The opinion of the court was delivered by: Conboy, District Judge:
This civil RICO action, to which various state law claims are
appended, arises out of an employment relationship between the
plaintiff and certain of the defendants.
Plaintiff William Miller ("Miller") was hired as an Executive
Vice President of Brown Harris Stevens, Inc. ("BHS") in
February 1984, and subsequently became the president of BHS, in
January of 1986. Complaint ¶ 3. BHS, a residential real-estate
management and brokerage firm, is owned by Helmsley
Enterprises, Inc. and Harry B. Helmsley ("Mr. Helmsley"). In
addition to a salary, Miller's compensation as president of BHS
included a bonus of 5% of BHS' pre-tax profits and a 20%
commission on BHS' net commissions on sales of all Helmsley
properties. Compalint ¶ ¶ 3, 53-56. It is also alleged that Mr.
Helmsley promised an additional reward to Miller for BHS's de
facto acquisition of the prime personnel and business of a
competitor Douglas Elliman-Gibbon & Ives. Complaint ¶¶ 57-58. In
a memorandum dated April 17, 1989, Miller voluntarily resigned
as president of BHS, although he alleges that his departure was
ordered by Mrs. Leona Helmsley, Harry Helmsley's wife.
Complaint ¶ 41.
The RICO claims are brought under section 1962(a)-(d) of Title
18 of the United States Code and against all of the defendants
in the complaint except BHS. Plaintiff's Memorandum of Law in
Opposition to the Defendants' Motions to Dismiss ("Pltf. Mem.")
at 4. All of the defendants, including BHS, but excepting
Joseph Licari ("Licari") are referred to by the parties as the
Helmsley defendants*fn2 and have collectively moved to
dismiss the federal claims in the complaint pursuant to Rules
8(a), 9(b) and 12(b)(6) of the Federal Rules of Civil Procedure
and for sanctions pursuant to Rule 11. These defendants also
move to dismiss the state law claims for lack of subject matter
jurisdiction or, in that alternative, pursuant to Rules 8(a),
9(b) and 12(b)(6). We observe that defendant Licari has
submitted a separate motion to dismiss, arguing a lack of
standing on a slightly different theory than the branch of the
Helmsley defendants' motion directed to lack of standing.
Licari also joins in the motions submitted by his co-defendants
to the extent "applicable to him and not inconsistent with his
own arguments." Defendant Joseph Licari's Memorandum in Support
of His Motion to Dismiss the Complaint at 6. Accordingly, in
this opinion, we will refer to all of the defendants
collectively as having made the motion to dismiss, and will
acknowledge Licari's separate arguments when necessary.
Count 1 of the complaint specifically alleges that the RICO
defendants formed an association-in-fact enterprise through
which they committed various offenses constituting predicate
acts under RICO. Mrs. Helmsley and the other defendants are
alleged to have used the enterprise in a "number of ways to
defraud the IRS, to fraudulently wrest wealth, power, and
control away from Mr. Helmsley, and to fraudulently injure or
eliminate Miller, who could impede the pursuit of such
purpose." Plft.Mem. at 4. There are three so-called "schemes"
alleged; the "Extortion and Tax-Fraud Scheme"; the
"Fraudulent-Transfer Scheme"; and the "Fraudulent Scheme
Against Miller." The "Extortion and Tax-Fraud Scheme" basically
rehashes the Government's criminal income tax case against Mrs.
Helmsley, in which she was convicted of 33 of 47 counts, but,
significantly, not of conspiracy to commit extortion, and makes
the additional assertion that the defendant allocated certain
business expenses and salaries to BHS instead of other Helmsley
entities, thus deflating BHS's pre-tax profits. The
"FraudulentTransfer Scheme" alleges that Mrs. Helmsley, in an
attempt to circumvent a pre-nuptial agreement, defrauded Mr.
Helmsley out of certain real property including 230 Riverside
Drive and the Leslie Building and certain personal property
including a corporate jet and bearer bonds valued at greater
than $90 million. Compliant ¶ ¶ 34-36. Miller also asserts that
Mrs. Helmsley thwarted Mr. Helmsley's plans to convert those
buildings to cooperatives or condominiums, thereby causing BHS
to lose sales commissions. Finally, the "Fraudulent Scheme
Against Miller" alleges, in substance, that the defendants
devised a plan to reduce BHS's profits, thereby reducing
Miller's bonus and commissions, and that Mrs. Helmsley
misrepresented her corporate authority to certain corporate
officers, i.e., she stated that she had Mr. Helmsley's
authorization to ask for Miller's resignation when she did not
have such authority, thereby forcing Miller to resign his
position as president of BHS.
In order to maintain a private RICO action "a plaintiff must
show (1) a violation of section 1962; (2) injury to business or
property; and (3) causation of the injury by the violation."
Hecht v. Commerce Clearing House, Inc., 897 F.2d 21, 23 (2nd
Cir. 1990) (citing O'Malley v. O'Neill, 887 F.2d 1557, 1561
(11th Cir. 1989). cert. denied,___ U.S. ___, 110 S.Ct. 2620,
110 L.Ed.2d 641 (1990)). The motions in this case are directed
to the lack of causation. See Sedima, S.P.R.L. v. Imrex Co.,
473 U.S. 479, 496, 105 S.Ct. 3275, 3285, 87 L.Ed.2d 346 (1985)
(the plaintiff must show injury "by the conduct constituting
the violation"). It is imperative that the plaintiff show that
he was injured by the conduct constituting the violation
because "[a] defendant who violates section 1962 is not liable
for treble damages to everyone he might have injured by other
conduct.'" Sedima, supra, 473 U.S. at 496, 105 S.Ct. at 3285
(quoting Haroco, Inc. v. American National Bank & Trust Co. of
Chicago, 747 F.2d 384, 398 (7th Cir. 1984), aff'd,
473 U.S. 606, 105 S.Ct. 3291, 87 L.Ed.2d 437 (1985)). In this way, the
standing section of the statute, section 1964(c), which allows
private civil RICO suits to be brought only by "[a]ny person
injured in his business or property by reason of a violation of
section 1962," is directly intertwined with the causation
The injury must be caused by a pattern of racketeering activity
violating section 1962 or by individual RICO predicate acts.
See Hecht, 897 F.2d at 23; Bankers Trust Co. v. Rhoades,
859 F.2d 1096, 1100 (2d Cir. 1988), cert. denied, ___ U.S.
___, 109 S.Ct. 1642, 104 L.Ed.2d 158 (1989). However, "factual
causation (e.g., `cause-in-fact' or `but for' causation) is not
sufficient" by itself Hecht, supra, 897 F.2d at 23, see
Department of Economic Development v. Arthur Anderson & Co., et
al., No. 85 Civ. 1292 (CES), 1990 U.S. Dist. LEXIS 67
(S.D.N.Y. Jan. 8, 1990) ("The Second Circuit has asserted that
legal liability under RICO does not extend as far as factual
causation, only proximate causation."). The RICO pattern or
acts must proximately cause plaintiff's injury. Hecht, supra,
897 F.2d at 23 (citing Sperber v. Boesky, 849 F.2d 60, 64 (2d
Cir. 1988)). For the RICO pattern or acts to proximately cause
a plaintiff's injury, they must be "a substantial factor in the
sequence of responsible causation, and . . . the injury [must
be] reasonably foreseeable or anticipated as a natural
consequence." Hecht, 897 F.2d at 23-24 (citing Bonsignore v.
City of New York, 683 F.2d 635, 637 (2d Cir. 1982);
Restatement (Second) of Torts §§ 431, 435 comment b (1965)).
Defendants argue that Miller does not have standing to assert a
RICO action "because the predicate acts of fraud and extortion
that he has attempted to plead were not `directed at him.'"
Memorandum of the Helmsley Defendants in Support of Their
Motion to Dismiss the Complaint ("Dfts. Memo."), at 8 (quoting
Burdick v. American Express Co., 865 F.2d 527, 529 (2d Cir.
1989)). The predicate acts alleged by Miller are: (1)
extortion, in violation of New York law and the Hobbs Act.
18 U.S.C. § 1951; (2) mail fraud, in violation of 18 U.S.C. § 1341;
and, (3) wire fraud, in violation of 18 U.S.C. § 1343.
Complaint ¶ 27. The defendants argue that even if the
plaintiff's "far-fetched allegations" are true, Miller lacks
standing because the conduct complained of allegedly was
intended to harm and had the consequence of injuring BHS and/or
Mr. Helmsley and/or the IRS, not Miller. Defendants claim that
Miller's injury is at best derivative of the injury to BHS, to
whom the fraud was directed, and thus too remote to confer
standing. Thus, the defendants assert that while Miller may be
able to demonstrate factual causation, he has not established
and cannot establish the requisite proximate cause, and
therefore the RICO claims should be dismissed. We will proceed
to examine the relevant case authority before we consider
Miller's specific claims.
Since the parties submitted their memoranda of law, the Second
Circuit decided Hecht v. Commerce Clearing House, Inc.,
897 F.2d 21, 23 (2nd Cir. 1990), which we believe is completely on
point. In Hecht, the court of appeals affirmed the trial
court's holding that the plaintiff lacked standing to assert a
civil RICO action despite his allegations that: (1) defendants'
racketeering conduct proximately caused him to lose not only
his job but also business commissions; and (2) that an overt
act in furtherance of defendants' RICO conspiracy was his
discharge from employment. Id. at 23. We believe that Hecht
provides direct support for the defendants' argument and, in
combination with the other cases cited by the defendants and
upon which the Hecht court relied, is dispositive of the
standing issue in this case.
In Hecht, the plaintiff argued that because he would not go
along with the fraudulent practices of his employer directed at
customers of the company, he lost commissions as well as his
job. 897 F.2d at 22-23. With regard to Hecht's first claim,
that the defendants' ...