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WIENER v. NAPOLI

August 10, 1991

FLORENCE WIENER, AS EXECUTRIX OF THE ESTATE OF SAMUEL WIENER, PLAINTIFF,
v.
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.

OPINION AND ORDER

The defendants' motion to dismiss the amended complaint in this case raises the 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 Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961-1968. Taking the allegations of the amended complaint as true for the purposes of these motions, and for the reasons discussed below, the Court finds that the plaintiff has sufficiently pled two predicate acts of "mail fraud" racketeering activity as well as two acts of bank fraud with the requisite particularity so as to state a claim for relief under RICO. Therefore, the defendants' motions to dismiss the amended complaint are denied.

I. PRELIMINARY STATEMENT

A description of the factual background of this action is set forth in detail in this Court's memorandum decision, which ruled on the parties' earlier motions to dismiss the complaint (see Wiener v. Napoli, 760 F. Supp. 2 [E.D.N.Y. 1991]). At that time, the defendants moved to dismiss on the grounds, inter alia, that the plaintiff had failed to plead fraud with the requisite particularity and that the alleged RICO violation failed to state a claim upon which relief could be granted. The defendants, Joseph P. Napoli, Esq. and Morris J. Eisen & Joseph P. Napoli also moved 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 state law claims could not be sustained by pendent jurisdiction. The Court agreed with the defendants and dismissed the complaint, without prejudice to the plaintiff filing an amended complaint within thirty (30) days. The plaintiff's amended complaint is now before the Court.

II. FACTUAL BACKGROUND

Although set forth at length at 760 F. Supp. 278, the Court briefly reiterates only those facts relevant to the instant motions to dismiss.

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. By letter agreement, Wiener retained defendant Napoli as trial counsel in a number of civil actions and made specific arrangements for fees and disbursements. The amended complaint 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 Samuel Wiener's estate, retained Napoli and the other defendants as attorneys in a substantial number of additional cases. The plaintiff alleges that the defendants took advantage of a personal and confidential relationship with her as Executrix of her husband's estate, and that such a violation constituted a breach of fiduciary duty as well as a fraudulent scheme to cheat and defraud the plaintiff of monies belonging to the Estate of Samuel Wiener. According to the plaintiff, this scheme was effectuated through racketeering activities prohibited by 18 U.S.C. § 1961-1968 which included acts of mail fraud (18 U.S.C. § 1341) and bank fraud (18 U.S.C. § 1344). The object of this racketeering activity was to obtain by fraudulent means certain fees and disbursements due to the estate from the settlement of cases for which the defendants provided legal representation after Samuel Wiener's death.

The amended complaint provides, in part, as follows:

  "¶ 29. After the transfer of the files, and pursuant to the
  fraudulent scheme and racketeering activities set forth herein,
  defendants committed the following acts, concealments and
  breaches, without limitation:
    (a) A continuing failure to advise of settlements or
  recoveries and resulting failure to remit fees and
  disbursements due or to remit fees in proper amounts.
  Defendants had a duty to so advise and remit fees both under
  the confidential relationship between the parties and by
  reason of the covenant of good faith implied into the fee
  arrangements. This act was committed by all of the
  defendants. For example, no status has been provided on the
  following matters since transfer: . . . (list of affected
  clients follows) . . .
    (b) The forging of estate endorsements upon settlement drafts
  made payable to one or more of the defendants and the Estate
  of Samuel Wiener. One known example of forged endorsements
  upon settlement drafts made payable to `M. Eisen & S. Wiener'
  is in connection with a matter entitled `V. Jones v. The City
  of New York.' The City issued two payment warrants in
  settlement of the case, both payable to `M.J. Eisen & S.
  Wiener' in 1987. Both drafts (nos. 758453 and 758462) are
  endorsed by `Morris J. Eisen' and `Sam Wiener,'
  notwithstanding

  that decedent was deceased approximately five years at the
  time. Plaintiff was never presented said drafts for
  endorsement and has never received the estate's portion of
  the fee and disbursement, due and owing.
    (c) By advising prospective settlement defendants that
  settlement drafts should be made out only to EISEN, P.C. and
  that hold harmless agreements would be provided as to any
  claim that the WIENER Estate may have against the settlement
  proceeds. One known specific instance pertains to the matter
  entitled `Haber v. Carlma Associates' where Eisen, P.C.
  agreed to hold harmless Crum & Forster Commercial Insurance
  from any attorney lien which may be asserted by the estate
  from the settlement of said case. Said agreement is confirmed
  by Crum & Forster to defendants pursuant to Crum & Forster's
  letter of September 11, 1990 to Mr. Chris Caputo, `Morris J.
  Eisen, Attorneys' . . .
    (e) By preparing, mailing and filing closing statements of
  cases which understated the fees due to the estate. This act
  was performed by EISEN, P.C. under the direction of NAPOLI
  and EISEN. Examples of this practice are contained in closing
  statements obtained from Eisen, P.C. concerning the `Quinones
  v. Pepsico' matter, the `Patricia Crispino' matter, the
  `Philip Schultz v. Daniels' matter, the `Ancona v. Cohen'
  matter and many other matters.
    (f) By failing to file closing statements with the New York
  State Office of Court Administration in an effort to conceal
  the terms of settlements and fees due the WIENER Estate. This
  act was performed by EISEN, P.C., the law offices of EISEN &
  NAPOLI, and EISEN and NAPOLI as partners, individually,
  depending on what entity handled a particular matter.
  Examples of this are the `Virginia Faro v. DiBenedetto'
  matter, the `Faustein v. Dendy' matter, the `Lescaille v. 360
  Bedford Market, Inc.' matter, and others unknown at this time
  . . . ."

The amended complaint sets forth five claims for relief: (1) RICO, 18 U.S.C. § 1962(c) [including mail fraud and bank fraud]; (2) common law fraud; (3) accounting and constructive trust; (4) monies had and received; and (5) breach of contract. In contrast to the original complaint, the plaintiff has set forth specific factual allegations in support of these claims, an example of which is cited below.

A. Acts of Mail Fraud

  "¶ 35. 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:
    (A) Melvina Smith, Administratrix of the Estate of Valeane
  Jones v. The City of New York
    (a) Pursuant to agreement in August 1982, defendant NAPOLI
  agreed to share with SAMUEL WIENER the fees on the
  above-noted matter on a 50-50 basis. Said agreement was on
  behalf of himself and all of the defendants.
    (b) In furtherance of the agreement, the matter was handled
  by MORRIS J. EISEN & JOSEPH P. NAPOLI.
    (c) Upon resolution of the matter, the Honorable Marie M.
  Lambert, Surrogate, New York County, issued a `Decree
  Authorizing Compromise and Settling Account,' dated October
  26, 1984, which specifically ordered that the defendant City
  of New York pay to `Morris J. Eisen, P.C.' and `Samuel
  Wiener,' attorneys for plaintiffs, the sums of $1,894.13 in
  disbursements and $12,701.96 in fees.
    (d) Pursuant to said decree, the City of New York issued its
  payment draft nos. 758453 and 758462 to `M.J. Eisen & S.
  Wiener' about July 10, 1987.
    (e) As set forth more fully in paragraph 29(b) supra, and
  paragraphs 43-49, infra, said drafts were never presented
  for endorsement to the Estate and no payment made to the
  Estate for fees due.
    (f) As set forth more fully in the complaint at ¶¶ 29(b) and
  43-49, said endorsement of `S. Wiener' was forged by
  defendants.
    (g) Upon information and belief, in furtherance of said
  fraud, defendant NAPOLI mailed or caused to be mailed a
  closing statement to both the client, Melvina Smith, and to
  the Office of Court Administration which falsely stated that
  a fee in the amount of $4,233.99 was paid to the Estate. Said
  mailing and fraudulent statement was intended as a cover-up
  of the nonpayment to the Estate in order to falsely represent
  compliance with the order of Surrogate Lambert and a settling
  of account to the client.
    (h) The information upon which said belief is based as to
  NAPOLI's mailing of the fraudulent matter is a series of
  documents obtained from defendants' offices which include a
  closing statement prepared on behalf of `Morris J.
  Eisen/Joseph P. Napoli, Esqs.' which states a copy was
  forwarded to the client on August 31, 1987, and an affidavit
  dated August 31, 1987 for Joseph P. Napoli's signature for
  submission to the Office of Court Administration in
  connection with the late filing of a retainer statement."

In all, plaintiff cites seventeen instances of similar alleged acts of mail fraud. Thereafter, the amended complaint alleges the following:

    "42. Those uses of the mail constituted a pattern of
  racketeering activity by the repeated presentation of checks
  to plaintiffs representing underpayment, misrepresentations
  that the underpayments were the Estate's actual share of
  fees, requests by defendants for and receipt of settlement
  drafts and funds from insurance companies, which failed to
  account for the Estate's interest in the settlement proceeds,
  defendants' use of the mails to forward closing statements
  which misrepresented that payments were made when they in
  fact were not, and defendants' causing the use of mails
  setting forth the terms of and, ...

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