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HAVILAND v. J. ARON & CO.

June 10, 1992

LEO HAVILAND, Plaintiff,
v.
J. ARON & CO., Defendant.



The opinion of the court was delivered by: HONORABLE LEONARD B. SAND

 This Opinion, addressing defendant J. Aron's motion to dismiss, is not our first in this litigation. Plaintiff Leo Haviland commenced this action in December 1989, initially naming his former employer, Goldman, Sachs & Co. ("Goldman"), and its affiliate, J. Aron & Company ("Aron") as defendants. Defendants filed a motion to stay this proceeding pending arbitration before the New York Stock Exchange, which we granted as to Goldman but denied as to Aron. See Haviland v. Goldman Sachs & Co., 736 F. Supp. 507 (S.D.N.Y. 1990), aff'd, 947 F.2d 601 (2d Cir. 1991), cert. denied, 118 L. Ed. 2d 591, 112 S. Ct. 1995 (1992). Plaintiff subsequently discontinued this action against Goldman, see Stipulation and Order dated January 7, 1992, so Aron is the only remaining defendant.

 In the motion currently before this Court, Aron argues, inter alia, that Haviland's claims pursuant to the Racketeer Influenced and Corrupt Organizations ("RICO") Act should be dismissed because Haviland lacks standing to assert them. *fn1" In the event that we dismiss the RICO claims, Aron also contends that we should dismiss Haviland's claim of common law fraud for lack of federal jurisdiction. For the reasons that follow, we agree that Haviland lacks standing to assert the RICO claims and dismiss the complaint in its entirety.

 I. BACKGROUND

 Although the facts underlying this action have been set forth in prior opinions, we restate them because they are so essential to our discussion of RICO standing. Leo Haviland joined Goldman in 1979 and served as a vice president in Goldman's Energy Futures and Options Group ("Energy Futures") from April 1984 until the termination of his employment in February 1989. In that role, Haviland earned commissions for Goldman by trading energy futures and options on energy futures on behalf of large refining and marketing firms, energy producers, and oil trading companies. According to the complaint, Haviland's efforts brought him "extensive, exclusive, and confidential knowledge about the needs and plans of important players in the energy market." P2.

 Aron is a partnership consisting of all Goldman partners through which the partners invest their own capital in various commodities and in foreign exchange. In 1984, Aron began trading as a principal in the energy futures, options, forwards and physical delivery markets. According to Haviland, Aron's entry into the energy market created a potential conflict of interest in that the confidential information he acquired from his clients about their future trading plans could be of enormous value to Aron. For example, if Aron knew that one of Haviland's clients intended to purchase a substantial amount of oil, Aron could attempt to enter the market before Haviland's client and later sell the oil at a profit.

 Recognizing this potential conflict and convinced that "no significant client would have dealt with [Haviland] if they believed that [he] would disclose that client's plans . . . to another participant in the marketplace," Haviland expressed "grave concerns" to Goldman about the need to preserve his clients' confidentiality. P17. According to the complaint, Goldman responded to his concerns by making explicit, but false, promises that it would erect a "Chinese wall" between Energy Futures and Aron to prevent the disclosure of any confidential information to Aron. These misrepresentations, which were allegedly designed to deceive Haviland into thinking he could remain at Goldman and yet continue to act ethically, occurred from April 1984 until the spring of 1987 and were made to both Haviland and his clients.

 Although the above statements were allegedly intended to defraud Haviland into remaining at Goldman, Goldman and Aron later shifted tactics. The complaint further asserts that from July 1987 through January 1989, Goldman and Aron attempted to extort Haviland into divulging confidential client information. Specifically, Haviland asserts that on eight occasions, he was informed that increased cooperation between Energy Futures and Aron was necessary, and that his prospects and compensation at Goldman would be tied to such cooperation. Haviland claims that because he refused to provide the requested information, he was denied appropriate salary increases and ultimately fired in February 1989.

 I. DISCUSSION

 A. The Standard of Review

 In reviewing Aron's motion to dismiss, this Court is required to accept the allegations in the complaint as true and to construe them in the light most favorable to Haviland. See Scheuer v. Rhodes, 416 U.S. 232, 236, 40 L. Ed. 2d 90, 94 S. Ct. 1683, (1974); Dacey v. New York County Lawyers Ass'n, 423 F.2d 188, 191 (2d Cir. 1969), cert. denied, 398 U.S. 929, 26 L. Ed. 2d 92, 90 S. Ct. 1819, (1970). The complaint will be dismissed only if Haviland can prove no set of facts that would entitle him to relief. See Conley v. Gibson, 355 U.S. 41, 45-46, 2 L. Ed. 2d 80, 78 S. Ct. 99, (1957); Goldman v. Belden, 754 F.2d 1059, 1065 (2d Cir. 1985). Despite the liberality of this standard, only the "well-pleaded factual allegations" in the complaint must be accepted as true, Papasan v. Allain, 478 U.S. 265, 283, 92 L. Ed. 2d 209, 106 S. Ct. 2932, (1986), and we need not credit "baldly conclusory" statements that are unsupported by any factual basis. Duncan v. AT&T Communications, 668 F. Supp. 232, 234 (S.D.N.Y. 1987).

 B. Haviland's Claims for Relief

 Haviland's complaint contains three causes of action. First, Haviland asserts a claim under 18 U.S.C. § 1962(c) of the RICO Act, which prohibits any person from conducting the affairs of an enterprise through a pattern of racketeering activity. Second, Haviland charges Aron with having conspired with Goldman to commit that substantive RICO offense in violation of 18 U.S.C. § 1962(d). Finally, Haviland asserts a claim of common law fraud.

 In fleshing out his RICO claims, Haviland states that Goldman and Aron formed an "association in fact" enterprise through which they engaged in a "pattern of racketeering activity" that was directed at him. The complaint divides the pattern of racketeering activity into two separate sub-schemes, each involving a different type of predicate conduct. In describing the first scheme, Haviland focuses on the alleged plan to defraud him into remaining at Goldman, and asserts that various misrepresentations made to Goldman's customers from April 1984 to the spring of 1987 amount to "thousands of violations" of the mail fraud statute, 18 U.S.C. § 1341 (Supp. 1992), and a more limited number of violations of the wire fraud statute, 18 U.S.C. § 1343 (Supp. 1992). In describing the second scheme, Haviland sets forth the alleged efforts to extort him into divulging confidential client information that occurred from July 1987 until his termination in February 1989. Haviland contends that these threats, combined with an allegedly inappropriate raise in 1987, a salary reduction in 1988, and his ultimate discharge in 1989, constituted attempted extortion in violation of the Hobbs Act. *fn2"

 C. Standing Under Section 1964(c) and the Relevant Caselaw

 In urging this Court to dismiss the RICO causes of action, Aron does not focus on the sufficiency of the predicate acts themselves. Instead, Aron argues that Haviland's claim is essentially one for "wrongful termination," and that courts in this Circuit and elsewhere have consistently held that the injury ...


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