The opinion of the court was delivered by: Platt, Chief Judge.
Defendants Revien, Cohen, Ellenbogen, Curylo, Berg, and
Matthias & Berg move pursuant to Federal Rules 12(b)(6) and
9(b) of Civil Procedure to dismiss plaintiffs' complaint.
Plaintiff's complaint asserts ten claims against all
defendants*fn1: (i) civil conspiracy to defraud, (ii)
violation of Section 1962(c) of the Racketeer Influenced and
Corrupt Organizations Act, ("RICO"), i.e., employees or
associates of an enterprise which engages in interstate
commerce who conduct or participate in that enterprises affairs
through a pattern of racketeering, (iii) violation of Section
1962(d) of RICO, i.e., conspiracy to violate RICO, (iv) Section
17 of the Securities Act of 1933, i.e., fraud in the sale of
securities, and (v)-(x) fraudulent misrepresentation.*fn2
The complaint bases these claims on defendants' alleged
participation in six "transactions" with plaintiffs. According
to the complaint, the first transaction involved defendants
investing $200,000 of plaintiffs money in non-existent Repo
Bonds between February and May, 1989. Cmplt ¶ 18-26.
In the second alleged transaction, plaintiffs gave defendants
$150,000 in exchange for defendants' enterprise,
D.L.Cabot*fn3, promising to provide $2,350,000 to fund the
purchase of a parking garage; plaintiffs' money which was
supposed to be held in trust, has not been returned and the
purchase was not funded. Cmplt. ¶ 27-38. This transaction took
place between March, 1989 and June 26, 1989.
A third transaction, the "D.K. Investors transaction", took
place between December 1988 and May, 1989 and involved
plaintiffs investing in a private offering of securities.
Cmplt. ¶ 39-45. Plaintiffs allegedly made out checks totalling
$200,000 payable to D.L. Cabot to invest in the offering but
the offering never closed and the money was never returned.
Cmplt. ¶ 40, 41 and 45.
In the fourth transaction, plaintiffs gave a deposit of
$200,000 payable to D.L. Cabot in reliance upon defendants'
promise that D.L. Cabot would fund plaintiffs' purchase of
residential property units in Houston, Texas. Cmplt ¶ 46, 47.
The $200,000 was not returned to plaintiffs and the checks
given plaintiffs in order to fund the deal were returned for
insufficient funds. Cmplt. ¶ 47, 48.
The fifth transaction involved a cattle feed operation in
Alabama. Cmplt ¶ 50, 51. Plaintiffs executed an assignment to
D.L. Cabot of $300,000 supposedly representing money due from
the Repo Bond deal and the D.K. Investors transaction. Cmplt ¶
51. The Alabama cattle deal never took place.
Finally, in the sixth transaction, which took place in May
and June, 1989, defendants agreed to make a public offering of
plaintiffs' company Alumni Plumbing & Heating Corp. Cmplt ¶ 53.
Again plaintiffs assigned to D.L. Cabot money supposedly due
from the D.K. Investors deal; there was no return of the money
and the public offering never occurred.*fn4
Defendants move pursuant to Federal Rule 12(b)(6) of Civil
Procedure to dismiss plaintiffs' claims of (i) civil conspiracy
to defraud, (ii) violation of Section 1962(c) of RICO, (iii)
violation of Section 1962(d) of RICO, and (iv) violation of
Section 17 of the Securities Act of 1933, on the ground that
they fail to state a claim upon which relief may be granted.
Defendants also move pursuant to Federal Rule 9(b) of Civil
Procedure to dismiss plaintiffs claims of (ii) violation of
Section 1962(c) of RICO and (v)-(x) fraudulent
misrepresentation on the ground that they fail to plead claims
of fraud with requisite particularity.
During oral argument, this Court dismissed pursuant to
Federal Rule 12(b)(6) of Civil Procedure plaintiffs' claim (i)
for civil conspiracy on the ground that no claim for civil
conspiracy to defraud exists in New York. At that time, this
Court also ruled that plaintiffs' claims (v)-(x) for fraudulent
misrepresentation were sufficiently pled to satisfy the
dictates of Federal Rule 9(b) of Civil Procedure and therefore
would not be dismissed unless plaintiffs' remaining federal
claims are dismissed and no basis exists for ancillary
jurisdiction. We now address those federal claims, i.e., claim
(ii) brought under Section 1962(c) of the RICO statute, claim
(iii) brought under Section 1962(d) of the RICO statute, and
claim (iv) brought under Section 17 of the Securities Act of
A complaint may be dismissed pursuant to Federal Rule
12(b)(6) for failure to state a claim, only if, taking the
allegations of the complaint in the light most favorable to the
plaintiff, the Court nonetheless concludes that "no relief
could be granted under any set of facts that could be proved
consistent with the allegations." H.J. Inc. v. Northwestern
Bell Telephone Co., ___ U.S. ___, 109 S.Ct 2893, 2906, 106
L.Ed.2d 195 (1989) (quoting Hishon v. King & Spalding,
467 U.S. 69, 73, 104 S.Ct. 2229, 2232, 81 L.Ed.2d 59 (1984)); see also
Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 1686, 40
L.Ed.2d 90 (1974); Conley v. Gibson, 355 U.S. 41, 45-46, 78
S.Ct. 99, 101-02, 2 L.Ed.2d 80 (1957). As the Third Circuit
recently emphasized, "this standard of review does not
distinguish between RICO and non-RICO claims." Rose v. Bartle,
871 F.2d 331, 355 (3rd Cir. 1989).