The opinion of the court was delivered by: MOTLEY
Plaintiff Estee Lauder, Inc. (Estee Lauder) has brought this action charging three defendants with violating the civil provisions of the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. §§ 1961 et seq., as well as with common law fraud. Specifically, Estee Lauder has charged defendants Harco Graphics (Harco), Harry Aronson (Aronson) and Perry Printing (Perry) with engaging in a pattern of racketeering activity predicated on violations of the federal mail fraud, federal racketeering and New York commercial bribery statutes, 18 U.S.C. § 1962(c). The defendants are also charged with conspiring to engage in a pattern of racketeering activity, 18 U.S.C. § 1962(d). Only Perry has appeared in this action.
This case is now before the court on Perry's motions to dismiss the complaint and for summary judgment, Fed.R.Civ. P. 12(b) and 56(b). For the reasons set forth below, the court denies these motions.
Estee Lauder is a New York corporation which manufactures, distributes and sells cosmetics in interstate commerce under a variety of trademarks. Perry Printing is a Wisconsin corporation doing business as a commercial printer. Harco is a New York corporation; Aronson is an officer, shareholder and employee of Harco.
In order to promote the sale of its cosmetic products, Estee Lauder invests substantial sums of money on direct mail and point-of-sale promotional materials. To that end, Estee Lauder purchases millions of dollars of printing from commercial printers like Perry Printing.
This action arises out of the alleged misconduct of Stephen Juda (Juda), who ran Estee Lauder's production department from 1973 until June 1979. Juda's responsibilities included arranging for the printing of promotional materials by contracting with commercial printers. Estee Lauder contends that Juda initiated a scheme whereby he received kickbacks in exchange for awarding printing contracts. Under this scheme, printers would overcharge Estee Lauder for work performed. Juda then would authorize payment of the overcharge. Once paid, the printers would funnel money to High Street Graphics (High Street), a dummy corporation owned by Juda.
In this vein, Estee Lauder alleges that Perry Printing overcharged it by over $500,000. This sum was then passed from Perry to Harco. Harco, in turn, passed part of the overcharge, nearly $150,000, on to High Street.
As indicated, Estee Lauder maintains that this scheme resulted in violations of the RICO statute as well as in common law fraud. In addition to this litigation, Estee Lauder filed suits against Juda and other printers.
1. Motion to Dismiss the Complaint
Perry moves to dismiss the complaint on three grounds. First, Perry argues that Estee Lauder has failed to allege the requisite association between Perry and a RICO enterprise. Second, Perry urges adoption of a narrow definition of RICO enterprise which would exclude Perry. Third, Perry argues that Estee Lauder's complaint does not allege the appropriate sort of injury under RICO. The court finds no merit in any of these contentions.
To establish a violation of section 1962(c), Estee Lauder must demonstrate that Perry was "employed by or associated with any enterprise . . . to conduct or participate . . . in the conduct of a . . . pattern of racketeering activity.
Perry contends that Estee Lauder's failure to allege that Perry was "associated with" a RICO enterprise renders the complaint fatally defective. For support, Perry looks to Judge Pollack's dismissal of a RICO count in Moss v. Morgan Stanley, 553 F. Supp. 1347 (S.D.N.Y.), aff'd, 719 F.2d 5 (2d Cir. 1983). The court finds Moss readily distinguishable from this case. The complaint in Moss contained no allegation of Morgan Stanley's direct or indirect participation in the activities of other defendants. Id. at 1362. Thus, the plaintiff in Moss failed to supply the allegations necessary to cross even the low threshold established by the Supreme Court's decision in Conley v. Gibson, 355 U.S. 41, 45-46 (1957). See also Strobl v. New York Mercantile Exchange, 561 F. Supp. 379, 383 (S.D.N.Y. 1983).
By contrast, Estee Lauder's complaint alleges existence of a scheme "devised by Harco, Aronson and Perry to defraud [Estee Lauder] through the submission of inflated bids and the creation of false invoices." As Perry concedes, the complaint also alleges Perry's active participation in this scheme. The court, therefore, finds that Estee Lauder's complaint describes circumstances which, if proved, ...