Abdullah M. Al-Rayes v. Erika Willingham , 914 F.3d 1302 ( 2019 )

Case: 18-11059 Date Filed: 02/05/2019 Page: 1 of 15
[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
________________________
Nos. 18-11059, 18-11539
Non-Argument Calendar
________________________
D.C. Docket No. 3:15-cv-107-J-34JBT
ABDULLAH M. AL-RAYES, et al.,
Plaintiffs-Appellants,
versus
ERIKA M. WILLINGHAM,
individually and as Trustee of the
ERIKA M. WILLINGHAM TRUST,
Defendant-Appellee.
________________________
Appeals from the United States District Court
for the Middle District of Florida
________________________
(February 5, 2019)
Before JILL PRYOR, BRANCH, and GRANT, Circuit Judges.
GRANT, Circuit Judge:
The creditors in this case claim that a husband and wife worked together to
commit multiple acts of mail and wire fraud over several years for the purpose of
Case: 18-11059 Date Filed: 02/05/2019 Page: 2 of 15
hiding the husband’s assets—acts which, in the creditors’ telling, violated RICO.
The creditors sued the wife. While the district court agreed that the couple may
have committed the alleged acts of fraud, it nonetheless granted the wife’s motion
for summary judgment. According to the court, because the couple’s marriage
predated the alleged RICO acts, and the couple had created no sort of structure
external to their marital relationship, no reasonable juror could conclude that they
“formed an organization with some sort of framework, formal or informal, for the
purpose of engaging in racketeering activity.” In other words, to put it in RICO
terms, the court found no evidence of an “association-in-fact” enterprise. We are
convinced otherwise; after a thorough review of the record, we conclude that a
genuine factual dispute exists about whether this couple formed an association-in-
fact enterprise separate and apart from their marital relationship. We therefore
reverse the district court’s order granting summary judgment and remand for
further proceedings. We also vacate the district court’s order awarding the wife
costs.
I.
Abdullah Al-Rayes and various corporate entities under his control
(collectively “Al-Rayes”) sued Ben Willingham and several of his businesses,
asserting that Ben defrauded Al-Rayes over the course of many real-estate
transactions. Roughly a year after that 2006 lawsuit, Al-Rayes received a $25.7
million consent judgment against Ben. But after more than a decade, he has been
able to collect only $39,943.81. Al-Rayes now argues that Ben’s wife, Erika
Willingham, has stymied his efforts to collect the judgment by working with Ben
2
Case: 18-11059 Date Filed: 02/05/2019 Page: 3 of 15
to execute an intricate asset-concealment scheme. Viewed in the light most
favorable to Al-Rayes as the nonmovant, the record reflects the following facts.
According to Al-Rayes, Erika and Ben’s scheme to hide Ben’s assets
involved secretly transferring funds to offshore bank accounts. Their efforts to
conceal those accounts began shortly after Al-Rayes secured the consent judgment
against Ben. Less than a year after that judgment was entered, Al-Rayes’s counsel
deposed Ben as part of an attempt to collect the judgment. Ben testified that he did
not have any accounts or assets in Switzerland, where Erika was from and where
he and Erika had previously lived. Ben also swore that Erika did have a single
Swiss bank account in her name, but that she had sole control over it. According
to Ben, Erika made wire transfers from her Swiss account to the couple’s joint
account in the United States, and then used that money to pay for living expenses.
Erika, on the other hand, testified that she had no Swiss bank accounts in her name,
and that her husband controlled all of her financial matters.
Additional facts emerged a few years later when Ben filed for bankruptcy
and Al-Rayes renewed his attempt to collect the consent judgment. During the
proceedings, Erika stood by her earlier testimony that she did not have any bank
accounts in Switzerland. But the bankruptcy court concluded otherwise, finding
that approximately 68 wire transfers were made from a Swiss bank account held
only in Erika’s name to the couple’s joint account in the United States. Those
transfers, totaling $255,740, were all made within approximately three years of the
consent judgment.
3
Case: 18-11059 Date Filed: 02/05/2019 Page: 4 of 15
Bank records subsequently turned over to the bankruptcy court revealed that
over an eleven-year span Erika and Ben (individually or together) made at least
240 wire transfers of Ben’s salary and benefits to Erika’s known Swiss account and
to other (previously undisclosed) Swiss accounts held in Erika’s name. When
confronted with these records, Ben admitted that—despite his prior testimony that
he had no control over his wife’s (purportedly) single Swiss bank account—he
actually had signatory authority over four Swiss bank accounts held in Erika’s
name. He also conceded that—contrary to his prior testimony that he had no assets
in Switzerland—he had made numerous transfers of his salary, benefits, and tax
refunds to Erika’s Swiss accounts. Following these admissions, he acknowledged
that he and Erika had used Swiss funds to pay their living expenses.
Still, the parties dispute the extent of Erika’s involvement in these transfers.
For his part, Al-Rayes cites Ben’s testimony that his wife was aware that he was
making the transfers, consented to the transfers, and even initiated some of the
transfers herself. Erika, on the other hand, consistently testified that her husband
had sole control over her finances and that she did not know about the Swiss
accounts or any transfers involving those accounts.
Al-Rayes’s allegations do not end there; he argues that Erika and Ben
misrepresented not only the location of Ben’s assets, but also their extent. For
example, Al-Rayes points to Ben’s declaration to the bankruptcy court that he and
Erika had no significant assets and a combined monthly income of $4,062. Only a
week after that declaration, however, the couple applied to a retirement community
and represented that they owned $750,000 in real estate, $395,000 in investments,
4
Case: 18-11059 Date Filed: 02/05/2019 Page: 5 of 15
and $40,000 in cash. And subsequent events showed that the couple did have
available assets; a few months later, they paid the retirement community a
$254,962.50 entrance fee.
The couple also failed to notify the bankruptcy court of two important real-
estate transactions made while the bankruptcy action was pending. First, they sold
their house and received $334,295.53 in net proceeds, but failed to notify either the
bankruptcy court or Al-Rayes. Moreover, both Erika and Ben paid for the house
and signed the mortgage, but the title was in Erika’s name only, shielding Ben’s
funds from creditors who were seeking his assets. And a few months later, the
couple purchased a condo for $120,000 and again failed to notify the bankruptcy
court or Al-Rayes. Like the house, the condo was purchased using funds from a
joint account, but title was placed in Erika’s name alone—again, Al-Rayes
contends, in an attempt to hide Ben’s assets.
These were not the only transactions that went unreported. The couple also
failed to notify the bankruptcy court or Al-Rayes when they received a partial
refund of their retirement-home entrance fee after moving out early. And they
failed to notify the bankruptcy court or Al-Rayes when Erika created a trust,
named herself as trustee, and executed a quitclaim deed transferring the condo title
to herself as trustee, while reserving a life estate in the condo for herself—and for
her husband.
Their alleged scheme did not end there. A few months before the
bankruptcy action closed, Erika and Ben formed a corporation—Osborn of
Jacksonville, Inc.—purportedly to market a book that Ben had written. In the four
5
Case: 18-11059 Date Filed: 02/05/2019 Page: 6 of 15
months between Osborn’s creation and the close of the bankruptcy action, Ben
made several transfers totaling $176,630 from the couple’s joint bank account to
the corporation’s bank account. He did not notify the bankruptcy court or Al-
Rayes of those transfers, and later admitted to using funds from the corporation’s
account to pay the couple’s personal expenses.
In light of these acts, Al-Rayes sued Erika1 in the United States District
Court for the Middle District of Florida, alleging that she violated RICO, 18 U.S.C.
§ 1962(c); conspired to violate RICO, 18 U.S.C. § 1962(d); and violated several
Florida laws. To support the RICO claims, Al-Rayes alleged that Erika and Ben
formed an association-in-fact enterprise by working together to conceal Ben’s
assets. After thorough discovery, the district court granted Erika’s summary
judgment motion, holding that both RICO claims failed because no reasonable
juror could find that Erika and Ben together constituted an association-in-fact
enterprise. Specifically, the court determined that the facts here could not satisfy
the Supreme Court’s requirement that individuals in an association-in-fact
enterprise were “associated together for a common purpose of engaging in a course
of conduct.” Boyle v. United States, 556 U.S. 938, 944 (2009) (quoting United
States v. Turkette, 452 U.S. 576, 583 (1981)).
In evaluating whether Erika and Ben could be considered an association-in-
fact enterprise under RICO, the court acknowledged that the two “are associated in
1
For whatever reason, Ben Willingham is not a party to this action. The Complaint states that
Al-Rayes sued Erika Willingham because she “orchestrated and carried out a convoluted
fraudulent scheme to conceal [Ben’s] assets in order to hinder, delay, and impede” Al-Rayes’s
ability to collect the consent judgment. Also, Erika is the sole trustee of the Erika Willingham
Trust.
6
Case: 18-11059 Date Filed: 02/05/2019 Page: 7 of 15
marriage, and in the course of that marriage engaged in acts which may constitute
mail or wire fraud.” Still, the court determined, the couple could not constitute an
association-in-fact enterprise because “there is no evidence to suggest that they
associated together for that purpose.” The court indicated that Al-Rayes
nevertheless could have shown an association-in-fact enterprise if he had alleged
that the enterprise was—or at least included—a business or other separate entity
run by Erika and Ben. But because the alleged enterprise lacked a non-marital
component, the court concluded that Al-Rayes had failed to present sufficient
evidence of a RICO enterprise.
Having disposed of both federal RICO claims, the court declined to exercise
supplemental jurisdiction over the remaining state-law claims. The court later
deemed Erika a prevailing party and awarded her $2,661.72 in costs under Federal
Rule of Civil Procedure 54(d)(1). Al-Rayes now appeals, challenging both the
order granting summary judgment and the order awarding costs.
II.
On appeal from a grant of summary judgment, this Court reviews legal
questions de novo. Hairston v. Gainesville Sun Publ’g Co., 9 F.3d 913, 918–19
(11th Cir. 1993). We also conduct a de novo review of the evidence, viewing all
evidence in the light most favorable to the nonmoving party and resolving all
reasonable inferences in favor of the nonmoving party. Id. As for the award of
costs, whether “the facts as found suffice to render the plaintiff a ‘prevailing party’
is a legal question reviewed de novo.” Lipscher v. LRP Publ’ns, Inc., 266 F.3d
1305, 1321 (11th Cir. 2001) (citation omitted).
7
Case: 18-11059 Date Filed: 02/05/2019 Page: 8 of 15
III.
RICO is widely regarded as a broad statute; indeed, the RICO text itself
“provides that its terms are to be ‘liberally construed to effectuate its remedial
purposes.’” Boyle, 556 U.S. at 944 (quoting Pub. L. No. § 904(a), 84 Stat. 922,
947 (1970)); see also Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 497 (1985)
(“RICO is to be read broadly.”); Russello v. United States, 464 U.S. 16, 21 (1983)
(recognizing “the pattern of the RICO statute in utilizing terms and concepts of
breadth”); Ray v. Spirit Airlines, Inc., 767 F.3d 1220, 1227 (11th Cir. 2014)
(observing that “civil RICO targets a broad category of criminally fraudulent
acts”). This breadth of language (and, we will see, of construction) is evident in
the provision of RICO at issue in this case: RICO makes it “unlawful for any
person employed by or associated with any enterprise engaged in, or the activities
of which affect, interstate or foreign commerce, to conduct or participate, directly
or indirectly, in the conduct of such enterprise’s affairs through a pattern of
racketeering activity or collection of unlawful debt.” 18 U.S.C. § 1962(c)
(emphasis added).2
“Enterprise,” in turn, is defined to encompass “any individual, partnership,
corporation, association, or other legal entity, and any union or group of
individuals associated in fact although not a legal entity.” 18 U.S.C. § 1961(4)
(emphasis added). As the Supreme Court has emphasized, the “term ‘any’ ensures
that the definition has a wide reach, and the very concept of an association in fact
2
“A violation of § 1962(c)” requires “(1) conduct (2) of an enterprise (3) through a pattern (4) of
racketeering activity.” Sedima, 473 U.S. at 496.
8
Case: 18-11059 Date Filed: 02/05/2019 Page: 9 of 15
is expansive.” Boyle, 556 U.S. at 944 (citation omitted). Along those lines, the
Supreme Court has “succinctly” defined an association-in-fact enterprise as any
“group of persons associated together for a common purpose of engaging in a
course of conduct.” Id. at 946 (quoting Turkette, 452 U.S. at 583). In keeping
with that general definition, an association-in-fact enterprise may be “formal or
informal,” and requires only “three ‘structural features’: (1) a ‘purpose,’
(2) ‘relationships among those associated with the enterprise,’ and (3) ‘longevity
sufficient to permit these associates to pursue the enterprise’s purpose.’” Almanza
v. United Airlines, Inc., 851 F.3d 1060, 1067 (11th Cir. 2017) (first quoting
Turkette, 452 U.S. at 583; and then quoting Boyle, 556 U.S. at 946).
Here, the district court granted summary judgment because it determined
that the evidence was insufficient to satisfy Boyle’s “purpose” requirement. The
district court’s order acknowledges the rather obvious point that as a married
couple Erika and Ben have a relationship, and goes on to conclude that “in the
course of that marriage [the couple] engaged in acts which may constitute mail or
wire fraud.” Still, the district court declined to recognize Erika and Ben as an
association-in-fact enterprise because the record lacked evidence that they
originally married for the purpose of engaging in mail or wire fraud. The district
court was careful to note that it was not ruling out the possibility that a married
couple could form an enterprise. But the court also indicated that, so long as a
couple does not “get married for the purpose of engaging in racketeering activity,”
some additional structure or vehicle must be alleged for the pair to qualify as an
association-in-fact enterprise; this requirement seemed to reflect a view that the
9
Case: 18-11059 Date Filed: 02/05/2019 Page: 10 of 15
formation of a new entity would somehow demonstrate a new shared purpose
between the couple that eclipsed their prior marital intentions.
We disagree. As an initial matter, to satisfy the purpose requirement, neither
the text of RICO nor any relevant precedent requires an association-in-fact
enterprise to consist of strangers who originally met for the purpose of engaging in
illegal activity. “That an ‘enterprise’ must have a purpose is apparent from the
meaning of the term in ordinary usage, i.e., a ‘venture,’ ‘undertaking,’ or
‘project.’” Boyle, 556 U.S. at 946 (quoting Webster’s Third New International
Dictionary 757 (1976)). Thus, the “concept of ‘associat[ion]’ requires both
interpersonal relationships and a common interest.” Id. (alteration in original).
Nothing in that description prevents individuals with preexisting relationships—
say, family members or business partners—from later joining together for the
common purpose of engaging in illegal activity. So, unsurprisingly, federal courts
have routinely recognized association-in-fact enterprises made up of individuals
who had relationships that predated their schemes. See, e.g., Crowe v. Henry, 43
F.3d 198, 201, 205 (5th Cir. 1995) (plaintiff adequately pleaded an association-in-
fact enterprise consisting of two people who originally met as “friends and
business associates”); United States v. Torres Lopez, 851 F.2d 520, 528 (1st Cir.
1988) (evidence was sufficient for a rational trier of fact to find that a RICO
enterprise consisted of a group of police officers who met as members of the
Puerto Rico Police Department and then joined together to engage in criminal
conduct for pay); Nesbitt v. Regas, No. 13 C 8245, 2015 WL 1331291, at *7 (N.D.
Ill. Mar. 20, 2015) (plaintiff adequately pleaded that people with longtime “family
10
Case: 18-11059 Date Filed: 02/05/2019 Page: 11 of 15
and business relationships” formed an association-in-fact enterprise). We can see,
then, that the relevant “purpose” in an association-in-fact enterprise is the
members’ shared purpose of engaging in illegal activity—not the purpose for
which they initially became acquainted.
Moreover, neither the text of RICO nor any relevant precedent imposes a
heightened “structure” requirement for married couples. But the district court
appears to have done just that. While it may not have described it as mandatory,
the district court’s explanation of how a married couple could form an association-
in-fact enterprise under RICO is telling. The court emphasized that an enterprise
must be a “vehicle” and that “some discernable structure is still required.” The
court then went on to deem it “[s]ignificant[]” that the RICO enterprise here “does
not encompass the actions of Ben Willingham’s business entities.” 3 The court also
concluded that the couple’s actions to hide Ben’s assets were those of a “husband
and wife, conducting the personal affairs of Erika and Ben Willingham, not the
affairs of a separate ‘enterprise.’”
In so reasoning, the court imposed a requirement that the Supreme Court has
already expressly rejected in Boyle. When presented with the assertion that “the
3
The corporation formed by the couple deserves a brief discussion. The district court stated that
while “Ben Willingham did incorporate Osborn, allegedly as part of his concealment efforts,
Creditors do not allege that Osborn is the RICO enterprise, or even a part of the enterprise, at
issue here.” A more generous reading of the Complaint could indicate that Al-Rayes did allege
that Osborn was part of the enterprise; that document contends that Erika and Ben “formed a
scheme or artifice to defraud” Al-Rayes that included, among other things, “creating” Osborn
“and using Osborn’s bank accounts to further launder funds that were subsequently used to pay
for personal expenses.” But whether Osborn is viewed as a part of the alleged RICO enterprise
is not dispositive because an association-in-fact enterprise need not include a corporation or
other formal structure in any event.
11
Case: 18-11059 Date Filed: 02/05/2019 Page: 12 of 15
definition of a RICO enterprise is limited to ‘businesslike entities,’” the Supreme
Court stated that it saw “no basis to impose such an extratextual requirement.”
Boyle, 556 U.S. at 945. Not only has the Supreme Court rejected the assertion that
an association-in-fact enterprise must be “businesslike,” it has also instructed lower
courts not to require that association-in-fact enterprises have the formal
characteristics often associated with businesses or other legal entities. For
example, the Supreme Court has stated that the group comprising the association-
in-fact enterprise “need not have a hierarchical structure or a ‘chain of command,’”
and the “group need not have a name, regular meetings, dues, established rules and
regulations, disciplinary procedures, or induction or initiation ceremonies.” Id. at
948. In light of Boyle’s express rejection of the assertion that association-in-fact
enterprises must be “businesslike,” we cannot agree with the district court’s
conclusion that, as a matter of law, an association-in-fact enterprise cannot exist
here simply because the couple’s alleged bad acts were confined to the
management of their personal funds.4
We note that the district court cited several cases to back up its suggestion
that, absent a business or other distinct operation, Erika and Ben could not
constitute an association-in-fact enterprise. But none of those cases actually
supports that conclusion. In fact, one case shows that an association-in-fact
enterprise can consist solely of two people who are married to each other. See,
4
The Supreme Court has repeatedly rejected the notion that RICO only targets organized crime
in the traditional sense. See, e.g., Sedima, 473 U.S. at 499 (RICO is not limited to “being used
against mobsters and organized criminals.”); Turkette, 452 U.S. at 580 (RICO encompasses
“both legitimate and illegitimate enterprises.”).
12
Case: 18-11059 Date Filed: 02/05/2019 Page: 13 of 15
e.g., Absolute Activist Value Master Fund Ltd. v. Devine, No. 2:15-cv-328-FtM-
29DNF, 2015 WL 12838168, at *19 (M.D. Fla. July 1, 2015) (plaintiff was
substantially likely to establish an association-in-fact enterprise consisting of a
husband and wife working together for the common purpose of concealing the
proceeds of a fraudulent scheme). And in another, the court—having already
found the enterprise element satisfied by the presence of a “business entity”—
summarily declined to recognize the marriage itself as a RICO enterprise simply
because “the plaintiff cite[d] no case law” on point. Edvisors Network, Inc. v.
Husser, No. 14-062-JJB-RLB, 2014 WL 3853457, at *3 (M.D. La. Aug. 5, 2014).
Moreover, the cases concluding that the requirements for an association-in-fact
enterprise were not met all turn on infirmities not present here. See Danny Lynn
Elec. & Plumbing, LLC v. Veolia ES Solid Waste Se., Inc., No. 2:09cv192-MHT,
2011 WL 2893629, at *4 (M.D. Ala. July 19, 2011) (complaint did not allege that
members of the alleged enterprise actually carried out the illegal acts); Paradise
Nw. Inc. v. Randhawa, No. 2:09-cv-02027-MCE-KJN, 2011 WL 1459206, at *2
(E.D. Cal. April 15, 2011) (no shared purpose because complaint did not allege
that wife played a meaningful role in her husband’s fraudulent business). So what
these cases actually affirm is that a married couple can constitute an association-in-
fact enterprise under RICO—or not—depending on the facts of the case.
That brings us back around to the facts of this case. Under a purpose
analysis consistent with Boyle, the record contains sufficient evidence for a
reasonable juror to find that—although Erika and Ben originally joined together for
the purpose of marriage—the couple came together shortly after the consent
13
Case: 18-11059 Date Filed: 02/05/2019 Page: 14 of 15
judgment was entered against Ben for a new purpose, to hinder Al-Rayes’s efforts
to collect the consent judgment by committing mail and wire fraud. That evidence,
viewed in the light most favorable to Al-Rayes, reflects that the couple deposited
Ben’s income into offshore bank accounts held in Erika’s name only, and then
transferred some of those offshore funds to their joint U.S. bank account to pay for
living expenses. All the while, both Erika and Ben denied the existence of the
offshore accounts under oath and made numerous misrepresentations regarding the
extent of their financial assets. The record also reflects that the couple purchased
real estate jointly, but put the titles to the properties in Erika’s name only;
eventually, the couple created a trust in Erika’s name only, to which they
transferred the condo title. Finally, the record contains evidence that the couple
formed a corporation, set themselves up as its sole shareholders, and then used its
bank account as both a haven for personal funds and a source for personal
expenditures. These actions may or may not constitute RICO violations. But they
certainly could lead a reasonable juror to conclude that Erika and Ben came
together shortly after the consent judgment was entered and orchestrated an asset-
concealment scheme for the common purpose of hiding Ben’s assets from Al-
Rayes. A marriage certificate does not transform alleged mail and wire fraud into
ordinary household management.
In sum, to survive summary judgment, Al-Rayes did not need to bolster
Erika and Ben’s marital relationship with evidence that the alleged association-in-
fact enterprise included a business or other separate entity formed by the couple.
Nor did he need to provide evidence that Erika and Ben originally married for the
14
Case: 18-11059 Date Filed: 02/05/2019 Page: 15 of 15
purpose of engaging in mail or wire fraud. Under RICO, the same rules apply to
married people as to everyone else. Because the district court applied a heightened
standard for association-in-fact enterprises consisting of married couples when it
granted summary judgment in Erika’s favor, we must reverse that order.
This opinion addresses only the “enterprise” element of the RICO claims
because the district court’s order addressed only that element. Accordingly,
nothing in this decision prevents the district court from entering judgment as a
matter of law in Erika’s favor on some other basis, should that be appropriate. And
because we reverse the order granting summary judgment in Erika’s favor, Erika
no longer qualifies as a prevailing party under Federal Rule of Civil Procedure
54(d)(1). We therefore also vacate the district court’s order awarding her costs.
REVERSED, VACATED, AND REMANDED.
15