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October 7, 1991


The opinion of the court was delivered by: Edelstein, District Judge:


In this damages action, Official Publications, Inc. ("Official") seeks to recover for injuries it allegedly sustained as a result of defendants' fraudulent business practices. Official bases its complaint upon both state law and the federal RICO statute.


Official is a publisher of magazines for distribution and sale to the public. Kable News Company, Inc. ("Kable"), a distributor of magazines, entered into a series of exclusive agreements with Official under which Kable agreed to distribute Official's publications. The two most recent agreements, enacted in 1974 and 1980, allowed Kable to grant certain wholesalers special allowances, for which Official then had to compensate Kable. The agreements also called for Kable to submit to Official individual monthly statements for each magazine title it distributed; these statements provided various financial sales data. When Kable changed the statement format in 1984, Official supposedly discovered that Kable had granted its customers, who were wholesalers, allowances in excess of that permitted by the 1974 and 1980 agreements. Official alleges that Kable then charged these discounts to its account, which reduced profits. Official's "allowance" claim is based on such charges.

Official has also asserted a "service fee" claim. It claims that Kable reduced its bills to certain wholesalers, charged the wholesalers a service fee and also charged Official for the initial discount without accounting for the service fee. Official contends that defendants Daniel Friedman ("Friedman") and Alfred W. Holpp, Jr. ("Holpp"), Kable's principal officers, designed and implemented this fraudulent scheme.

After amending its complaint, Kable asserted claims under the Robinson-Patman Price Discrimination Act, the Racketeer Influenced and Corrupt Organizations Act ("RICO"), the Mail Fraud Act, the Wire Fraud Act and also sued for breach of contract and common law fraud. By Order dated August 4, 1988, this Court granted Kable's motion to dismiss because Official lacked standing on its Robinson-Patman Act claim and because it failed to plead fraud with specificity as required by Federal Rule of Civil Procedure 9(b). Official's failure to comply with Rule 9(b) led to a dismissal of all fraud charges and the RICO claim, which relied on predicate acts involving fraud. Finally, this Court dismissed Official's claim under section 1962(c) of the RICO statute because Kable, which was the sole defendant in the initial action, could not be both a "person" and an "enterprise" under the statute. See Official Publications, Inc. v. Kable News Co., 692 F. Supp. 239 (S.D.N.Y. 1988), aff'd in part and rev'd in part, 884 F.2d 664 (2d Cir. 1989). On appeal, the Second Circuit upheld this Court's finding that plaintiff lacked standing to sue under the Clayton Act and also affirmed the Section 1962(c) ruling, but granted Official leave to replead its fraud claims. See Official Publications, Inc. v. Kable News Co., 884 F.2d 664, 670 (2d Cir. 1989). Official has now filed a second amended complaint, in which it has alleged RICO, mail and wire fraud violations, and also has asserted state law claims for breach of contract, fraud, accounting and punitive damages.

The defendants have moved for judgment on the pleadings pursuant to Federal Rule of Civil Procedure 12(c), for summary judgment under Rule 56(b) and to strike Official's jury demand pursuant to Rule 38. Defendants' Rule 12(c) motion is denied in part and granted in part. The Rule 56(b) motion is denied. The Rule 38 motion is moot.

I. The Rule 12(c) Motion

The defendants have moved pursuant to Rule 12(c) for judgment on the pleadings as to Official's RICO claim. In so moving, the defendants have not referred, and this Court has not considered, materials outside the pleadings; therefore, the 12(c) motion is not treated as one for summary judgment. See Ad-Hoc Comm. of the Baruch Black and Hispanic Alumni Ass'n, 835 F.2d 980, 982 (2d Cir. 1987). On the 12(c) motion, the defendants assert that Official failed to state a RICO cause of action. Rule 12(h)(2) permits a party to assert a defense of failure to state a claim upon which relief can be granted after the pleadings have closed in the form of a 12(c) motion. See id.; 5A C. Wright & A. Miller Federal Practice & Procedure § 1367, at 515-16 (1990).

In assessing such a defense, courts employ the 12(b)(6) standard. See Ad-Hoc Committee, 835 F.2d at 982. Under a Rule 12(b)(6) standard, courts "view all facts and allegations in the complaint in the light most favorable to" the plaintiff. Juster Associates v. City of Rutland, 901 F.2d 266, 269 (2d Cir. 1990). Moreover, courts must liberally construe allegations in the complaint and deny the motion "`unless it appears beyond doubt that the plaintiff can prove no set of facts in support of [her] claim which would entitle [her] to relief.'" Rauch v. RCA Corp., 861 F.2d 29, 30 (2d Cir. 1988) (quoting Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 101-02, 2 L.Ed.2d 80 (1957)). In addition, the Supreme Court has consistently rejected a narrow interpretation of pleading under the RICO statute. See H.J. Inc. v. Northwestern Bell Tel. Co., 492 U.S. 229, 235-36, 109 S.Ct. 2893, 2898-99, 106 L.Ed.2d 195 (1989); Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 105 S.Ct. 3275, 87 L.Ed.2d 346 (1985); Sperber v. Boesky, 849 F.2d 60, 63 (2d Cir. 1988).

A. 18 U.S.C. § 1962(a)

The defendants allege that Official has failed to state a claim under 18 U.S.C. § 1962(a). Section 1962(a) provides that:

  It shall be unlawful for any person who has
  received any income derived, directly or
  indirectly, from a pattern of racketeering
  activity . . . to invest, directly or indirectly,
  any part of such income, or the proceeds of such
  income, in the acquisition of any interest in, or
  the establishment or operation of, any enterprise
  which is engaged in, or the activities of which
  affect, interstate or foreign commerce.

18 U.S.C. § 1962(a) (1990).

The Second Circuit has stated that "to state a claim under § 1962(a), a plaintiff must allege injury from the defendants' investment of racketeering income in an enterprise." Ouaknine v. MacFarlane, 897 F.2d 75, 83 (2d Cir. 1990); see also Vista Co. v. Columbia Pictures Indus., Inc., 725 F. Supp. 1286, 1299 (S.D.N.Y. 1989) (investment of racketeering income in defendants' general business operations does not state a § 1962(a) claim); In re Gas Reclamation, Inc. Sec. Litig., 659 F. Supp. 493, 511 (S.D.N.Y. 1987) (same). In its second amended complaint, Official alleges that the defendants invested racketeering income in the criminal enterprise that injured Official. This allegation, while hardly laden with detail, satisfies the Ouaknine court's pleading requirement and thus states a claim under § 1962(a).

B. 18 U.S.C. § 1962(b)

The defendants assert that Official has failed to state a claim under 18 U.S.C. ยง ...

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