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December 13, 1991


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 established.*fn1


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 RICO violations.


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).

Mail Fraud

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 ¶¶ 41, 43).

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 ...

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