The opinion of the court was delivered by: Sand, District Judge.
The Defendants move this Court for an order dismissing the
Amended Complaint for failure to state a claim pursuant to
Fed.R.Civ.P. 12(b)(6) and for failure to plead fraud with
particularity pursuant to Fed.R.Civ.P. 9(b). Counts VIII and
IX of the Amended Complaint allege violations of the Racketeer
Influenced and Corrupt Organizations Act of 1970 ("RICO"),
18 U.S.C. § 1961 et seq., and this Court's jurisdiction is based
upon RICO and principles of pendent jurisdiction. We grant the
Defendants motion to dismiss Counts VIII and IX of the Amended
Complaint and therefore also dismiss this case for lack of
subject matter jurisdiction.
This dispute arises out of a real estate transaction gone
sour. By a Letter of Intent dated August 27, 1987, JCP Realty,
Inc. ("JCP Realty"), on behalf of J.C. Penney Company, Inc.
("JCP") and J.C. Penney Properties, Inc. ("JCP Properties"),
agreed to sell to Continental Realty Corporation
("Continental") their interests in three shopping center
properties located in Florida. Philip O'Connell, an officer of
JCP Realty, subsequently represented to Continental in a
letter dated September 24, 1987 that the agreed terms would be
recommended to JCP's Capital Appropriations Committee and that
the formal written contract was being prepared. Those steps,
however, were never taken because the Defendants received a
higher bid for the same properties from Home Depot, Inc.
Rather than completing the sale to Home Depot, the
Defendants offered on February 11, 1988 to sell the Florida
properties to Continental if Continental would also agree to
purchase two additional properties in Georgia that Home Depot
had agreed to purchase and if Continental would match Home
Depot's bid of $22 million for the five properties.
Continental agreed and offered $22.5 million for the Florida
properties, the Georgia properties and another small parcel of
undeveloped land in Georgia. However, even though the
Defendants and Continental executed an Agreement of Purchase
and Sale on June 3, 1988, the parties did not close their deal
because a dispute arose as to the documents that would be
needed to convey marketable title.
Continental alleges in its Amended Complaint that the
Defendants had no intention of selling the Florida properties
to Continental (¶ 26), that O'Connell falsely represented to
Continental the competing bid from Home Depot to induce
Continental to raise its bid and purchase additional property
(¶¶ 32-34) and that the Defendants concealed information
necessary to establish marketable title in order to "re-direct
the contract to defendants' former employee and/or colleague,
William Harris of Home Depot" (¶¶ 48-49). The Amended Complaint
seeks damages for breach of contract, fraud, tortious
interference with contract, unjust enrichment and violations of
§ 1962(c) and (d) of RICO.
We agree with the Defendants that the Amended Complaint does
not allege a pattern of racketeering activity as required by
H.J. Inc. v. Northwestern Bell Tel. Co., ___ U.S. ___, 109
S.Ct. 2893, 106 L.Ed.2d 195 (1989), United States v. Kaplan,
886 F.2d 536 (2d Cir. 1989), United States v. Indelicato,
865 F.2d 1370 (2d Cir. 1989) (en banc), cert. denied, ___ U.S. ___,
110 S.Ct. 56, 107 L.Ed.2d 24 (1989), and Beauford v. Helmsley,
865 F.2d 1386 (2d Cir. 1989) (en banc), vacated for further
consideration, ___ U.S. ___, 109 S.Ct. 3236, 106 L.Ed.2d 584
(1989), upheld by order of Sept. 15, 1989. "To establish a RICO
pattern it must also be shown that the predicates themselves
amount to, or that they otherwise constitute a threat of,
continuing racketeering activity." H.J. Inc., 109 S.Ct. at 2901
(emphasis in original). Because the allegations in the Amended
Complaint do not indicate sufficient continuity or threat of
continuity, the RICO claims are dismissed.
In H.J. Inc., the Supreme Court recently examined RICO's
pattern requirement and elaborated on its definition:
Congress had a more natural and commonsense
approach to RICO's pattern element in mind,
intending a more stringent requirement than proof
simply of two predicates, but also envisioning a
concept of sufficient breadth that it might
encompass multiple predicates within a single
scheme that were related and that amounted to, or
threatened the likelihood of, continued criminal
H.J. Inc., 109 S.Ct. at 2899. "Continuity" is "centrally a
temporal concept" that can "refer[ ] either to a closed period
of repeated conduct, or to past conduct that by its nature
projects into the future with a threat of repetition." Id. at
2902 (citations omitted). "A party alleging a RICO violation
may demonstrate continuity over a closed period by proving a
series of related predicates extending over a substantial
period of time." Id. Alternatively, "the threat of continuity
may be established by showing that the predicate acts or
offenses are part of an ongoing entity's regular way of doing
business." Id. While its opinion offers these broad guidelines,
the Supreme Court declined to provide a firm definition of the
continuity requirement, noting that the proof required will
depend on the specific facts of each case. Id.
The Second Circuit in Kaplan, reaffirming its earlier
decision in Indelicato, held that continuity or threat of
continuity can be shown by either related predicate acts
extending over a long time period or by reference to external
facts that indicate that the Defendant's activities are not
"isolated" or "sporadic." Kaplan, 886 F.2d at 542-43. Those
external facts can be the nature of the RICO enterprise, such
as an entity whose business is racketeering, or other facts
that indicate that the racketeering acts will continue. Id.
While Plaintiffs are no longer required to allege "an ongoing
scheme having no demonstrable ending point, . . . [w]hat is
required is that the complaint plead a basis from which it
could be inferred that the acts of racketeering activity were
neither isolated nor sporadic." Beauford, 865 F.2d at 1391.
Other Circuits have identified several factors for assessing
threat of continuity. See Jones v. Lampe, 845 F.2d 755, 757
(7th Cir. 1988) ("(1) the number and variety of predicate acts
and the length of time over which they were committed; (2) the
number of victims; (3) the presence of separate schemes; and
(4) the occurrence of distinct injuries"); Barticheck v.
Fidelity Union Bank/First Nat'l State, 832 F.2d 36, 39 (3d Cir.
1987) ("the number of unlawful acts, the length of time over
which the acts were committed, the similarity of the acts, the
number of victims, the number of perpetrators, and the
character of the unlawful activity"); see also Airlines
Reporting Corporation n. AERO Voyagers, Inc., 721 F. Supp. 579
(S.D.N.Y. 1989) (collecting other cases).
In this case, Continental alleges that the Defendants
committed several acts of mail and wire fraud over a period of
more than one year in furtherance of a scheme to defraud them.
Amended Complaint ¶ 65(a), 65(b). Continental also alleges ...