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PATRICK CARTER v. RENT STABILIZATION
December 13, 1991
PATRICK CARTER ASSOCIATES, INC., PLAINTIFF,
RENT STABILIZATION ASSOCIATION OF N.Y.C., INC., ASSOCIATION PROGRAM INSURANCE CONSULTANTS, INC., JOHN J. GILBERT, III, SHELDON FACTOR, ROBERT H. SMITH AND MORRIS OPPMAN, DEFENDANTS.
The opinion of the court was delivered by: William C. Conner, District Judge:
Plaintiff Patrick Carter Assocs., Inc. brings this action for
damages pursuant to 28 U.S.C. § 1331 and the Racketeer
Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1964,
and under the Court's pendent jurisdiction for common law
fraud, breach of contract, interference with contractual
relations and quantum meruit against Rent Stabilization
Association of N.Y.C., Inc. ("RSA"), its President John J.
Gilbert, III, and its Director of Finance, Sheldon Factor,
Association Program Insurance Consultants, Inc. ("APIC"), and
its officers, Robert H. Smith and Morris Oppman. By order dated
November 28, 1990, this Court dismissed the Complaint in this
action, but allowed repleading. On January 11, 1992, plaintiff
served an Amended Complaint. Defendants RSA, Gilbert, and
Factor bring this motion for summary judgment pursuant to Rule
56, Fed.R.Civ.P., to dismiss the Amended Complaint contending
that it is clear on the record that the RICO predicates (acts
of mail fraud) and the other elements of RICO cannot be
Defendant RSA is an incorporated real estate industry
association whose members and associate members include the
great majority of landlords of rent-stabilized apartments in
New York City. Defendant APIC is a Florida corporation which
was hired as an insurance consultant by RSA during the relevant
time period. Plaintiff alleges that in December, 1987, Oppman,
an officer of APIC, sought plaintiff's assistance in developing
and implementing a group health insurance plan for RSA members
and associate members. Am. Complaint at ¶ 12. At a meeting held
in May 1988, APIC representatives Oppman and Smith suggested
that plaintiff develop a group health plan for RSA's members
and associate members which was acceptable to RSA and APIC and
at no cost to RSA or APIC. Am. Complaint at ¶ 15. Plaintiff and
APIC further agreed to divide equally the administrative fees
to be charged to program subscribers. At a July 1988 meeting,
defendants Factor and Gilbert, respectively, RSA's Director of
Finance and President, allegedly confirmed this agreement with
plaintiff's president. Am. Complaint at ¶ 18. They are also
alleged to have agreed that RSA would pay the initial
development and start-up costs of the plan and reimburse
plaintiff and APIC for all advances in relation thereto. Am.
Complaint at ¶ 18.
Plaintiff thereafter developed and implemented a group health
insurance program which resulted in Empire Blue Cross/Blue
Shield ("Blue Cross") issuing a group health insurance policy
in RSA's name (the "Plan"), effective September 1, 1989. Am.
Complaint at ¶¶ 19, 22. Under the Plan, eighty percent of the
premium collected from program subscribers was to be remitted
to Blue Cross and the remaining twenty percent was to be
retained by RSA, subject to payment to Blue Cross if the
premium amounts remitted to Blue Cross were insufficient to
meet claims and Blue Cross expenses. Am. Complaint at ¶ 19.
Plaintiff was designated administrator in accordance with the
parties' agreement. Plaintiff's duties included collecting
premiums as well as a $20.00 per month administrative fee from
each subscriber. The $20.00 fee was to be divided equally
between plaintiff and APIC after payment of administrative
expenses pursuant to plaintiff's agreement with the defendants.
Am. Complaint at ¶¶ 20-21.
Plaintiff acted as Plan administrator for two months. In the
course of an October 27, 1989 meeting, Factor and Gilbert
requested plaintiff to remit to RSA the monies from the premium
account and loss reserve account which plaintiff had collected
as administrator. Plaintiff refused to comply with their
request. Am. Complaint at ¶¶ 24-25.
By letter dated November 1, 1989, Gilbert directed plaintiff
to transmit to RSA all funds in plaintiff's custody regarding
the RSA Group Health Insurance Plan which plaintiff had
collected as administrator, along with a statement listing the
amounts paid by each subscriber. Am. Complaint at ¶ 26. In a
letter dated November 1, 1989, plaintiff reiterated its refusal
to transmit the funds and transmitted instead to Blue Cross
what it estimated to be the premiums it presently held. Am.
Complaint at ¶ 27. In a letter dated November 2, 1989, RSA
terminated plaintiff's position as administrator, effective
immediately. Am. Complaint at ¶ 28. In a letter dated November
6, 1989, APIC also terminated plaintiff's position on the basis
of plaintiff's transfer of funds to Blue Cross without RSA's
approval. Am. Complaint at ¶ 29. RSA thereafter informed Blue
Cross that plaintiff no longer administered the program and on
or about November 10, 1989, RSA sent bills to Plan subscribers
directing them to send their premium payments directly to RSA.
Am. Complaint at ¶¶ 30-31. Plaintiff claims not to have
received any portion of the administrative fees collected while
it acted as administrator of the plan or subsequent to its
dismissal (Carter Affidavit ¶ 24). Further, plaintiff claims
that it has not been reimbursed for any portion of the $48,000
in developmental and start-up costs it advanced (Id.).
Plaintiff charges that in and around early 1988, defendants
entered into a conspiracy whereby they would retain plaintiff,
at no cost, to develop a health insurance plan for RSA's
members and associate members and thereafter divide the
administrative fee charged each subscriber among themselves.
Plaintiff alleges that defendants' representations regarding
the division of administrative fees, the reimbursement of
expenses, and plaintiff's role as administrator of the Plan
were false and known to be false when made. Plaintiff alleges
that in the course of and in furtherance of defendants' scheme
to defraud the plaintiff, defendants engaged in acts of mail
and wire fraud in violation of 18 U.S.C. § 1341 and 1343,
which taken together constitute racketeering activity in
violation of 18 U.S.C. § 1962.
Defendant argues that, based on undisputed facts and on a
lack of factual support for allegations added to the Amended
Complaint, plaintiff's Complaint shows neither mail fraud nor
The Standard for Summary Judgement
A party seeking summary judgment must demonstrate that "there
is no genuine issue as to any material fact." Fed. R.Civ.P.
56(c); Knight v. U.S. Fire Ins. Co., 804 F.2d 9, 11 (2d Cir.
1986), cert. denied, 480 U.S. 932, 107 S.Ct. 1570, 94 L.Ed.2d
762 (1987). "When the moving party has carried its burden under
Rule 56(c), its opponent must do more than simply show that
there is some metaphysical doubt as to the material facts."
Matsushita Electrical Indus. Co. v. Zenith Radio Corp.,
475 U.S. 574, 586, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986). It
must establish that there is a "genuine issue for trial." Id.
at 587, 106 S.Ct. at 1356. "In considering the motion, the
court's responsibility is not to resolve disputed issues of
fact but to assess whether there are any factual issues to be
tried, while resolving ambiguities and drawing reasonable
inferences against the moving party." Knight, 804 F.2d at 11.
The inquiry under a motion
for summary judgment is thus the same as that under a motion
for a directed verdict: "whether the evidence presents a
sufficient disagreement to require submission to a jury or
whether it is so one-sided that one party must prevail as a
matter of law." Anderson v. Liberty Lobby, Inc., 477 U.S. 242,
251-52, 106 S.Ct. 2505, 2512, 91 L.Ed.2d 202 (1986).
Plaintiff alleges that defendants Gilbert and Factor, on
behalf of defendant RSA, made three statements which it
characterizes as "misrepresentations." Gilbert and Factor
supposedly each "confirmed" oral agreements that had been
entered into between plaintiff and defendant APIC, to the
effect that, in exchange for plaintiff's development and
implementation of a health insurance plan for RSA's members,
(1) "plaintiff would be the administrator of any group health
insurance plan effectuated on behalf of RSA's members and
associate members through plaintiff's efforts" (Am. Complaint
¶ 18); (2) "administrative fees to be charged the plan's
subscribers would be equally divided between plaintiff and
APIC" (Am. Complaint ¶ 39); and (2) "RSA would pay the initial
development and start-up costs of the plan and would reimburse
Carter and APIC for all advances thereto" (Am. Complaint ¶ 40).
Plaintiff alleges that these promises were false when made
because defendants intended not to fulfill them and that, in
reliance on these false representations, plaintiff developed a
plan and expended $48,000 in start-up costs (Am. Complaint ¶¶
Defendants first argue that plaintiff did not suffer a
deprivation of any of its property so as to bring this case
within the ambit of the federal mail and wire fraud statutes or
within RICO. Next, RSA argues that summary judgment is
appropriate on the basis that it and its officers lacked motive
or intent to defraud plaintiff of "its legitimate start-up
expenses." Finally, RSA argues that the mailings identified in
the Complaint are ...