The opinion of the court was delivered by: SAND
Plaintiffs, Paul Soper and David Daoud, filed their complaints in the Northern District of New York in 1983 alleging common law conspiracy to defraud and violation of the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. §§ 1961-1968 ("RICO"). In a Memorandum Decision and Order of December 21, 1983, the Honorable Howard G. Munson, Chief Judge, (1) denied defendants' motion to dismiss plaintiffs' RICO claim for failure to state a claim upon which relief can be granted; (2) denied "without prejudice" all other motions including defendants' motion to dismiss plaintiffs' first cause of action (id. at n.1); and (3) transferred the case to this Court.
On February 13, 1984, Judge Munson denied a motion brought by defendants Xenel Industries, Ltd., Hisham Alireza and Abdullah Alireza (the "Xenel defendants") for reconsideration of their motion for dismissal of the RICO claims. In an Opinion dated May 30, 1984, this Court granted defendants' motion for summary judgment pursuant to F.R.Civ.P. 56 as to plaintiffs' first claim and denied summary judgment as to plaintiffs' second claim, with leave to renew this motion in twenty (20) days. The renewal of defendants' motion was to be limited solely to the question of whether plaintiffs had adequately alleged violation of the mail and wire fraud statutes and injury resulting therefrom.
On August 22, 1984, the case was placed on this Court's suspense docket pending completion of appellate review in a trilogy of Second Circuit cases: Sedima, S.P.L.R. v. Imrex Co., 741 F.2d 482 (2d Cir. 1984), rev'd, 473 U.S. 479, 105 S. Ct. 3275, 87 L. Ed. 2d 346 (1985); Bankers Trust Co. v. Rhoades, 741 F.2d 511 (2d Cir. 1984, vacated and remanded, 473 U.S. 922, 105 S. Ct. 3550, 87 L. Ed. 2d 673 (1985); Furman v. Cirrito, 741 F.2d 524 (2d Cir. 1984), vacated and remanded sub nom. Joel v. Cirrito, 473 U.S. 922, 105 S. Ct. 3550, 87 L. Ed. 2d 672 (1985). Thus, although defendants renewed their motion in a timely fashion, this Court did not hear oral argument until September 19, 1985, after the case had been returned to its active docket.
In an Order dated November 4, 1985, this Court dismissed plaintiffs' complaint with leave to file within twenty days a new complaint that satisfied the requirements of F.R.Civ.P. 9(b). As noted, plaintiffs had failed to supply any factual basis for the alleged "fraudulent scheme" underlying the mail and wire fraud (18 U.S.C. §§ 1341; 1343) contentions serving as "predicate acts" for their RICO claim. Plaintiffs filed their amended complain
in a timely fashion.
On December 9, 1985, defendants moved pursuant to F.R.Civ.P. 12(b)(6) and 56 for an order dismissing plaintiffs' amended complaint. Defendants allege that (1) plaintiffs' amended complaint also fails to satisfy F.R.Civ.P. 9(b); (2) plaintiffs have not pleaded mail or wire fraud because a scheme to deprive them of an "unenforceable expectation" does not rise to the level of an interest protected by these statutes; (3) plaintiffs have failed to allege an injury to "their business or property by reason of a violation of section 1962," 18 U.S.C. § 1964(c); and (5) plaintiffs have not pleaded a "pattern of racketeering activity" because the alleged predicate acts arise from the same allegedly fraudulent scheme to deprive plaintiffs of their hoped-for commissions. See generally Defendants' Joint Memorandum of Law.
Hisham A. Alireza and Abdullah A. Alireza (collectively "the Alirezas") also have renewed their motion, pursuant to F.R.Civ.P. 12(b)(2) and 56, for an order dismissing the now amended complaint against them for lack of personal jurisdiction.
For the foregoing reasons, this Court grants defendants' motion for an order dismissing plaintiffs' amended complaint on the grounds that it fails to satisfy F.R.Civ.P. 9(b). This Court also finds that plaintiffs have failed to adequately plead a "pattern of racketeering activity."
The facts underlying this action already have been elaborated in previous rulings rendered by this Court and by the Northern District of New York. See, e.g., Soper v. Simmons International, Ltd., No. 84-70; 71; 72 (S.D.N.Y. May 30, 1984). Briefly, plaintiffs allege that on February 2, 1977, an agent of the Xenel defendants solicited plaintiffs' services in the procurement of a source of institutional furnishings under a possible joint venture agreement with the Xenel defendants. The plaintiffs identified defendant Thonet Industries, a wholly-owned subsidiary of the defendant Simmons companies, as a possible source of the sought-after merchandise, and then arranged later meetings with Thonet representatives at which the latter expressed interest in this proposal.
At a meeting on February 20, 1977, defendants James A. Riddering, the president of Thonet, and Dennis P. Fitzgerald, a Simmons executive, orally agreed that if an agreement between Thonet and Xenel was consummated, plaintiffs would receive a commission representing 10% of the gross sales generated over a period of ten years. Plaintiff Soper advised them that he had with him a proposed written commission agreement; however, Mr. Riddering assured him that no writing was necessary "and that there was nothing to worry about for he was dealing with honorable people at Simmons/Thonet." Amended Complaint P 22; see also Complaint P 14.
As this Court noted in its prior Opinion, plaintiffs alleged that "[t]hese statements were the first of a series of representations that 'were made with the intent to defraud plaintiffs of their commissions.' (Complaint P 26)."
The next day, plaintiffs introduced Riddering and Fitzgerald to the Alirezas, owners of the Xenel Company. While advising plaintiffs that they would honor whatever bargain had been struck, the Xenel defendants "maliciously plotted and schemed to insure that it would be them, not the plaintiffs, who would benefit from the introduction with Simmons/Thonet arranged by the plaintiffs." Plaintiffs' Memo. of Law in Opp. to Joint Motion at 4. Thus, plaintiffs claim that, pursuant to the alleged conspiracy, they were continuously and falsely assured by all the defendants, both orally and in writing, that they would be taken care of, when, in reality, the defendants had arranged to divert compensation to the Xenel defendants and to disavow the bargain plaintiffs had been led to believe existed.
Notwithstanding the Xenel defendants' representations in two telegrams that plaintiffs' presence was not required, plaintiff Daoud attended a meeting defendants had scheduled for April 14 in London for the execution of a contract. At the meeting, defendant Fitzgerald, in the presence and with the assent of defendants Manfred J. Sobek (Vice-President of Marketing of Simmons International, Ltd.) and Hisham Alireza, "attempted to disavow the existence of any commission arrangement with the plaintiffs." Amended Complaint 51. Hisham Alireza, "consciously adopting a less hostile ... approach ... and in furtherance of the scheme and conspiracy to defraud, decided to lull the plaintiffs, stating that he would discuss the matter with Simmons/Thonet and would see that the plaintiffs were protected." Plaintiffs' Memo. of Law in Opp. to Joint Motion at 5. Defendants allegedly repeated these misrepresentations in subsequent conversations. See Amended Complaint PP 53; 55; 58.
The agreement between Simmons/Thonet and Xenel Industries, Inc. was publicly announced on May 6, 1977. Subsequently, these parties in fact entered into an agreement whereby the Xenel defendants would receive 10% commission on gross sales in return for promoting Simmons/Thonet's products in Saudi Arabia. Amended Complaint P 59. Sales have since taken place in Saudi Arabia from which defendants all have allegedly ...