United States District Court, Southern District of New York
August 14, 1991
METRO FURNITURE RENTAL, INC., PLAINTIFF,
MICHAEL ALESSI, DAVID JACOBSON, BUCHBINDER STEIN TUNICK & PLATKIN, CHEMICAL BANK, AND JOHN DOES NO. 1-10, DEFENDANTS.
The opinion of the court was delivered by: Robert P. Patterson, Jr., District Judge.
OPINION AND ORDER
This is an action alleging violations of the Racketeer
Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961
et seq., with pendent claims for breach of contract,
accountant malpractice, breach of
fiduciary duty, fraud and conversion. The action, filed in
state court on October 26, 1990, was removed to this Court in
November 1990 by defendant Buchbinder Stein Tunick & Platkin
("Buchbinder"), an accounting firm, with the consent of
defendant Chemical Bank. Defendant Michael Alessi ("Alessi")
now moves to remand the action to state court. Chemical Bank
("Chemical") and Buchbinder move pursuant to Rules 9(b) and
12(b)(6) of the Federal Rules of Civil Procedure to dismiss the
complaint. For the reasons set forth below, Alessi's motion is
denied and Chemical's and Buchbinder's motions are granted in
part. The pendent claims are remanded sua sponte.
From January 1988 through July 1990 Alessi was president of
Metro Furniture Rental, Inc. ("Metro"), a New York corporation.
The complaint alleges that during this period Alessi conspired
with David Jacobson ("Jacobson"), allegedly employed not as a
teller, cashier or officer but as a vault manager at a Chemical
Bank branch located in Forest Hills, Queens (Complaint ¶ 10),
to defraud Metro of over $430,000. Alessi allegedly wrote
hundreds of checks drawn on Metro's accounts at the Bank of New
York and Manufacturer's Hanover Trust Company. As Metro's
president, Alessi was an authorized signatory for these
accounts. The checks were made payable to cash and to Alessi
himself, Jacobson and other persons including fictitious
parties. Plaintiff claims none of the checks represented actual
obligations owed to the payees and that the proceeds of these
checks were never paid to those persons. Over several years,
Alessi allegedly hand-delivered checks at regular intervals to
Jacobson at Chemical Bank. Jacobson is alleged to have given
the messenger envelopes containing cash in return. Complaint ¶¶
The complaint also alleges that Alessi wrongfully charged
Metro over $24,000 for the cost of a car and monthly parking
expenses. Complaint ¶¶ 24-25.
Plaintiff further claims that Buchbinder, retained by Metro
in January 1989 to audit Metro's management-prepared financial
statements for 1988, negligently failed to detect Alessi's
scheme, which at that time had resulted in the embezzlement of
over $80,000. Plaintiff claims that as a result of Buchbinder's
negligence, Alessi's scheme continued undetected until July
1990 allowing Alessi to embezzle an additional $350,000.
1. Motion to Remand
In support of his motion to remand this action to state
court, defendant Alessi claims he did not join in the removal
petition filed by Buchbinder and never consented to the
removal. The unanimous consent of all defendants in a
multiparty case is normally a precondition to removal. See
Nannuzzi v. King, 660 F. Supp. 1445, 1447 (S.D.N.Y. 1987).
However, when a nonconsenting defendant seeks by motion to
remand the action to state court due to a defect in the removal
procedure, he must do so within 30 days of the filing of the
notice of removal. 28 U.S.C. § 1447(c) (1988).
Buchbinder filed its notice of removal on November 15,
1990.*fn1 Alessi filed an answer on December 26, 1990 and
filed his motion to remand on December 27, 1990. Because
Alessi's motion to remand was brought more than 30 days after
the notice of removal was filed, the motion to remand is denied
2. Motions to Dismiss
A complaint should not be dismissed under Rule 12(b)(6) for
failure to state a claim 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. See Conley v. Gibson,
355 U.S. 41
, 45-46, 78 S.Ct. 99, 101-02, 2 L.Ed.2d 80
(1957). When passing on a motion to dismiss, the court must
accept the allegations in the complaint as true and construe
them in favor of the pleader. See Scheuer v. Rhodes,
416 U.S. 232
, 236, 94 S.Ct. 1683, 1686, 40 L.Ed.2d 90 (1974); Cruz v.
Beto, 405 U.S. 319
, 322, 92 S.Ct. 1079, 1081, 31 L.Ed.2d 263
a. RICO (Count I)
Plaintiff's RICO claim suffers from a number of deficiencies.
The claim rests on predicate acts of mail and wire fraud
alleged to consist of:
"(i) documentary and oral misrepresentation as to
the purpose for which checks were drawn by Alessi
and cashed by Jacobson and Chemical Bank;
(ii) documentary and oral communications regarding
the delivery of the checks to Jacobson and
Chemical Bank to be negotiated; and
(iii) documentary and oral misrepresentations
regarding the [Buchbinder] audit."
Complaint ¶ 42.
Where the predicate acts of a RICO claim sound in fraud, Rule
9(b) requires that "the circumstances constituting fraud . . .
be stated with particularity." Fed. R.Civ.P. 9(b). See Morin v.
Trupin, 711 F. Supp. 97, 111 (S.D.N.Y. 1989). See also Ruff v.
Genesis Holding Corp., 728 F. Supp. 225, 230 (S.D.N.Y. 1990)
("the pleading of alleged mail and wire fraud is wholly
inadequate, as it fails to indicate when, where and how these
acts occurred and by whom they were committed").
Rule 9(b) serves three important purposes: first, to give the
defendant fair notice of the claims against it and the grounds
therefor; second, to protect a defendant from the harm that
would befall its goodwill when it is charged with serious
wrongdoing; and third, to diminish the possibility that a
plaintiff with a largely groundless claim will succeed in using
the threat of extensive discovery to impose an in terrorem
increase on the settlement value. Ross v. A.H. Robins Co.,
607 F.2d 545, 557 (2d Cir. 1979), cert. denied, 446 U.S. 946, 100
S.Ct. 2175, 64 L.Ed.2d 802 (1980), reh'g denied, 448 U.S. 911,
100 S.Ct. 3057, 65 L.Ed.2d 1140 (1980). See Philan Ins. Ltd. v.
Frank B. Hall & Co., 712 F. Supp. 339, 342 (S.D.N.Y. 1989).
Metro has failed to comply with Rule 9(b) by specifying the
time, place, speaker and content of the "misrepresentations"
and "communications" alleged to constitute mail and wire fraud.
At most, the complaint states that Alessi telephoned Jacobson
at Chemical prior to delivering checks for cashing. Complaint
¶ 21. Metro's principal place of business is in Manhattan and
Jacobson worked at a Chemical Bank branch in Queens. Where the
parties are New York residents, it may be presumed that calls
made between them were intrastate calls which cannot constitute
wire fraud under 18 U.S.C. § 1343. See McCoy v. Goldberg,
748 F. Supp. 146, 154 (S.D.N.Y. 1990); Utz v. Correa, 631 F. Supp. 592,
595-96 (S.D.N.Y. 1986).
The second deficiency in plaintiff's RICO claim is that it
fails to allege any facts demonstrating a knowing agreement
involving each of the defendants to commit at least two
predicate acts. See Hecht v. Commerce Clearing House, Inc.,
897 F.2d 21, 26 n. 4 (2d Cir. 1990) ("the complaint must allege
some factual basis for a finding of a conscious agreement among
the defendants"). For example, although Buchbinder is named as
a RICO conspirator, no facts are alleged in the complaint
showing that Buchbinder participated in any agreement that may
have existed between Alessi and Jacobson.
Finally, respondeat superior has been rejected as a basis for
imposing liability on a party such as Chemical Bank under RICO.
Judge McKenna in Kahn v. Chase
Manhattan Bank, N.A., 760 F. Supp. 369 (S.D.N.Y. 1991), found
the independent acts of a bank employee not acting in the
bank's interest in accepting checks fraudulently endorsed by a
securities broker for deposit into the broker's personal
account at the bank insufficient to subject the bank to RICO
liability. Id. at 372-73 (collecting cases). The court in Kahn
rejected plaintiff's respondeat superior theory where, as here:
There is no allegation in the complaint that any
employee or officer other than [the participating
employee] knew of or was involved in this
activity, that the acceptance of the checks
reflected a corporate policy of [the bank] or that
[the bank] did or could have benefited from [the
Id. at 372. Cf. Amendolare v. Schenkers Int'l Forwarders, Inc.,
747 F. Supp. 162
, 169 (E.D.N.Y. 1990) ("substantial evidence"
that union officials were directly involved in both RICO
conspiracy and predicate acts supported vicarious liability of
union). Metro's alternative argument — that Chemical can be
held liable under RICO because its agent Jacobson acted with
apparent authority in cashing the checks — is inapplicable.
The court in Amendolare specifically warned that applying the
agency doctrine of apparent authority "against passive entities
that have been victimized by low-level employees," would not
serve to promote RICO's policy objectives aimed at eliminating
the infiltration of legitimate businesses by organized crime.
Accordingly, plaintiff's RICO claim in Count I of the
complaint is dismissed.
b. Pendent Claims
Where the federal claims have been dismissed in a case which
was removed from state court, a district court has discretion
to remand the remaining pendent claims sua sponte upon a proper
determination that retaining jurisdiction over the case would
be inappropriate. See Carnegie-Mellon Univ. v. Cohill,
484 U.S. 343
, 357, 108 S.Ct. 614, 622, 98 L.Ed.2d 720 (1988); Baylis v.
Marriott Corp., 843 F.2d 658
, 665 (2d Cir. 1988) (citing
Carnegie-Mellon). Plaintiff's federal claim having been
dismissed and there being no basis for diversity jurisdiction
over the remaining claims of plaintiff, retaining jurisdiction
over this action would be inappropriate. See United Mine
Workers v. Gibbs, 383 U.S. 715
, 726, 86 S.Ct. 1130, 1139, 16
L.Ed.2d 218 (1966) ("Needless decisions of state law should be
avoided . . . . Certainly, if the federal claims are dismissed
before trial, . . . the state claims should be dismissed as
well."). Accordingly, Buchbinder's and Chemical's motions to
dismiss the state claims are denied and this action is remanded
to Supreme Court of the State of New York, County of New York.
This case is ordered closed.
IT IS SO ORDERED.