United States District Court, Eastern District of New York
March 29, 1991
FLORENCE WIENER, AS EXECUTRIX OF THE ESTATE OF SAMUEL WIENER, PLAINTIFF,
JOSEPH P. NAPOLI, ESQ., MORRIS J. EISEN, ESQ., MORRIS J. EISEN, P.C., AND MORRIS J. EISEN & JOSEPH P. NAPOLI, DEFENDANTS.
The opinion of the court was delivered by: Spatt, District Judge.
MEMORANDUM AND ORDER
The defendants' motions to dismiss the Complaint raise the
novel issue of whether the defendants' alleged fraudulent
activity as trial counsel for the plaintiff's attorney-decedent
in tort litigation, is sufficient to state a claim for relief
under the Racketeering Influenced Corrupt Organization Act,
18 U.S.C. § 1961, et seq. ("RICO").
This action stems from financial arrangements between Samuel
Wiener, an attorney at law, and the defendants-attorneys,
whereby the defendants acted as trial counsel for Wiener.
According to the Complaint, by letter agreement dated May 24,
1982, Wiener retained defendant Napoli as trial counsel with
respect to fourteen civil actions and agreed to either (1) an
equal division of the fees, or (2) a one-third
Wiener/two-thirds Napoli division of the fees. The agreement
also provided that Wiener would be reimbursed for any
disbursements he incurred in connection with the actions. The
Complaint also alleges that Napoli practiced individually and
also in association and partnership with defendants Eisen and
Eisen & Napoli.
After Wiener's death on August 20, 1982, Florence Wiener, as
the executrix of Mr. Wiener's estate, retained defendant Napoli
and the other defendants as attorneys in an additional
ninety-nine of Wiener's cases (see Complaint, Schedule A).
Wiener's estate and Napoli entered into separate agreements
with respect to each case with regard to the division of fees.
In the Complaint the "Eisen Enterprise" is apparently defined
as Napoli individually and the other named defendants, as an
association (see Complaint, ¶ 18). The Complaint provides, in
part, as follows:
"¶ 26. Since the transfer of the cases to the
EISEN ENTERPRISE under the agreements entered into
prior and subsequent to decedent's death, the fees
and disbursements due from the cases set forth in
Schedule A have not been paid either in full or, in
many instances, not at all.
¶ 27. Defendants, both individually and as part
of the EISEN ENTERPRISE, have in several instances
concealed the resolution and settlement of cases
from plaintiff and failed to remit monies due.
¶ 28. Defendants, both individually and as part
of the EISEN ENTERPRISE, have forged indorsements
on settlement drafts made payable to the Estate of
SAMUEL WIENER and failed to remit fees and
disbursements due thereunder.
¶ 29. Defendants, individually and as part of the
EISEN ENTERPRISE, agreed to hold harmless an
insurance carrier from any claim by decedent's
estate to a lien on settlement proceeds if
settlement drafts would be made payable to EISEN,
P.C. and not to EISEN, P.C. and the Estate of
SAMUEL WIENER, jointly, in order to conceal the
fact of settlement from plaintiff.
¶ 30. Defendants have also failed to file closing
statements with the New York State Office of Court
Administration in a further effort to conceal
settlements and the nonpayment of fees, in whole or
in part, to plaintiff."
The Complaint sets forth five claims: (1) fraud; (2)
accounting based on a constructive trust; (3) moneys had and
received; (4) RICO (18 U.S.C. § 1962[c]); and (5) breach of
contract. Subject matter jurisdiction is based on 28 U.S.C. § 1331,
in that the RICO claim "arises under the . . . laws . . .
of the United States." The Complaint asserts pendent
jurisdiction with regard to the remaining four claims which are
state law causes of action.
As to the RICO claim, the Complaint alleges that defendants
"NAPOLI, EISEN, EISEN, P.C." and "EISEN & NAPOLI" constitute an
"enterprise," the "EISEN ENTERPRISE," within the meaning of
18 U.S.C. § 1961(4), and that "NAPOLI, EISEN, EISEN, P.C." and
"EISEN & NAPOLI" participated in the affairs of the "EISEN
ENTERPRISE" through a "pattern of racketeering" by numerous
acts of alleged mail fraud in violation of 18 U.S.C. § 1341.
In particular, the Complaint alleges the following:
"¶ 56. Defendants formulated and implemented a
fraudulent scheme to defraud plaintiff out of fees
and disbursements due under the various written
agreements referred to herein by concealing
settlements, forging estate endorsements, inducing
settlement checks to issue which did not account
for the estate's continuing interests in settlement
proceeds, by failing to file closing statements
with the appropriate state authorities setting
forth fees and disbursements due, all as set forth
more fully in the claims for relief stated above.
¶ 57. The fraudulent scheme continues to this day
and threatens to continue inasmuch as a number of
the legal matters in which the defendants
substituted as counsel in place of decedent SAMUEL
WIENER are cases and matters which are still open,
awaiting final resolution through either trial,
settlement or other disposition.
¶ 58. On or about the dates set forth below, the
defendants unlawfully, willfully and knowingly, and
for the purpose of furthering and executing their
fraudulent scheme, did place and cause to be placed
in the United States Post Offices and authorized
depositories for mail matter, and did cause to be
delivered by mail, according to the directions
thereon, certain mail matter to be sent and
delivered by the United States Postal Service, all
in violation of 18 U.S.C. § 1341, as follows:"
Thereafter, under the headings "Date," "Transmitting Party,"
"Receiving Party," and "Description," the Complaint lists 32
mailings by the defendant dating from November 11, 1982 to
September 11, 1990. The "Description" of these mailings include
"settlement draft," "fee check" or "check," "letter enclosing
general release," and "closing statement." The list does not
allege what statements or omissions in the mailings were
In addition, the Complaint alleges that each mailing
constitutes a "racketeering act," and that "[t]he mail frauds
directed at plaintiff were neither isolated nor sporadic, but
were related to one another by their promotion of the common
purpose of misappropriation of the estate's money." The
Complaint also alleges the following:
"¶ 61. Those uses of the mail constituted a
pattern of racketeering activity by the repeated
presentation of checks to plaintiffs representing
underpayment, the receipt by defendants of
settlement drafts and funds from insurance
companies, defendants' use of the mails to forward
settlement papers to clients and defense law firms,
and defendants' receipt of mails setting forth the
terms of and, invoking performance under, hold
harmless agreements they gave to settling parties
to the lawsuits and claims against fee claims by
SAMUEL WIENER's estate."
II. DEFENDANT'S MOTIONS TO DISMISS
Defendants Morris J. Eisen, Esq. and Morris J. Eisen, P.C.
move to dismiss the
Complaint pursuant to Rules 9(b), 12(b)(1) and 12(b)(6) of the
Federal Rules of Civil Procedure, on five grounds: (1) the
Complaint fails to plead fraud with the requisite
particularity; (2) the alleged RICO claim fails to state a
claim upon which relief can be granted; (3) the alleged state
law claims fail to state a claim upon which relief can be
granted; (4) the alleged fraud claim is barred by the
applicable statute of limitations; and (5) the alleged state
law claims cannot be sustained by pendent jurisdiction.
Defendants Joseph P. Napoli, Esq. and Morris J. Eisen & Joseph
P. Napoli also move to dismiss the Complaint, pursuant to Rules
9(b), 12(b)(1), 12(b)(6) and 12(b)(7) of the Federal Rules of
Civil Procedure, on the grounds that the alleged RICO claim
fails to state a claim upon which relief can be granted and
that the alleged state law claims cannot be sustained by
III. STANDARD OF REVIEW
The applicable standard of review on a motion to dismiss is
that "the court should not dismiss the complaint pursuant to
Rule 12(b)(6) unless it appears `beyond doubt that the
plaintiff can prove no set of facts in support of his claim
which would entitle him to relief'" (Goldman v. Belden,
754 F.2d 1059, 1065 [2d Cir. 1985] [quoting Conley v. Gibson,
355 U.S. 41, 45-46, 78 S.Ct. 99, 101-102, 2 L.Ed.2d 80 ]; see
also Branum v. Clark, 927 F.2d 698, 705 [2d Cir. 1991]). In
assessing the sufficiency of the Complaint, the Court must
accept the allegations of the Complaint as true (see Branum v.
Clark, supra; Procter & Gamble Co. v. Big Apple Industrial
Bldgs., Inc., 879 F.2d 10, 14 [2d Cir. 1989], cert. denied, ___
U.S. ___, 110 S.Ct. 723, 107 L.Ed.2d 743 ; North Star
Contracting Corp. v. Long Island R.R. Co., 723 F. Supp. 902, 905
[E.D.N.Y. 1989]), and must construe all reasonable inferences
in favor of the plaintiff (see Scheuer v. Rhodes, 416 U.S. 232,
236, 94 S.Ct. 1683, 1686, 40 L.Ed.2d 90 ). A motion to
dismiss is addressed solely to the face of the pleading, and
"[t]he court's function . . . is not to weigh the evidence that
might be presented at a trial but merely to determine whether
the complaint itself is legally sufficient" (Goldman v. Belden,
supra, 754 F.2d at p. 1067).
In addition, the Court may not consider matters submitted
outside the pleading at issue, unless, according to Rule 12(b),
notice is given to all parties that the motion to dismiss is
being converted to a motion for summary judgment and the
parties are afforded a reasonable opportunity to present
additional pertinent material (see Krijn v. Pogue Simone Real
Estate Co., 896 F.2d 687, 689 [2d Cir. 1990]). This rule is
mandatory as to Rule 12(b)(6) motions (see Festa v. Local 3
Int'l Brotherhood of Elec. Workers, 905 F.2d 35, 38 [2d Cir.
1990]). In this regard, the defendants Morris J. Eisen, Esq.
and Morris J. Eisen, P.C. by Stuart Perry, Esq. as well as the
plaintiff submitted affidavits which are replete with material
which is not within the pleading at issue. Accordingly, the
Court declines to consider these affidavits in determining the
A. Governing Law
Section 1962(c) of RICO makes it unlawful to participate in
the conduct of the affairs of an "enterprise" through a
"pattern of racketeering activity" in interstate or foreign
commerce. (See Sedima, S.P.R.L. v. Imrex Co., Inc.,
473 U.S. 479
, 496, 105 S.Ct. 3275, 3285, 87 L.Ed.2d 346  ["A
violation of § 1962(c) . . . requires (1) conduct (2) of an
enterprise (3) through a pattern (4) of racketeering
activity."].) A "pattern of racketeering activity" must include
the commission of at least "two acts of racketeering activity"
within a ten year period (see 18 U.S.C. § 1961). Mail fraud
is an "act of racketeering activity" under RICO (see
18 U.S.C. § 1961[B]). 18 U.S.C. § 1964(c) expressly creates a private
right of action for any person injured by reason of a section
Defendants' motions to dismiss are directed at the
allegations in the Complaint pleading two or more predicate
acts of mail fraud. The federal mail fraud statute reads as
"[w]hoever, having devised or intending to devise
any scheme or artifice to defraud, or for
obtaining money or property by means of false or
fraudulent pretenses, representations, or promises.
. . for the purpose of executing such scheme or
artifice or attempting so to do, places in any post
office or authorized depository for mail matter,
any matter or thing whatever to be sent or
delivered by the Postal Service . . . ." (18 U.S.C. § 1341
A showing of either intentional fraud or reckless
indifference to the truth is required, and "[a]cts done
inadvertently, mistakenly, or in good faith without an intent
to defraud do not satisfy the requirements of the statute"
(O'Malley v. New York City Transit Authority, 896 F.2d 704, 706
[2d Cir. 1990]). As was recently articulated by Chief Judge
Platt, the applicable standard in pleading mail fraud as a
predicate act under RICO is as follows:
"Mail fraud requires proof of (1) a scheme or
artifice to defraud or obtain money by means of
false pretenses, representations or promises; (2)
a use of the mails for the purpose of executing
the scheme; and (3) a specific intent to defraud
either by devising, participating in or abetting
the scheme. . . . to establish mail fraud the
plaintiffs must prove: 1) that the defendants
`caused' the mailing, i.e., acted `with knowledge
that the use of the mails will follow in the
ordinary cause of business, or where such use can
reasonably be foreseen, even though not actually
intended' . . ., and 2) that the mailing was for
the purpose of executing the scheme or, in other
words `incident to an essential part of the
scheme'. . . . " (Morrow v. Black, 742 F. Supp. 1199,
1205 [E.D.N.Y. 1990])
Further, "[i]t is the use of mail . . . in furtherance of the
scheme — not the fraudulent scheme itself — that is the
predicate act." (Lou v. Belzberg, 728 F. Supp. 1010
[S.D.N.Y. 1990]) Each separate use of the mail in furtherance
of the fraudulent scheme constitutes a separate predicate
racketeering act. (Beauford v. Helmsley, 865 F.2d 1386
[2d Cir. 1989] [en banc], vacated, 492 U.S. 914
, 109 S.Ct.
3236, 106 L.Ed.2d 584 , adhered to, 893 F.2d 1433
Cir. 1989], cert. denied, ___ U.S. ___, 110 S.Ct. 539
L.Ed.2d 537 .)
Allegations of the predicate act of mail fraud, which
necessarily includes the element of scienter, must pass muster
under Fed.R.Civ.P. 9(b), which requires that:
"In all averments of fraud . . ., the
circumstances constituting fraud . . . shall be
stated with particularity. Malice, intent,
knowledge, and other condition of mind of a person
may be averred generally."
One of the primary purposes of the specificity requirement of
Rule 9(b) "is to insure that the defendant receives fair notice
of plaintiff's claim, and is thus able to prepare a defense"
(Hutton v. Klabal, 726 F. Supp. 67, 72 [S.D.N.Y. 1989] [citing
Di Vittorio v. Equidyne Extractive Industries, Inc.,
822 F.2d 1242
, 1247 [2d Cir. 1987]]), as well as to protect a
defendant's reputation and to avoid strike suits (see Ross v.
Bolton, 904 F.2d 819
, 823 [2d Cir. 1990]; Philan Ins., Ltd. v.
Frank B. Hall & Co., 712 F. Supp. 339, 342 [S.D.N.Y. 1989];
United States v. Rivieccio, 661 F. Supp. 281, 290 [E.D.N Y
1987]). "These concerns are even more immediate in civil RICO
actions, because such suits `implicate the reputation interests
of defendants accused of committing racketeering offenses.'"
(Atlantic Gypsum Co., Inc. v. Lloyds International Corp.,
753 F. Supp. 505
, 512 [S.D.N.Y. 1990] [quotation omitted].)
"[F]actual allegations must give rise to a `strong inference'
that the defendants possessed the requisite fraudulent intent,"
which can be established by alleging "facts showing a motive
for committing fraud and a clear opportunity for doing so. . .
. [or] by identifying circumstances indicating conscious
behavior by the defendant, . . . though the strength of the
circumstantial allegations must be correspondingly greater"
(Beck v. Manufacturers Hanover Trust Co., 820 F.2d 46, 50 [2d
Cir. 1987] [citations omitted], cert. denied, 484 U.S. 1005,
108 S.Ct. 698, 98 L.Ed.2d 650 ;
accord Ouaknine v. MacFarlane, 897 F.2d 75, 80 [2d Cir. 1990]
["there must be some factual basis for conclusory allegations
Finally, if multiple defendants are involved in the alleged
fraud, it is especially important that the fraud be
particularized as to each one of them (see, e.g., Lou v.
Belzberg, supra, 728 F. Supp. at p. 1022; United States v.
Rivieccio, supra; Laterza v. American Broadcasting Co.,
581 F. Supp. 408, 413 [S.D.N.Y. 1984]).
B. The RICO Claim
Accepting the allegations of the Complaint as true, and
construing all reasonable inferences in the plaintiff's favor,
the Court finds that the Complaint fails to satisfy Rule 9(b)
with respect to its allegations of mail fraud.
The Complaint fails to set forth with any particularity the
fraudulent acts, statements or omissions made by the
defendants. Specifically, the Complaint fails to set forth with
any particularity the "false or fraudulent pretenses,
representations, or promises" which are the required elements
of a "mail fraud" predicate act. The Complaint (1) does
characterize the general purpose of the alleged fraudulent
scheme, i.e. to prevent the plaintiff from receiving her
appropriate share of the attorneys' fees, (2) does characterize
the general means by which the defendants allegedly defrauded
the plaintiff, i.e. by concealing settlements, forging estate
endorsements or failing to file closing statements with the
appropriate state authorities, and (3) does identify certain
"mail matter," i.e. Complaint, ¶ 58 (listing 32 mailings).
However, the Complaint (1) fails to set forth any specific
fraudulent acts, statements or omissions made by the
defendants, and (2) fails to describe how the mail matter
furthered or executed the defendants' scheme.
Although the Complaint identifies the general modus operandi
of the alleged fraud — concealing settlements, forging estate
endorsements or failing to file closing statements — the
Complaint does not identify a single fraudulent statement or
omission with regard to a single settlement document, estate
endorsement or closing statement relating to a particular civil
action. For example, while the Complaint contains the serious
charge that the defendants "forged endorsements or settlement
drafts," no particulars are set forth.
Since the Complaint fails to specify the "circumstances" of
the alleged fraud, it fails to comport with Rule 9(b).
(See, e.g., Official Publications, Inc. v. Kable News Co.,
692 F. Supp. 239, 244-46 [E.D.N.Y. 1988] [district court found that
simple, conclusory allegations of fraudulent practices through
the mails were insufficient to state a RICO mail fraud claim],
affirmed in part, reversed in part, 884 F.2d 664, 668 [2d Cir.
In sum, while the Complaint does allege a motive for the
defendants undertaking fraudulent activity — namely, a scheme
to deprive the Estate of Samuel Wiener of its rightful share of
fees due Wiener — and a "clear opportunity" for them to commit
fraud (see Beck v. Manufacturers Hanover Trust Co., supra, 820
F.2d at p. 49), there are no misrepresentations set forth from
which a fraudulent intent could be inferred. (Compare Ouaknine
v. MacFarlane, supra, 897 F.2d at pp. 80-81 [fraudulent intent
inferred from statements in offering memorandum and partnership
agreement]; Beck v. Manufacturers Hanover Trust Co., supra, 820
F.2d at p. 50 [fraudulent intent inferred from statements in
"valuation" of collateral and failure to make Hart-Scott-Rodino
Illustrative of the defect in the Complaint, it contains no
allegations of fraudulent misrepresentations to any carrier, to
any client or to Florence Wiener, as Executrix. Where the
Complaint describes certain routine business communications,
such as the "settlement draft," "fee check" or "check," "letter
enclosing general release," and "closing statement" as
fraudulent mailings, it fails to set forth a single fact in
support of such a conclusion. Innocuous business communications
are insufficient to lead to a reasonable inference of
fraudulent intent. (See O'Malley v. New York City Transit
Auth., supra, 896 F.2d at p. 707 [Court held that five letters
"routine, innocuous, business communications" did not provide
a factual basis for a conclusory allegation of intent to
defraud]; Atlantic Gypsum Co. v. Lloyds International Corp.,
supra, 753 F. Supp. at p. 513 ["Routine business communications
that show only a dispute between the parties do not lead to a
reasonable inference of fraudulent intent."].)
Stated simply, if the defendants did not pay the Estate the
shares of the fees agreed upon, this would possibly form the
basis for an action for breach of contract and/or moneys had
and received and/or conversion. To raise these basic causes of
action to a RICO claim requires the additional elements, among
others, of mail fraud, namely "false or fraudulent pretenses .
. . representations, or promises." (See 1A L. Sand, Modern
Federal Jury Instructions, ¶ 44.01, Instruction 44-3 at p. 44-7
) The Complaint does not contain any such specific
allegations and is therefore insufficient, as a matter of law.
Finally, while the Complaint alleges a RICO claim against all
of the defendants, it fails to particularize each defendant's
fraudulent activity. (See Lou v. Belzberg, supra, 728 F. Supp.
at p. 1024 [quoting Di Vittorio v. Equidyne Extractive
Industries, Inc., 822 F.2d 1242, 1247 [2d Cir. 1987]] ["In
addition to providing each defendant with a meaningful
opportunity to prepare his defenses, `the complaint should
inform each defendant of the nature of his alleged
participation in the fraud.'"].)
In sum, the predicate acts are not pled with sufficient
particularity as to the alleged mail fraud and as to each
defendant's participation, and therefore plaintiff's RICO
allegation fails to state a claim upon which relief can be
Since the Court finds that the plaintiff has failed to plead
two acts of "mail fraud" racketeering activity with the
requisite particularity so as to state a claim for relief under
RICO as to any defendant, the Court does not address the other
elements of the RICO claim alleged in the Complaint,
i.e. a "pattern" (see 18 U.S.C. § 1961 [at least two acts of
"racketeering activity, occurring within 10 years of each
other"]; H.J., Inc. v. Northwestern Bell Tel. Co.,
492 U.S. 229, 109 S.Ct. 2893, 2900, 106 L.Ed.2d 195  [emphasis in
original] ["to prove a pattern of racketeering activity a
plaintiff . . . must show that the racketeering predicates are
related, and that they amount to or pose a threat of continued
criminal activity"]; United States v. Alkins, 925 F.2d 541, 553
[2d Cir. 1991] ["the law of this circuit is that the acts that
constitute the pattern of racketeering activity must be related
and continuous or pose the threat of continuity"]) and an
"enterprise" (see 18 U.S.C. § 1961 [includes any
"individual, partnership, corporation, association, or other
legal entity, and any union or group of individuals associated
in fact although not a legal entity"]; United States v.
Turkette, 452 U.S. 576, 583, 101 S.Ct. 2524, 2528, 69 L.Ed.2d
246  [must prove "evidence of an ongoing organization,
formal or informal, and by evidence that the various associates
function as a continuing unit"]; Bennett v. United States Trust
Co., 770 F.2d 308, 315 [2d Cir. 1985], cert. denied,
474 U.S. 1058, 106 S.Ct. 800, 88 L.Ed.2d 776  [the "enterprise"
must be separate and distinct from the "person" sued under
Accordingly, the motions by the defendants to dismiss the
Fourth Claim alleging a RICO cause of action are granted.
C. The Pendent State Law Claims
The Court does not find any exceptional circumstances which
would require it to retain jurisdiction of the plaintiff's four
remaining causes of action which are state law claims. Since
the parties' citizenship is not diverse, the Court therefore
dismisses the four remaining state law claims for lack of
subject matter jurisdiction. (See West Hartford v. Operation
Rescue, 915 F.2d 92, 104 [2d Cir. 1990] [quoting United Mine
Workers v. Gibbs, 383 U.S. 715, 726, 86 S.Ct. 1130, 1139, 16
L.Ed.2d 218 (1966)] ["it is well settled that `if the federal
claims are dismissed before trial, even though not
insubstantial in a jurisdictional sense, the state claims
should be dismissed as well'"]; Ouaknine v. MacFarlane, supra,
at pp. 83-84 ["having determined that no exceptional
circumstances justified retaining the state-law claims alone,"
the district court did not abuse its discretion in dismissing
state law claims for lack of pendent jurisdiction after
dismissing RICO claim]; Hughes v. Patrolmen's Benev. Ass'n,
850 F.2d 876, 881 [2d Cir. 1988] ["[i]f, during the course of
trial, it becomes apparent that the federal claims are
discernibly meritless, both the federal and pendent state law
claims must be dismissed"], cert. denied, 488 U.S. 967, 109
S.Ct. 495, 102 L.Ed.2d 532 ; O'Brien v. Price Waterhouse,
740 F. Supp. 276, 284 [S.D.N.Y. 1990] ["As all of plaintiffs'
federal claims have been dismissed, the Court no longer has
jurisdiction over plaintiffs' state law claims"].)
The defendants' motions to dismiss the Complaint is granted,
without prejudice to the plaintiff filing an amended complaint
within thirty (30) days from the date of this Memorandum and
Order. (Branum v. Clark, supra, at 705 ["Certainly the court
should not dismiss without granting leave to amend at least
once when a liberal reading of the complaint gives any
indication that a valid claim might be stated"]; cf. Ronzani v.
Sanofi S.A., 899 F.2d 195
, 198 [2d Cir. 1990] [quoting 2A Moore
& Lucas, Moore's Federal Practice ¶ 12.14 at 12-99 [2d ed.
1989] ["[w]hen a motion to dismiss is granted, `the usual
practice is to grant leave to amend the complaint' . . . [and]
refusal to grant leave must be based on a valid ground"]].)
In the event the plaintiff does file an amended complaint,
her counsel should be alerted to a similar pleading defect in
the First Claim For Relief sounding in fraud. Nowhere in the
first cause of action are any specific facts set forth in
support of the claim of "implied and express representations"
as stated in Paragraph 35 of the Complaint.
In the event the plaintiff does not timely file an amended
complaint, the defendants shall submit an Order, on notice, for
the entry of Judgment in favor of the defendants.
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