of whether the plaintiff has stated a cognizable claim under
The only case plaintiffs cite in support of their argument,
Republic of the Philippines v. Marcos, 862 F.2d 1355 (9th Cir.
1988) (en banc), cert. denied, ___ U.S. ___, 109 S.Ct. 1933,
104 L.Ed.2d 404 (1989), is wholly different from this case.
There, plaintiffs in making RICO claims alleged that the
Marcoses obtained money and jewels by fraud in the Philippines,
transported that fraudulently-obtained booty to the United
States in order to invest and conceal it, and through their
agents in the United States, arranged to, and did, purchase
real estate and open bank accounts with those
fraudulently-obtained assets. 862 F.2d at 1358. Unlike the
actions alleged here, the completion of the fraudulent scheme,
not just the preparation, allegedly took place in this country.
Since plaintiffs' allegations are not comparable, they fail the
"effects" test, and the motions of Hall Mexico, PWS, Fielding
and RBH Bermuda to dismiss the complaint as to them are
2. The RICO Issues
All of the defendants move to dismiss the Second Amended
Complaint on the ground (1) that under Rule 12(b) it fails to
state a RICO claim, and (2) that under Rule 9(b) the
allegations are not made with the particularity required for
a RICO claim. Because the Court lacks subject matter
jurisdiction over the claims against Hall Mexico, PWS,
Fielding and RBH Bermuda, this portion of the motion addresses
plaintiffs' claims against the remaining defendants, namely,
Hall, Hall Re N.Y., Hall Re International, RBH, Keough-Kirby
Associates, Keough Kirby Re, Maloney, Smith and Birnberg. If
the Court dismisses the RICO claims, they argue, it lacks
subject matter jurisdiction over the state law claims and the
entire action must be dismissed.
(a) Elements of a RICO claim
Plaintiffs are required to allege with particularity the
following essential elements of a RICO claim: (1) that the
defendant (2) through the commission of two or more predicate
acts (3) constituting a pattern (4) of "racketeering activity"
(5) directly or indirectly invests in, or maintains an
interest in or participates in, (6) an "enterprise" (7) the
activities of which affect interstate or foreign commerce.
18 U.S.C. § 1962(a)-(c); Moss v. Morgan Stanley, Inc., 719 F.2d 5,
17 (2d Cir. 1983), cert. denied, 465 U.S. 1025, 104 S.Ct. 1280,
79 L.Ed.2d 684 (1984). In a civil case, to have standing to
bring a claim the plaintiff must also show that its injury was
"by reason of" the commission of the predicate acts. Sedima,
S.P.R.L. v. Imrex Co., Inc., 473 U.S. 479, 496, 105 S.Ct. 3275,
3285, 87 L.Ed.2d 346 (1985).
Plaintiffs' RICO claim is predicated on alleged predicate
acts of mail and wire fraud, 18 U.S.C. § 1341, 1343,
transportation of stolen monies, 18 U.S.C. § 2314, and receipt
of stolen monies, 18 U.S.C. § 2315. In order to withstand a
motion to dismiss under Rules 12(b)(6) and 9(b), plaintiffs
must also plead each of the elements of these predicate acts
with particularity. Official Publications, Inc. v. Kable News
Co., 692 F. Supp. 239, 245 (S.D.N.Y. 1988), aff'd in relevant
part, 884 F.2d 664 (2d Cir. 1989).
(b) Deprivation of "Property"
In dismissing plaintiffs' First Amended Complaint, Judge
Walker specified that "plaintiffs provide[d] no specific
allegation which might show that the diverted money had become
the plaintiffs' property." Philan, 712 F. Supp. at 343. An
essential element of each of the statutory violations alleged
as predicate acts in the Second Amended Complaint is that the
plaintiff be deprived of money or property by the fraudulent
acts of the defendants. Thus, in order to plead the predicate
acts of mail and wire fraud, plaintiffs must plead facts
demonstrating a deprivation of a property right or interest.
See McNally v. United States, 483 U.S. 350, 360, 107 S.Ct.
2875, 2881, 97 L.Ed.2d 292 (1987) (mail fraud statute "limited
in scope to the protection of property rights");*fn5 Corcoran
Plan Corp., 886 F.2d 16, 21 (2d Cir. 1989) (plaintiff fails to
state a claim under mail fraud statute if he has not alleged
"any property right or interest in the monies that defendants
allegedly stole from" plaintiff).
The property requirement also applies to the predicate act
of transportation, and the predicate act of receipt, of stolen
property. See United States v. Bennett, 665 F.2d 16, 22 (2d
Cir. 1981) (§§ 2314 and 2315 "inapplicable where the theft or
fraudulent taking has not deprived the owner of the goods, or a
person having an interest tantamount to ownership, of the
perquisites of ownership"); United States v. Long Cove Seafood,
Inc., 582 F.2d 159, 163, 164 (2d Cir. 1978) ("stealing is still
essentially an offense against another person's proprietary or
possessory interests in property" and does not include "all
A failure to set forth facts showing that plaintiffs had a
property right in the premiums is a failure to allege RICO
causation; if the monies did not belong to the plaintiffs at
the time of diversion, they were not injured by reason of the
unlawful taking. Thus, a failure in the pleading to
demonstrate adequately that the plaintiffs had property rights
in the monies in question is fatal to the entire RICO claim.
Defendants argue that the monies allegedly diverted by
defendants are not demonstrated by allegations in the
complaint to be property of, or to belong to, the plaintiff
reinsurance companies, and therefore the plaintiffs were not
deprived of a property right by the alleged diversions.
Specifically, since, under the plaintiffs' own allegations,
the monies in question were in the possession of the
reinsurance intermediaries at the time that the defendants
caused funds to be transferred to Mansion and Island, and the
reinsurance intermediaries were admittedly agents of the
ceding insurance companies, defendants argue the monies
received by the defendant reinsurance intermediaries did not
belong to the plaintiffs at the time of the diversion to the
Plaintiffs rely on their repeated allegation of a fiduciary
relationship between the plaintiffs and the defendant
reinsurance intermediaries typified in ¶ 30 of the Second
Amended Complaint, which states that the reinsurance
. . while acting as the agents of ceding
insurers, were responsible as fiduciaries for
collecting on behalf of assuming reinsurers such
as plaintiffs the reinsurance premiums paid by
ceding insurers and exercising due care in
remitting these premiums to such assuming
Similarly in ¶ 55 of the Second Amended Complaint plaintiffs