MYFREEMEDICINE.COM, LLC v. ALPINE INVESTORS (Me. 8-13-2010)

r in which the Enterprise charged MyFreeMedicine, as well as other clients.

254. Defendant Jeffery Stanek participated and managed the call center's fraudulently billing of MyFreeMedicine and other clients for service that involved misrepresenting MyFreeMedicine and other products, and in which the call center charged MyFreeMedicine for services that were not provided.

Amend. Compl. ¶¶ 253, 254. These paragraphs only demonstrate Mr. Stanek's willingness to assemble and transmit invoices that were manipulated by someone other than himself or that contained charges incurred as a result of call center customer service representatives misrepresenting MyFreeMedicine. They do not demonstrate that Mr. Stanek knew about, participated in, or encouraged the manipulation of the invoices or that he knew about, participated in, or encouraged the misrepresentation of the MyFreeMedicine product.

The Court also agrees with the Magistrate Judge's conclusion that "[n]one of the Stanek-specific allegations in the amended complaint . . . allege any predicate act of racketeering activity." Rec. Dec. at 15. The Plaintiffs have not alleged that Mr. Stanek was involved in any of the other health care product schemes, thus the only possible scheme to which Mr. Stanek can be connected is the scheme to defraud MyFreeMedicine. This alone is insufficient to satisfy the pattern of racketeering element. Feinstein v. Resolution Trust Corp., 942 F.2d 34, 41 (1^st Cir. 1991). The Court must dismiss Count I of the Amended Complaint as alleged against Mr. Stanek.

5. Alpine, Mr. MacCheyne, Mr. Weaver, Mr. Maguy, Mr. Adams and Mr. Flaherty

Turning to Count I as alleged against Alpine, Mr. MacCheyne, Mr. Weaver, Mr. Maguy, Mr. Adams, and Mr. Flaherty (the Alpine Defendants), the Magistrate Judge noted that the "factual allegations added by the amended complaint seek to refocus the causal nexus analysis . . . from injury to the public caused by the defendants, which resulted in injury to the plaintiffs as well, to direct injury to the plaintiffs." Id. at 18. The new allegations include

º Adams and Weaver controlled call center operations on Alpine's behalf. First Amended Complaint ¶¶ 133-34.

º Members of Alpine control, participate in, and derive revenue from the call center's activities. Id. ¶ 145.

º Weaver controlled the media buying strategy that was led by Maguy. Id. ¶ 151.

º Weaver reviewed and ratified correspondence between Alpine and MyFreeMedicine. Id. ¶ 153.

º Weaver controlled the contractual relationship between Alpine and MyFreeMedicine by reviewing and approving the language of the contract. Id. ¶ 155.

º Maguy was instrumental in shaping the media buying strategy to earn interest fees paid by the plaintiffs to Alpine. Id. ¶¶ 162, 169.

º Maguy managed the advertising so as to maximize the volume of telephone calls. Id. ¶ 1220.

º Adams concealed misrepresentations made about MyFreeMedicine. Id. ¶ 188.

º Frank DeWolfe prepared and transmitted weekly invoices to the plaintiffs seeking payment for telephone calls in which MyFreeMedicine had been misrepresented to customers. Id. ¶ 200.

º MacCheyne executed all daily electronic bank transfers between MyFreeMedicine's customers and its bank account, and contributed fraudulent data to all invoices sent from members of the Enterprise to the plaintiffs. Id. ¶ 238.

º Flaherty prepared and transmitted fraudulent weekly invoices to the plaintiffs and oversaw the financial and accounting practices of the Enterprise. Id. ¶ 261.

º Adams and MacCheyne monitored calls in and out of the call center. Id. ¶ 285.

º The Enterprise routinely misrepresented its customer transactions to the plaintiffs and billed them directly for fraudulent sales activity. Id. ¶ 486.

º AdvanceTel charged the plaintiffs for all order fulfillment and sales it reported. Id. ¶ 507.

º Flaherty transmitted invoices for commissions based on sales volume to the plaintiffs on a weekly basis. Id. ¶ 511.

º In an August 6, 2004, e-mail, Adams misrepresented Alpine's intentions to Hasler, by failing to disclose Alpine's role in the fraudulent promotion and sale of Avacor and the Alpine partners' desire to use MyFreeMedicine as a vehicle for fraudulent activity. Id. ¶ 548.

º In an August 2004 meeting with Hasler, the Alpine partners concealed their role in the fraudulent promotion of Avacor and misrepresented their intent to reinvest income derived from a pattern of fraud connected to marketing Avacor and other products so that the Enterprise would profit at the expense of MyFreeMedicine. Id. ¶ 555.

º Adams was acting on behalf of Alpine and each of its partners when he signed a contract with the plaintiffs on October 23, 2004. Id. ¶¶ 563-64.

º Every time Alpine purchased a television advertisement through Quigley Simpson, the defendants obtained direct interest payments from MyFreeMedicine. Id. ¶ 573.

º Through Flaherty, the Enterprise defrauded the plaintiffs by transmitting invoices to them for sales commissions and order fulfillment activities that it claimed to have earned when in fact the customer service representatives misrepresented MyFreeMedicine's eligibility criteria and program description to customers. Id. ¶ 1175.

º MacCheyne manipulated data regarding the number of calls received for MyFreeMedicine and the disposition of these calls and provided the data to Flaherty, who included the data on invoices sent to the plaintiffs. Id. ¶ 1178.

º On November 30, 2004, Maguy informed the plaintiffs of advertising plans that were designed to increase the volume of calls and thereby increase the interest payments that the plaintiffs owed Alpine and increase the sales commissions and order fulfillment fees for which the plaintiffs were billed on a weekly basis. Id. ¶¶ 1191-92.

º MyFreeMedicine issued refunds to two complaining customers, in December 2004 and January 2005, while also paying sales commissions and other charges to AdvanceTel Direct, leaving it with a net loss due to the Enterprise's misrepresentation of MyFreeMedicine's product. Id. ¶¶ 1193-94, 1197-98.

º MyFreeMedicine rebated, credited, or refunded more than $500,000 to disadvantaged members of the public. Id. ¶ 1222.

º Adams expressly assumed a duty of good faith and fair dealing for himself and on behalf of Alpine, Maguy, Weaver, and Flaherty, when he promised on October 23, 2004 to conduct all of their activities relating to MyFreeMedicine with openness, full disclosure, and fairness for all parties involved. Id. ¶ 1300.

º These defendants breached their promise to work exclusively on MyFreeMedicine from October 23, 2004, through the end of 2004 by continuing to market Avacor. Id. ¶ 1303.

º These defendants promised the plaintiffs that they would make sure that the customer service representatives accurately stated the MyFreeMedicine eligibility criteria to customers, but failed to do so. Id. ¶ 1308.

º These defendants' refusal to cooperate with the plaintiffs' defense in the federal and state litigation filed against the plaintiffs breached their duty of good faith and fair dealing. Id. ¶ 1310.

Rec. Dec. 18-22.

The Magistrate Judge's Recommended Decision focuses on the Plaintiffs' failure to allege fraudulent conduct that has directly injured the Plaintiffs, and the failure to allege a pattern of racketeering. The Magistrate Judge points out that "direct harm" to the Plaintiffs from the Defendants "systematic misrepresentations" "is no more apparent from the `new' facts recited above than it was at the time of [his] original recommended decision." Id. at 22. He reiterates that "the requirement of direct causation of a plaintiff's damages by the alleged racketeering, or proximate cause, still holds." Id. at 22. As for the pattern of racketeering requirement, the Magistrate Judge concluded that the schemes involving the other health care related products were not "sufficiently `related' to the alleged scheme directed against the plaintiffs by the defendants to be considered as the necessary predicate acts of racketeering under RICO." Id. at 25. In addition, the Plaintiffs have not "describe[d] how the media funding arrangement was part of any pattern of racketeering activity." Id. at 23. Therefore, the Plaintiffs "cannot base any portion of their RICO claims on the funding of advertising." Id. at 23.

The Plaintiffs object to the Magistrate Judge's "conclusion that they fail to explain how the Alpine Defendants' misrepresentations harmed them." Pls.' Obj. at 10. The Plaintiffs reiterate that the Alpine Defendants sought the Plaintiffs' trust and then arranged for a joint bank account and began the media funding scheme. Id. at 11. "The media funding scheme became a key component of the scheme to defraud MyFreeMedicine. . . . [T]he media funding scheme [was] designed to earn interest payments for Alpine, but it also channeled more telephone calls to the Enterprise, thus increasing the opportunity for customer service representatives to misrepresent MyFreeMedicine." Id. at 11. The Plaintiffs also argue that when all reasonable inferences are drawn in their favor, "they have alleged that the money in the joint bank account was indeed lost to the Defendants." Id. at 12. "The plaintiffs deposited over $1 million in advertising and interest charges in an Alpine controlled back account . . . This money far exceeds the amount lost by individual customers." Id. at 12 (citation omitted). Additional injury includes the hundreds of thousands of dollars in commission and fees that the Plaintiffs paid out that they would not have paid had they known that the Defendants were misrepresenting their product to the public and misrepresenting the call centers' operations to the Plaintiffs. Id. at 13. The Plaintiffs expressed concern that there was no mention of the Good Morning America segment in the Second Recommended Decision. Id. at 14.

The Plaintiffs also take issue with the Magistrate Judge's analysis of the predicate acts requirement of a RICO claim. Id. at 15-16. "The Second Recommendation conducts only part of the analysis required for a pattern, and fails to explain how the allegations with respect to the scheme to defraud MyFreeMedicine, including the media funding arrangement, are no longer sufficiently `related' to the Avacor, Vinarol, and other schemes perpetrated by the Enterprise." Id. at 15 (citation omitted). The Plaintiffs argue that they have met the relatedness prong of the pattern element because the fraud directed at MyFreeMedicine and the call center's other schemes all "involved a call center located at 121 Mill Street in Auburn, Maine, the use of television advertising to direct callers to the call center, misrepresentation of products to consumers, and resulted in lawsuits being filed against clients of the Enterprise." Id. at 15.

a. The Court's Analysis: Standing

Section 1964(c) imposes a standing requirement under which a plaintiff seeking civil remedies for violation of § 1962(c) must establish that the defendant's racketeering activity caused injury to the plaintiff's business or property. See 18 U.S.C. § 1964(c); Sedima, 473 U.S. at 495-97; Camelio v. Am. Fed'n, 137 F.3d 666, 669-70 (1st Cir. 1998). More particularly, a plaintiff's standing to sue depends upon a finding that at least one of the defendant's predicate acts of racketeering was the proximate cause, as well as the but-for or factual cause, of the plaintiff's injury. See Holmes, 503 U.S. at 268, 276; see, e.g., George Lussier Enters., 393 F.3d at 51 ("Section 1964(c) [of the RICO Act] requires that the defendant's specified acts of racketeering were the proximate cause of the plaintiffs' injuries.") (citing Holmes, 503 U.S. at 268)); Camelio, 137 F.3d at 670. The Supreme Court has indicated that "some direct relationship between the injury asserted and the injurious conduct alleged" is required to show proximate causation; if the connection is too remote, the standing requirement is not satisfied. See Holmes, 503 U.S. at 268-69, 271-74; Anza v. Ideal Steel Supply Corp., 547 U.S. 451, 456-61 (2006).

The Court agrees with the Magistrate Judge's conclusion that despite the new section in the Amended Complaint entitled "Direct Misrepresentations and Financial Costs to the Plaintiffs", Am. Compl. ¶¶ 1174-1243, they still have not demonstrated the proximate cause requirement of a RICO claim. To begin, the inclusion of paragraphs with the words "proximate result" is insufficient to remedy the Amended Complaint's earlier deficiencies. See In re Am. Express Co. S'holder Litig., 39 F.3d 395, 400 n. 3 (2nd Cir. 1994) (stating that "conclusory allegations of the legal status of the defendant's acts need not be accepted as true for the purposes of ruling on a motion to dismiss"). In addition, many of the alleged damages remain speculative. For example, the Plaintiffs provide no basis for the $500,000 figure they allege to have paid out in refunds. The Plaintiffs' pleading provides only five instances in which it issued refunds. Id. ¶¶ 819, 868, 1172, 1194, 1198. In the first two instances the refund amount was $195, in the next instance the amount was $199.95, and in last two instances no refund amount was provided. These five allegations do not even come close to the $500,000 alleged in the Amended Complaint. "If any proposition under RICO is well-established, it is that a RICO damages claim may not be based on mere speculation." Circiello v. Alfano, 612 F. Supp. 2d 111, 114 (D. Mass. 2009) (citing cases). In addition, the injury to MyFreeMedicine for having to defend itself in several legal actions was caused only because the alleged scheme the call center was perpetrating on the public was exposed and thus failed. These injuries were not the "preconceived purpose" or the "specifically-intended consequence" of the Defendants' alleged racketeering. In re Am. Express Co. S'holder Litig., 39 F.3d at 400. Therefore, any harm to MyFreeMedicine was neither the necessary result nor the foreseeable consequence of the scheme. Id.

b. The Court's Analysis: Pattern of Racketeering Activity

In addition to failing to meet RICO's proximate cause requirement, the Plaintiffs have failed to demonstrate "a pattern of racketeering activity." To satisfy this element, the Plaintiff must demonstrate at least two acts of racketeering activity, 18 U.S.C. § 1961(5), and "must show that the racketeering predicates are related, and that they amount to or pose a threat of continued criminal activity." H.J. Inc., 492 U.S. at 239 (emphasis in original).

RICO is not aimed at a single narrow criminal episode, "even if that single episode involves behavior that amounts to several crimes (for example, several unlawful mailings)." Apparel Art Int'l., Inc. v. Jacobson, 967 F.2d 720, 723 (1st Cir. 1992); see also Fujisawa Pharmaceutical Co., Ltd. v. Kapoor, 115 F.3d 1332, 1338 (7th Cir. 1997) (noting that if successive frauds "were installments in the sale of [a] company, the requirement of a pattern would probably not have been satisfied because the reality would have been that there was only a single fraud").

The Magistrate Judge concluded that "the other predicate acts alleged in the complaint and the amended complaint, involving other products such as Avacor and Vinarol, are no longer sufficiently `related' to the alleged scheme directed against the plaintiffs by the defendants to be considered as the necessary predicate acts of racketeering under RICO." Rec. Dec. at 25. "To the extent that the plaintiffs rely on the account set up to fund advertising [as a predicate act]," they do not "describe how the media funding arrangement was part of any pattern of racketeering activity." Rec. Dec. at 23.

Plaintiffs object to the Magistrate Judge's handling of the pattern element. Pls.' Obj. at 15. They complain that the Magistrate Judge "failed to apply the criteria for relatedness, or to explain why it concludes that none of the various schemes share `distinguishing characteristics'" and did not address the continuity prong at all. Id. at 15.

i. Relatedness

Relatedness is readily shown where the predicate acts "have the same or similar purposes, participants, victims, or methods, or otherwise [are] interrelated by distinguishing characteristics." H.J. Inc., 492 U.S. at 240. The Plaintiffs attempt to relate the schemes involving Avacor, Vinarol, Thermal Carb, and Glucotrin to the scheme to defraud MyFreeMedicine. Pls.' Obj. at 17. They argue that "the fraud directed at MyFreeMedicine is related to the Enterprise's other schemes because they involved a call center located at 121 Mill Street in Auburn, Maine, the use of television advertising to direct callers to the call center, misrepresentation of products to consumers, and resulted in lawsuits being filed against clients of the Enterprise." Pls.' Obj. at 15.

With regard to the Vinarol, Thermal Carb, and Glucotrin schemes, although the Amended Complaint contains allegations that the products were misrepresented by call center customer service representatives, there is no allegation that the Defendants encouraged, approved of, or benefited from this misrepresentation. For example, several paragraphs simply allege that customer service representatives "were instructed" to misrepresent these products. Am. Compl. ¶ 433, 439, 479. The paragraphs do not state that the instructions were given by "the Defendants" collectively, much less by any one Defendant. Furthermore, apart from alleging that Alpine and Mr. Weaver, Mr. Maguy and Mr. Adams "control" Great Falls Marketing, the call centers' current name, id. ¶ 462, and that the DeWolfes, Mr. Weaver, Mr. Adams, Mr. Stanek, Mr. MacCheyne knew that Vinarol contained sildenafil citrate, the Defendants' names do not appear in the Amended Complaint's description of the Vinarol, Thermal Carb and Glucotrin schemes. Id. ¶¶ 413-418. As it relates to the Vinarol, Thermal Carb, and Glucotrin, the Amended Complaint does not include a description of a media funding scheme similar to the one alleged to have been perpetrated on MyFreeMedicine by the Defendants, or allege that "unqualified members" of the public were enrolled and billed for these products. Vinarol, Thermal Carb, and Glucotrin are not prescription medications, and the alleged victims of the Vinarol, Thermal Carb, and Glucotrin schemes were not low-income individuals. In addition, the Amended Complaint does not include allegations that the owners of the Vinarol, Thermal Carb, and Glucotrin products were duped, like MyFreeMedicine, into engaging in a media funding campaign. The Vinarol, Thermal Carb, and Glucotrin schemes may not be used as predicate acts in this case as the Amended Complaint has not sufficiently alleged that these schemes involved the same participants, victims, or methods.

Although the Plaintiffs' allegations regarding the Avacor scheme include slightly more details than their allegations regarding the Vinarol, Thermal Carb, and Glucotrin schemes, the Avacor scheme cannot be used as a predicate act to the MyFreeMedicine scheme. Apart from a statement that "James DeWolfe knew and told others, including the staff and employees, that Avacor had Minoxidil in it," the description of the Avacor scheme does not include allegations that the Defendants collectively or individually encouraged call center representatives to misrepresent the product. Am. Compl. ¶ 372. The Plaintiffs attempt to describe a media funding scheme similar to the one involving MyFreeMedicine and Quigley Simpson, but they have failed to connect the dots between Global Vision Products, Avacor, and Alpine. Id. ¶¶ 376-382. The Plaintiffs have not explained the relevance of Global Vision Products.

The Plaintiffs allege that "[t]he 121 Mill Street Enterprise misrepresented to the public" that Avacor was "all natural," "contained no chemicals," and had "no side effects." Id. ¶¶ 365, 366, 367. Like the RICO action, the Plaintiffs must plead predicate acts of fraud with particularity. Simply claiming that the Enterprise engaged in misrepresentations is insufficient. It is well established in the First Circuit that predicate acts of mail fraud alleged in civil RICO actions must be pleaded with particularity in accordance with the requirements of Rule 9(b) of the Federal Rules of Civil Procedure. See Ahmed v. Rosenblatt, 118 F.3d 886, 889 (1st Cir. 1997) (citing Feinstein, 942 F.2d at 42; New England Data Servs., 829 F.2d at 290.) Under the First Circuit's interpretation of Rule 9(b)'s particularity requirement, a civil RICO plaintiff alleging predicate acts of mail fraud must specify the time, place, and content of allegedly false mail communications. See Ahmed, 118 F.3d at 889; Doyle v. Hasbro, 103 F.3d 186, 194 (1st Cir. 1996); New England Data Servs., 829 F.2d at 288, 290. The Plaintiffs have failed to do this.

The First Circuit has devised a special approach for civil RICO cases in which alleged predicate acts of mail and/or wire fraud fail to meet the standard required under Rule 9(b). In such cases, "a district court should make a second determination as to whether further discovery is warranted and, if so, the plaintiff should be provided with the opportunity to amend the complaint after the completion of this discovery." Ahmed, 118 F.3d at 890 (citing New England Data Servs., 829 F.2d at 290); see also Feinstein, 942 F.2d at 43. A plaintiff is not, however, automatically entitled to such discovery and opportunity to amend. See Ahmed, 118 F.3d at 890; Feinstein, 942 F.2d at 44. For example, when a plaintiff "fail[s] to supply specific allegations which would indicate that critical information was in the sole possession of the defendants," he or she may not be entitled to discovery or the opportunity to amend. See Ahmed, 118 F.3d at 890. Moreover, the First Circuit has stated that "in a RICO action where fraud has not been pleaded against a given respondent with the requisite specificity and Rule 9(b) has been flouted, dismissal should follow as to that respondent unless the plaintiff, at a bare minimum, suggests to the district court, in a timely manner, that a limited period of discovery will likely allow him to plug the holes in the complaint and requests leave (i) to conduct discovery for this limited purpose and (ii) thereafter to amend his

complaint. It is only then that a district court must take a second look to ascertain whether a particular case is `appropriate' for the special unguent of deferral." Feinstein, 942 F.2d at 44 (internal citation omitted).

In this case, the Plaintiffs have already had an opportunity to amend their complaint. Even so, the Amended Complaint does not explain how the Defendants' involvement in the other health care related schemes amounts to fraud. Furthermore, the Plaintiffs have not alleged that the Defendants have critical information within their possession. Consistent with Feinstein, the Plaintiffs have not convinced the Court that they should be given the opportunity to engage in limited discovery and to amend their complaint for a second time. The facts relating to the other health care product schemes, as alleged do not contain "any demonstrable imbrication" with the facts of the MyFreeMedicine scheme, and they are not sufficiently related. Feinstein, 942 F.2d 34, 45.

It is also true that the individual episodes of mail fraud, wire fraud, and financial institution fraud within the scheme to defraud MyFreeMedicine, although related, cannot establish the pattern of racketeering activity. See footnote 1l.

Having failed to demonstrate that the racketeering predicates involve acts of fraud related to the alleged MyFreeMedicine scheme, the Plaintiffs RICO claims must be dismissed for lack of a "pattern of racketeering activity." The Plaintiffs other objections are without merit.

The Plaintiffs have also failed to demonstrate the continuity requirement of "a pattern of racketeering activity." A plaintiff may satisfy the continuity requirement by evidence that the racketeering acts "include a specific threat of repetition extending indefinitely into the future" or "form part of an ongoing entity's regular way of doing business." H.J. Inc., 492 U.S. at 242. The Plaintiffs argue that the Defendants continue to engage in criminal activity because they "continue[] to operate a telemarketing call center located at 121 Mill Street in Auburn, Maine and continue[] to sell products related to the healthcare industry" as demonstrated by the Glucotrin scheme. Pls.' Obj. at 15-16. As explained, the allegations surrounding Glucotrin merely state that call center representatives made misrepresentations about the product, but the Plaintiffs have not identified one Defendant who encouraged or actively participated in the misrepresentations, or identified one individual who was defrauded through the alleged acts of the Enterprise. Am. Compl. ¶¶ 458-485. To properly allege a claim in federal court, it is not enough merely to allege that a defendant acted unlawfully; a plaintiff must affirmatively plead "factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 129 S.ct. at 1949 (citing Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 556 (2007)). The Plaintiffs' pleadings do not sufficiently allege the continuity prong of the pattern of racketeering element.

6. DeWolfe Brothers

Turning to the additional facts alleged against the DeWolfe Brothers, the Magistrate Judge pointed out that those against James DeWolfe include that

he controlled the customer service representatives who spoke to MyFreeMedicine customers, First Amended Complaint ¶ 212; he exercised managerial control over or participated in all aspects of the call center in its "early days," id. ¶ 215; he implemented the technique of misrepresenting MyFreeMedicine as a government program and as part of the official training for customer service representatives, without disclosing it to the plaintiffs, id. ¶ 497; and he "orchestrated" several telephone conference calls in 2004 during which he suggested that Alpine emulate the success of Avacor with MyFreeMedicine, id. ¶ 545.

Rec. Dec. at 16-17. The additional facts alleged against Frank DeWolfe include that

he prepared and transmitted weekly invoices to the plaintiffs seeking payment for calls in which the Enterprise misrepresented MyFreeMedicine to customers, id. ¶ 200, and he made the false representation to the plaintiffs that AdvanceTel Direct was "hoping to see a steady increase in calls as our agents are feeling much better about the calls," id. ¶¶ 205-06.

Rec. Dec. at 17. None of these additional facts changed the Magistrate Judge's earlier analysis of the claims against the DeWolfes. In his first Recommended Decision, the Magistrate Judge noted that "a long line of cases interprets RICO to require that the alleged fraudulent conduct be the direct cause of the plaintiff's injury. None of the additional facts alleged against either James DeWolfe or Frank DeWolfe . . . would support a conclusion that either defendant engaged in fraudulent conduct that directly caused the plaintiffs' injury." Id. at 17. With regard to the Rule 9(b) requirement that claims of fraud be plead with particularity, the Magistrate Judge concluded that "the additional pleading does not meet the pleading standards of Fed.R.Civ.P. 9(b)." Id. at 17. "It is not possible to tell from the amended pleadings exactly what either of these defendants did that was fraudulent or, more important, why that conduct constituted fraud." Id. at 18. The Magistrate Judge concluded that James and Frank DeWolfe are entitled to dismissal of Counts One through Four.

The Plaintiffs object to the Magistrate Judge's Recommended Decision, arguing that he overlooked the DeWolfes' "central role" in "encouraging customer service representatives to misrepresent MyFreeMedicine" Pls.' Obj. at 5. James DeWolfe executed the initial agreements for MyFreeMedicine to use the Enterprise for telemarketing services and order fulfillment activity. Id. at 7. The DeWolfes encouraged employees to deviate from the script and freelance during sales calls, such as telling callers that MyFreeMedicine was a government program, in an effort to increase the call volume, and increase profit. Id. at 6, 7. All the while the DeWolfes gave assurances to Mr. Hasler that approved sales scripts would be honored. Id. at 6.

The Plaintiffs' Amended Complaint continues, however, to fail to allege predicate acts by the DeWolfe brothers that caused MyFreeMedicine's injury, to demonstrate a pattern of racketeering activity, and to meet the specificity requirements of Rule 9(b). The Plaintiffs' other arguments are without merit.

C. Count IV: The RICO Conspiracy Count, § 1962(d)

The Plaintiffs' 18 U.S.C. 1962(d) count alleging conspiracy to violate subsection (c) against all defendants fails because it does not adequately allege a

violation of that subsection. See Miranda, 948 F.2d at 45 n. 4; see also Efron, 223 F.3d at 21. Count IV is dismissed.

D. Count V: Breach of Contract Claim

1. The Amended Complaint

The named Defendants in Count Five, the breach of contact claim, are Alpine Investors, William Adams, William Maguy, Graham Weaver, and Brian Flaherty. Attached to Plaintiffs Amended Complaint is a memo to Mr. Hasler from Mr. Adams and copied to Mr. Flaherty. Am. Compl., Ex. A. The email explains that "the purpose of this memo is to outline a general agreement for moving forward with the rapid ramp-up of the MyFreeMedicine campaign." Id. at 1. The memo includes five sections: general approach, media funding agreement, media purchases, ramp-up schedule, and roles and responsibilities. Id. at 1-4. The memo also contains a chart identifying different tasks and outlining the person responsible for those tasks. Id. at 4. The memo is signed by Geoff Hasler for MyFreeMedicine and William Adams for Alpine. Id. As part of the agreement Mr. Adams and "other members of the Alpine team" agreed to "dedicate [them]selves to working exclusively with [MyFreeMedicine] for the remainder of the year to develop the foundation for a long standing, high volume, and very profitable campaign." Id. at 1. In addition, "Will Adams agrees that he (or, in his absence his partners at Alpine Investors) will conduct his activities related to the MyFreeMedicine campaign with openness, full disclosure and fairness for all parties involved and that he will never act advance (sic) the interests of AdvanceTel Direct at the expense of the interest of MyFreeMedicine." Id. at 2.

The Amended Complaint alleges that Mr. Adams signed this agreement with MyFreeMedicine on behalf of Alpine and its partners Mr. Maguy, Mr. Weaver, and Mr. Flaherty. Am. Compl. ¶ 1294. Pursuant to the agreement, the Plaintiffs say Mr. Adams promised that Alpine and its partners would work exclusively with MyFreeMedicine from October 23, 2004 through the end of the year. Id. ¶ 1296. The Defendants breached "their promise to work exclusively on MyFreeMedicine for the remainder of 2004 by continuing to work in furtherance of the Avacor scheme." Id. ¶ 1309. MyFreeMedicine also alleges that the Defendants breached their express duty of good faith and fair dealing "[t]hrough their failure to stop customer service representatives from misrepresenting MyFreeMedicine eligibility criteria" and "by refusing to cooperate with Plaintiffs' defense in the federal and state litigation filed against Plaintiffs." Id. ¶¶ 1310, 1311.

2. The Renewed Motion

In their renewed motion to dismiss, the Alpine Defendants argue that, even if true, their alleged actions would not "have deprived them of the benefits they reasonably could have expected to receive under the Media Funding Agreement, nor do they reflect a failure or refusal on the part of any of the Alpine Defendants to fulfill any of their alleged contractual responsibilities under the Media Funding Agreement." Alpine's Renewed Mot. at 38. Specifically, the Amended Complaint does not allege a claim against the individual Defendants because the language of the contract "would bind only Will Adams, unless he was `absent', which is not alleged by the Plaintiffs. Id. at 38 n. 18. They argue that the Defendants "should not be permitted to bring a breach of fiduciary duty claim in the guise of a breach of contract claim." Id. at 39.

3. The Recommended Decision

The Magistrate Judge focused on the Defendants' assertion that the Amended Complaint does not state a claim against the individual plaintiffs because it does not allege that Adams was "absent" at any time, and stated that this "interpretation places too heavy a burden of factual detail on the plaintiffs in pleading what is a general state-law claim, not subject to the enhanced pleading standard applicable to claims of fraud such as those involved in RICO claims." Rec. Dec. at 27. Given the Court's obligation to construe all reasonable inferences in favor of the Plaintiffs, the Magistrate Judge determined that "it is reasonable to construe the allegations in Count Five to include all instances of alleged breach, if any, in which Adams was `absent.'" Id. at 27. While the question is a close one, the Magistrate Judge concluded "that Count Five states a claim upon which relief may be granted against Maguy and Weaver, who are alleged against Adams, to be partners in Alpine." Rec. Dec. at 28.

4. The Objections

a. Mr. Adams, Mr. Weaver, and Mr. Maguy's Objection

Mr. Adams, Mr. Weaver, and Mr. Maguy argue that the Court misconstrued their arguments and the Plaintiffs' allegations regarding the alleged contract. Adams, Maguy, Weaver Obj. at 3. Specifically, it is the Defendants' position that Plaintiffs "failed to allege any material failure on the part of the Defendants either to provide media funding or to perform the other tasks specified in the agreement. [] The Court did not take account of the latter half of this argument" which they claim is "fatal to the Plaintiffs' breach of contract claim." Adams, Maguy, Weaver Obj. at 5. "There are no allegations in Count Five that Messrs. Adams, Maguy or Weaver failed materially to fulfill any obligation in the Alleged Contract." Adams, Maguy, Weaver Obj. at 5. Mr. Adams, Mr. Weaver, and Mr. Maguy focus on paragraph 1303 of the First Amended Complaint:

Defendants Alpine, Adams, Weaver, Maguy and Flaherty breached their promise to work exclusively on MyFreeMedicine from October 23, 2004 through the end of 2004, by continuing to market Avacor through television advertising, by shipping Avacor from Lewiston and Auburn, Maine, and by running a telemarketing call center and order fulfillment center that earned millions of dollars from the sale and promotion of Avacor, during the same time that they promised to only work on MyFreeMedicine.

Am. Compl. ¶ 1303. They argue that the Media Funding Agreement does not bind Alpine as an entity, and that if Alpine is not bound, "the allegations in paragraph 1303 are relevant only with regard to measuring the alleged actions of the individual defendants." Id. at 6. When evaluating the actions of the individual defendants, they say that "it is simply not plausible that Messrs. Adams, Maguy and Weaver under took in their individual capacities the wrongful activities alleged by the Plaintiffs." Id. at 6. "Responsibility for the actions alleged in paragraph 1303 lies at the entity level, if at all, not at the individual level." Id. at 7.

b. The Plaintiffs' Objections

The Plaintiffs object to the dismissal of Alpine and Brian Flaherty under Count Five. Pls.' Obj. at 16. With regard to Alpine, the Plaintiffs argue that "[w]hen Adams signed the [media funding] contract . . ., the words `Alpine Investors' appear below his signature. . . . This appears to be the deliberate act of a partner to bind the partnership, and it is premature to dismiss Defendant Alpine Investors." Id. at 16. As for Mr. Flaherty, the Plaintiffs argue that "it is a fact question whether or not Will Adams's statement `his partners at Alpine' included Mr. Flaherty, as he is alleged to have been a member of the organizational structure through which Alpine engaged in media funding and call center operations." Id. at 16-17.

5. The Court's Analysis

a. Mr. Flaherty's Status

Although the Amended Complaint alleges that Mr. Flaherty was present at the signing of the Media Funding Agreement between Alpine and MyFreeMedicine, and was designated in the Media Funding Agreement as responsible for several tasks, id. ¶¶ 258, 562, throughout the Amended Complaint when MyFreeMedicine describes Alpine, the Amended Complaint mentions Mr. Adams, Mr. Weaver, and Mr. Maguy, but not Mr. Flaherty. See Am. Compl. ¶¶ 12, 14, 131, 144, 169, 176, 376, 379, 462, 539, 545, 552, 554, 564, 580, 587, 1278, 1279, 1281, 1282, 1283, 1286. For example, paragraph 12 of the Amended Complaint states "[u]pon information and belief, Defendants Weaver, Adams, and Maguy are owners, employees, members, managers, and/or partners of Defendant Alpine Investors, LP." Id. ¶ 12. With regard to the Media Funding Agreement, the Amended Complaint specifically states that "Defendant Will Adams was acting on behalf of Defendant Alpine, as well as all of the individual partners at Defendant Alpine, including Defendants Weaver and Maguy, when he signed the contract with Plaintiffs and listed `Alpine Investors' below his signature." Id. ¶ 564. For these reasons, the Court agrees with the Magistrate Judge's conclusion that Mr. Flaherty cannot be liable on the Media Funding Agreement as an Alpine partner and "Flaherty is entitled to dismissal of Count Five." Rec. Dec. at 27.

b. Breach of Contract Claim

Pursuant the Media Funding Agreement, Mr. Adams along with other members of the Alpine team agreed to "dedicate ourselves to working exclusively with [MyFreeMedicine] for the remainder of the year[,]" and Mr. Adams agreed "that he (or, in his absence his partners at Alpine Investors) will conduct his activities related to the My Free Medicine campaign with openness, full disclosure and fairness for all parties involved and that he will never act [to] advance the interests of AdvanceTel Direct at the expense of the interest of My Free Medicine." Am. Compl., Ex. A at 1, 2.

In their Amended Complaint, the Plaintiffs allege that the Alpine Defendants "breached their promise to work exclusively on MyFreeMedicine from October 23, 2004 through the end of 2004, by continuing to market Avacor through television advertising, by shipping Avacor from Lewiston and Auburn, Maine, and by running a telemarketing call center and order fulfillment center that earned millions of dollars from the sale and promotion of Avacor, during the time that they promised to only work on MyFreeMedicine." Am. Compl. ¶ 1303. In addition, the Plaintiffs allege that in failing "to stop customer service representatives from misrepresenting MyFreeMedicine eligibility criteria, the Defendants failed to conduct themselves with honesty, fair dealing, and good faith to which they were bound by the October 23, 2004 agreement." Id. ¶ 1310. The Court agrees with the Magistrate Judge's conclusion that the Plaintiffs adequately allege a breach of contract claim against Mr. Adams, Mr. Weaver and Mr. Maguy. Count V is dismissed against all Defendants except Mr. Adams, Mr. Weaver and Mr. Maguy.

The Court agrees with the Magistrate Judge that the language in the Media Funding Agreement upon which the Plaintiffs rely for their breach of contract claim only binds the individual members of Alpine, and not Alpine the corporate entity. Rec. Dec. at 26-27.

E. Count VI: Tortious Interference Claim

1. The Amended Complaint

Count Six, the tortious interference with prospective economic advantage claim, is alleged against all Defendants. MyFreeMedicine claims that the Defendants interfered with the "prospective economic relationship [that] existed between MyFreeMedicine and its qualified customers" "by participating in, encouraging, and misrepresenting MyFreeMedicine to callers, and by misrepresenting their activities to the Plaintiffs." Am. Compl. ¶¶ 1317, 1318. "As a result of these misrepresentations, few qualified customers renewed their enrollment with MyFreeMedicine, causing further damage to Plaintiffs by depriving them of business revenue." Id. ¶ 1321.

In his Recommended Decision, the Magistrate Judge noted that the Amended Complaint made three minor changes to the tortious interference count. Rec. Dec. at 29. The Magistrate Judge stated that "[t]he additional factual allegations . . . do nothing to change" his earlier conclusion "that the claim for tortious interference was too speculative to state a claim on which relief could be granted." Rec. Dec. 29, 30. He explained that he "fail[ed] to see how the defendants' alleged misrepresentation of the defendants' activities to the plaintiffs interfered with the plaintiffs' prospective customer relationships." Rec. Dec. at 30.

In his first Recommended Decision, the Magistrate Judge pointed out that the "elements of the claim of tortious interference with a prospective economic advantage under Maine law are the existence of a valid prospective economic advantage, interference with that advantage through fraud or intimidation, and damages proximately caused by the interference." First Rec. Dec. at 26 (citing Currie v. Industrial Sec., Inc., 2007 ME 12, ¶ 31, 915 A.2d 400, 408). He further noted that in a tortious interference with prospective economic advantage claim, "usually a specific current or prospective business relationship is involved," Mangan v. Rumo, 226 F. Supp. 2d 250, 252-53 (D. Me. 2002), and here the plaintiffs offer nothing specific." First Rec. Dec. at 26-27 (footnote omitted). According to the Recommended Decision, the Plaintiffs "offer only speculation that their business would have continued to grow had the defendant not engaged in the conduct complained of in the complaint." First Rec. Dec. at 27. As for the amendments, the Magistrate Judge "fail[ed] to see how the defendants' alleged misrepresentation of the defendants' activities to the plaintiffs interfered with the plaintiffs' prospective customer relationships in any way. . . . [A]dding an allegation of reliance on the alleged misrepresentations, does not address an element of the tort." Rec. Dec. at 30.

2. The Plaintiffs' Objections

The Plaintiffs have renewed the objections in their objection to the first Recommended Decision and argue that "whether or not the Plaintiffs had a valid prospective economic advantage is at a minimum a fact question which is premature at this stage." Pls.' Obj. at 17.

3. The Court's Analysis

The Court agrees with the Magistrate Judge's conclusion. The relationship between Plaintiffs and any "potential customers" is in this case too attenuated and speculative to support their claim. See Norris v. Bangor Publ'g. Co., 53 F. Supp. 2d 495, 509 (D. Me. 1999). Count VI is dismissed.

III. CONCLUSION

The Court ADOPTS the Magistrate Judge's Recommended Decision (Docket # 100). The Court GRANTS Jeffrey Stanek's Renewed Motion to Dismiss (Docket # 91) and James N. DeWolfe and Frank G. DeWolfe's Renewed Motion to Dismiss (Docket # 90). As for the Alpine Defendants Renewed Motion to Dismiss, the Court GRANTS the motion as it applies to Alpine Investors, LP, Scott MacCheyne, and Brain G. Flaherty and DENIES the motion as it applies to Graham Weaver, William T. Maguy, and William Adams only on Count five (Docket #89). The Remaining Counts are dismissed against Mr. Weaver, Mr. Maguy, and Mr. Adams.

SO ORDERED.

Dated this 13th day of August, 2010