged by Drummond—or the “Ask” by Mr. Scherer—are properly pleaded, and none extends the alleged “pattern of racketeering activity,” Compl. ¶ 1, beyond litigation conduct that, as explained below, is nothing more or less than petitioning activity protected by the First Amendment. B.

Defendants’ Litigation Conduct is Constitutionally Protected from Collateral Attack Based on Federal Statutory Law, Including RICO

The Supreme Court has long recognized that the First Amendment is the source of the Noerr-Pennington doctrine,7 which immunizes individuals’ petitioning activities from federal statutory liability. See McGuire Oil Co. v. Mapco, Inc., 958 F.2d 1552, 1558-59 (11th Cir. 1992) (citing California Motor Transport Co. v. Trucking Unlimited, 404 U.S. 508 (1972)). In 2006 the Ninth Circuit observed that the Noerr-Pennington doctrine stands for “a generic rule of statutory construction, applicable to any statutory interpretation that could implicate the rights protected by the Petition Clause.” Sosa v. DIRECTV, Inc., 437 F.3d 923, 930-31 (9th Cir. 2006) (citing BE&K Construction Co. v. NLRB, 536 U.S. 516, 525 (2002) (noting that, in 2002, the Supreme Court extended the Noerr-Pennington doctrine beyond the antitrust context)). Federal statutes, including RICO, must be construed “so as to avoid burdening conduct that implicates the protections afforded by the Petition Clause unless the statute clearly provides otherwise.” This doctrine is derived from the Supreme Court’s decisions in Eastern Railroad Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127 (1961), and United Mine Workers v. Pennington, 381 U.S. 657 (1965). 7

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Sosa, 437 F.3d at 931. Courts must not “lightly impute” to Congress an intent to invade First Amendment freedoms. E. R. R. Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127, 138 (1961). In Sosa, the satellite television broadcaster DIRECTV sent “tens of thousands of demand letters alleging that the recipients had accessed DIRECTV’s satellite television signal illegally and would be sued if they did not quickly settle.” Sosa, 437 F.3d at 926. DIRECTV sent these demand letters despite the fact that it had absolutely “no information” as to whether the letter recipients were using “smart card programming technology” to steal its signal. Id. at 926. And in fact, the smart card equipment purchased by the demand letter recipients “ha[d] a number of lawful applications … such as implementing secure access to computer networks or controlling physical access to buildings or rooms.” Id. at 926. In other words, so far as DIRECTV knew, many of its demand letters were false. And although they maintained their innocence of DIRECTV’s accusations, a number of recipients of the false demand letters paid cash settlements to DIRECTV rather than incur the expense to respond to DIRECTV’s allegations. Id. at 926-27. After an unsuccessful state court action, they brought a RICO suit in federal court in California, accusing DIRECTV of extortion. Id. at 927. The district court dismissed the claim on the grounds of Noerr-Pennington immunity, and the Ninth Circuit affirmed, id. at 929, 942, reasoning as follows: Applying these principles here, we must determine whether Sosa's RICO lawsuit burdens DIRECTV's petitioning activities. If it does, we must examine the precise petitioning conduct DIRECTV engaged in to determine whether the burden identified may be imposed consistently with the Constitution. If there is a substantial question that it may not, we must determine whether RICO or the RICO predicate acts Sosa alleges clearly provide for liability for the conduct at issue. If a reasonable construction of RICO or the predicate act statutes exists that avoids the burden, we will adopt that construction. Only where the statutes clearly provide for the burden posed by the lawsuit will we address whether the statute may be applied to the petitioning conduct consistently with the Constitution. 13

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Id. at 932 (applying the First Amendment principles set out by the Supreme Court in BE & K Const. Co. v. N.L.R.B., 536 U.S. 516, 524-25 (2002)). Finding that a RICO claim based on the false and misleading demand letters clearly burdened DIRECTV’s litigation conduct, the court moved on to consider whether that burden ran “afoul of the Petition Clause.” Id. at 933. The court noted that “petitions” include “assorted documents and pleadings, in which plaintiffs or defendants make representations and present arguments to support their request that the court do or not do something.” Id. at 933. The Petition Clause also precluded burdening documents and activities that are not themselves petitions—like DIRECTV’s demand letters—so as to “preserve the breathing space required for the effective exercise of the rights it protects.” Id. “[T]o exercise its petitioning rights meaningfully, a party may not be subjected to liability for conduct intimately related to its petitioning activities.” Id. at 934.

The court also noted its previous

ruling that “where the underlying litigation fell within the protection of the Petition Clause,” any “incidental conduct would also be protected.” Id. at 935 (citing Columbia Pictures Indus., Inc. v. Prof’l Real Estate Investors, Inc., 944 F.2d 1525, 1528-29 (9th Cir. 1991)). The Ninth Circuit ultimately concluded that “the connection between presuit demand letters and access to the courts is sufficiently close that the Petition Clause issues raised by providing a treble-damages remedy with regard to such letters are indeed substantial.” Id. at 936. The court identified “several reasons” for its conclusion, including the following, among others. Id. First, a pre-suit invitation to engage in settlement negotiations is a common feature of modern litigation. Id. Second, “the intimate relationship between presuit settlement demands and the actual litigation process” is highlighted by many states’ pre-litigation communication privileges. Id. Third, protecting presuit demand letters serves the “same interests” that are implicated in the protection of private litigation. Id. 14

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In next evaluating whether RICO could be construed to avoid reaching the constitutional issue, the Ninth Circuit relied in part on the Eleventh Circuit’s decision in United States v. Pendergraft, 297 F.3d 1198, 1208 (11th Cir. 2002). Id. at 941. The Ninth Circuit found that neither RICO nor the predicate statutes permitted a lawsuit based on DIRECTV’s demand letters. Id. at 942. The court emphasized that federal statutes, including RICO, must be construed “so as to avoid burdens on activity arguably falling within the scope of the Petition Clause of the First Amendment.” Id. at 942.

The court found that RICO did not “unambiguously include” the

accused litigation conduct “within the scope of conduct it enjoins,” and affirmed the district court’s decision dismissing the complaint. Id. at 942. Drummond’s Complaint also fails Sosa’s test. By seeking to impose RICO’s treble damages on Defendants based on their conduct in prosecuting their clients’ human rights claims against Drummond, Compl. ¶ 199, the Complaint “quite plainly” burdens Defendants’, and their clients’, petitioning activities. See id. at 932-33. Also, given the “precise petitioning conduct,” this burden cannot be imposed consistently with the Constitution. See id. at 932. Witness assistance payments are “intimately” related to the presentation of witnesses to support Defendants’, and their clients’, petitioning activity.

Mistakes or even—if Drummond’s

allegations are to be believed—“misrepresentations” in discovery responses and to this Court are exactly the sort of “incidental conduct,” like Sosa’s false and misleading “demand letters,” that must be left unburdened by federal statutory liability, including RICO, so as to preserve the “breathing space” required for the exercise of First Amendment rights in our system of justice. Id. at 933-35. Although the Eleventh Circuit has not yet had occasion to consider the Ninth Circuit’s application of the Noerr-Pennington doctrine to RICO claims, the Eleventh Circuit’s reasoning

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in Pendergraft strongly influenced the Ninth Circuit’s determination that RICO must be construed so as to preclude liability for the Sosa defendant’s litigation conduct. See id. at 940 n. 10, 941.

As discussed immediately below, Pendergraft gives every indication that if the

Eleventh Circuit were to consider whether a civil RICO suit based purely on alleged litigation misconduct should be precluded by the protections afforded by the Petition Clause of the First Amendment, it would reach a similar conclusion to the Ninth Circuit’s and construe RICO so as not to burden litigation conduct, including litigation misconduct like that of DIRECTV in Sosa. Defendants in this case should receive the benefit of that analysis, and Drummond’s suit should be dismissed. II.

Even if Its Allegations of Litigation Misconduct are Accepted as True, Drummond Should not be Allowed to use RICO Predicate Acts to Collaterally Attack the Underlying Litigation Each of the so-called “predicate acts” is pure litigation conduct of the type that, in the

Eleventh Circuit, among many others, cannot support a claim based on extortion.8 Pendergraft, 297 F.3d at 1208 (“[P]rosecuting litigation activities as federal crimes would undermine the policies of access and finality that animate our legal system. Moreover, allowing such charges would arguably turn many state-law actions for malicious prosecution into federal RICO actions.”). It is also the type of litigation conduct that the Ninth Circuit has recognized as immune from civil RICO claims, as explained above. A.

Under Pendergraft, Even Blatant Litigation Misconduct Cannot Support the Predicate Acts of Extortion, Mail Fraud or Wire Fraud

The Pendergraft defendants, James Scott Pendergraft and Michael Spielvogel, were convicted of attempted extortion and mail fraud, among other crimes. Id. at 1200. These charges “arose out of their threat to seek damages in a lawsuit … and to use false evidence in Only one alleged predicate act—“The Ask”—is identified as extortion, but Drummond nevertheless repeatedly frames its allegations as a “massive” or “multifaceted” “scheme to extort.” Compl. ¶¶ 17-24, 142, 178, 179, 193. 8

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support of the lawsuit.” Id. (emphasis added). The appellate court reversed these convictions because that threat was neither (1) “wrongful” for Hobbs Act (extortion) purposes nor (2) a “scheme to defraud” for mail fraud purposes.” Id. The underlying lawsuit in Pendergraft arose out of the defendants’ efforts to open and operate an abortion clinic in Ocala, Florida. Id. at 1200. When Pendergraft’s request to the city and county to provide off-duty law enforcement officers for security was denied, he (along with the clinic) sued for injunctive relief. Id. at 1201. He then threatened to add a claim for actual and punitive damages as well as fees and costs based on certain threats that defendants falsely alleged Spielvogel had received from the Chairman of the County Board of Commissioners. Id. at 1201-02. Unbeknownst to Spielvogel, his conversations with the Board Chairman had been taped by the FBI. Id. at 1202. Thus, the defendants in the injunction lawsuit knew that the allegations, and the supporting affidavits, were false. Despite the fact that the Pendergraft defendants had gone so far as to make explicit threats to use false evidence in a damages claim, the Eleventh Circuit reversed their convictions of conspiracy to commit extortion and mail fraud. Id. at 1212. As to extortion, the Court noted that “[s]everal courts have held [in the civil RICO context] that a threat to file a lawsuit, even if made in bad faith, is not ‘wrongful’ within the meaning of the Hobbs Act. [In a]ll of these cases … litigants have included a threat to file a lawsuit as the predicate act of extortion.” Pendergraft, 297 F.3d at 1205 (citing Vemco, Inc. v. Camardella, 23 F.3d 129, 134 (6th Cir. 1994); First Pacific Bancorp, Inc. v. Bro, 847 F.2d 542, 547 (9th Cir. 1988); I.S. Joseph Co., 751 F.2d at 267–68; G–I Holdings, Inc. v. Baron & Budd, 179 F.Supp.2d 233, 259 (S.D.N.Y. 2001); Heights Cmty. Cong. v. Smythe, Cramer Co., 862 F.Supp. 204, 207 (N.D.Ohio 1994); Am. Nursing Care of Toledo, Inc. v. Leisure, 609 F.Supp. 419, 430 (N.D.Ohio 1984). “Most of these

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courts have re-characterized the extortion charges as actions for malicious prosecution and have held that malicious prosecution is not a RICO predicate act.” Id. The Court explained that because “fear of economic loss” is an “animating force of our economic system,” it “is not inherently wrongful.” Id. at 1206.9 A “threat to litigate” was also not necessarily “wrongful” for Hobbs Act extortion purposes, because “under our system, parties are encouraged to resort to courts for the redress of wrongs and the enforcement of rights.” Id. at 1206 (citing Boothby Realty Co. v. Haygood, 114 So. 2d 555, 559 (Ala. 1959) and 54 C.J.S. Malicious Prosecution § 4 at 525 (1987)).

The crucial question was whether the “use of

economic fear” via the deliberate, “bad faith” “fabrication of evidence” “in an effort to induce the payment of money” (while “certainly not ‘rightful’”) was “wrongful” for purposes of alleging a Hobbs Act violation. Id. at 1206-08. The Court determined that it was not wrongful. Id. at 1208. Despite its grand talk of a “massive and multifaceted” “scheme to exort,” the Complaint features just one meager predicate act of Hobbs Act extortion: Mr. Scherer’s single phone call to find out, via an intermediary, whether Drummond might be willing to settle the Underlying Litigation. Compl. ¶¶ 2, 142, 174. Drummond has not alleged—and cannot allege—that this one phone call involved the “wrongful use of actual or threatened force, violence, or fear” sufficient to state a claim under the Hobbs Act. See supra at 9. But even if it had, such a threat would have been no different and no worse than the Pendergraft defendants’ attempt to use the threat of “economic fear,” based on “fabrication of evidence,” “to induce the payment of 9

Before Pendergraft, the Eighth Circuit held that a “threat … to frighten [plaintiff] into paying or guaranteeing [defendant’s] debts” was not criminal extortion. I.S. Joseph Co. v. J. Lauritzen A/S, 751 F.2d 265, 267-68 (8th Cir. 1984). The court could not “agree that the threat alleged … constituted the infliction of ‘fear’ for purposes of the extortion statute” even if “the threat to sue was groundless and made in bad faith. Such conduct may be tortious under state law, but we decline to expand the federal extortion statute to make it a crime.” Id. at 267.

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money.” Pendergraft, 297 F.3d at 1208. The truth is that this is a much easier “extortion” case than Pendergraft. The Pendergraft court similarly found that absent certain circumstances, litigation conduct could not serve as the basis of a mail fraud claim. “A number of courts have considered whether serving litigation documents by mail can constitute mail fraud, and all have rejected that possibility.” Id. at 1208 (citing Daddona v. Gaudio, 156 F.Supp.2d 153, 162–64 (D.Conn. 2000); Auburn Med. Ctr., Inc. v. Andrus, 9 F.Supp.2d 1291, 1300 (M.D.Ala. 1998); von Bulow v. von Bulow, 657 F.Supp. 1134, 1142–46 (S.D.N.Y. 1987); Paul S. Mullin & Assocs., Inc. v. Bassett, 632 F.Supp. 532, 540 (D.Del. 1986); and Am. Nursing Care of Toledo, Inc. v. Leisure, 609 F.Supp. 419, 430 (N.D.Ohio 1984)). “As in the Hobbs Act context, these courts have rejected this mail-fraud theory on policy grounds, recognizing that such charges are merely ‘artfully pleaded claims for malicious prosecution.’” Id. at 1208 (quoting Auburn Med. Ctr., Inc., 9 F. Supp. 2d at 1297). For allegations of mail and wire fraud predicate acts, the inquiry turned on the meaning of “scheme to defraud.” “While both the mail-fraud and wire-fraud statutes use the phrase ‘scheme to defraud,’ neither statute defines what a ‘scheme to defraud’ is.”

Id. at 1208.

“Instead, the meaning of ‘scheme to defraud’ has been judicially defined.” Id. at 1208. “Courts have defined the phrase broadly, allowing it to encompass deceptive schemes that do not fit the common-law definition of fraud.”

Id. at 1208 (internal citation omitted).

“Nevertheless,

Congress did not strip the word ‘defraud’ of all its meaning…; the word still signifies the deprivation of something of value by trick, deceit, chicane, or overreaching.” Id. at 1208-09 (internal citation omitted). “There are limits to the types of schemes that the mail-fraud statute encompasses.” Id. at 1209 (internal citation omitted).

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“The possibility of an unfavorable verdict, based on perjurious testimony, may have caused [the defendant] to fear the lawsuit. But fear is different from fraud. A scheme to frighten is simply not criminalized by the mail-fraud statute.” Id. at 1209. “[I]f deceit, as well as fear, is intended, then the actions may be criminal.” Id. at 1209. But, crucially, because the defendants “knew that they could not deceive” the defendants in the underlying litigation—because the defendants in the underlying litigation knew that the false allegations were untrue—the RICO defendants “could not have had an intent to deceive.” Id. at 1209 (emphasis added). “Since there was no intent to deceive, there was no ‘scheme to defraud,’ and [the] mailing of litigation documents, even perjurious ones, did not violate the mail-fraud statute.” Id. at 1209 (emphasis added). The Court found that the mail fraud allegations failed “as a matter of law.” Id. at 1209. See also Sosa, 437 F.3d at 941 (“[L]etters cannot amount to mail fraud … where the sender knows the recipient will not be deceived by the falsehoods.”). “Because [the false] statements concerned [plaintiff’s] own conduct, [defendant] could not have intended that he would be deceived by them and was therefore necessarily lacking in the intent requisite to have committed mail or wire fraud.” Id. (citing Pendergraft, 297 F.3d at 1209).10 Surely Drummond, like the defendants in the underlying litigation in Pendergraft, would take the position that it “knows” that Defendants’ “false” allegations are “untrue.” Given the gravity of Defendants’ allegations, and Drummond’s repeated protestations of innocence, how could it not? But if Drummond knows, and has always known, that any allegation by any witness, paid or unpaid, that it conspired with Colombian terrorists in the murder of three union leaders and dozens of innocent civilians must be untrue, then like the Pendergraft defendants,

See also Warnock v. State Farm Mut. Auto. Ins. Co., 833 F. Supp. 2d 604, 609 (S.D. Miss. 2011) (“Because the evidence demonstrates only the transmittal of allegedly false litigation materials, this Court agrees that under Pendergraft and the related cases, Warnock has not proven the predicate acts of mail or wire fraud. For this reason alone, Warnock's RICO claims under §§ 1962(c) and (d) must fail.”). 10

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Defendants here could never have had the requisite intent to deceive Drummond, the victim of the alleged fraud. And the target of the deceit matters. Any intent to deceive the court, though unsavory and inadvisable, is not sufficient to form a RICO predicate act. “As in Pendergraft, if the Defendants sought to deceive anyone, it was the courts …. Defendants allegedly presented the courts … with misleading information and baseless claims in the hope that they would be fooled into depriving [Plaintiff] of the necessary legal backing to open their business. [Plaintiff] does not allege and presents no evidence that Defendants at any point sought to deceive it. Without that intent to deceive, there can be no mail fraud violation.” Livingston Downs Racing Ass'n, Inc. v. Jefferson Downs Corp., 257 F. Supp. 2d 819, 830-31 (M.D. La. 2002). Drummond’s allegations of extortion and of mail and wire fraud fail under Pendergraft. B.

This Court Should Recognize that Pendergraft’s Reasoning Applies Equally to the Additional “Predicate Acts” Alleged Here

Two years after Pendergraft, the Eleventh Circuit confirmed that its holding extended beyond threats of litigation to actual litigation and reaffirmed Pendergraft’s reasoning. Raney v. Allstate Ins. Co., 370 F.3d 1086, 1087-88 (11th Cir. 2004).

“In light of our decision in

Pendergraft, we doubt that the filing of a lawsuit could ever be ‘wrongful’ for the purposes of RICO.” Id. at 1088 (internal citation omitted). In Pendergraft, “[w]e noted that courts possess adequate procedures to distinguish valid claims from invalid claims and held that Congress did not intend to punish citizens merely for accessing the legal system. … We found ourselves troubled by any use of this federal criminal statute to punish civil litigants…. We noted that allowing litigants to be charged with extortion would open yet another collateral way for litigants to attack one another. We also expressed concern about transforming every state-law malicious prosecution action into a federal crime.” Raney, 370 F.3d at 1088 (internal citations omitted). The court also noted that “other courts have explicitly applied this reasoning to litigation that has 21

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already been filed.” Id. at 1088 (citing Deck v. Engineered Laminates, 349 F.3d 1253, 1258 (10th Cir. 2003) (citing Pendergraft and rejecting “meritless litigation” as a predicate act under RICO)). In Pendergraft, the Eleventh Circuit was especially concerned about the effect that treating allegations of false testimony and other litigation misconduct as extortion or wire fraud might have on witnesses. “The law jealously guards witnesses who participate in judicial proceedings; witnesses should be ‘unafraid to testify fully and openly.’” Id. at 1207 (internal citations omitted). Our judicial system already features sufficient checks to ensure that allegedly “false” testimony receives no more weight than it deserves. “Because the rigors of crossexamination and the penalty of perjury sufficiently protect the reliability of witnesses, courts have been unwilling to expand the scope of witness liability, since, by doing so, the risk of selfcensorship becomes too great.” Id. at 1207 (internal citations omitted). Though Pendergraft did not involve allegations of obstruction of justice, bribery, money laundering (based on alleged bribery), or witness tampering, Defendants urge this Court to recognize that Pendergraft’s logic regarding protection of witnesses from chilling influences applies equally to all allegations of litigation misconduct. Drummond does its best to dodge Pendergraft by padding its “violations” with conclusory allegations of obstruction of justice, money laundering, and so on, and by shying away from explicit allegations of “extortion” in its Appendices. But this Court should not ignore binding Eleventh Circuit precedent because of Drummond’s artful pleading. Without a doubt, claims for obstruction of justice, bribery, money laundering, and witness tampering could be RICO predicate acts, if properly pleaded in the right context. For example, a drug smuggler who bribed or intimidated witnesses in a federal prosecution based on his larger criminal enterprise could be guilty under RICO for those predicate acts, among others.

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But where, as here, the alleged “pattern of racketeering activity” is itself nothing more than a lawsuit or lawsuits, and the plaintiff cannot identify any predicate acts that are not themselves “intimately related” to Defendants’ “petitioning activities,” RICO must be construed carefully and narrowly to avoid reaching constitutionally protected litigation conduct. Sosa, 437 F.3d at 934. The Eleventh Circuit has recognized that when the plaintiff “does not allege any facts independent of plaintiffs’ pre-litigative and litigative activities … there is no predicate act … that constitutes an independent violation” of federal law. McGuire Oil. Co. v. Mapco, Inc., 958 F.2d 1552, 1561 (11th Cir. 1992) (emphasis added) (finding that “[n]othing in … any … case suggests that a conspiracy to use in good faith the adjudicative process to achieve anticompetitive goals violates the Sherman Act”).

Following McGuire, a district court in the

Eleventh Circuit more recently found that “pre-litigative and litigative activity” is constitutionally protected from state law claims for deceptive trade practices, among other claims. Atico Intern. USA, Inc. v. LUV N’Care, Ltd., No. 09-60397-CIV-COHN, 2009 WL 2589148, at *1 (S.D. Fla. Aug. 19, 2009). This Court should find that this alleged pattern of racketeering activity, consisting entirely of litigation conduct and nothing more, cannot support a civil RICO suit. This Court must not allow Drummond to use civil RICO as a blunt instrument for collateral attack. If courts allow RICO suits like this one to go forward, they will open the gates to a “flood” of civil RICO suits by powerful litigants seeking retaliation against litigation conduct that is “as American as apple pie.” See I.S. Joseph Co., 751 F.2d at 267. “If a suit is groundless or filed in bad faith, the law of torts may provide a remedy. Resort to a federal criminal statute is unnecessary.” Id. at 267-68. Allowing suits like this one to go forward would

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have an inevitable chilling effect on those who seek justice in civil litigation. It should be dismissed. C.

Any “Sham Litigation” Exception Does Not Apply

Drummond may argue that First Amendment protection is unavailable because the Underlying Litigation is a “sham.” See Prof'l Real Estate Investors, Inc. v. Columbia Pictures Indus., Inc., 508 U.S. 49, 51 (1993). Any such suggestion would be an insult to this Court, which has presided over the Underlying Litigation since 2009.

Further, the Underlying

Litigation does not meet the Supreme Court’s “two-part definition” of “sham” litigation. Id. at 60-61. First, a sham lawsuit must be “objectively baseless.” Id. at 60. Second, the baseless lawsuit must also be “an attempt to interfere directly with the business relationships of a competitor.” Id. at 60-61. A lawsuit is not a sham unless it satisfies both prongs of the two-part test. BE & K Const. Co. v. N.L.R.B., 536 U.S. 516, 526 (2002) (“For a suit to violate the antitrust laws, then, it must be a sham both objectively and subjectively.”) (emphasis added). Because the Underlying Litigation is not “objectively baseless,” it fails at least the first part of the Supreme Court’s two-part test, and therefore cannot be considered a “sham.” Drummond cannot claim with a straight face that the Underlying Litigation meets the objective prong of the two-part test for sham litigation.

“Unsuccessful” lawsuits are not

necessarily shams, and “[a]nalyzing whether the lawsuits were objectively baseless requires a look at the outcomes of each case.” In re Terazosin Hydrochloride Antitrust Litig., 335 F. Supp. 2d 1336, 1357 (S.D. Fla. 2004). The first action in the Underlying Litigation, Romero, went all the way to a jury verdict, surviving summary judgment on claims of extrajudicial killing pursuant to the Alien Tort Claims Act under a theory of aiding and abetting liability. Romero, Dkt. Nos. 329, 408, 486.

Balcero survived multiple motions to dismiss, but was lost on

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summary judgment because of an intervening Supreme Court decision that this Court compared to “an earthquake that has shaken the very foundation of Plaintiffs’ claims.” Balcero, Dkt. Nos. 31, 44, 142, 455 at p. 1.11 Baloco was dismissed at the summary judgment stage on grounds of res judicata. Baloco at Dkt. No. 95. Melo is still an active case. See Melo, Dkt. Nos 51, 53. The fact that the Underlying Litigation has not been ultimately successful is not an indication that it was a “sham.” “[W]hen the … defendant has lost the underlying litigation, a court must resist the understandable temptation to engage in post hoc reasoning by concluding that an ultimately unsuccessful action must have been unreasonable or without foundation…. The court must remember that even when the law or the facts appear questionable or unfavorable at the outset, a party may have an entirely reasonable ground for bringing suit.” Prof'l Real Estate Investors, 508 U.S. at 61 n. 5 (internal citations omitted). See also Andrx Pharm., Inc. v. Elan Corp., PLC, 421 F.3d 1227, 1234 (11th Cir. 2005) (holding that even though plaintiff in allegedly “sham” patent litigation had not won, it had made a “winning argument against … contentions of patent invalidity” and therefore its claims were not objectively baseless); In re AndroGel Antitrust Litig. (No. II), 888 F. Supp. 2d 1336, 1344 (N.D. Ga. 2012) (“Plaintiffs must satisfy a heavy burden to show that the Underlying Litigation was objectively baseless. Under this exacting standard, the plaintiff's case in the Underlying Litigation must have had no objective foundation.”) (internal citations omitted). Unless Drummond can show that the Underlying Litigation was “objectively baseless”— which it cannot—this Court must not inquire into Defendants’ “subjective motivation” in bringing those lawsuits. Prof'l Real Estate Investors, 508 U.S. at 60 (“Only if challenged

In determining whether an action was “objectively baseless,” the Court must look to the state of the law at the time of filing. See In re Terazosin Hydrochloride Antitrust Litigation, 335 F.Supp.2d at 1359-64 (evaluating whether underlying patent infringement suits were objectively baseless in light of an intervening change in the law governing application of the on-sale bar and concluding that they were not). 11

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litigation is objectively meritless may a court examine the litigant’s subjective motivation.”). The Supreme Court has explicitly rejected “a purely subjective definition of ‘sham’” and held that litigation is not a sham “merely because a subjective expectation of success does not motivate the litigant.” Id. at 57-58 (“We now … hold that an objectively reasonable effort to litigate cannot be sham regardless of subjective intent.”). In other words, Defendants are not required to show that the Underlying Litigation was not “an attempt to interfere directly with [Drummond’s] business relationships” in order to defeat the sham litigation exception. Showing that the Underlying Litigation was not “objectively baseless” is enough. The “sham” exception does not apply. D.

After Pendergraft, District Courts in the Eleventh Circuit Have Properly Characterized Claims Based on Litigation Misconduct as Malicious Prosecution, Not Extortion

None of the above should be understood to suggest that victims of litigation misconduct are or should be left in want of a remedy in the Ninth or Eleventh Circuits or anywhere else. For many, the answer is a tort action for malicious prosecution. See Levitan v. Patti, No. 3:09CV321 MCR MD, 2011 WL 1299947, at *16 (N.D. Fla. Feb. 8, 2011) (citing Pendergraft, 297 F.3d at 1206–07) (“The heart of plaintiffs’ claims in this section is that defendants made false statements to further litigation and filed false criminal charges. These acts are properly characterized as malicious prosecution, not extortion, and malicious prosecution is not a RICO predicate act.”). And where a Plaintiff “could have brought suit against the defendants for malicious prosecution, … [t]here is no reason to expand the scope of mail and wire fraud statutes to include attempts to obtain a third party’s property by deceiving the courts …, especially when independent causes of action exist to serve the same end.” Livingston Downs Racing Ass'n, Inc. v. Jefferson Downs Corp., 257 F. Supp. 2d 819, 831 (M.D. La. 2002) (emphasis added).

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When a litigant misbehaves in court, whether by deliberately falsifying evidence or otherwise, “[w]e trust the courts, and their time-tested procedures, to produce reliable results, separating validity from invalidity, honesty from dishonesty. While our process is sometimes expensive, and occasionally inaccurate, we have confidence in it. When a citizen avails himself of this process, his doing so is not inherently ‘wrongful.’” Pendergraft, 297 F.3d at 1206-07. In other words, it was and is this Court’s responsibility and prerogative to use the procedures available to it in the Underlying Litigation to ensure the fair and efficient administration of justice, and Drummond has never alleged that the Court failed to do so. Nor has Drummond alleged that it was in some way unfairly prevented from protecting its own interests, including seeking attorney fees, in the Underlying Litigation. Drummond also cannot deny that in the event of an adverse judgment procured by any alleged “fraud” in the Underlying Litigation, it would have had recourse to Federal Rule of Civil Procedure 60(b)(3). With such sanctions and remedies available, Drummond had no need to avail itself of the RICO statute.12 Its claims should be dismissed. E.

The Pendergraft Analysis Survives Even in States with Near-Absolute Litigation Immunity

Florida law features an explicit “litigation privilege,” which provides that “absolute immunity must be afforded to any act occurring during the course of a judicial proceeding, regardless of whether the act involves a defamatory statement or other tortious behavior … so long as the act has some relation to the proceeding.”

Levin, Middlebrooks, Mabie, Thomas,

Mayes & Mitchell, P.A. v. U.S. Fire Ins. Co., 639 So. 2d 606, 608 (Fla. 1994). In evaluating the

12

This is not to say that any attempt by Drummond to impose sanctions would likely have been successful. The Pendergraft court noted that “litigants may be sanctioned for only the most frivolous of actions. These sanctions include tort actions for malicious prosecution and abuse of process, and in some cases recovery of attorney's fees, but even these remedies are heavily disfavored because they discourage the resort to courts.” Pendergraft, 297 F.3d at 1206 (emphasis added).

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effect of the litigation privilege, the Eleventh Circuit has bolstered and provided further insight into its reasoning in Pendergraft. See Green Leaf Nursery v. E.I. DuPont De Nemours & Co., 341 F.3d 1292, 1296 (11th Cir. 2003). Green Leaf Nursery alleged that “after settling their case, they discovered that [Defendant] had engaged in a massive scheme of perjury, falsification of evidence, and fraudulent concealment of evidence to induce themselves and other … plaintiffs to settle their claims for less than the claims’ fair value.” Green Leaf Nursery, 341 F.3d at 1296. The court noted that Florida’s near-absolute litigation immunity “does not leave parties without a remedy for misconduct occurring during or relating to litigation. For example, a trial judge has the inherent power to do those things necessary to enforce its orders, to conduct its business in a proper manner, and to protect the court from acts obstructing the administration of justice.” Green Leaf Nursery, 341 F.3d at 1302 (citation omitted). Further, “Plaintiffs could have filed a contempt motion before the trial court in the Underlying Litigation as a remedy for [Defendant’s] misconduct. Plaintiffs chose instead to pursue fraud actions in subsequent litigation.” Green Leaf Nursery, 341 F.3d at 1302 (internal citation omitted). Even though Florida provides limited alternatives to a party claiming litigation misconduct, the Eleventh Circuit nevertheless affirmed dismissal of the related RICO claim. Id. at 1296. F.

Despite Surface Similarities, This Case is Nothing Like Chevron v. Donziger

This Complaint is an obvious attempt to wedge the facts of the Underlying Litigation into the very different shoe of Chevron Corp.’s RICO case against attorney Steven Donziger, which recently resulted in a favorable judgment for Chevron barring enforcement of an enormous Ecuadorian judgment in the United States. See Chevron Corp. v. Donziger, 974 F.Supp.2d 362 (S.D.N.Y. 2014). But Terry Collingsworth is not Steven Donziger, and this case is not Chevron.

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When Chevron brought suit, attorney-defendant Donziger was preparing to enforce a multibillion dollar judgment obtained against Chevron in a corrupt foreign judicial system that was rife with intimidation of judges, including by the President of Ecuador himself, who publicly favored the plaintiffs in the underlying case and took drastic steps to undermine the independence of the judiciary. Id. at 383-84; 608-617. The Donziger court went so far as to find “that Ecuador, at no time relevant to this case, provided impartial tribunals or procedures compatible with the due process of law.” Id. at 617. To secure his multibillion dollar judgment, Donziger engaged in a prolonged, deliberate scheme—explicitly documented in a series of documentary film outtakes, see, e.g., id. at 393-94, as well as in Donziger’s own personal journal, see, e.g., id. at 420—that included bribery, threats, and coercion of judicial officials and purportedly neutral experts. Id. at 384. The Donziger court found that Donziger and his team forged one supposedly neutral expert’s report and bought and paid for another. Id. at 412-14; 422-37. The Donziger court also found that he bribed the presiding judge and hired a disgraced former judge to ghostwrite the final judgment (in a jurisdiction where parties are not even permitted to submit proposed orders). Id. at 482535; 499. The situation here is, to say the least, very different.

Drummond has been almost

completely victorious in each of the lawsuits that make up the Underlying Litigation. See supra n. 1. The Underlying Litigation was prosecuted in the United States District Courts, surely a model worldwide for a functioning and fair judicial system. To the extent that the Underlying Litigation was ill-founded, Drummond has always had available to it all the usual remedies and sanctions for frivolous litigation, including Rule 11 sanctions, Rule 37 sanctions, sanctions pursuant to the inherent power of the Court, sanctions under 28 U.S.C. § 1927, a Rule 54 motion

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for attorney fees and costs, or a motion pursuant to Rule 60 to set aside the judgment. The Court and (in Romero) the jury had a full opportunity to evaluate the credibility of the purportedly “false” evidence submitted in support of the claims in the Underlying Litigation, to the extent that such evidence came into play.

Drummond has suffered no harm that is in any way

comparable to the multi-billion dollar judgment entered against Chevron.

Furthermore,

Donziger is on appeal and could itself shortly become bad law. And in light of Pendergraft, it is not at all clear that the Eleventh Circuit would affirm the Chevron decision, even on its far more extreme facts. The Court should also note that Donziger featured testimony of a key witness who received assistance payments—from Chevron. The Ecuadorian litigation underlying Donziger was initially assigned to Judge Alberto Guerra Bastidas (“Guerra”), then the president of the Lago Agrio court. Id. at 392. Ultimately, Guerra was removed from the bench in May 2008, id. at 502, after allegations of misconduct. Id. at 505 n. 7. Guerra himself admitted to selling his testimony and influence to the highest bidder, and acknowledged that since being removed from the bench, his arrangements with the presiding judge were his “main source of income.” Id. at 518-19; 505. He was the “beneficiary of what amounts to a private witness protection program created for him by Chevron.” Id. at 504. Chevron paid to relocate Guerra and his family from Ecuador to the United States, and continued to pay him $10,000 a month in living expenses at least through trial. Id. at 517. Chevron also paid for Guerra’s and his family’s health insurance, hired him a lawyer, and leased him a car. Id. Guerra was worth it. He was Chevron’s star witness, and Judge Kaplan’s decision relied heavily on his testimony. See id. at 533-35. Acknowledging that Guerra’s “credibility [was] not impeccable,” id. at 483, Judge Kaplan noted that “there are no saints here,” id. at 504, and went

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on to credit Guerra’s allegations that the Donziger plaintiffs procured the final judgment in their favor by bribing the sitting judge to sign an order they had Guerra ghostwrite. See id. at 534. Like Guerra, the witnesses whose families received assistance payments in the Underlying Litigation here are “no saints,” and like Guerra, they gave testimony whose credibility could be tested by corroboration and other traditional means. As in Chevron, there was nothing “wrongful” about providing assistance to those witnesses to offset the dangers they brought on themselves and their families by agreeing to provide truthful testimony in this Court. Unlike Chevron, which suffered a multibillion dollar injury in the form of a judgment procured by fraud, Drummond cannot show that it was harmed by those witness assistance payments in any way. III.

The Only Cognizable RICO Injury Drummond Alleges is Barred by RICO’s FourYear Statute of Limitations, and it Therefore Lacks Standing to Sue Not only does Drummond fail to allege a pattern of racketeering activity that meets

Eleventh Circuit and constitutional standards, it has filed suit far too late.

Defendant

Collingsworth filed his first lawsuit against Drummond fourteen years ago, alleging the same human rights violations the Underlying Litigation plaintiffs have continued to allege ever since. The moment Drummond received its first invoice for attorney fees to defend that first suit, its RICO “injury” began. Only now, after spending millions more in attorney fees defending the same and similar suits, does Drummond recognize its “injury” and decide to pursue a remedy. Drummond has waited too long. In enacting the civil RICO statute, Congress conferred standing to sue on “[a]ny person injured in his business or property by reason of a violation of section 1962 of this chapter.” 18 U.S.C. § 1964(c) (emphasis added). The Eleventh Circuit views RICO standing and proximate cause as overlapping inquiries: “[T]he ‘by reason of’ requirement contained in § 1964(c) … 31

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implicates two concepts: (1) a sufficiently direct injury so that a plaintiff has standing to sue; and (2) proximate cause…. Despite some significant overlap, we address the proximate cause and standing concepts separately.” Williams v. Mohawk Indus., Inc., 465 F.3d 1277, 1287 (11th Cir. 2006) (emphasis added). Only a “sufficiently direct” injury confers standing to sue. Id. The Eleventh Circuit has recognized that “[t]he words ‘business or property’ are, in part, words of limitation.” Grogan v. Platt, 835 F.2d 844, 846 (11th Cir. 1988) (emphasis added). Drummond’s attempts to allege injury consist of the following “damages” to its “reputation and business interests”: “more than $10 million in legal costs,”13 Compl. ¶ 7; “enormous” “damage to Drummond’s business interests” and “damage to its goodwill and reputation,” Compl. ¶ 8; damage to “Drummond’s business interests in Europe,” Compl. ¶ 157; and “inordinate time and expense [spent] dealing with the European response … to PAX’s antiDrummond campaign,” Compl. ¶ 169. Almost none of these “injuries” are quantified in any of the 225 paragraphs or five Appendices of the Complaint. Only the “more than $10 million in legal costs,” Compl. ¶ 7, Drummond claims to have spent defending itself, primarily against the allegations in Balcero, is a relatively concrete allegation even arguably sufficient to confer RICO standing—though it too fails for other reasons. A.

Drummond’s “Reputational” and Intangible or Speculative “Business” Injuries are Insufficient to Confer RICO Standing

Drummond alleges that its “goodwill” and “reputation” have been injured by Defendants’ activities. Reputational injuries, however, cannot confer RICO standing. “Personal” injury, including “damage to reputation,” is not an injury to “business or property” within the meaning of 18 U.S.C. § 1964(c). See Hamm v. Rhone-Poulenc Rorer Pharm., Inc., 187 F.3d 941, 954

13

Drummond fails to allege which of the plaintiff Drummond entities, Drummond Company, Inc. or Drummond Ltd., incurred and/or paid these legal costs.

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(8th Cir. 1999) (holding that employees of a pharmaceutical company did not have standing to assert RICO claims based on damage to their business reputations). See also City of Chicago Heights, Ill. v. Lobue, 914 F. Supp. 279, 285 (N.D. Ill. 1996).

In Chicago Heights, the

reputational injury was “personal” for RICO purposes even though the victim was not a natural person but a city. Id. (“As losses, the City cites the bad press it received as a locus of crooked dealing and corrupt officials, and an unspecified amount of royalties due …. Neither of these are the type of direct losses that are recoverable under RICO.”). A reputational injury that results in lost future business is also not cognizable under RICO. “[G]eneralized reputational harms …, including the risk of future lost business commissions, are too speculative to constitute an injury to business or property.” Kimm v. Chang Hoon Lee & Champ, Inc., 196 F. App'x 14, 15 (2d Cir. 2006) (internal citation omitted). Similarly, Drummond’s allegations of “enormous” “damage to [its] business interests” and “inordinate time and expense” are insufficiently definite to be considered RICO injuries. An alleged injury must be supported by “concrete facts or data in the …complaint.” Simpson v. Sanderson Farms, Inc., 744 F.3d 702, 710 (11th Cir. 2014). “[I]ntangible propery injuries” are insufficient to confer RICO standing.

Adell v. Macon Cnty. Greyhound Park, Inc., 785

F.Supp.2d 1226, 1241 (M.D. Ala. 2011) (collecting “clear holdings from the Fifth, Eighth and Ninth circuits that intangible property injuries are not RICO injuries”). See also Regions Bank v. J.R. Oil Co., LLC, 387 F.3d 721, 730 (8th Cir. 2004) (denying RICO standing to “a secondary lienholder in a bankruptcy where the priority lienholders held complete claims over the only assets” because “[i]njury to these ‘intangible property interests’ is not injury that may support standing to bring RICO claims”). Because Drummond’s “damage to its business interests” is

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insufficiently “concrete” or “tangible,” it cannot be an injury sufficient to support RICO standing. A RICO injury must be a “concrete financial loss,” Patterson v. Mobil Oil Corp., 335 F.3d 476, 492 n. 16 (5th Cir. 2003), not “mere injury to a valuable intangible property interest.” Maio v. Aetna, Inc., 221 F.3d 472, 483 (3d Cir. 2000) (internal citation omitted). The Maio court considered whether plaintiffs who claimed to have paid too much for health insurance failed to allege RICO injury. Id. The court held that “appellants cannot establish that they suffered a tangible economic harm compensable under RICO unless they allege that health care they received under Aetna's plan actually was compromised or diminished as a result of Aetna's management decisions challenged in the complaint.” Maio, 221 F.3d at 488. “[T]he nature of appellants' property interests at stake is [a] contractual right.” Maio, 221 F.3d at 489. The court asked, “what is the external event or condition which would cause appellants to have suffered economic harm, and have appellants alleged facts demonstrating that the necessary injurycausing event has occurred?” Id. at 490. Because the “necessary injury-causing event” had not yet occurred, plaintiffs lacked standing. Id. at 490. Similarly, Drummond has not pointed to any “injury-causing event” that has led to any actual, quantifiable harm to its business interests in Europe or elsewhere. See also Oscar v. Univ. Students Co-op. Ass’n, 965 F.2d 783, 786 (9th Cir. 1992) (finding that plaintiff, a neighbor of drug-dealing Berkeley students, who alleged no “outof-pocket expenditures as a direct or indirect result of the racketeering activity” suffered no “financial loss that which would be compensable under RICO,” noting that the alleged loss was “purely speculative”). Aside from its claim for legal costs, Drummond’s allegations of injury consist of vague, non-specific allegations of reputational injury, as well as unrealized injury to unspecified future

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business interests. As such, they are not concrete enough to confer RICO standing. To the extent that Drummond attempts to satisfy the requirement of RICO’s civil enforcement provision that it show an “injur[y] in [its] business or property,” 18 U.S.C. § 1964(c), via these allegations, its claims should be dismissed. B.

To the Extent Drummond’s RICO Claim Rests on Its “Legal Fees” Injury, it is Barred by the Injury Discovery Rule

The only quantifiable injury Drummond alleges consists of attorney’s fees spent defending itself against three of the four cases in the Underlying Litigation: more than $10 million overall, $8.5 million of which was spent on the Balcero case. Compl. ¶ 7. Drummond should have discovered this “injury” in 2003, when it began incurring legal fees to defend the Romero case. On this basis alone, to the extent that Drummond attempts to satisfy RICO’s injury requirement with its legal costs, its claims are barred by RICO’s statute of limitations.14 1.

Drummond was “Injured” and Discovered Its “Injury” in 2003

As discussed above, only Drummond’s alleged “$10 million in legal costs” even arguably meets the RICO injury standard.

Civil RICO claims are subject to a four-year statutory

limitations period, Agency Holding Corp. v. Malley-Duff & Assocs., Inc., 483 U.S. 143, 156 (1987), which begins to run when the plaintiff discovered or reasonably should have discovered his injury. This is the “injury discovery rule” announced in Rotella v. Wood, 528 U.S. 549, 55354 (2000). See also Powell v. Gorham, No. 2:13-CV-0055-LSC, 2013 WL 3151632, at *18 (N.D. Ala. June 14, 2013) (“The statute of limitations begins to run on the date that a plaintiff has knowledge of his injury.”). If Drummond was “injured” in that it was forced to pay legal costs, that injury began in or around March 2003—approximately twelve years before it filed this

In fact, Drummond’s alleged “reputational” and “business” injuries may also be time-barred, but they are too vague to bear analysis as required under the injury discovery rule. This deficiency only underscores why they are insufficiently definite to confer standing. 14

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RICO claim—when it paid its first bill for attorney fees to defend itself against the first suit in the Underlying Litigation (Romero).15 It discovered its imminent injury slightly earlier, when it received that first bill. 2.

Failure to Discover the Source of Its “Injury” in Time Does Not Rescue Drummond from the Statute

Under Rotella, there is no question that “discovery of the injury, not discovery of the other elements of a claim, is what starts the clock.” Rotella, 528 U.S. at 555. In other words, Drummond’s “clock” started in or around March 2003, when it received its first legal bill. Having discovered its injury—outgoing attorney fees to defend the Underlying Litigation— Drummond was immediately put on “inquiry notice” that it must begin to investigate the source of its “injury” or risk time preclusion. See Dysart v. BankTrust, No. CV-11-RRA-1917-S, 2012 WL 2577534, at *10 (N.D. Ala. Apr. 12, 2012) (“In the RICO context, ‘inquiry notice’ controls.”). Put another way, the limitations period begins to run when the plaintiff is “placed on notice that something is wrong.” Blackburn v. Calhoun, No. 207CV166, 2008 WL 850191, at *23 (N.D. Ala. Mar. 4, 2008) aff'd, 296 F. App'x 788 (11th Cir. 2008). At that point, the plaintiff has “a duty to commence inquiry.” Id. From that time, the plaintiff has “four years from the date … he first sensed he should inquire to file [the] case.” Id. The Eleventh Circuit has emphasized that the limitations period begins to run at the point of discovery of injury, regardless of whether the plaintiff ever discovers the pattern of racketeering activity. “[T]he limitations period for a civil RICO action begins to run when the injury was or should have been discovered, regardless of whether or when the injury is discovered to be part of a pattern of racketeering.” Maiz v. Virani, 253 F.3d 641, 676 (11th Cir. Even accepting Drummond’s unexplained decision to exclude Romero from the alleged “multifaceted criminal campaign,” Compl. ¶ 2 n.1, its injury cannot have begun later than March 2009, when it began paying attorney fees to defend Baloco. Similarly, Drummond can make no credible argument that it did not “discover” its “injury” at that time. 15

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2001) (internal citation omitted) (emphasis added). As the Supreme Court explained, “[t]he fact … that difficulty in identifying a pattern is inherent in civil RICO … only reinforces our reluctance to parlay the necessary complexity of RICO into worse trouble in applying its limitations rule.” Rotella, 528 U.S. at 559 (2000) (internal citation omitted). RICO is “a civil enforcement scheme … aimed at rewarding the swift.” Rotella, 528 U.S. at 559. Before Rotella was decided, this Circuit had already held that the civil RICO statute of limitations would not be tolled for plaintiffs who did not “investigate the problems [of which they now complain] or try to ascertain their problems’ cause. The limitations period for civil RICO claims was not tolled because the [plaintiffs] were not reasonably diligent in trying to discover their cause of action.” McCaleb v. A.O. Smith Corp., 200 F.3d 747, 752 (11th Cir. 2000) (citing Klehr v. A.O. Smith Corp., 521 U.S. 179, 194, 117 S.Ct. 1984, 138 L.Ed.2d 373 (1997) (lack of reasonable diligence precludes tolling of statute of limitations based on fraudulent concealment)). “[P]rotection of the non-diligent plaintiff is not the rule in civil RICO cases.” Blackburn, 2008 WL 850191 at *23 (declining to “casually” invoke equitable tolling).

It makes no

difference, for limitations purposes, when Drummond may have discovered the so-called “violations” it accuses as predicate acts. This is true even when, as alleged here, the “pattern of predicate acts may … be complex, concealed, or fraudulent.” Rotella, 528 U.S. at 556 (2000) (emphasis added). Rotella was untroubled by “[t]he fact … that a considerable effort may be required before a RICO plaintiff can tell whether a pattern of racketeering is demonstrable.” The Court was also unconcerned by the effect of the RICO plaintiff’s “ignorance of the underlying RICO pattern” on his “ability to investigate the cause of his injuries.” Rotella, 528 U.S. at 55657. Even though Defendants’ alleged predicate acts involve alleged concealment of and alleged

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misrepresentations regarding witness payments, therefore, it was not discovery of those acts that started the limitations clock. Rotella leaves no doubt that “the connection between civil RICO and fraud [is] an insufficient ground for recognizing a limitations period beyond four years.” Rotella, 528 U.S. at 557. The clock starts with injury. 3.

The Underlying Litigation Pleadings Gave Drummond More Than Ample Notice that it Must Inquire into the Source of its RICO “Injury”

The pleadings in three of the four lawsuits in the Underlying Litigation, Romero, Balcero, and Baloco (the “Underlying Pleadings”), the first of which was filed twelve years ago, contain more than enough information to put Drummond on notice that it was being forced to spend money defending itself against allegations that it collaborated with the so-called “United SelfDefense Forces of Colombia” (the “AUC”) in the murders of the three union leaders and scores of innocent civilians.16 Some of the allegations in the Underlying Pleadings have a specific, named, source, and some do not—but all of them are set out with sufficient clarity and specificity to put Drummond on clear notice of the nature of the allegations against which it would have to spend legal fees defending itself. In March of 2003, Defendant Collingsworth filed the Romero case against Drummond, including allegations that it collaborated with Colombian paramilitary organizations in the murder of trade union leaders for the purposes of protecting its business interests. See, e.g., Romero, Dkt. No. 1, ¶ 3 (“Valmore Locarno Rodriquez, Victor Hugo Orcasita Amaya, and Gustavo Soler Mora … were murdered in 2001 by paramilitary agents working for [Drummond] in a campaign to eliminate effective leaders of the trade union representing Drummond workers,

16

In considering this Motion to Dismiss, the Court may take judicial notice of the pleadings in the Underlying Litigation, the contents of which—as distinct from the truth of the allegations pleaded—are “not subject to reasonable dispute” and “can be accurately and readily determined from sources whose accuracy cannot reasonably be questioned.” See Fed. R. Evid. 201(b)(2); Bryant v. Avado Brands, Inc., 187 F.3d 1271, 1278 (11th Cir. 1999).

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and to intimidate other workers from joining the union or assuming a union leadership position.”). Having become aware of these “false” allegations, and the injury they would cause in the form of legal costs spent in its defense, Drummond had a responsibility to investigate the source and foundation of the claims. The Romero plaintiff alleged that one of the eventually murdered union leaders, Gustavo Soler, had “publicly denounced the murders of Locarno and Orcasita and publicly stated his belief that someone at the La Loma mines must have told the paramilitaries which specific bus was carrying them on the fateful night of March 12, 2001.” Romero, Dkt. No. 1, ¶ 45. The plaintiff himself alleged that in May 2002, he heard a Drummond executive “threaten[] that ‘union leaders who make demands were wearing their own tombstones on their backs.’ He also learned that (Ret.) Colonel Edgar Ruis Garzon, a security officer for the Drummond Defendants, compiled a list of trade union leaders who were viewed as problems by the company, and he gave the list to the paramilitaries working for Drummond.” Romero, Dkt. No. 1, ¶ 48. The plaintiff also alleged that the Colombian Administrative Department of Security (“DAS”) “informed him that there was little or nothing they could do to guarantee his safety if he continued working at Drummond. They offered to place him in the ‘internally displaced’ category, and assist him to go into hiding. On October 11, 2002, Plaintiff … officially went into hiding with assistance from the DAS.” Romero, Dkt. No. 1, ¶49. The Romero Complaint also repeatedly referred to the alleged “business relationship between Drummond and the AUC paramilitaries.” Romero, Dkt. No. 1, ¶¶ 60, 65. For example, “[a]fter the murders of Locarno, Orcasita and Soler, no action was taken to provide security for the remaining union leaders, and no action [w]as taken to terminate the business relationship between Drummond and the AVC paramilitaries.” Romero, Dkt. No. 1, ¶ 65 (emphasis added).

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Drummond cannot deny that it was on notice, as early as 2003, that it would be forced to defend a lawsuit alleging that it collaborated with the AUC in the 2001 killings of Locarno, Orcasita, and Soler. It was on notice that it had been accused of entering into a “business relationship” involving payments to the AUC (which accusation it now claims was utterly untrue) and that certain witnesses, including Soler and the Romero plaintiff himself, had made statements supporting those allegations. Drummond will surely disagree. But to the extent that the six-year effort Drummond expended defending the Romero litigation was not enough to put it on notice that it should look into the source of the injury of which it now complains, the filings of Baloco and Balcero in March and May, respectively, of 2009 certainly were. The initial pleadings in both Baloco and Balcero put Drummond on notice no later than May 2009 that despite its claim that it “has never paid Colombian paramilitaries, or any other illegal group in Colombia,” Compl.

¶ 7, it would be forced to pay legal fees to defend

“fraudulent lawsuits” and “false allegations,” Compl. ¶¶ 2, 7, 8, based on testimony of eyewitnesses who alleged that it paid the AUC to kill Locarno, Orcasita, and Soler and to massacre dozens of additional Colombian civilians. The foundation of some of the “false” allegations is no mystery, as the source is named: 

“Indeed, Rafael Garcia, a former DAS official, has stated under oath that the DAS worked closely with the AUC [and] that as a DAS official he witnessed Drummond making payments to the AUC to murder the union leaders at Drummond.” Balcero, Dkt. No. 1, ¶ 104 (emphasis added).



“Rafael Garcia … witnessed the payment of monies by … an individual he believed to be then Drummond Ltd. President Augusto Jimenez – to Jorge Castro Pacheco, a sitting Colombian Senator and a representative of the AUC Northern Bloc commander Jorge Cuarenta. It was clear … that the exchange of money was in return for the AUC's agreement to carry out the killings of Valmore Locarno and Victor Orcasita.” Baloco, Dkt. No. 1, ¶ 47.



“In early 2001, … Garcia attended a meeting at the Hotel Sicarare in Valledupar with Jorge Castro Pacheco, … 3rd succentor to Roberto Perez, a Senator from Sucre, 40

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Colombia. Also in attendance was Guillermo Sanchez Quintero, who at the time was Mayor of Ariguani and Alfredo Araujo, who was Drummond’s Director of Community Relations. At this meeting, Garcia witnessed Defendant Araujo give Jorge Castro Pacheco a suitcase filled with money. … Garcia heard Defendant Araujo say to Jorge Castro Pacheco that the money was to be given to Jorge 40 to carry out the killings of certain union leaders at Drummond. … Defendant Araujo specifically said that he wanted the AUC’s ‘help with these guys that were causing problems.’” Balcero, Dkt. No. 1, ¶ 6C. See also id., Dkt. No. 1, ¶ 115. 

“Recently, Salvatore Mancuso, who became the head of the AUC after Castano was killed (or disappeared), specifically testified that … Drummond … had paid the AUC to assassinate the top union leaders at the Drummond coal mine in Cesar Province, Colombia.” Balcero, Dkt. No. 1, ¶ 6. For others, the inclusion of specific names, places, dates, and/or quotations would

reasonably lead Drummond to look into the source of the “false” allegation and investigate the credibility and motivation of the witness or witnesses making the claims. 

“[T]he President of the La Loma mines, Defendant Augusto Jimenez, made veiled threats against the union leaders, telling them on several occasions that ‘the fish dies from opening his mouth.’” Baloco, Dkt. No. 1, ¶ 44. See also Romero, Dkt. No. 1, ¶ 38.



“The paramilitaries boarded the bus and asked for Locarno and Orcasita by name, saying that these two ‘had a problem with Drummond.’ … Locarno … was pulled off the bus and shot in the head several times in front of the other workers. Orcasita … was tied up and thrown in the paramilitaries’ vehicle. He was found dead by the side of the road several hours later, shot in the head.” Baloco, Dkt. No. 1, ¶ 50.



“Defendant James Atkins, who was the Director of Security for Drummond in Colombia … was present in November, 2000 at a meeting between Drummond officials and top AUC leaders. … Defendant Atkins was accompanied by Defendant Araujo and Jaime Blanco... For the AUC, Jorge 40 was present, along with Oscar Jose Ospino Pacheco, alias ‘Tolemaida’, and several other armed AUC members. At this meeting, Defendant Atkins, on behalf of Drummond, approved a payment to the AUC for the assassination of the top leaders of the Drummond union, including Valmore Locarno Rodriquez (hereinafter Locarno) and Victor Hugo Orcasita Amaya (hereinafter Orcasita).” Balcero, Dkt. No. 1, ¶ 6B.



“At a subsequent meeting in early May, 2001, Defendants Atkins and Araujo met again with the top leaders of the AUC, including Jorge 40, Tolemaida, Don Luis, and several AUC operatives who worked closely with Jorge 40, including Kener, EI Chino, EI Toro, Samario, Machoman, and 05. The meeting was held at a farm on the road between Bosconia and Plato. In front of the entire group, including Atkins and Araujo, Jorge 40

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congratulated Tolemaida for the successful operation of executing the two Drummond union leaders Locarno and Orcasita.” Balcero, Dkt. No. 1, ¶ 116. 

“At this meeting Drummond, through Atkins and Araujo, made an agreement with Jorge 40 to make a large cash payment to the AUC of approximately $1.5 million (U.S.) and regular monthly payments of approximately $100,000 (U.S.) to continue to support the AUC troops and equipment for the Juan Andres Alvarez Front to provide security and other services for Drummond. This additional funding was to allow the Juan Andres Alvarez Front to maintain a permanent base and to have the arms and equipment necessary to provide Drummond's rail line with ongoing security.” Balcero, Dkt. No. 1, ¶ 117.



“[I]t was common knowledge in Colombia that the highest levels of the AUC, including Jorge 40, planned the murders of the Drummond union leaders at the behest of the Drummond Defendants.” Baloco, Dkt. No. 1, ¶¶ 10-17 (emphasis added). These are simply a few examples of allegations that should have put Drummond on

notice well before March 2011 of the injury—attorney fees spent defending “false” claims of human rights violations in Colombia—it claims here. Further, Drummond alleges that “the Balcero case survived dismissal at the pleadings stage based almost exclusively on the false accusations of El Tigre.” Compl. ¶ 7. Drummond appears to be referring to this Court’s decision granting in part and denying in part Drummond’s motion to dismiss the First Amended Complaint in Balcero, issued April 30, 2010. See Balcero, Dkt. No. 43 at pp. 22-23 (citing allegations in the First Amended Complaint resting on statements attributed to El Tigre). For the $8.5 million in legal fees Drummond attributes to El Tigre’s “false accusations,” then, Compl. ¶ 7, the statute of limitations ran out, at the very latest, on April 30, 2014, almost a year before this suit was filed. In March 2003, Drummond was on inquiry notice that it would be forced to pay money to defend allegations that it collaborated with Colombian right-wing paramilitaries to commit multiple acts of murder. By December 4, 2009, when the First Amended Complaint in Balcero was filed, Balcero, Dkt. No. 35, Drummond was aware of the allegedly “false” accusations by El

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Tigre which, according to Drummond, forced it to pay the vast majority of the legal fees that make up its “damages.” Compl. ¶ 7. Drummond has claimed that the Underlying Litigation was entirely “false” and “fraudulent,” and that it never paid a dime to the AUC. Compl. ¶¶ 2, 7-8. If the Court and Defendants take Drummond’s position as true, as they must for purposes of this motion, then Drummond knew by December 2009, at the very latest, that it was the victim of “fraudulent” allegations supported by testimony of witnesses who, from Drummond’s perspective, must have been lying. Whether some of those witnesses received payments from Defendants, whether those payments were wrongful, and whether and how those payments may have been concealed are questions that are irrelevant to Drummond’s obligation to “diligently” “investigate” the source of its alleged injury—that is, to get to the bottom of why it was being forced to defend what must have been absolutely shocking, as well as “false,” allegations that it had collaborated in the contract killing of innocent Colombian civilians merely because it believed those civilians were interfering with its business.

Drummond did not bother to

complete that investigation in the four-year period permitted by statute. Its claims are timebarred. IV.

Drummond’s RICO Conspiracy Claim Fails for the Same Reasons as Its RICO Claim Drummond’s RICO conspiracy claim is based on the same alleged predicate acts and

events as its RICO claim. See Compl. ¶ 200-05. “[W]here a plaintiff fails to state a RICO claim and the conspiracy count does not contain additional allegations, the conspiracy claim necessarily fails.” Am. Dental Ass'n v. Cigna Corp., 605 F.3d 1283, 1296 (11th Cir. 2010) (quoting Rogers v. Nacchio, 241 Fed.Appx. 602, 609 (11th Cir. 2007)). For the same reasons that its RICO claim fails, Drummond’s RICO conspiracy claim must also be dismissed.

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V.

Drummond’s State Law Claims Also Fail The Court should also dismiss Drummond’s claims under Alabama law. A.

Civil Conspiracy

Drummond’s claim for civil conspiracy fails because Drummond does not allege an underlying claim. “Civil conspiracy rests upon the existence of an underlying claim. Jones v. BP Oil Co., Inc., 632 So.2d 435 (Ala.1993). If there is no underlying cause of action, there cannot be a conspiracy. Id.” Driver v. W.E. Pegues, Inc., No. 7:11-CV-1374 LSC, 2012 WL 3042939, at *6 (N.D. Ala. July 19, 2012). Though Drummond does not so plead, to the extent that the entire RICO cause of action might be deemed its “underlying claim,” the conspiracy claim fails with the RICO claim. “As the trial court correctly noted, liability for civil conspiracy rests upon the existence of an underlying wrong and if the underlying wrong provides no cause of action, then neither does the conspiracy.” Jones v. BP Oil Co., 632 So. 2d 435, 439 (Ala. 1993) (holding that because the plaintiff’s underlying claims were properly dismissed on summary judgment, the conspiracy claim must be dismissed as well). Furthermore, Alabama recognizes a general rule “which denies a right of action [for civil conspiracy] based upon testimony offered in a judicial proceeding.” Snyder v. Faget, 295 Ala. 197, 203, 326 So. 2d 113, 118 (1976). Drummond offers no explanation as to why this rule should not apply here. For all these reasons, its civil conspiracy claim should be dismissed. B.

Willful Misrepresentation

Drummond’s claim for willful and/or reckless misrepresentation is based on Alabama Code Section 6-5-101.

Section 6-5-101 requires Drummond to plead, per Rule 9(b)’s

particularity requirement, reliance on the alleged misrepresentation or concealment. Foremost Ins. Co. v. Parham, 693 So. 2d 409, 422 (Ala. 1997) (“The elements of a misrepresentation claim are 1) a misrepresentation of material fact, 2) made willfully to deceive, recklessly, without 44

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knowledge, or mistakenly, 3) which was justifiably relied on by the plaintiff under the circumstances, and 4) which caused damage as a proximate consequence.”) (citing Ala.Code 1975, § 6–5–101; Harrington v. Johnson–Rast & Hays Co., 577 So.2d 437 (Ala.1991)). Drummond could not have “justifiably” relied on statements it allegedly knew to be “false” and “fraudulent.” Compl. ¶ 2. Drummond also does not and cannot plead the requisite intent to deceive, because there is no dispute that the alleged misrepresentations and “concealments” were made with alleged intent to deceive third parties such as this Court and others, rather than Drummond itself. See supra § I.A.2. For these reasons, its misrepresentation claim must be dismissed. Drummond’s claims for Willful Misrepresentation and Fraudulent Concealment against Defendant Scherer should be dismissed for the additional reason that, as explained above, they fail to allege with plausibility or particularity Mr. Scherer’s individual involvement in any scheme to defraud Drummond. See supra § I.A.1. C.

Fraudulent Concealment

Alabama Code Section 6-5-102 requires a showing that “1) that the defendant had a duty to disclose material facts, 2) that the defendant concealed or failed to disclose those facts, 3) that the concealment or failure to disclose induced the plaintiff to act; and 4) that the defendant's action resulted in harm to the plaintiff.” Lawson v. Harris Culinary Enterprises, LLC, 83 So. 3d 483, 492 (Ala. 2011). Drummond fails to specifically plead per Rule 9(b) how it was “induced to act” by the concealment of any “facts” related to the “violations” in its five Appendices. See Compl. ¶ 213. Indeed, it cannot—regardless of the fact or propriety of witness assistance payments to any of the witnesses who provided testimony in the Underlying Litigation, Drummond’s position that those witnesses’ testimony was “false,” and the Underlying Litigation

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“fraudulent,” would surely have remained the same. Its claim for fraudulent concealment should be dismissed. CONCLUSION The right to petition the courts for redress of wrongs—regardless of the strength of the underlying claims—is a fundamental freedom of our system of government. This RICO action is nothing more than a brutal swipe by powerful private interest at a group of lawyers who have spent considerable time, effort, and resources helping the powerless to exercise that fundamental right. Drummond had its day in court, and it won. This Court should not tolerate Drummond’s cynical attempt to punish Defendants further by means of this purely retaliatory lawsuit. For the foregoing reasons, Defendants respectfully urge that the Complaint be DISMISSED WITH PREJUDICE in its entirety. DATE: August 12, 2015

Respectfully submitted,

/s/ Robert K. Spotswood Robert K. Spotswood (SPO 001) Michael T. Sansbury (SAN 054) William T. Paulk (PAU 016) SPOTSWOOD SANSOM & SANSBURY LLC 1819 5th Avenue N., Suite 1050 Birmingham, Alabama 35203 Telephone: (205) 986-3620 [email protected] [email protected] [email protected] Attorneys for Defendants Conrad & Scherer LLP and William R. Scherer, Jr.

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Of Counsel for Defendants Conrad & Scherer LLP and William R. Scherer, Jr. Kenneth E. McNeil (pro hac vice) Stuart V. Kusin (pro hac vice) SUSMAN GODFREY L.L.P. 1000 Louisiana, Suite 5100 Houston, Texas 77002 Telephone: (713) 653-9366 [email protected] [email protected] Lindsey Godfrey Eccles (pro hac vice) SUSMAN GODFREY L.L.P. 1201 Third Avenue, Suite 3800 Seattle, Washington 98101 Telephone: (206) 516-3880 [email protected] Christopher S. Niewoehner (pro hac vice) STEPTOE & JOHNSON LLP 115 S. LaSalle Street, Suite 3100 Chicago, Illinois 60603 Telephone: (312) 577-1240 [email protected] Kendall R. Enyard (pro hac vice) STEPTOE & JOHNSON LLP 1330 Connecticut Avenue NW Washington, D.C. 20036 Telephone: (202) 429-6489 [email protected]

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CERTIFICATE OF SERVICE I hereby certify that on this 12th day of August, 2015, a true and correct copy of the foregoing document was served upon all parties of record via the Court’s CM/ECF system and/or by electronic mail: William Anthony Davis, III H. Thomas Wells, III Benjamin T. Presley STARNES DAVIS FLORIE LLP P.O. Box 59812 Birmingham, AL 35259 Phone (205) 868-6000 Fax (205) 868-6099 [email protected] [email protected] [email protected] Sara E. Kropf LAW OFFICE OF SARAH KROPF PLLC 1001 G St. NW, Suite 800 Washington DC 20001 Phone (202) 627-6900 [email protected] W. Percy Badham III 2001 Park Place North Suite 500 Birmingham, Alabama 35203 Phone: (205) 521-0036 Fax: (205) 521-0037 [email protected]

/s/ Robert K. Spotswood Rober K. Spotswood

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