OPINION AND ORDER
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
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. § 1962(b), which provides that:
It shall be unlawful for any person through a
pattern of racketeering activity . . . to acquire
or maintain, directly or indirectly, any interest
in or control of any enterprise which is engaged
in, or the activities of which affect, interstate
or foreign commerce.