The opinion of the court was delivered by: CARTER
This case arises from the collapse of plaintiffs' plans to build two restaurants, one in Stamford, Connecticut, the other in Short Hills, New Jersey. Rich-Taubman Associates ("Rich-Taubman") and TKUD Associates No. 2 ("TKUD"), the plaintiffs, have sued several parties alleging, inter alia, that they conspired to convert plaintiffs' money, fraudulently concealed the fact that they were working to do so, and violated the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961 et seq. The case is before the court on a motion to dismiss by defendant, All Building Construction Corporation ("All Building"), on grounds that certain claims in the complaints fail to meet the specificity requirements of Rule 9(b), F.R.Civ.P., and that consequently, the court is deprived of subject matter jurisdiction.
All Building also raises an issue with regard to the sufficiency of the RICO pleadings. Having considered these questions, the motion to dismiss is denied.
Each plaintiff, in the capacity of landlord, entered into a lease agreement with certain of the defendants, (the builder defendants), as tenants, for property in the Stamford Town Center and the Mall at Short Hills. Each plaintiff agreed to provide financial backing for the defendants, and the defendants agreed to design, construct, furnish and equip restaurants on plaintiffs' properties. Pursuant to the lease agreement, plaintiffs provided defendants with access to loans totaling $1,500,000 to build the restaurants at each location.
The builder defendants hired the second group of defendants in this action, the vendor defendants, including All Building, to perform the work on plaintiffs' properties. Plaintiffs claim that although the builder defendants disbursed checks totaling almost $1,500,000 to the vendor defendants, the checks were never put to their intended use. Instead, plaintiffs maintain, the vendor defendants cashed the checks and immediately warote checks to one of the builder defendants or to other entities in which the builder defendants had a substantial economic interest.
According to plaintiffs, each vendor defendant acted in precisely the same manner in laundering the checks. Plaintiffs also charge several defendants, excluding All Building, with fraudulently concealing their participation in the scheme to convert plaintiffs' funds by issuing invoices and receipts which certified falsely that goods or services had been rendered.
Three claims were made against All Building based upon its participation in the alleged conversion scheme. Count 6 of the complaints charges All Building, along with the other vendor defendants, with violation of RICO. (P63-67). Count 7 is a claim against All Building and the vendor and builder defendants for conspiracy to convert. (P68-76).Count 11 alleges that All Building was unjustly enriched in the amount of $130,000 which it received from plaintiff Rich-Taubman.
Although not spelled out in the complaint, Count 6 apparently charges All Building with violating § 1962(c) of RICO.
Under this section it is illegal for individuals "employed by or associated with any enterprise . . . 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." 18 U.S.C. § 1962(c).
The elements of this RICO claim are the same whether the case is civil or criminal. Eaby v. Richmond, 561 F. Supp. 131, 133-34 (E.D. Pa. 1983); accord Eisenberg v. Gagnon, 564 F. Supp. 1347, 1352 (E.D. Pa. 1983). Plaintiffs must prove both the existence of an enterprise and a connected pattern of racketeering activity. United States v. Zang, 703 F.2d 1186 (10th Cir. 1982), cert. denied, 464 U.S. 828, 104 S. Ct. 103, 78 L. Ed. 2d 107 (1983) citing United States v. Turkette, 452 U.S. 576, 69 L. Ed. 2d 246, 101 S. Ct. 2524 (1981).
Plaintiffs allege that in early 1982, all builder and vendor defendants joined forces to formulate a scheme to convert checks issued by or drawn on plaintiffs' bank accounts. (P63). This association, plaintiffs maintain, constituted an "enterprise" as defined by the act. 18 U.S.C. § 1961(4). Plaintiffs claim that this enterprise, through use of the mail and telephone, engaged in fraudulent acts constituting a pattern of racketeering activity within 18 U.S.C. § 1961(5). (P66). The alleged RICO violation is claimed to have cost plaintiffs approximately $3,000,000 in damages.
All Building does not dispute the sufficiency of the pleadings with respect to the "enterprise" allegations.
What All Building does contest is the adequacy of the pleadings with regard to its commission of "a pattern of racketeering activity". That phrase means "at least two acts of racketeering activity, one of which occurred after the effective date of . . . [the act] and the last of which occurred within ten years . . . after the commission of a prior act of racketeering activity." 18 U.S.C. § 1961(5). Specifically listed predicate offenses define, in turn, what is considered as racketeering activity under the act. 18 U.S.C. § 1961(1). The list includes federal offenses such as mail fraud, (18 U.S.C. § 1341), and wire fraud, (18 U.S.C. § 1343). See Minpeco, S.A. v. ContiCommodity Services, Inc., 558 F. Supp. 1348 (S.D.N.Y. 1983) (Lasker, J.).
F.R.Civ.P. 9(b) requires that allegations of fraud be set forth with "particularity", see Posner v. Coopers & Lybrand, 92 F.R.D. 765, 768 (S.D.N.Y. 1981) (Goettel, J.) aff'd, 697 F.2d 296 (2d Cir. 1982), citing Denny v. Barber, 576 F.2d 465 (2d Cir. 1978), and the rule applies with equal force to allegations of mail and wire fraud as predicate RICO civil offenses. Eaby v. Richmond, supra, 561 F. Supp. at 136. All Building maintains that Rule 9(b) has been ignored in this case because plaintiffs have failed to identify instances in which All Building committed such fraudulent acts. Citing this defect in its reply memorandum, All Building argues further that plaintiffs have failed to state a RICO claim upon which relief can be granted. F.R.Civ.P. 12(b).
Plaintiffs concede that they have not shown that defendant All Building actually committed a pattern of racketeering activity. But, they claim, there is no need for such a showing in this case since the enterprise alleged was also a conspiracy. In consequence, an actionable wrong of any one of the defendants in the enterprise, such as mail fraud, may be imputed to the other defendants because "the significance of an allegation of conspiracy . . . is to charge that an actionable wrong was committed jointly by the defendants." ...