cash." Complaint ¶ 6. The complaint further alleges that
"defendant, knowing the merchandise had been stolen from
plaintiff, resold the merchandise at a profit," Complaint ¶ 6,
"transmitt[ing] the same in interstate commerce." Complaint ¶
15. The value of the merchandise said to have been stolen by
Bornfreund and subsequently purchased by defendant is alleged
to be in excess of $750,000. Complaint ¶ 7.
This action was filed on January 22, 1990. Defendant filed
his answer on March 5, 1990, and an amended answer on June 25,
1990. Defendant thereafter brought the instant motion to
1) Sufficiency of Plaintiff's Conversion Claim
Defendant first attacks the sufficiency of plaintiff's
conversion claim, arguing that plaintiff has failed to plead
with the particularity required by Fed.R.Civ.P. 9(b). Rule 9(b)
provides, in relevant part, that "[i]n all averments of fraud
or mistake, the circumstances constituting fraud or mistake
shall be stated with particularity," and thus, by its own
terms, is explicitly limited to averments of fraud or mistake,
neither of which is found in plaintiff's conversion claim.
Accordingly, the Court will not apply the heightened
particularity standard of Rule 9(b) to plaintiff's conversion
claim, but rather the liberal standard applicable to a motion
brought pursuant to Fed.R.Civ.P. 12(b)(6).*fn1
"The court's function on a Rule 12(b)(6) motion is not to
weigh the evidence that might be presented at a trial but
merely to determine whether the complaint itself is legally
sufficient." Festa v. Local 3 International Brotherhood of
Electrical Workers, 905 F.2d 35, 37 (2d Cir. 1990); see also
Ryder Energy Distribution Corp. v. Merrill Lynch Commodities,
Inc., 748 F.2d 774, 779 (2d Cir. 1984) ("The function of a
motion to dismiss `is merely to assess the legal feasibility of
the complaint, not to assay the weight of the evidence which
might be offered in support thereof.'" (quoting Geisler v.
Petrocelli, 616 F.2d 636, 639 (2d Cir. 1980))).
Thus, a motion to dismiss must be denied "unless it appears
beyond a doubt that the plaintiff can prove no set of facts in
support of his claim which would entitle him to relief."
Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 1686, 40
L.Ed.2d 90 (1974) (citing Conley v. Gibson, 355 U.S. 41, 45-46,
78 S.Ct. 99, 101-102, 2 L.Ed.2d 80 (1957)); see also Morales v.
New York State Dep't of Corrections, 842 F.2d 27, 30 (2d Cir.
1988). In deciding a motion to dismiss, the Court must limit
its analysis to the four corners of the complaint, see Kopec v.
Coughlin, 922 F.2d 152, 155 (2d Cir. 1991), and must accept the
plaintiff's allegations of fact as true, together with such
reasonable inferences as may be drawn in his favor. Papasan v.
Allain, 478 U.S. 265, 283, 106 S.Ct. 2932, 2943, 92 L.Ed.2d 209
(1986); Murray v. Milford, 380 F.2d 468, 470 (2d Cir. 1967);
Hill v. Sullivan, 125 F.R.D. 86, 90 (S.D.N.Y. 1989) ("all
allegations in plaintiffs' amended complaint must be accepted
as true and liberally construed."); see also Scheuer, supra,
416 U.S. at 236, 94 S.Ct. at 1686. Federal Rule of Civil
Procedure 8(a) requires only a "`short and plain statement of
the claim' that will give the defendant fair notice of what
plaintiff's claim is and the ground upon which it rests."
Conley, supra, 355 U.S. at 47, 78 S.Ct. at 102
(quoting Fed.R.Civ.P. 8(a)).*fn2
Applying this standard to plaintiff's claim for conversion,
the Court finds that plaintiff has adequately pled that claim.
"Under New York law, to establish a conversion action, a
plaintiff must show legal ownership of, or a superior
possessory right in, the disputed property, and `that the
defendant exercised an unauthorized dominion over that
property, . . . to the exclusion of the plaintiff's rights.'"
Middle East Banking Co. v. State Street Bank International,
821 F.2d 897, 906 (2d Cir. 1987) (quoting Meese v. Miller,
79 A.D.2d 237, 242, 436 N.Y.S.2d 496, 500 (4th Dep't 1981)).
"Conversion does not require the defendant's wrongful intent .
. . [and a] rightful owner need only be deprived of his
property, partially or temporarily." Pittston Warehouse Corp.
v. American Motorists Insurance Co., 715 F. Supp. 1221, 1225
(S.D.N.Y. 1989) (citations omitted). In the case at bar,
plaintiff's allegations that defendant knowingly received
property stolen from plaintiff, and then resold that property
at a profit, sufficiently pleads a claim for conversion under
New York law. Defendant's motion to dismiss that claim is,
2) Sufficiency of Plaintiff's RICO Claim
Section 1964(c) of Title 18 United States Code provides a
civil remedy for "[a]ny person injured in his business or
property by reason of a violation of section 1962 of this
chapter. . . ." 18 U.S.C. § 1964(c). To state a claim for
violation of § 1962, a plaintiff must allege "(1) that the
defendant (2) through the commission of two or more 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." 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); see also
Clapp v. Greene, 743 F. Supp. 273, 277 (S.D.N.Y. 1990) (quoting
Moss, supra, 719 F.2d at 17); Wanamaker v. Columbian Rope Co.,
740 F. Supp. 127, 139 n. 5 (N.D.N.Y. 1990) (same). Defendant
asserts that plaintiff has failed to meet this pleading burden
in several respects.
A) Sufficiency of the RICO Predicate Acts Allegations
As he argued with respect to plaintiff's conversion claim,
defendant asserts that plaintiff has failed to plead his
predicate act claim of interstate transportation of stolen
property with the particularity required by Fed.R.Civ.P. 9(b).
Defendant's position is that despite the plain language of Rule
9(b) limiting its application to averments of fraud and
mistake, Rule 9(b) should control the pleading of all civil
RICO predicate acts because of the stigma attached to being
labelled a "racketeer." However, "[s]ince the rule is a special
pleading requirement and contrary to the general approach of
simplified pleading adopted by the federal rules, its scope of
application should be construed narrowly and not extended to
other legal theories or defenses." 5 C. Wright & A. Miller,
Federal Practice and Procedure § 1297, at 615 (1990). This
Court is unpersuaded that the fact that a civil RICO defendant
is termed a "racketeer" merits judicial expansion of the scope
of Rule 9(b). See Sedima, S.P. R.L. v. Imrex Co., 473 U.S. 479,
492, 105 S.Ct. 3275, 3283, 87 L.Ed.2d 346 (1985) ("As for
stigma, a civil RICO proceeding leaves no greater stain than do
a number of other civil proceedings."). Although some courts
have chosen to apply the particularity requirements of Rule
9(b) in RICO cases involving
non-fraud-based predicate acts, see Philan Insurance Ltd. v.
Frank B. Hall & Company, Inc., 712 F. Supp. 339, 344 (S.D.N Y
1989); Plount v. American Home Assurance Company, Inc.,
668 F. Supp. 204, 207 (S.D.N.Y. 1987), this Court believes the
better course is to follow those courts that have applied the
rule as it is written, and let Congress redraft it if
necessary. See United States v. International Brotherhood of
Teamsters, 708 F. Supp. 1388, 1395-96 (S.D.N.Y. 1989); United
States v. Bonanno Organized Crime Family of La Cosa Nostra,
683 F. Supp. 1411, 1427-28 (E.D.N.Y. 1988); see also Seville
Industrial Machinery Corp. v. Southmost Machinery Corp.,
742 F.2d 786, 792 n. 7 (3d Cir. 1984), cert. denied, 469 U.S. 1211,
105 S.Ct. 1179, 84 L.Ed.2d 327 (1985). Therefore, the Court
will apply the liberal pleading standard set forth in
Section 1961(1) of Title 18 United States Code sets forth
those crimes that may serve as RICO predicate acts. Among those
enumerated in that section is 18 U.S.C. § 2314, which imposes
criminal penalties on anyone who "transports, transmits, or
transfers in interstate or foreign commerce any goods, wares,
merchandise, securities or money, of the value of $5,000 or
more, knowing the same to have been stolen, converted or taken
by fraud." 18 U.S.C. § 2314. Plaintiff's allegations in the
complaint that defendant engaged in "acts of receipt and sale
of stolen goods and the transmittal of the same in interstate
commerce, knowing the goods to have been stolen, such goods
having had a value of $5,000 or more," Complaint ¶ 15,
considered with plaintiff's allegations concerning defendant's
purchase of stolen goods from Bornfreund and subsequent resale
of those goods, Complaint ¶ 6, sufficiently pleads a violation
of § 2314. Certainly it cannot be said, reviewing the four
corners of the complaint, that "it appears beyond a doubt that
the plaintiff can prove no set of facts in support of his claim
which would entitle him to relief." Scheuer, supra, 416 U.S. at
236, 94 S.Ct. at 1686. Generally, it has been the teaching of
the Supreme Court that the courts not be overly restrictive and
technical in their interpretation of civil RICO claims, as may
be appropriate under the circumstances. See Kerr-McGee
Refining Corp. v. M/T Triumph, 924 F.2d 467, 470 (2d Cir. 1991)
(citing Sedima, S.P. R.L. v. Imrex Co., 741 F.2d 482 (2d Cir.
1984), rev'd, Sedima, supra, 473 U.S. 479, 105 S.Ct. 3275).
Accordingly, defendant's motion to dismiss the RICO claim in
this action for failure to plead adequately the predicate acts
B) Sufficiency of the RICO "Enterprise" Allegations
Section 1961(4) of Title 18 defines a RICO "enterprise" as
"any individual, partnership, corporation, association, or
other legal entity, and any union or group of individuals
associated in fact although not a legal entity."
18 U.S.C. § 1961(4). It is well settled that to support a RICO claim, the
alleged enterprise must be an entity distinct from the
defendant. See Jacobson v. Cooper, 882 F.2d 717, 719 (2d Cir.
1989); Bennett v. United States Trust Company of New York,
770 F.2d 308, 315 (2d Cir. 1985), cert. denied, 474 U.S. 1058, 106
S.Ct. 800, 88 L.Ed.2d 776 (1986). Defendant argues that the
complaint alleges that he — and he alone — constitutes the
RICO "enterprise" in this action, and thus the RICO claim must
Paragraph 6 of the complaint, however, avers that "Bornfreund
and defendant entered into a common plan, scheme,
design and business pursuant to which Bornfreund stole
merchandise from plaintiff's storeroom, removed it from
plaintiff's premises, and sold it to defendant for cash. . . .
[D]efendant, knowing the merchandise had been stolen from
plaintiff, resold the merchandise at a profit." Complaint ¶ 6.
Paragraph 11 avers that "[d]efendant's continuous business as a
purchaser and reseller of stolen merchandise belonging to
plaintiff, constituted an enterprise as defined in Title
18 U.S.C. § 1961(4)." Complaint ¶ 11. Despite defendant's argument
to the contrary, these allegations, together with such
reasonable inferences as may be drawn in plaintiff's favor, see
Papasan, supra, 478 U.S. at 283, 106 S.Ct. at 2943,
sufficiently plead a RICO enterprise consisting of Bornfreund
and defendant. The fact that paragraph eleven of the complaint
defines the enterprise as "defendant's business," rather than
as "Bornfreund's and defendant's business," does not render the
pleading of enterprise inadequate in this case, particularly
given the description in paragraph six of the business as
consisting of Bornfreund and defendant. Complaint ¶ 6; see also
Cullen v. Margiotta, 811 F.2d 698, 729-30 (2d Cir.) (single
entity may be both the RICO "person" and one of a number of
members of the RICO "enterprise"), cert. denied, 483 U.S. 1021,
107 S.Ct. 3266, 97 L.Ed.2d 764 (1987). Hence, plaintiff has
sufficiently alleged a RICO enterprise.
C) Causal Link Between Predicate Acts and RICO Injury
To prevail in a civil RICO action, the plaintiff must allege
that he has been "injured in his business or property by reason
of a violation of section 1962" of Title 18, United States
Code. 18 U.S.C. § 1964(c). This requirement of a causal link
between the RICO violation and the plaintiff's injury is
well-established. See Sedima, supra, 473 U.S. at 496, 105 S.Ct.
at 3285; County of Suffolk v. Long Island Lighting Co.,
907 F.2d 1295, 1311 (2d Cir. 1990); Hecht v. Commerce Clearing
House, Inc., 897 F.2d 21, 23 (2d Cir. 1990). The Second Circuit
has further held that "[b]y itself, factual causation (e.g.,
`cause-in-fact' or `but-for' causation) is not sufficient."
Hecht, supra, 897 F.2d at 23. Rather, "the RICO pattern or acts
must proximately cause plaintiff's injury. . . . For our
purposes, the RICO pattern or acts proximately cause a
plaintiff's injury if they are a substantial factor in the
sequence of responsible causation, and if the injury is
reasonably foreseeable or anticipated as a natural
consequence." Hecht, supra, 897 F.2d at 23-24 (emphasis in
original) (citations omitted).
Applying this rule to the case at bar, there can be no
question but that plaintiff's injury — the loss of his
merchandise — was both factually and proximately caused by the
alleged RICO violations. Accepting the allegations in the
complaint as true for present purposes, see Papasan, supra, 478
U.S. at 283, 106 S.Ct. at 2943, defendant, by allegedly
engaging in acts of transporting property he knew to have been
stolen from plaintiff, was a substantial factor in causing
plaintiff's loss, and reasonably could have foreseen or
anticipated that loss. A strong causal link exists between the
alleged predicate acts and plaintiff's injury, and thus
defendant's motion to dismiss the RICO claim on the ground that
such a link is lacking, is denied.
D) Sufficiency of the RICO "Pattern" Allegations
To state a claim under the RICO statute, a plaintiff must
allege a "pattern" of racketeering activity, 18 U.S.C. § 1962(c),
which is defined by the statute as two or more acts of
racketeering activity within a ten-year period.
18 U.S.C. § 1961(5). Determining whether a "pattern" exists within the
meaning of the RICO statute is not, however, as simple as
mechanically applying the definition provided by the statute.
Rather, as the Supreme Court noted in Sedima, supra, 473 U.S.
at 496 n. 14, 105 S.Ct. at 3285 n. 14, "while two acts are
necessary, they may not be sufficient." More recently, the
Supreme Court further expounded upon the pattern requirement in
RICO cases, holding that "RICO's legislative history reveals
Congress' intent that to prove a pattern of racketeering
activity a plaintiff or prosecutor
must show that the racketeering predicates are related,
and that they amount to or pose a threat of continued criminal
activity." H.J. Inc. v. Northwestern Bell Telephone Co.,
492 U.S. 229, 109 S.Ct. 2893, 2900, 106 L.Ed.2d 195 (1989)
(emphasis in original). There are thus two distinct, although
overlapping, constituents of RICO's pattern requirement.
Relying on Sedima and H.J. Inc., defendant in the present
action argues that plaintiff has failed to allege adequately a
"pattern" of racketeering activity.
The Supreme Court in H.J. Inc. held that, as to the
"relatedness" of the predicate acts, "criminal conduct forms a
pattern if it embraces criminal acts that have the same or
similar purposes, results, participants, victims, or methods of
commission, or otherwise are interrelated by distinguishing
characteristics and are not isolated events." H.J. Inc., supra,
109 S.Ct. at 2901; see also United States v. Indelicato,
865 F.2d 1370, 1382 (2d Cir.) ("An interrelationship between acts,
suggesting the existence of a pattern, may be established in a
number of ways. These include proof of their temporal
proximity, or common goals, or similarity of methods, or
repetitions."), cert. denied, 491 U.S. 907, 109 S.Ct. 3192, 105
L.Ed.2d 700 (1989) and ___ U.S. ___, 110 S.Ct. 56, 107 L.Ed.2d
24 (1989). "[T]he involvement of similar participants is
sufficient to demonstrate a relationship among the predicate
acts." United States v. Simmons, 923 F.2d 934, 951 (2d Cir.
In the action now before the Court, the allegations in the
complaint support a finding that the predicate racketeering
acts share, at minimum, a similar purpose (to carry out a
scheme to convert plaintiff's merchandise), similar methods,
and similar participants. These similarities are more than
sufficient to lead this Court to find that the predicate acts
in this case are "related," as that term is defined by the
Supreme Court with respect to the RICO "pattern" requirement.
See H.J. Inc., supra, 109 S.Ct. at 2900-01; Simmons, supra, 923
F.2d at 951; Jacobson, supra, 882 F.2d at 720; Friedman v.
Arizona World Nurseries Limited Partnership, 730 F. Supp. 521,
547-48 (S.D.N.Y. 1990).
With respect to the "continuity" element of the test for a
RICO "pattern," the Supreme Court has held that
"[c]ontinuity" is both a closed- and open-ended
concept, referring 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. . . . 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.
Predicate acts extending over a few weeks or
months and threatening no future criminal conduct
do not satisfy this requirement: Congress was
concerned in RICO with long-term criminal conduct.
H.J. Inc., supra, 109 S.Ct. at 2902; see also Azurite Corp.
Ltd. v. Amster & Co.,