The opinion of the court was delivered by: Telesca, Chief Judge.
Presently before the court are defendants' motions to dismiss
Counts VI and VII of plaintiff's complaint which allege
violations of 18 U.S.C. § 1962(a), (c) of the Racketeer
Influenced and Corrupt Organizations Act ("RICO"). For the
reasons discussed below, the defendants' motions are granted.
The facts of this case were extensively discussed in a prior
opinion of this court and therefore need only be briefly
recounted here. This action arose out of a broker customer
relationship between the plaintiff, a 71 year old widow, the
brokerage firm of Prudential-Bache, and one of its employees,
David Klass. The accounts which served as the basis of that
relationship (hereinafter referred to as the "Estate," "Margin"
and "Investment" accounts) were originally opened by the
plaintiff's husband and were under his exclusive control and
direction until the time of his death in July of 1986. Soon
after his death, the plaintiff, as the Executrix of her
husband's estate and sole legatee under his will, took
responsibility for those accounts and advised defendant Klass
that because she did not understand the securities market, she
would rely on him "to do the right thing" for her.
Plaintiff alleges, however, that between the fall of 1986 and
the fall of 1988, defendant Klass nonetheless "knowingly,
intentionally and without plaintiff's authorization and
knowledge," executed 90 purchase and sale securities
transactions for the Estate Account and 142 such transactions
for the Investment Account. All but six of these were confirmed
as "principal" transactions through a notice stating that: "We
sold to or bought from you for our own account as Principal."
Complaint at ¶¶ 23-29. The defendants did not disclose to the
plaintiff any interest or profit they may have had in these
In her original RICO count, plaintiff alleged that
defendants' conduct violated 18 U.S.C. § 1962(c), which
essentially prohibits any "person" "employed by or associated
with an enterprise" from conducting the affairs of that
enterprise through a pattern of racketeering activity. By
Decision and Order dated November 13, 1990, I dismissed this
count with leave to replead, holding that the "plain language
[of § 1962(c)] clearly envisions liability only where there is
a specified interaction between two entities, and that the same
defendant-`person' may therefore not serve in two roles at the
same time." Nundy v. Prudential-Bache, et al., slip op. at 15
(unpublished disposition); see also Official Publications, Inc.
v. Kable News Co., 884 F.2d 664, 668 (2d Cir. 1989).
In attempt to avoid this infirmity, the plaintiff has since
amended her § 1962(c) claim to allege a cause of action solely
against defendant Klass and has added a separate claim under §
1962(a) against defendant Prudential-Bache. The defendants now
move to dismiss these two counts.
1. Section 1962(a) Claim Against Prudential-Bache
Section 1962(a) provides, in relevant part:
It shall be unlawful for any person who has
received any income derived . . . from a pattern of
racketeering activity . . . to invest . . . such
income . . . in the acquisition . . ., . . .
establishment or operation of . . . any enterprise
which is engaged in . . . interstate . . .
18 U.S.C. § 1962(a) (emphasis added).
Relying on the language of the statute, Prudential-Bache
argues initially that plaintiff's § 1962(a) claim must fail
because it alleges that Prudential-Bache is both the "person"
who received racketeering income and the "enterprise" into
which such income was invested. I find this argument
unavailing. Although the Second Circuit has yet to rule on this
issue, the majority of circuits that have done so have held
that a corporate-"enterprise" may be held liable under
subsection (a) when it also acts as a perpetrator of the
alleged predicate acts. See, e.g., Yellow Bus Lines,
839 F.2d 782, 790 (D.C.Cir. 1988), reh'g denied, en banc (D.C.Cir.
1988), cert. denied, 488 U.S. 926, 109 S.Ct. 309, 102 L.Ed.2d
328 (1989); Haroco v. Amer. Nat. Bank & Trust Co. of Chicago,
747 F.2d 384, 402 (7th Cir. 1984), aff'd on other grounds,
473 U.S. 606, 105 S.Ct. 3291, 87 L.Ed.2d 437 (1985); see generally
Solovy, et. al., Current Issues in Civil RICO Litigation, at
33 (1989). These courts have reasoned, and I agree, that such a
construction of § 1962(a) is consistent both with the overall
framework of the RICO statute, as well as the terms of the
provision itself which, unlike subsection (c), contain no
language suggesting that the "person" and the "enterprise" must
be separate. See Schofield v. First Commodity Corp. of Boston,
793 F.2d 28, 31-32 & n. 2 (1st Cir. 1986);
The defendant alternatively argues that the plaintiff has
also failed to plead the type of special racketeering injury
necessary to sustain a cause of action under § 1962(a). I find
this argument more persuasive. Under the plain language of the
RICO statute, a plaintiff alleging a violation of § 1962(a)
must demonstrate that she suffered an "injury `by reason of'
defendant['s] investment of racketeering income in an
enterprise," and not merely as a result of defendant's
participation in the
predicate acts themselves. Ouaknine v. MacFarlane, 897 F.2d 75,
83 (2d Cir. 1990) (emphasis ...