LONDON, Kentucky – New London Tobacco Market (NLTM) and Fivemile Energy are accusing James C. Justice Cos. Inc. of violating the Racketeer Influenced and Corrupt Organizations Act (RICO) in its second amended complaint.
The case was initially filed in 2017. The second amended complaint was filed April 29 in U.S. District Court for the Eastern District of Kentucky.
NLTM and Fivemile filed the suit against James C. Justice Cos. Inc.; Kentucky Fuel Corp.; Justice Management Services LLC; Justice Farms of North Carolina; Oakhurst Club; Southern Minerals; Bluestone Industries; Dynamic Energy; JCJ Coal Group; Bluestone Resources; James C. Justice II; and James C. Justice III.
In 2005, James C. Justice Cos. executed a guaranty agreement with the NLTM and Kentucky Fuel Corp., according to the suit. It also provided an audited consolidated financial statement for it and its subsidiaries that showed more than $175 million in assets, stockholders' equity greater than $48 million, and a net income for one year of $47 million.
"The defendants intended for the plaintiffs to rely upon this disclosure to induce plaintiffs to do business with them and to conclude that any debt owed by the defendants to the plaintiffs could be paid," the amended complaint states.
Kentucky Fuel agreed to pay $10,000 per month to NLTM, and Justice Cos. reaffirmed its obligations under the guaranty. Kentucky Fuel has not paid the monthly retainer fees in the amount of $970,000.
The plaintiff claims the monthly retainer fees continue to accrue at the rate of $10,000 per month.
The defendants also failed to pay rent for a property known as the "Strong Brothers property."
"Kentucky Fuel and JCJC have failed and refused to pay rents due under the leases of the Strong Brothers property as required by the fourth amendment," the complaint states. "Kentucky Fuel and JCJC have admitted that they owe the unpaid amounts for the Strong Brothers leases."
In 2012, the plaintiffs filed a lawsuit against Justice Cos. and in 2014 the court entered a default judgment in the case.
The plaintiffs claim after the complaint was filed, Justice Cos. "began to engage in a series of transactions with the intent to hinder, delay or defraud its creditors."
"These transfers had the effect of draining the assets, stockholders’ equity, and current and future net income shown on the 2009 Consolidated Financial Statements from JCJC to other related or cooperating entities and individuals," the complaint states.
The plaintiffs claim the transfers of real property and other assets were made without valuable consideration and were made with the actual intent to "hinder, delay or defraud" the plaintiffs.
"The transfers...were made at a time when JCJC and Kentucky Fuel were not paying their debts as they became due," the complaint states. "JCJC and Kentucky Fuel were not paying either the monthly retainer fees or the rents due under the lease of the Strong Brothers property when due."
The plaintiffs claim the defendants are all persons associated with the Justice Enterprise who have engaged in fraudulent transfers of assets, money and real property.
"These transfers involved the transferring of things of value from one Justice Enterprise entity to another so as to deprive creditors like the plaintiffs of payments to which they are entitled, thus establishing a purpose other than the predicate acts," the complaint states.
The plaintiffs claim the defendants participated, either directly or indirectly, in directing or management of the conduct or affairs of the Justice Enterprise and knowingly carried out decisions made on its behalf.
The plaintiffs are seeking compensatory and punitive damages. They are represented by John A. Lucas and W. Edward Shipe of Howard & Howard; and Scott M. Webster of Tooms, Dunaway & Webster.
U.S. District Court for the Eastern District of Kentucky case number 6:17-cv-00245