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NU-LIFE CONST. v. BOARD OF EDUC.

December 2, 1991

NU-LIFE CONSTRUCTION CORP. AND TERMINATE CONTROL CORP., PLAINTIFFS,
v.
BOARD OF EDUCATION OF THE CITY OF NEW YORK, DIVISION OF SCHOOL BUILDINGS OF THE BOARD OF EDUCATION OF THE CITY OF NEW YORK, STUART HOROWITZ, STANLEY DOBROWOLSKI, JOHN TRAPANOTTO, JOHN J. MANFREDI, JOHN FRISONE, NICHOLAS E. BORG, AND DOES 1 THROUGH 20, DEFENDANTS.



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

MEMORANDUM DECISION AND ORDER

Despite the explosion of civil RICO litigation in recent years, the issue before the Court at this time has not yet been squarely addressed by the Second Circuit: Is a municipal corporation subject to civil liability under RICO based on an alleged pattern of racketeering activity and underlying predicate acts allegedly committed by its agents or employees?

PRELIMINARY STATEMENT

This is an action brought by the plaintiffs Nu-Life Construction Corp. ("Nu-Life") and Terminate Control Corp. ("Terminate"), pursuant to the Racketeer Influenced Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961-68, against the defendants Board of Education of the City of New York ("Board"), the Division of School Buildings of the Board ("DSB"), and various individual employees of each.

Presently before the Court is the motion of the Board and the DSB, pursuant to Fed.R.Civ.P. 12(b)(6), to dismiss the RICO claims contained in the second amended complaint for failure to state a claim upon which relief may be granted. This Court has twice before denied similar motions to dismiss brought on by the Board and the DSB. However, in light of recent appellate authority outside this Circuit, the Board and the DSB renew that motion and seek reconsideration of the Court's prior rulings.

For the reasons set forth below, the motion of the Board and the DSB is granted, and the RICO claims set forth in the second amended complaint are dismissed as against these defendants.

FACTUAL BACKGROUND

Since this motion is made pursuant to Fed.R.Civ.P. 12(b)(6), the allegations of the second amended complaint are accepted as true (see Bankers Trust Co. v. Rhoades, 859 F.2d 1096, 1098 [2d Cir. 1988], cert. denied, 490 U.S. 1007, 109 S.Ct. 1642, 104 L.Ed.2d 158 [1989]), and, in order to prevail, the defendants must demonstrate that under no interpretation of the facts alleged can the plaintiffs succeed (see Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 101-102, 2 L.Ed.2d 80 [1957]).

With these well-settled principles in mind, the Court turns to the allegations set forth in the second amended complaint. Although the question presented is purely one of law, an overview of the basic allegations is warranted.

During the years 1984 and 1985, Nu-Life and Terminate were each awarded contracts by the Board, through the DSB, for work in various public school facilities in New York City. Nu-Life received construction and maintenance contracts, and Terminate was awarded extermination and pestcontrol contracts. Each of the plaintiffs proceeded to perform under these contracts.

Both Nu-Life and Terminate allege that the Board and the DSB, through their respective agents and/or employees, repeatedly demanded that Nu-Life and Terminate pay illegal "kick-backs" in order to retain their contracts. The plaintiffs refused to make the demanded kick-back payments, and, as a result of their refusals, the Board and the DSB thereafter allegedly took retaliatory actions against them. Specifically, the plaintiffs allege that the Board and the DSB withheld payments and made complaints about the quality of the work performed by the plaintiffs.

Both Nu-Life and Terminate brought actions in state court alleging, inter alia, breach of contract and tortious interference. These actions are currently pending in New York State Supreme Court, Kings County. In fact, Justice Aaron D. Bernstein recently denied the defendants' motion for summary judgment in the Nu-Life action (see Nu-Life Construction Corp. v. Board of Ed. of the City of N.Y., N.Y.L.J., Oct. 3, 1991, p. 25, col. 5 [Sup.Ct. Kings County 1991]).

Nu-Life and Terminate also commenced this civil RICO action, alleging conspiracy to violate RICO as well as violations of RICO's substantive provisions (see 18 U.S.C. § 1962[c] & [d]).

The Board and the DSB now move, pursuant to Fed.R.Civ.P. 12(b)(6), to dismiss the RICO claims contained in the second amended complaint, on the ground that they, as municipal entities, are not subject to liability under the civil ...


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