The opinion of the court was delivered by: Mukasey, District Judge.
This case is one of at least seven actions arising out of
plaintiffs' inability to repay loans by defendants that
financed construction of a gypsum wallboard manufacturing
plant.*fn1 Plaintiffs have asserted various state law claims
for breach of fiduciary duty, breach of contract, common law
fraud, tortious interference with contracts, and usury, and
have infused this apparently ordinary business dispute with
overtones of criminality by invoking the Racketeering
Influenced and Corrupt Organization Act, 18 U.S.C. § 1961-68
(1984 & Supp.), with allegations that the entire loan
transaction was actually part of a fraudulent scheme by the
lenders and others to gain control of the borrower. Defendants
have moved to dismiss all claims pursuant to Fed.R.Civ.P. 9(b)
and 12(b)(6). For the reasons set forth below, the RICO counts
are dismissed against all defendants for failure to plead the
predicate acts of mail and wire fraud with the particularity
required by Rule 9(b). All state law claims are also dismissed
against all defendants for lack of jurisdiction. As plaintiffs
have already amended their complaint, the dismissal is without
leave to replead.
The facts set forth below are based on the amended complaint.
Plaintiff Atlantic Gypsum Company, Inc. ("AGC"), a New Jersey
Corporation, is the borrower in the loan underlying this
action, and plaintiffs GNK Enterprises, Inc., Kahn Lumber and
Millwork Co., Inc., Polaris
Properties, Inc., Gerhard Kahn and Regina Kahn are guarantors
of that loan. All plaintiffs are related.
Defendants United Jersey Bank ("UJB"), Barclays Bank Plc.
("Barclays"), Lloyds Bank Plc. ("Lloyds"), and DnC America
Banking Corporation ("DNC") were the principal lenders.
Defendant Lloyds International Corporation ("LIC"), a New York
corporation, helped arrange the loan and is referred to as an
agent for plaintiff in some of the instruments governing the
transaction. Together, LIC, UJB, Barclays, Lloyds, and DNC are
referred to collectively as the "Consortium." Defendant
Woodward & Dickerson, Inc. ("W & D"), is a supplier of gypsum
ore. Defendant Flakt, Inc. was the general contractor
supervising construction of the gypsum wallboard manufacturing
plant. Flakt and W & D were also subordinated lenders in the
transaction. Defendant Gary Riddell is an officer of LIC.
In 1985, AGC applied to LIC to arrange financing for the
long-term lease of a plot of land under the control of the Port
Authority of New York and New Jersey ("PA"), the construction
of a modern gypsum wallboard manufacturing plant at the site,
and start-up operation of the plant. (Complaint ¶¶ 17, 18).
The lender-borrower relationship soured after the lenders
insisted on continued payments to the contractor, Flakt,
notwithstanding a dispute between AGC and Flakt over the
latter's performance. It is these efforts by the lenders to
make AGC keep paying Flakt rather than withholding payment, as
AGC apparently would have preferred to do, and the lenders'
subsequent attempts to obtain repayment from AGC, that give
rise to the claims in this case. As is apparent even from this
cursory description of how the disagreement started, this is at
most a business dispute involving breach of contract*fn2 and,
giving plaintiffs the benefit of several doubts about governing
law, breach by LIC of a fiduciary duty to plaintiff. But see
Boley v. Pineloch Associates, Ltd., 700 F. Supp. 673, 681
(S.D.N.Y. 1988) ("[a]llegations of reliance on another party
with superior expertise, standing by themselves, will not
suffice [to establish a fiduciary duty]"). Yet, as set forth in
some detail below, the facts in the complaint consist mainly of
the contents of various documents and other communications
among the parties, to set up and effect the transaction, that
passed through the mail and over the wires. Plaintiffs garnish
this recitation with conclusory allegations that defendants'
conduct was fraudulent and was designed to permit defendants to
dominate plaintiffs' business, and then whip this bland mixture
into a froth of RICO claims.
Thus, we are told that "defendants or some of them undertook
to and did, directly or indirectly, represent and purport to
protect the interests of plaintiffs," as allegedly evidenced by
ten letters, all from LIC to certain of plaintiffs, offering
initially to "`act as sole and exclusive agent to arrange
financing for the project,'" to "`be available to assist Kahn
Lumber in negotiating one or more key Project documents," and
then to "`engage local counsel to arrange the Project
financing,'" "`arrange satisfactory commercial bank financing
for a portion of the referenced project,'" and the like.
(Complaint ¶ 20).
AGC alleges that such "representations were false, in that
defendants did not protect the interests of plaintiffs but,
instead, acted contrary to the interests of the plaintiffs both
during said negotiation, development and formulation of said
financing and of the documentation in connection therewith, and
thereafter. . . ." (Complaint ¶ 27). Nowhere are we told the
facts from which a reasonable person could conclude that the
quoted statements, apparently made by LIC but attributed
promiscuously to other unnamed defendants, were false when
made, and known to be so.
The complaint also alleges that prior to the incorporation of
AGC, defendants recommended to AGC's promoter an attorney,
Marcia H. Goodwillie, Esq., without disclosing that she was the
wife of the partner in the law firm of White & Case who was
representing both plaintiffs and defendants in the proposed
financing transaction. (Complaint ¶ 29). However, we are not
told how, if at all, that non-disclosure injured plaintiff.
Eventually, LIC arranged for the commitment of nearly $20
million from members of the Consortium to finance the project.
In connection with that commitment, the Consortium "insisted"
upon the procurement of additional contracts to which
Consortium members were not parties, including a gypsum ore
supply agreement between AGC and W & D, various subordinated
financing and security agreements, and a "turn-key"
construction agreement between AGC and Flakt. (Complaint ¶¶ 30,
31). The Consortium drafted the above agreements and
participated substantially in drafting the lease of the
construction site from PA to AGC. (Complaint ¶ 31). The
complaint alleges no additional facts from which one can
reasonably infer that the motive for these additional contracts
was other than the Consortium's reasonable interest in assuring
the success of the venture and repayment of the loan.
In numerous paragraphs, the complaint goes on to describe
provisions in agreements among the parties, including
conditions precedent to AGC's ability to exercise certain
rights. (Complaint ¶¶ 32-35, 42-44). Essentially, the
agreements allowed the Consortium, inter alia, to exercise
substantial power over the advancement of loans to Flakt in the
event of a dispute between Flakt and AGC and also provided that
any default by AGC in the ...