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April 29, 2026
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A former Berks County judge navigates complex federal racketeering law on remand from the Third Circuit

For those following the prolonged saga of Laurel Gardens LLC v. McKenna, the case has reached what may be its final chapter. United States District Judge Jeffrey L. Schmehl, a Berks County native who served on the Berks County Court of Common Pleas for over a decade before his appointment to the federal bench in 2013, has once again granted summary judgment to the Isken Defendants, this time on different legal grounds following the Third Circuit’s 2024 remand.

Key takeaways:

• The court dismissed the federal racketeering claims again after taking a second look at the case.
• The decision shows that not every business dispute or dishonest act rises to the level of a racketeering claim.
• To move forward on this kind of claim, a plaintiff needs evidence that the defendant had real influence or control over the business, not just that the defendant benefited from someone else’s conduct.
• A plaintiff also must show that its injury came from that alleged control, not just from the underlying misconduct.
• The opinion is a reminder that courts will closely examine whether the facts truly support a complex business misconduct claim before allowing it to proceed.

Background: a snow removal business gone wrong

The case centers on Charles Gaudioso, who in 2012 formed Laurel Gardens Holdings, LLC to acquire several snow-removal and landscaping companies, including Laurel Gardens, LLC and American Winter Services, LLC. To help manage the enterprise, Gaudioso hired Timothy McKenna, a man with substantial experience in the snow-removal industry and longstanding relationships with various customers, including brothers Paul and Donald Isken and their company, Isken Enterprises, LLC.

Plaintiffs alleged that McKenna, whilst employed by Laurel Gardens, secretly diverted the company’s materials and labor to his personal creditors, including the Iskens, through a so-called “rooms-for-salt” arrangement. Under this alleged deal, McKenna would provide the Iskens’ hotels with discounted snow-removal services and ice-melting salt in exchange for free hotel rooms for his snowplow drivers. From Gaudioso’s perspective, he authorized neither these discounted deliveries nor the free services performed at Isken properties.

The first dismissal: August 2023

Judge Schmehl first dismissed the RICO claims in August 2023, finding that Plaintiffs had failed to establish the existence of a RICO enterprise. The Court applied the “hub, spokes, and rim” analysis, concluding that whilst the various defendants may have each dealt with McKenna (the “hub”), there was no evidence of coordination or relationships between the “spokes,” i.e., the Iskens and Julichers.

As the Court noted, Plaintiffs’ own counsel had acknowledged that “although the Iskens and Julichers acted in conjunction with the McKennas, the Iskens and Julichers did not act in conspiracy with each other.” Donald Isken testified that he had never heard of Mr. Julicher until reading the complaint, and Mr. Julicher claimed he did not know the Isken Defendants or do business with them.

The Third Circuit intervenes: June 2024

Laurel Gardens appealed to the Third Circuit, which vacated the district court’s summary judgment ruling in June 2024. The appellate court, in an opinion by Circuit Judge Jordan, found that Judge Schmehl had “conflated two distinct concepts: the ‘vehicle’ enterprise of subsection (c) and the ‘victim’ enterprise of subsection (b).”

The Third Circuit explained the crucial distinction: under § 1962(b), the enterprise is the victim of unlawful activity, whereas under § 1962(c), the enterprise is the vehicle through which unlawful activity is committed. The district court had dismissed the § 1962(b) claim based on the absence of an association-in-fact criminal enterprise, a “vehicle” concept, when Laurel Gardens itself was the alleged “victim” enterprise.

The Third Circuit remanded with specific instructions: “On remand, the Court must consider whether the Julichers and the Iskens obtained or maintained ‘interest or control’ in Laurel Gardens ‘through a pattern of racketeering activity.’”

The second dismissal: March 2026

On remand, Judge Schmehl addressed the proper legal framework but reached the same ultimate conclusion: summary judgment for the Isken Defendants. This time, however, the analysis focused squarely on whether the Iskens acquired or maintained “control” of Plaintiffs’ enterprise within the meaning of § 1962(b).

The Court defined “control” as “the power to manage, direct, or govern the enterprise,” akin to “the control one gains through the acquisition of sufficient stock to … elect one or more [of an enterprise’s] directors.” Applying this standard, Judge Schmehl found that the record contained “no evidence that the Isken Defendants possessed any corporate voting power, ownership rights, or any other legal interest in Plaintiffs’ enterprise.”

Critically, even assuming the Plaintiffs could establish control, Judge Schmehl found no evidence of an “acquisition injury,” the causal link between the defendant’s acquisition or maintenance of control and the injury suffered. The Court observed that the Plaintiffs pointed to “no evidence that the Isken Defendants ever dictated pricing or discounts, determined customer priorities, overrode management decisions, coordinated broader enterprise operations, or otherwise used the debt against McKenna as leverage to obtain favorable treatment”.

The sale of approximately $14,000 worth of salt at a discount did not constitute sufficient evidence of control over an enterprise that Mr. Gaudioso himself testified generated roughly $6,000,000 in annual revenue.

The § 1962(d) conspiracy claim likewise failed because Plaintiffs identified no evidence that the Iskens “agreed to facilitate any infiltration or control of Plaintiffs’ enterprise by the Julicher Defendants”. With only state-law claims remaining and no supplemental jurisdiction, the Court dismissed those claims without prejudice.

Lessons for RICO litigants

This case offers several important takeaways for practitioners considering civil RICO claims:

First, understand the distinction between § 1962(b) and § 1962(c). The former targets infiltration of a victim enterprise; the latter targets operation of a vehicle enterprise. Conflating these concepts, as the district court initially did, can prove fatal on appeal.

Second, “control” under § 1962(b) requires meaningful authority over the enterprise’s affairs, not merely benefiting from an employee’s misconduct. Personal loans to an employee, even when coupled with discounted services, do not automatically confer control over the employer’s business.

Third, the “acquisition injury” requirement demands proof that injury flowed from the acquisition or maintenance of control itself, not merely from the underlying predicate acts.

This case has now been before the federal courts for nearly a decade, survived one trip to the Third Circuit, and produced multiple published opinions. Whether the Plaintiffs will pursue their state-law claims in state court remains to be seen, but in federal court, the Laurel Gardens RICO claims appear to have reached their conclusion.

A copy of the recent opinion can be found here.