Full opinion text
MEMORANDUM OPINION AND ORDER REGARDING DEFENDANTS’ MOTIONS TO DISMISS PLAINTIFFS’ THIRD AMENDED AND SUBSTITUTED COMPLAINT BENNETT, Chief Judge. TABLE OF CONTENTS I. INTRODUCTION AND FACTUAL BACKGROUND...........................989 A. Procedural Background................................................989 B. Factual Background...................................................993 1. RICO allegations ..................................................993 2. Federal securities allegations.......................................994 II. LEGAL ANALYSIS........................................................995 A. Rule 12(b)(6) Standards................................................995 B. Civil Rico Claims-Counts XII-XTV......................................997 1. Arguments of the parties ...........................................997 2. Enterprise ........................................................999 a. Generally......................................................999 i. Association-in-fact enterprises .............................1000 ii. Existence separate and distinct from the pattern of racketeering............................................1000 b. Analysis......................................................1001 C. Federal Securities Allegations (Counts XXI, XXII, and XXVI)............1006 1. Arguments of the parties ..........................................1006 2. Analysis .........................................................1008 a. Specification of false statements................................1009 h. Scienter......................................................1010 c. Loss causation................................................1013 D. Dismissal Of State Law Claims........................................1015 III. CONCLUSION...........................................................1016 Following this court’s granting, in part, and denying, in part, of the defendants’ first onslaught of motions to dismiss and the plaintiffs’ subsequent amending of their complaint after the court’s prior ruling, the pleadings in this longstanding case have become reminiscent of the legendary phoenix. The motions to dismiss currently before the court require the court to determine, inter alia, if the plaintiffs have, on their third attempt, improved their allegations sufficiently to withstand the defendants’ motions to dismiss. The plaintiffs’ complaint, now in its fourth iteration, asserts a plethora of claims against Fay Anderson, F.H. Anderson Company, P.C., F.H. Anderson Company, Cal Cleveringa and American State Bank (collectively, “the defendants”). The plaintiffs’ claims arise out of allegations that defendants Fay Anderson and Cal Cleveringa fraudulently induced both Orville Schuster and William Schlichte (collectively, “the plaintiffs”) into investing in a number of unsuccessful investment schemes. The plaintiffs’ claims are generally for professional negligence, breach of fiduciary duty, fraudulent misrepresentation, fraudulent nondisclosure, negligent misrepresentation, fraud in the inducement based on fraudulent misrepresentation, fraud in the inducement based on fraudulent nondisclosure, negligent supervision, breach of contract, conversion, state securities law claims, federal securities law claims and violations of the Racketeer Influenced and Corrupt Organizations Act (RICO) under 18 U.S.C. §§ 1962(b), (c) & (d). Particularly relevant to the current motion before the court are the plaintiffs’ allegations under RICO and them corresponding state and federal securities law claims. Specifically, the court is called upon here to ascertain whether plaintiffs have sufficiently pleaded the element of “enterprise,” with respect to their claims under RICO. The defendants contend the plaintiffs are attempting to “fit a square peg into a round hole,” and consequently, have not adequately pleaded this element as defined by Eighth Circuit precedent. The defendants argue that because the plaintiffs’ third amended and substituted complaint fails to cure the critical flaws identified by the court in the second amended complaint, the plaintiffs should be denied leave to file a fourth amended complaint on the ground that the amendment is futile. The plaintiffs, not surprisingly, contend they have “resurrected” their RICO claims out of the ashes of their second-amended complaint because they have cured the defects identified by this court in its prior ruling. In their motions to dismiss, the defendants further take issue with the plaintiffs’ newly-asserted securities fraud claims and aver these claims should be dismissed because the plaintiffs’ third amended complaint fails to exhibit the degree of particularity required by the Private Securities Litigation Reform Act (“PSLRA”). Accordingly, the defendants argue that because all of the plaintiffs’ federal law claims require dismissal, the remaining state law claims asserted by the plaintiffs in their third amended complaint should be dismissed from federal court. Contrarily, the plaintiffs assert they have pleaded their securities law fraud claims with sufficient particularity in order to survive the defendants’ motions to dismiss. However, in the event the court dismisses the plaintiffs’ federal law claims, the plaintiffs argue this court should retain jurisdiction of their asserted state law claims. Thus, this court is called upon to determine whether the plaintiffs’ third amended complaint sufficiently breathes new life into their federal law claims. I. INTRODUCTION AND FACTUAL BACKGROUND The procedural and factual background for this lawsuit is discussed extensively in this court’s prior ruling. See Schuster v. Anderson, 378 F.Supp.2d 1070, 1075-81 (N.D.Iowa 2005). The court will therefore present here only procedural matters arising since the court dismissed the second amended complaint and -the new factual allegations of the proffered third amended and substituted complaint. A. Procedural Background By order dated July 12, 2005, this court granted in part and denied in part the defendants’ motions to dismiss the plaintiffs’ second amended complaint. See id. at 1123. Specifically, with respect to the RICO claims, the court held that the plaintiffs’ complaint sufficiently complied with the particularity required by Rule 9(b) and that the plaintiffs could assert RICO claims against American State Bank as a “person” under a respondeat superior theory of liability. Id. at 1083-1105. Thus, the court denied the defendants’ motions to dismiss the plaintiffs’ RICO claims on these grounds. Id. at 1094. However, the court granted the defendants’ motions to dismiss the plaintiffs’ RICO claims because the plaintiffs failed to state a claim for which relief could be granted under Rule 12(b)(6) of the Federal Rules of Civil Procedure by inadequately pleading the “enterprise” requirement. Id. at 1098. The basis for the court’s dismissal was that the plaintiffs failed to adequately plead a RICO enterprise consisting of an “association-in-fact.” Id. Although the plaintiffs met their burden with respect to two of the three requirements — common purpose and continuity — the plaintiffs failed to adequately plead the third element — that the association-in-fact had an ascertainable structure distinct from the alleged pattern of racketeering. Id. The plaintiffs were allowed to file a third amended and substituted complaint remedying this deficiency and any additional infirmities perceived in their complaint not addressed by the court in its order. Id. at 1105, 1123-24. The plaintiffs were further permitted to assert additional federal and state law claims and amend existing claims in their third amended and substituted complaint. Id. at 1124. On August 31, 2005, plaintiffs Orville Schuster (“Schuster”) and William Schlichte (“Schlichte”) filed their Third Amended and Substituted Complaint against defendants American State Bank (“ASB”), Cal Cleveringa (“Cleveringa”), Fay Anderson (“Anderson”), F.H. Anderson Company, P.C. and F.H. Anderson Company. (Doc. No. 77). Whereas the second amended complaint was 55 pages and 206 paragraphs long and alleged 20 causes of action against the defendants, the third amended complaint is 68 pages and 255 paragraphs long and asserts 27 various causes of action against the defendants. The plaintiffs’ third amended complaint realleges all the counts iterated in the plaintiffs’ second amended and substituted complaint, with the exception of the two counts that were dismissed by the court in its previous order. Although these eighteen causes of action are identical with respect to the types of claims, the counts have been renumbered and are as follows: I. Schuster’s professional negligence claim against defendants Anderson, F.H. Anderson Company, P.C. and F.H. Anderson Company; II. Schuster’s breach of fiduciary duty claim against Anderson, F.H. Anderson Company, P.C. and F.H. Anderson Company; III. Schuster and Schlichte’s breach of fiduciary duty claim against Cleverin-ga and ASB; IV. Schuster’s claim for fraudulent misrepresentation against Anderson, F.H. Anderson Company, P.C. and F.H. Anderson Company; V. Schuster’s fraudulent nondisclosure claim against Anderson, F.H. Anderson Company, P.C. and F.H. Anderson Company; VI. Schuster and Schlichte’s fraudulent misrepresentation claim against Cleveringa and ASB; VII. Schuster and Schlichte’s fraudulent nondisclosure claim against Cleveringa and ASB; VIII. Schuster’s claim for negligent misrepresentation against Anderson, F.H. Anderson Company, P.C. and F.H. Anderson Company; IX. Schuster and Schlichte’s negligent misrepresentation claim against Cleveringa and ASB; X. Schuster and Schlichte’s claim for fraud in the inducement based on fraudulent misrepresentation by ASB; XI. Schuster and Schlichte’s claim for fraud in the inducement based on fraudulent nondisclosure by ASB; XII. Schuster and Schlichte’s claim of an 18 U.S.C. § 1962(b)-Racketeer Influenced and Corrupt Organizations Act (“RICO”) violation by Anderson, F.H. Anderson Company, P.C., F.H. Anderson Company, Cleveringa and ASB; XIII. Schuster and Schlichte’s claim of an 18 U.S.C. § 1962(c)-RICO violation by Anderson, F.H. Anderson Company, P.C., F.H. Anderson Company, Cleveringa and ASB; XIV. Schuster and Schlichte’s claim of an 18 U.S.C. § 1962(d)-RICO violation by Anderson, F.H. Anderson Company, P.C., F.H. Anderson Company, Cleveringa and ASB; XV. Schuster and Schlichte’s claim for negligent supervision against Anderson, F.H. Anderson Company, P.C. and F.H. Anderson Company; XVI. Schuster and Schlichte’s negligent supervision claim against ASB; XVII. Schlichte’s breach of contract claim against Anderson; XVIII. Schlichte’s breach of fiduciary duty claim against Anderson, F.H. Anderson Company, P.C. and F.H. Anderson Company. With respect to these causes of action, the majority of the plaintiffs’ allegations are identical with the exception of the RICO counts, Counts XII through XIV. With respect to Counts XII through XIV, the plaintiffs’ third amended complaint attempts to clarify the alleged RICO enterprise by expounding upon the relationships between the parties involved in the alleged RICO enterprise and outlining the parties’ business transactions. The plaintiffs’ third amended complaint also alleges nine new causes of action against the defendants encompassing the following claims: XIX. Schuster’s conversion claim against Anderson, F.H. Anderson Company, P.C. and F.H. Anderson Company; XX. Schuster’s conversion claim against Cleveringa and ASB; XXI. Schuster’s federal securities law claim against Anderson, F.H. Anderson Company, P.C. and F.H. Anderson Company; XXII. Schuster’s federal securities law claim against Cleveringa and ASB; XXIII. Schuster’s state securities law claim against Anderson, F.H. Anderson Company, P.C. and F.H. Anderson Company; XIV. Schuster’s state securities law claim against Cleveringa and ASB; XV. Schlichte’s conversion claim against Cleveringa and ASB; XVI. Schlichte’s federal securities law claim against Cleveringa and ASB; XVII. Schlichte’s state securities law claim against Cleveringa and ASB. On September 13, 2005, defendant ASB filed a Renewed Motion to Dismiss Counts XII-X1V, XXII, and XXVI of the third amended complaint pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. (Doc. No. 78). Specifically, ASB asserts that the RICO claims embodied in Counts XII-XIV should be dismissed for failure to state a claim upon which relief can be granted, and that federal, and state securities law claims embodied in Counts XXII and XXVI, respectively, should be dismissed because the plaintiffs’ third amended complaint fails to comply with the requirements promulgated in the PSLRA. ASB further argues the plaintiffs have failed to allege loss causation, another requirement of an action brought under the PSLRA. ASB contends that because all of the plaintiffs’ federal claims require dismissal, the remaining state law claims should be dismissed as well because supplemental jurisdiction with this court is no longer proper. On September 13, 2005, defendants Anderson, F.H. Anderson Company,. P.C. and F.H. Anderson Company filed a Renewed Motion to Dismiss Counts XII-XIV and XXI and XXIII of the Plaintiffs’ Third Amended Complaint (Doc. No. 80) for precisely the same reasons as asserted by defendant ASB. Similarly, on September 14, 2005, defendant Cleveringa filed a Renewed Motion to Dismiss Counts XII-XIV and XXII and XXVI (Doe. No. 81). Cleveringa’s arguments for dismissal also mirror the arguments initially enunciated by ASB. The plaintiffs filed a combined resistance to all of the defendants’, motions to. dismiss on October 21, 2005. (Doc. Nos. 90 and 91). The plaintiffs assert the adequacy of the new allegations in their third amended complaint. The'' plaintiffs contend that the revised pleading of the RICO enterprise and the more detailed pleading of the parties business relationships and dealings aré sufficient to sustain the RICO claims over objections made pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. The plaintiffs further aver their federal and state law securities claims are adequately pleaded with sufficient particularity and in compliance with the requirements of the PSLRA. Additionally, the plaintiffs argue that even if the court determines their federal claims require dismissal, the court should retain jurisdiction in the interest of fairness, efficiency and comity. Defendant ASB filed its reply on October 31, 2005 reasserting its original arguments for dismissal of the plaintiffs’ federal and state law claims. (Doc. No. 92). On this same date, defendant Cleveringa filed a motion to join in ASB’s reply. (Doc. No. 93). On November 1, 2005, the Anderson defendants also filed a motion to join in ASB’s reply. (Doc. No. 94). Both Cleveringa’s and the Anderson defendants’ motions to join in ASB’s reply were granted on November 1, 2005 (Doc. No. 95). Oral argument on the defendants’ motions to dismiss was held on December 16, 2005. At oral argument plaintiff Schuster was represented by Terrence D. Brown of Hixson & Brown, P.C., in Clive, Iowa. Plaintiff Schlichte was represented by Timothy A. Clausen of Klass, Stoik, Mugan, Villone, Phillips, Orzechowski, Clausen & Lapierre L.L.P. in Sioux City, Iowa. ASB was represented by Edward M. Mansfield of Be-lin, Lamson, McCormick, Zumbach, Flynn in Des Moines, Iowa and Lloyd Bierma of Oostra, Bierma & Schouten in Sioux Center, Iowa. Cleveringa was represented by John C. Gray of Heidman, Redmond, Fre-dregill, Patterson, Plaza, Dykstra & Prahl, L.L.P., in Sioux City, Iowa. Anderson, F.H. Anderson Company, P.C. and F.H. Anderson Company were represented by Robert S. Keith of'Engles, Ketcham, Olson & Keith, P.C., in Omaha, Nebraska. In light of those arguments and the parties’ voluminous written submissions, the court now turns to a more detailed discussion of the factual background for this case. B. Factual Background Because of the procedural posture of this ease, the court will here identify differences between the facts as alleged in the second amended complaint and as alleged in the plaintiffs’ proffered third amended complaint. As mentioned previously, the plaintiffs’ third amended complaint is substantially similar to their second amended complaint, with the exception of the allegations embodied in the plaintiffs’ three RICO counts. Additionally, the plaintiffs’ third amended complaint adds nine new causes of action, arising for the most part, out of the same set of facts previously asserted. The parties have directed their attention in the pending motions exclusively to the repleaded federal claims under RICO and the newly-asserted claims alleging violations of federal securities law. The court’s supplemental jurisdiction over the state common-law claims, of course, depends upon the viability of one or more of the federal claims. The court will therefore focus, as did the parties, on the repleaded RICO allegations and the newly-asserted violations of federal securities laws. 1. RICO allegations Like the second amended complaint, the third amended complaint identifies the RICO enterprise as an “association-in-fact,” consisting of the various defendants and other unknown individuals. The third amended complaint, however, is more detailed and extensive with respect to this particular element of the plaintiffs’ RICO claims. Specifically, the plaintiffs’ third amended complaint, in an attempt to address the previous deficiency identified by this court in the plaintiffs’ second amended complaint, incorporates an entire new paragraph alleging the enterprise had an ascertainable structure distinct from that inherent in a pattern of racketeering. The new paragraph and corresponding subpar-agraphs state as follows: 171. The enterprise in this case had an ascertainable structure distinct from that inherent in a pattern of racketeering in one or more of the following ways: a. ASB was at all relevant times a bank insured by the Federal Deposit Insurance Company (“FDIC”) with assets in excess of $200 million. It provided a range of services to customers in Northwestern Iowa, to include savings accounts, checking accounts, investment advice, consumer, agricultural and commercial loan services, and trust services. It had branches in Alvord, Iowa, Gran-ville, Iowa, and Hospers, Iowa, as well as a sister bank in Le Mars, Iowa. b. On information and belief, at least one ASB lending officer, Cal Cleveringa had a business referral relationship with Anderson, F.H. Anderson Company, and F.H. Anderson Company, P.C., wherein he would refer banking clients needing accounting services to Anderson, F.H. Anderson Company, and F.H. Anderson Company, P.C. c. On information and belief, ASB approved of its lending officers having referral relationships with accountants in its market area and encouraged its lending officers to develop just such relationships. d. On information and belief, Anderson, F.H. Anderson Company, and F.H. Anderson Company, P.C., referred their accounting clients needing banking services to ASB and Cleveringa. e. On information and belief, the business referral relationships that existed at all relevant times between ASB and its banking officers with Anderson, F.H. Anderson Company, and F.H. Anderson Company, P.C., involved more customers then [sic] the Plaintiffs in this case and also customers who were not involved in the investment schemes giving rise to this lawsuit. f. Yournet, while operating as an investment scheme did, from time to time, produce a legitimate service wherein customers could order one or more products through its website. Yournet maintained more than one demand deposit account relationships [sic] with ASB in order to conduct the legitimate business services it provided to customers and sales representatives. g. At all relevant times, Anderson, F.H. Anderson Company and F.H. Anderson Company, P.C. had legitimate accounting relationships with numerous customers in their market area, which included Le Mars, Iowa. h. At all relevant times, Anderson, F.H. Anderson Company and F.H. Anderson Company, P.C. had a legitimate accounting relationship with Schuster, Schuster, Co., and Le Mars Truck & Trailer, Inc. i. Creative Marketing conducted, for some period of time, legitimate business activities, to include the sale of prepaid telephone cards. j. Prior to its combination with Creative Marketing, Team, Inc. for some period of time, generated sales income. k. On information and belief, WWFN operated, for some period of time, as a legitimate business. It maintained an account with ASB in order to conduct its business. l. R-Chief maintained an account at ASB. m. On information and belief, each of the business entitles there were part of the enterprise/association in fact, followed legitimate and appropriate procedures to incorporate under various state laws, adopted by-laws and entered into contracts. n. Irrespective of Anderson’s, F.H. Anderson Company’s, F.H. Anderson Company, P.C.’s, Cleveringa (sic), ASB’s, Yournet’s, WWFN’s, and R-Chiefs involvement in the investment schemes giving rise to this lawsuit, this group of individuals and entities maintained a symbiotic relationship with each other that amounted to a structure that had ongoing legitimate business relationships and involved similar and in some cases identical clients in North West [sic] Iowa. Plaintiffs’ Third Amended and Substituted Complaint, Doc. No. 77, at pp. 44-46, ¶ 171. 2. Federal securities allegations The plaintiffs’ third amended complaint incorporates new allegations against all of the defendants alleging violations of section 10(b) of the Securities and Exchange Act of 1934 ánd SEC Rule 10b-5. With respect to these allegations, the following new facts can be gleaned from the third amended complaint. When Schuster invested in Yournet, he was informed he was either purchasing shares or unsecured promissory notes in Yournet. With respect to these transactions, Schuster was provided a stock subscription agreement. Both Schuster and Yournet executed the stock subscription agreement on or about September 30, 1999. The executed agreement indicated Schuster was purchasing shares in Yournet and did not indicate the money Schuster invested would be used for purposes other than the development of Yournet. In connection with Schuster’s investments in Yournet in the forms of loans, Schuster received a confidential private placement memorandum sometime during the months of March and April of 2000. The confidential private placement memorandum indicated that Schuster was purchasing convertible unsecured promissory notes in Yournet. This memorandum did not indicate that Schuster’s financial investments would be used for purposes other than the development of Yournet. Between approximately October 10,1997 and early 2004, Cleveringa and Anderson induced Schuster to invest $1,748,873.80 in Yournet, Yournet related entities, and the Witherspoon affair. Of the total sum of Schuster’s investments, $1,416,873.80 was invested after Schuster received the stock subscription agreement and the confidential private placement memorandum. These investments were funded by Schus-ter’s personal financial assets and/or loans made to Schuster by other financial entities. In order to make a number of these investments, Schuster secured eleven loans through ASB — with Cleveringa acting as the loan officer. Schuster alleges each of these loans, detailed in this court’s original order, were made to Schuster after he had received the stock subscription agreement and the confidential private placement memorandum. Cleveringa and Anderson induced Schuster to borrow the money associated with these individual loans for the purposes of investing in Yournet, Yournet related entities or the Wither-spoon affair, the breakdown of which is detailed in this court’s prior order. Cleve-ringa and Anderson represented to Schus-ter that these investments were safe and would earn a high rate of return, despite the existence of written disclaimers to the contrary set forth in the stock subscription agreement and the confidential private placement memorandum. As in the second amended complaint, Schuster alleges these loan proceeds were distributed for purposes other than for the purposes which Schuster believed and intended at the time he borrowed the money. With respect to plaintiff, Schlichte, the third amended complaint contends that, similar to Schuster, Cleveringa and Anderson also induced Schlichte to invest approximately $847,500 in Yournet, Your-net related entities or the Witherspoon affair, the exact amounts of which are detailed in this court’s prior ruling. The proceeds of these investments were then deposited into various accounts and then disbursed to various individuals and entities, in contravention to the purposes in which Schlichte believed he was investing based on the representations made by Anderson and Cleveringa. It is unclear from the third amended complaint whether Schlichte executed a stock purchase agreement and/or a confidential private placement memorandum, or whether Schlichte was induced into investing in Yournet, Yournet related entities, and the Wither-spoon affair solely based on the verbal representations and guarantees made by Cleveringa and Anderson. The essence of both plaintiffs’ federal and state securities claims is that Cleverin-ga and Anderson made material misrepresentations and omissions of fact to both Schlichte and Schuster in connection with their various investments in Yournet and that the material misrepresentations and omissions of fact caused both Schlichte and Schuster to suffer financial losses. With this background in mind, the court turns to the legal analysis of the motions now pending before the court. II. LEGAL ANALYSIS A. Rule 12(b)(6) Standards The issue on a Rule 12(b)(6) motion to dismiss for failure to state a claim upon which relief can be granted is not whether a plaintiff will ultimately prevail, but whether the plaintiff is entitled to offer evidence in support of his, her, or its claims. Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974); United States v. Aceto Agric. Chems. Corp., 872 F.2d 1373, 1376 (8th Cir.1989). In considering a motion to dismiss under Rule 12(b)(6), the court must assume that all facts alleged by the complaining party are true, and must liberally construe those allegations. Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957); Gross v. Weber, 186 F.3d 1089, 1090 (8th Cir.1999) (“On a motion to dismiss, we review the district court’s decision de novo, accepting all the factual allegations of the complaint as true and construing them in the light most favorable to [the non-mov-ant].”); St. Croix Waterway Ass’n v. Meyer, 178 F.3d 515, 519 (8th Cir.1999) (“We take the well-pleaded allegations in the complaint as true and view the complaint, and all reasonable inferences arising therefrom, in the light most favorable to the plaintiff.”); Gordon v. Hansen, 168 F.3d 1109, 1113 (8th Cir.1999) (same); Midwestern Mach., Inc. v. Northwest Airlines, 167 F.3d 439, 441 (8th Cir.1999) (same); Wisdom v. First Midwest Bank, 167 F.3d 402, 405 (8th Cir.1999) (same); Duffy v. Landberg, 133 F.3d 1120, 1122 (8th Cir.) (same), cert. denied, 525 U.S. 821, 119 S.Ct. 62, 142 L.Ed.2d 49 (1998); Doe v. Norwest Bank Minn., N.A., 107 F.3d 1297, 1303-04 (8th Cir.1997) (same); WMX Techs., Inc. v. Gasconade County, Mo., 105 F.3d 1195, 1198 (8th Cir.1997) (same); First Commercial Trust v. Colt’s Mfg. Co., 77 F.3d 1081, 1083 (8th Cir.1996) (same). The court is mindful that, in treating the factual allegations of a complaint as true pursuant to Rule 12(b)(6), the court must “reject conclusory allegations of law and unwarranted inferences.” Silver v. H & R Block, Inc., 105 F.3d 394, 397 (8th Cir.1997) (citing In re Syntex Corp. Sec. Litig., 95 F.3d 922, 926 (9th Cir.1996)); Westcott v. City of Omaha, 901 F.2d 1486, 1488 (8th Cir.1990) (the court “do[es] not, however, blindly accept the legal conclusions drawn by the pleader from the facts”) (citing Morgan v. Church’s Fried Chicken, 829 F.2d 10, 12 (6th Cir.1987); 5 C. Wright & A. Miller, Federal Practice and Procedure § 1357, at 595-97 (1969)); see also LRL Props. v. Portage Metro Hous. Auth., 55 F.3d 1097, 1103 (6th Cir.1995) (the court “need not accept as true legal conclusions or unwarranted factual inferences,” quoting Morgan, 829 F.2d at 12). Conclusory allegations need not and will not be taken as true; rather, the court will consider whether the facts alleged in the plaintiffs’ complaint, accepted as true, are sufficient to state a claim upon which relief can be granted. Silver, 105 F.3d at 397; Westcott, 901 F.2d at 1488. The United States Supreme Court and the Eighth Circuit Court of Appeals have both observed that “a court should grant the motion and dismiss the action ‘only if it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations.’ ” Handeen v. Lemaire, 112 F.3d 1339, 1347 (8th Cir.1997) (quoting Hishon v. King & Spalding, 467 U.S. 69, 73, 104 S.Ct. 2229, 81 L.Ed.2d 59 (1984)); accord Conley, 355 U.S. at 45-46, 78 S.Ct. 99 (“A complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his [or her] claim which would entitle him [or her] to relief.”); Meyer, 178 F.3d at 519 (“The question before the district court, and this court on appeal, is whether the plaintiff can prove any set of facts which would entitle the plaintiff to relief’ and “[t]he complaint should be dismissed ‘only if it is clear that no relief can be granted under any set of facts that could be proved consistent with the allegations,’ ” quoting Frey v. City of Herculaneum, 44 F.3d 667, 671 (8th Cir.1995)); Gordon, 168 F.3d at 1113 (“We will not dismiss a complaint for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts that would demonstrate an entitlement to relief.”); Midwestern Mach., Inc., 167 F.3d at 441 (same); Springdale Educ. Ass’n v. Springdale Sch. Dist., 133 F.3d 649, 651 (8th Cir.1998) (same); Parnes v. Gateway 2000, Inc., 122 F.3d 539, 546 (8th Cir.1997) (same); Doe, 107 F.3d at 1304 (same); WMX Techs., Inc., 105 F.3d at 1198 (same). Rule 12(b)(6) does not countenance dismissals based on a judge’s disbelief of a complaint’s factual allegations. Neitzke v. Williams, 490 U.S. 319, 327,109 S.Ct. 1827, 104 L.Ed.2d 338 (1989). Thus, “[a] motion to dismiss should be granted as a practical matter only in the unusual case in which a plaintiff includes allegations that show on the face of the complaint that there is some insuperable bar to relief.” Frey, 44 F.3d at 671 (internal quotation marks and ellipses omitted); accord Pames, 122 F.3d at 546 (also considering whether there is an “insuperable bar to relief’ on the claim). With respect to the defendants’ motions to dismiss on the plaintiffs’ federal securities law claims, the Private Litigation Reform Act of 1995, 15 U.S.C. § 78u-4, imposes additional pleading requirements on plaintiffs in private securities fraud actions. 15 U.S.C. § 78u—4(b)(1)—(2); see Ferris, Baker Watts, Inc. v. Ernst & Young, L.L.P., 395 F.3d 851, 854 (8th Cir.2005) (noting the PSLRA embodies the particularity requirement of Rule 9(b) of the Federal Rules of Civil Procedure); In re Cerner Corp. Sec. Litig., 425 F.3d 1079, 1083 (8th Cir.2005) (noting in order to survive a motion to dismiss, a plaintiff in a securities action must satisfy two heightened pleading requirements); In re K-tel Int’l, Inc. Sec. Litig., 300 F.3d 881, 888-89 (8th Cir.2002) (setting forth the pleading standards unique to securities cases); see also In re Navarre Corp. Sec. Litig., 299 F.3d 735, 742 (8th Cir.2002) (“Congress enacted two heightened pleading requirements for securities fraud cases.”); accord. In re Digital Island Sec. Litig., 357 F.3d 322, 328 (3d Cir.2004) (“In requiring a ‘strong inference of scienter, the PSLRA alters the normal operation of inferences under [Rule 12(b)(6) of the Federal Rules of Civil Procedure].’ ”). “First, the plaintiff must plead falsity by specifying] each statement alleged to have been misleading and the reasons why each statement is misleading.” Cerner Corp., 425 F.3d at 1083; see 15 U.S.C. § 78u-4(b)(1). Additionally, if the falsity alleged in the complaint is based on information and belief, “the complaint must state with particularity all facts on which the belief is formed.” Cerner Corp., 425 F.3d at 1083; see 15 U.S.C. § 78u-4(b)(2). Second, the PSLRA requires that the plaintiff plead scienter by “stat[ing] with particularity facts giving rise to a strong inference that the defendant acted with the required state of mind.” 15 U.S.C. § 78u-4(b)(2); see Cerner Corp., 425 F.3d at 1083. If a complaint fails to meet these pleading requirements, the court must dismiss the complaint. 15 U.S.C. § 78u-4(3)(A); see Kushner v. Beverly Enters., Inc., 317 F.3d 820, 826 (8th Cir.2003); In re BankAmerica Corp. Sec. Litig., 78 F.Supp.2d 976, 988 (E.D.Mo.1999). The PSLRA further requires courts to disregard “catch-all” or “blanket” assertions that do not live up to the particularity requirements of the statute. Ferris, Baker Watts, 395 F.3d at 853; K-tel Int’l, 300 F.3d at 889; In re AMDOCS Ltd. Sec. Litig., 390 F.3d 542, 547 (8th Cir.2004); Kushner, 317 F.3d at 824; Fla. State Bd. of Admin. v. Green Tree Fin. Corp., 270 F.3d 645, 660 (8th Cir.2001). Keeping these standards in mind, the court will proceed to address the merits of the defendants’ motions to dismiss. B. Civil Rico Claims— Counts XII-XIV 1. Arguments of the parties As in their second amended complaint, Schuster and Schlichte allege civil RICO violations against Anderson, F.H. Anderson Company, P.C., F.H. Anderson Company, Cleveringa and ASB under §§ 1962(b), 1962(c), and 1962(d), in Counts XII, XIII, and XIV, respectively, in their third amended complaint. All of the defendants assert the same basic argument for dismissal of the RICO Counts, namely, that the plaintiffs have failed to allege facts supporting the existence of an enterprise separate and distinct from the alleged racketeering activity. The defendants contend that the plaintiffs have not cured the defect in their complaint as identified by this court in its prior order. The defendants contend the plaintiffs’ allegations regarding the referral relationship that existed between Anderson and Cleve-ringa do not transform the entities into a RICO enterprise. Further, the defendants assert it is not enough to show that the individual members of the alleged enterprise carried on distinct activities. Rather, the defendants contend the plaintiffs must show the group as a whole had an existence distinct from the pattern of racketeering. In resistance, the plaintiffs contend they have cured the defect in their complaint and that the allegations stated in their third amended complaint, particularly in paragraph 171, are sufficient to demonstrate the existence of a structure distinct from that inherent in a pattern of racketeering. The plaintiffs contend their third amended complaint demonstrates that the defendants functioned in a mutually beneficial and “symbiotic” relationship. The plaintiffs aver Cleveringa and Anderson had a business referral relationship with Anderson and that ASB approved of its lending agents having such referral relationships with accountants. In further support of their argument, the plaintiffs postulate that the defendants were involved in at least some legitimate business endeavors. Both Anderson and Cleverin-ga both allegedly held ownership interests in Creative Marketing. Anderson also held an interest in Yournet, a business entity in which ASB maintained several accounts. The third amended complaint further contends that Cleveringa acted as the account officer on all of Yournet’s accounts maintained by ASB, and that ASB encouraged this relationship due to the profit generated from the interest collected on Schuster’s and Schlichte’s loans. In reply, the defendants reiterate their contention that the plaintiffs have failed to properly plead the enterprise requirement. The defendants argue that the only difference in the plaintiffs’ third amended complaint supporting the existence of an enterprise distinct from the pattern of racketeering is their allegations that Anderson and Cleveringa may have referred business to each other. The defendants contend that referrals are ubiquitous in the business world and that such a loose connection cannot form the basis of a RICO enterprise. The defendants aver the plaintiffs cannot cite a single case in suppoit of their “novel” position, and cite a number of cases that the defendants contend hold the contrary. In sum, the defendants posit that the plaintiffs are simply attempting to “lump various persons and entities into a single ‘association in fact,’ ” which is woefully inadequate to constitute an enterprise as required under RICO. Consequently, the defendants assert the plaintiffs’ third amended complaint suffers from the same fatal flaw identified by this court in its prior order. The court will now proceed to address the parties’ respective arguments on this point. 2. Enterprise a. Generally As mentioned previously, Schus-ter and Schlichte allege civil RICO violations against the named defendants under §§ 1962(b), 1962(c), and 1962(d). These sections provide: (b) It shall be unlawful for any person through a pattern of racketeering activity or through collection of an unlawful debt to acquire or maintain, directly or indirectly, any interest in or control of any enterprise which is engaged in, or the activities of which affect, interstate or foreign commerce. (c) It shall be unlawful for any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate 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. (d)It shall be unlawful for any person to conspire to violate any of the provisions of subsection (a), (b), or (c) of this section. 18 U.S.C. § 1962(b)-(d). Common elements are present in all three of the RICO subsections alleged by the plaintiffs in their third amended complaint. Crowe v. Henry, 43 F.3d 198, 204 (5th Cir.1995) (“Common elements are present in all four [RICO] subsections.”). Particularly relevant to this action is the concept of the existence of an “enterprise.” An “enterprise” is defined by RICO to include “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). Thus, “The RICO Act encompasses two kinds of enterprises: legal entities, and ‘associations in fact.’ ” Bennett v. Berg, 685 F.2d 1053, 1060 n. 9 (8th Cir.1982) (citing United States v. Turkette, 452 U.S. 576, 581-82, 101 S.Ct. 2524, 69 L.Ed.2d 246 (1981)); see United States v. Snider, 720 F.2d 985, 988 n. 2 (8th Cir.1983) (noting that under § 1961(4) of RICO, two kinds of enterprises are defined, the second of which is an “association in fact”) (citing United States v. Lemm, 680 F.2d 1193, 1198 (8th Cir.1982)); see also Libertad v. Welch, 53 F.3d 428, 441 (1st Cir.1995) (“There are, therefore, two types of [RICO] enterprises [under § 1961(4)]: legal entities and associations-in-fact.”); Richmond v. Nationwide Cassel L.P., 52 F.3d 640, 644 (7th Cir.1995) (noting there are two kinds of entities proscribed under § 1961(4)); Crowe, 43 F.3d at 204 (“A RICO enterprise can be either a legal entity or an association-in-fact.”); Aetna Cas. Surety Co. v. P & B Autobody, 43 F.3d 1546, 1557 (1st Cir.1994) (distinguishing between “legal entity” enterprise and “association-in-fact” enterprise); United States v. Blandford, 33 F.3d 685, 703 (6th Cir.1994) (“Under § 1961(4), ‘associations in fact’ also are deemed enterprises.”). “The ‘enterprise’ is not the ‘pattern of racketeering activity’; it is an entity separate and apart from the pattern of activity in which it engages.” Turkette, 452 U.S. at 583, 101 S.Ct. 2524. Consequently, “[t]he existence of an enterprise at all times remains a separate element which must be proved by the [plaintiff].” Id. i. Association-in-fact enterprises. As previously noted, the plaintiffs in this case have alleged an association-in-fact enterprise consisting of Anderson, Cleveringa, ASB, F.H. Anderson Company, F.H. Anderson Company, P.C. and the entities described herein as Yournet and the Yournet-related entities. RICO defines an association-in-fact enterprise as a “union or group of individuals associated in fact although not a legal entity.” 18 U.S.C. § 1961(4). Where an association-in-fact entity is alleged, the Supreme Court has said that the enterprise may be shown “by evidence of an ongoing organization, formal or informal, and by evidence that the various associates function as a continuing unit.” Turkette, 452 U.S. at 583, 101 S.Ct. 2524; Libertad, 53 F.3d at 442 (describing the requirement as alleging facts that the constituent entities or persons constituted and operated as part of an association-in-fact enterprise); Crowe, 43 F.3d at 205 (citing this standard from Turkette); Aetna Cas. Surety Co., 43 F.3d at 1557 (citing the Turkette standard); United States v. Console, 13 F.3d 641, 651-52 (3d Cir.1993) (citing Turkette); Frank v. D’Ambrosi, 4 F.3d 1378, 1386 (6th Cir.1993) (citing Turkette). In other words, [plaintiffs] must show the existence of the enterprise, of which [defendants] were a part. As a matter of law, it is not sufficient that several organized, ongoing groups come together for one concerted action, unless those groups can also be shown to constitute a larger unit, over and- above them separate structures and operations, and that this unit meets the Turkette criteria for an “association-in-fact.” Libertad, 53 F.3d at 442. In accordance with the guidance set forth by the Supreme Court in Turkette, the Eighth Circuit has determined that a RICO enterprise, including enterprises allegedly constituting an “association-in-fact,” must possess three basic characteristics. See Atlas Pile Driving Co., 886 F.2d at 995 (requiring proof of the same characteristics of a RICO enterprise defined as an association-in-fact as it had previously required for proof of a RICO enterprise defined as a single legal entity). These characteristics are not only mandated, but ultimately necessary “in order to avoid the danger of guilt by association that arises because RICO does not require a proof of a single agreement as in a conspiracy case, and in order to ensure that criminal enterprises, which are RICO’s target, are distinguished from individuals who associate for the commission of sporadic crime.” United States v. Kragness, 830 F.2d 842, 855 (8th Cir.1987). These characteristics are the following: “(1) a common or shared purpose; (2) some continuity of structure and personnel; and (3) an ascertainable structure distinct from that inherent in a pattern of racketeering.” Id.; see also United States v. Nabors, 45 F.3d 238, 240 (8th Cir.1995); Diamonds Plus, Inc. v. Kolber, 960 F.2d 765, 770-71 (8th Cir.1992); accord. Libertad, 53 F.3d at 441 (requiring showing of same three characteristics for association-in-fact enterprise); Crowe, 43 F.3d at 205 (same characteristics for association-in-fact enterprise). The defendants argue that the third characteristic is absent from the plaintiffs’ third amended complaint. ii. Existence separate and distinct from the pattern of racketeering. “An enterprise cannot simply be the undertaking of the acts of racketeering, neither can it be the minimal association which surrounds these acts.” United States v. Bledsoe, 674 F.2d 647, 664 (8th Cir.1982); see Eighth Circuit Model Criminal Jury Instruction § 6.18.1692D at 440 (noting that to show an enterprise exists, “[t]he government must prove that the association had a structure distinct from that necessary to conduct the pattern of racketeering activity.”). Rather, a RICO enterprise must have a structure separate and distinct from the pattern of racketeering. Bledsoe, 674 F.2d at 665. This distinct structure might be demonstrated by proof that a group engaged in a diverse pattern of crimes or that it has an organizational pattern or system of authority beyond what was necessary to perpetrate the predicate crimes. The command system of a Mafia family is an example of this type of structure as is the hierarchy, planning, and division of profits within a prostitution ring. See, e.g., United States v. McLaurin, 557 F.2d 1064, 1067-71 (5th Cir.1977), cert. denied, 434 U.S. 1020, 98 S.Ct. 743, 54 L.Ed.2d 767 (1978) (describing structure of prostitution ring). Id. Thus, to meet this requirement, a plaintiffs complaint must plead an association-in-fact “that encompasses something more than what is necessary to commit the predicate RICO offense.” Gunderson v. ADM Investor Servs., Inc., 85 F.Supp.2d 892, 916 (N.D.Iowa 2000) (quoting Diamonds Plus, Inc., 960 F.2d at 770). However, it is important to note that “the facts used to support the predicate offenses may be considered when conducting this inquiry.” Diamonds Plus, Inc., 960 F.2d at 770 (citing United States v. Leisure, 844 F.2d 1347, 1363 (8th Cir.1988)). However, “[t]hat each member of a group carries on activities distinct from the pattern of racketeering is insufficient; the group as a whole must have a common link other than the racketeering activity.” McDonough v. Nat’l Home Ins. Co., 108 F.3d 174, 177 (8th Cir.1997); see Stephens, Inc. v. Geldermann, Inc., 962 F.2d 808, 816 (8th Cir.1992) (“Although it is true that each member of this group carried on other legitimate activities, these-activities were not in furtherance of the common or shared purpose of the enterprise and, thus, were not acts of the enterprise.”). “In assessing whether an alleged enterprise has an ascertainable structure distinct from that inherent in a pattern of racketeering, it is our normal practice to determine if-the enterprise would still exist were 'the predicate acts removed from the equation.” Handeen v. Lemaire, 112 F.3d 1339, 1352 (8th Cir.1997). Stated another way, the question this court must answer is whether the association-in-fact enterprise would’exist but for the nefarious acts. b. Analysis In this instance, the RICO claims are based on the allegation of a scheme to induce Schuster and Schlichte into investing personal funds, and to obtain loans for the purposes of further investment, in entities and schemes in which Anderson, Cleveringa and/or ASB had an interest or from which -Anderson, Cleveringa and/or ASB would otherwise profit. A series- of wire transfers were allegedly made by the defendants in furtherance of this scheme— and said wire transfers are plead as the predicate acts requisite to -maintaining the plaintiffs’ RICO claims. The plaintiffs, in their third amended complaint' allege that Anderson and ASB, and Anderson and Cleveringa, had long-standing, symbiotic referral relationships, and that many of Cleveringa’s contacts with Anderson were in Cleveringa’s capacity as an ASB employee. The defendants assert a simple “referral” relationship is not enough to establish an enterprise under RICO and that it is- not enough that each of the individuals in the enterprise carries on activities distinct from the pattern of racketeering. However, it is clear from the plaintiffs’ third amended complaint, that the plaintiffs are averring much more than a simple business referral relationship between Anderson, Cleveringa, and ASB. The plaintiffs’ third amended complaint, taking the facts in the light most favorable to the plaintiffs, sufficiently asserts that Anderson and Cleveringa created and operated a variety of business entities together, many, if not all, of which maintained their accounts at ASB. Although these entities were allegedly the primary vehicles used,to defraud the plaintiffs, the plaintiffs’ third amended complaint contends some of the entities formed by Cleveringa and Anderson also conducted legitimate transactions and even produced a profit. Putting the acts of wire fraud aside, it is clear that the allegations in the third amended complaint sufficiently allege a number of activities aside from the commission of the alleged predicate acts that demonstrate the enterprise had an on-going structure, and that its members were not merely engaging in sporadic, ad hoc criminal activity. For example, the plaintiffs’ allegations, if proved, demonstrate that the various entities formed by Cleve-ringa, Anderson, and ASB were much more than mere “shell corporations” designed for the sole purpose of defrauding the plaintiffs. Rather, the plaintiffs allegations assert the various entities were formed for some legitimate purposes as well, as . evidenced by the entities’ generation of sales and income. ASB encouraged the relationship between Anderson and Cleveringa, because it received profits from the interest generated by the various loans utilized for investing in the created entities. Anderson and Cleveringa did more than simply “refer” occasional business to each other. Rather, Anderson and Cleveringa, according to the plaintiffs’ third amended complaint, formulated and developed investment opportunities, with the approval of ASB, for the purpose of promoting each other’s respective businesses. This highly-evolved relationship would have existed regardless of the alleged acts of racketeering. Further, it can be inferred that such a well-developed scheme had some kind of decision-making mechanism in place. The formation and development of business investment opportunities that would be mutually beneficial to all of the individuals and entities involved clearly requires that some kind of organizational structure, even though it may have been highly attenuated, be in place. The defendants assert that it is not enough that each member of the alleged enterprise carries on activities distinct from the predicate acts of racketeering. While the defendants are correct in their assertion, see McDonough, 108 F.3d at 177, the plaintiffs’ third amended complaint does not solely rely on the unrelated, independent activities of the various members of the enterprise. Rather, as discussed above, the third amended complaint alleges a common nexus between the members of the alleged association-in-fact enterprise by virtue of their ties to Anderson, Cleveringa, and ASB. These entities and the individuals who formed these entities would have existed but for the nefarious acts due to their common purpose of proliferating Cleveringa’s, ASB’s and Anderson’s respective businesses and profit generation. These facts, if proved, are sufficient to demonstrate the existence of an enterprise distinct from the pattern of racketeering and the alleged scheme to defraud the plaintiffs. See Kragness, 830 F.2d at 857-58 (holding RICO enterprise existed because if the predicate acts of drug smuggling were put aside, the evidence still disclosed that the enterprise purchased property, acquired airplanes, and rented airplane hangars); United States v. Lemm, 680 F.2d 1193, 1201 (8th Cir.1982) (holding an arson ring constituted an enterprise under RICO because it carried on various other legitimate activities, such as purchasing and repairing property); see also Geldermann, 962 F.2d at 816 (holding enterprise did not exist where absent the predicate acts of mail fraud and wire fraud, the association-in-fact enterprise had no common link). The Ninth Circuit decided a similar issue in United States v. Feldman, 853 F.2d 648, 660 (9th Cir.1988), cert. denied, 489 U.S. 1030, 109 S.Ct. 1164, 103 L.Ed.2d 222 (1989), and came to the same conclusion reached by this court today. In Feldman, the defendant was convicted of violating RICO as a result of the arson of three of his businesses and his subsequent concealment of the respective insurance proceeds from various creditors. Id. at 651-52. On appeal, one of the many arguments that was advanced by the defendant was that the evidence failed to show the enterprise alleged had an existence separate and distinct from the pattern of racketeering activity. Id. at 659. The enterprise alleged consisted of an association-in-fact of seven corporations and two individuals. Id. at 657. The Ninth Circuit affirmed the defendant’s conviction under RICO, finding sufficient evidence proved the existence of an enterprise with an ascertainable structure. Id. at 660. In doing so, the Ninth Circuit stated: The individual corporations together comprised ... Feldman’s “business interests.” They existed for the purpose of making money for Feldman and [his brother]. The illegal purposes to which Feldman put them were subsidiary to that legitimate goal. The only individual charged as a member [Feldman’s brother], was involved in the enterprise as a co-owner and partner.... The plaintiffs’ third amended complaint mirrors the situation addressed by the Ninth Circuit in Feldman. The individual business entities identified in the plaintiffs’ third amended complaint existed for the purpose of making money for Anderson, Cleveringa, and ASB. The third amended complaint can be read to assert that the illegal purpose of defrauding the plaintiffs was subsidiary to the legitimate goal of generating business profits. Cleveringa, Anderson, and ASB were both involved, to some degree, with each of the respective entities, either as. co-owners, partners, or beneficiaries. The facts of the plaintiffs’ third amended complaint, if true, show that the existence of the various corporations and entities allegedly formed by Anderson and Cleveringa made the duo’s allegedly fraudulent activities possible and profitable. At the same time, the entities functioned to achieve objectives that were not illegal. As the Ninth Circuit noted in Feldman, this “is just the sort of legal shield for illegal activity that RICO tries to pierce.” Id. at 656 (citing McCullough v. Suter, 757 F.2d 142, 144 (7th Cir.1985)). Accordingly, as in Feldman, this court concludes the plaintiffs have alleged sufficient facts to survive the defendants’ motion to dismiss with respect to this issue. The defendants rely on Moll v. U.S. Life Title Insurance Co., 654 F.Supp. 1012 (S.D.N.Y.1987) and VanDenBroeck v. CommonPoint Mortgage Co., 210 F.3d 696 (6th Cir.2000) for the proposition that the mere existence of referrals is insufficient to demonstrate the existence of an ascertainable structure. As the prior discussion indicates, much more than the occasional referral of business clientele linked the association-in-fact. Further, even if all that was alleged in the plaintiffs’ third amended complaint was the existence of referrals in support of their allegations of an association-in-fact, the cases cited by the defendants do not lend credence to the defendants’ position. Both of the cases relied upon by the defendants involve a putative enterprise consisting of an amorphous amalgamation of entities and independent actors allegedly committing criminal acts within a specialized industry or a manufacturer selling a product through independent distributors. See VanDenBroeck, 210 F.3d at 700 (holding the defendant lender’s relationship with myriad secondary lenders to which the lender sold customer loans was “too unstable and fluid an entity to constitute a RICO enterprise”); Moll, 654 F.Supp. at 1031 (holding the plaintiffs allegation of an association-in-fact enterprise comprised of a “group of attorneys ..., abstractors, and other individuals and corporations ... engaged in the real estate settlement industry” was insufficient to survive the defendants’ motions to dismiss). To illustrate, in VanDenBroeck, a group of borrowers brought a class action lawsuit under RICO against a lender. VanDenBroeck, 210 F.3d at 698. The plaintiffs’ complaint alleged the defendant lender made loans to various borrowers at a higher rate based upon a secondary lender’s proposed rate of interest. Id. at 700. The complaint averred the defendant would then sell the loan to the secondary lender and collect a “backend” fee. Id. The plaintiffs contended these undisclosed fees were unconscionable. Id. at 698. In granting the defendant’s motion to dismiss, the district court noted that there were numerous secondary lenders who purchased the loans from the defendant. Id. at 700. In light of the absence of a discrete numbers of lenders, the district court concluded that the alleged conspiracy “could have transpired with any lender in the secondary lending market.” Id. at 700. Consequently, the district court determined the facts alleged by the plaintiffs failed to “show any type of mechanism by which this ‘group’ (Com-monPoint and the entire secondary lending market) conducted its affairs or made decisions.” Id. On appeal to the Sixth Circuit, the plaintiffs argued that Com-monPoint used an “Approval Advice” form, which basically insured ultimate approval of a loan by a secondary lender prior to CommonPoint’s issuing of its own loan to the borrower. Id. In rejecting the plaintiffs’ argument, the court stated as follows: Most cases interpreting elements applicable to this statute require evidence of some sort of “chain of command” or other evidence of a hierarchy, even a highly limited one. Evidence of any such hierarchical structure is absent from this appeal. Although the plaintiffs argue that CommonPoint’s routine use of the “Approval Advice” form— which assured ultimate approval of a loan by a secondary lender before Com-monPoint issued its own loan to the customer — was evidence of an enterprise, the use of those forms seems to indicate nothing more than that Com-monPoint had a business relationship . with the secondary lenders. It does not allege or show they function[ed] as a continuous unit.” Id. The defendants, in the matter currently before this court, hone in on the Sixth Circuit’s use of the words “business relationship” and “hierarchical structure” and argue this case reflects that business referrals are not sufficient to allege an enterprise for RICO purposes. The court believes such a sweeping statement is an overextension of the import of the Van-DenBroeck decision. In VanDenBroeck, the main problem with the plaintiffs’ complaint was that the complaint failed to identify a discrete number of secondary lenders involved in the putative enterprise. See id. As a result, the conspiracy could have included any secondary lender operating in the United States. Thus, the threshold problem with the plaintiffs’ complaint in VanDenBroeck was the instability and lack of continuity of the putative enterprise’s members. Id. Given the fact that membership in the alleged enterprise was overly fluid, it was entirely reasonable to conclude that a secondary problem also existed with the plaintiffs’ allegations— namely, that a hierarchal structure or decision making mechanism also could not be established because the key players in the alleged enterprise were constantly changing. Thus, VanDenBroeck, at least according to this court, stands simply for the proposition that alleging the existence of a “business relationship” with an unlimited number of participators in a relative market is not enough to establish an enterprise for RICO purposes. Accordingly, the VanDenBroeck decision is inapposite to the issue before this court — specifically, whether an enterprise can be established based on business referrals between a discrete number of members who mutually benefit from such an arrangement. In their brief, the defendants assert “informal referrals are ubiquitous in our society,”