United States District Court, D. Colorado
JOSSE ANTHONY MAZO a/k/a Josse Anthony Mazo-Mayorquin and MARITZA RIASCOS f/u/b/o MAZO-RIASCOS M.D., LLC, Plaintiffs,
JOHN MICHAEL MERRITT, JR. FULL SPECTRUM NUTRITION LLC, a Florida limited liability company, and FULL SPECTRUM NUTRITION, INC., a Delaware corporation, Defendants, and JOHN MICHAEL MERRITT, JR, individually and on behalf of himself and other members of Full Spectrum Nutrition, Inc. a Delaware corporation, and FULL SPECTRUM NUTRITION, LLC, a Florida limited liability company, Counterclaim and Crossclaim Plaintiffs,
JOSSE ANTHONY MAZO a/k/a Josse Anthony Mazo-Mayorquin and MARITZA RIASCOS f/u/b/o Mazo-Riascos M.D., LLC; BRYAN ROBERT FERRERO; DOUGLAS EDWARD BISHOP; NATALIA SWINDLER a/k/a Natalia Radzuik; FULL SPECTRUM NUTRITION INT, INC., a Florida corporation; SACRED ROOT, INC., a Colorado corporation; and SACRED ROOT, LLC, a Colorado limited liability corporation, Counterclaim Defendants; and FULL SPECTRUM NUTRITION, INC., a Delaware corporation, Crossclaim Defendant.
ORDER ON MOTIONS TO DISMISS
BROOKE JACKSON UNITED STATES DISTRICT JUDGE
are two partial motions to dismiss before the Court. First,
the original plaintiffs- now acting as counterclaim
defendants-Josse Anthony Mazo, Maritza Riascos, and
Mazo-Riascos M.D., LLC (“M-R, LLC”) move to
dismiss the first and second claims set forth in
defendants' counterclaim. Mot. to Dismiss, ECF No. 22;
Defs.' Answer to Am. Compl., Counterclaims, Crossclaims,
and Joinder of Parties, ECF No. 11. Second, counterclaim
defendant Full Spectrum Nutrition Int, Inc. (“FSN
Int”) moves to dismiss the first, second, third,
fourth, seventh, and eighth claims in the counterclaim. Mot.
to Dismiss, ECF No. 32. For the reasons stated below, the
first motion to dismiss, ECF No. 22, is GRANTED, and the
second motion to dismiss, ECF No. 32, is GRANTED in part and
DENIED in part.
amended complaint alleges very basic facts of a business deal
gone wrong. See Am. Compl., ECF No. 8. Plaintiffs,
who are married, are medical doctors from Florida. From May
2017 to August 2017, Drs. Mazo and Riascos allege that they
invested $1.1 million in two of defendant John Merritt's
businesses, Full Spectrum Nutrition, LLC (“FSN,
LLC”) and Full Spectrum Nutrition, Inc. (“FSN,
Inc.”) (collectively referred to as “Full
Spectrum Nutrition” or “FSN”). Id.
at ¶24. Full Spectrum Nutrition sells cannabis-derived
products such as cannabidiol
(“CBD”). Plaintiffs' allege that they decided
to invest in Full Spectrum Nutrition only after Mr. Merritt
wrongfully induced them to invest in his companies by using
false financial reports, false projected cash flows, and
false projected profits and losses. ECF No. 8 at ¶22.
allege that Mr. Merritt was to use plaintiffs' money for
two specific purposes: (1) to expand Full Spectrum
Nutrition's office in Colorado Springs, and (2) to
purchase CBD-infused products as nutritional supplements so
the company could sell the products at retail prices.
Id. at ¶23. Instead, plaintiffs allege that Mr.
Merritt comingled their investment money and used it to fund
two of his other businesses-a wildlife refuge and a bottled
water company called “iRescue.” Id. Both
companies are based in Costa Rica. Id. Plaintiffs
seek to recover their lost investment.
Merritt tells a different story. He alleges that Dr. Mazo was
a wholesale purchaser of Mr. Merritt's CBD-products
produced and sold by FSN. ECF No. 48 at ¶3. According to
Mr. Merritt, Mr. Mazo expressed interest in breaking into the
CBD-business and wanted to invest in FSN, Inc. Id.
After plaintiffs invested $1.1 million into Mr. Merritt's
companies, Mr. Merritt alleges that plaintiffs conspired to
steal his companies. Id. at ¶4. The alleged
conspiracy first included embezzling assets, looting
FSN's facility, and stealing FSN's CBD-products.
Id. at ¶5. Counterclaim defendants then
allegedly started new companies using similar names as Mr.
Merritt's companies to launder money, sell the stolen
products, and cash illegal checks. Id.
a careful reading of the counterclaim appears to show that
the real culprits of the alleged wrongdoing are three named
counterclaim defendants who were yet to be served at the time
of the April 10, 2018 scheduling conference: Bryan Ferrero,
Douglas Bishop, and Natalia Swindler. See ECF No. 48 at
¶64. Mr. Ferrero became acquainted with Mr. Merritt in
August 2016, and later became an initial investor,
shareholder, and board member of FSN, Inc. Id. at
¶¶27, 34. Mr. Bishop presumably got involved in FSN
when his cousin, Mr. Ferrero, convinced him to invest in Mr.
Merritt's companies. Mr. Bishop is a shareholder and
board member of FSN, Inc. Id. at ¶18. Finally,
Ms. Swindler was an employee of FSN, and according to Mr.
Merritt, Ms. Swindler and Mr. Ferrero were romantically
involved. Id. at ¶51. In November 2017, Mr.
Merritt fired Ms. Swindler for “poor performance and
disruptive behavior, ” which, according to him,
potentially served as the catalyst for the alleged
conspiracy. Id. at ¶¶55, 62. The
counterclaim asserts that Mr. Ferrero, Mr. Bishop, and Ms.
Swindler, “and potentially Mazo and Riascos, ”
launched a campaign to take over FSN. Id. at
¶62. The counterclaim continues, stating that
“Swindler, Ferrero, and D. Bishop quickly contacted
Mazo, making false accusations and telling him lies about
Merritt's conduct, in an effort to turn Mazo against
Merritt and stage a coup.” Id. at ¶64.
The main reason Mr. Merritt believes that Mr. Mazo was
involved in the alleged conspiracy is because Mr. Mazo made
an unannounced visit to FSN, LLC's facility on November
20, 2017. Id. at ¶54. Mr. Merritt suspects that
Mr. Mazo made this trip on this date because Mr. Merritt was
at a trade exposition in Medellin, Colombia. Id.
This opening provided Mr. Mazo an opportunity to inspect the
profit and loss statements, bank balances, and product
inventory, which showed an inventory of $392, 000 of CBD
product. Id. In the alternative, the counterclaim
states that Mr. Mazo and Ms. Riascos may have already been
part of the conspiracy. Id. at ¶65.
filed their complaint on April 10, 2018. ECF No. 1. They
filed an amended complaint on May 22, 2018, making it the
operative complaint. ECF No. 8. Defendants filed an answer to
the amended complaint, and as part of that answer, filed a
lengthy counterclaim. ECF No. 11. Plaintiffs, now acting as
counterclaim defendants, filed two partial motions to dismiss
defendants' counterclaim. ECF Nos. 22, 32. Defendants
filed a response to both motions, ECF Nos. 23, 45, and
plaintiffs replied to the first response, ECF No. 25, but not
the second response. As such, both motions are ripe for
review, and I address each one below.
STANDARD OF REVIEW
survive a Fed.R.Civ.P. 12(b)(6) motion to dismiss, the
complaint must contain “enough facts to state a claim
to relief that is plausible on its face.” Ridge at
Red Hawk, L.L.C. v. Schneider, 493 F.3d 1174, 1177 (10th
Cir. 2007) (quoting Bell Atlantic Corp. v. Twombly,
550 U.S. 544, 570 (2007)). A plausible claim is a claim that
“allows the court to draw the reasonable inference that
the defendant is liable for the misconduct alleged.”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). While
the Court must accept the well-pleaded allegations of the
complaint as true and construe them in the light most
favorable to the plaintiff, Robbins v. Wilkie, 300
F.3d 1208, 1210 (10th Cir. 2002), conclusory allegations are
not entitled to be presumed true. Iqbal, 556 U.S. at
681. However, so long as the plaintiff offers sufficient
factual allegations such that the right to relief is raised
above the speculative level, he has met the threshold
pleading standard. See, e.g., Twombly, 550
U.S. at 556; Bryson v. Gonzales, 534 F.3d 1282, 1286
(10th Cir. 2008).
Counterclaim Defendants Mazo, Riascos, and M-R, LLC's
Motion to Dismiss the First and Second Claims of the
defendants (Mazo, Riascos, and M-R, LLC) argue that
counterclaim plaintiffs' (Merritt, FSN, LLC, and Merritt
as a shareholder on behalf of FSN, Inc.) RICO and COCCA
claims should be dismissed for failure to state a claim upon
which relief may be granted. I agree.
RICO and COCCA Claims for Relief.
their motion and response, the parties treat the RICO claim
and COCCA claim in the exact same manner. Therefore, the
Court will do the same.
defendants' first argument is that neither claim alleges
any wrongdoing by M-R, LLC. ECF No. 22 at 6. They next argue
that any allegations against Mazo and Riascos are conclusory
and fail the heightened pleading standards set forth in
Fed.R.Civ.P. 9(b). See Id. at 6-8. Finally,
counterclaim defendants argue that counterclaim plaintiffs
failed to properly allege a RICO violation-specifically, the
“continuity” requirement. Id. at 8. They
allege that the allegations amount to nothing more than a
single, narrowly focused scheme with no threat of future
harm. Id. at 8-9.
response, counterclaim plaintiffs argue that the movants
engaged in a pattern of racketeering activities aimed at
stealing Merritt's companies and those companies'
assets and intellectual property. ECF No. 23 at 6.
Counterclaim plaintiffs alleged that M-R, LLC, which Mazo and
Riascos control, was and is part of this conspiracy; the LLC
was used as one of many shell companies to funnel and hide
the money and assets that the counterclaim defendants stole
from Merritt. Id. at 3-7. In responding to the
continuity argument, counterclaim plaintiffs argue that they
properly plead both closed- and open-ended continuity.
Id. at 12. After citing paragraphs 122 and 135 of
the counterclaims, counterclaim plaintiffs state the
Taken as a whole, Merritt has alleged facts in his
counterclaim that show that Josse Mazo and his wife Riascos
both conspired and acted directly to commit multiple illegal
acts with the ongoing goal of taking over, converting the
assets of, and/or otherwise destroying and continuing to
destroy John Merritt's businesses, trademarks, websites,
brands, goodwill, assets, and reputation in the industry and
community; and that they will continue to engage in this
behavior in the future against not only Merritt, but by
implication, anyone else they do business with.
Counterclaims at ¶¶ 51-111.
Id. at 12-13 (emphasis added).
I find counterclaim defendants' continuity argument
dispositive, I focus exclusively on that argument.
The “Continuity” Requirement of RICO.
prevail on their RICO claim, counterclaim plaintiffs must
allege four elements: “(1) conduct (2) of an enterprise
(3) through a pattern (4) of racketeering activity.”
Robbins, 300 F.3d at 1210 (quoting Sedima,
S.P.R.L. v. Imrex Co., 473 U.S. 479, 496 (1985)). To
“prove a pattern of racketeering activity, ”
counterclaim plaintiffs “must show that the
racketeering predicates are related, and that they
amount to or pose a threat of continued criminal
activity.” See H.J. Inc. v. Nw. Bell Tel. Co.,
492 U.S. 229, 240-42 (1989) (emphasis in original). In this
case, the parties do not dispute that the acts complained of