The opinion of the court was delivered by: GERARD L. GOETTEL
This proposed class action arises out of allegedly deplorable conditions which exist at Weisman's Rockland Manor (the Manor) in New City, New York, "an adult care facility established and operated for the purpose of providing long-term residential care, room, housekeeping, personal care and supervision to five or more adults unrelated to the operator." N.Y.C.R.R. § 485.2. Adult homes of this type must be licensed and are subject to extensive state regulation. The Manor is a partnership comprised of Eugene Weisman, Leon Weisman and Mollie Weisman. The partnership leases the property used by the Manor from Weisman's Rest Hotel, a corporation. Leon, Eugene and Mollie Weisman are alleged to be owners, operators and administrators of the adult home; Kones Paramananthan is a manager and employee of the partnership, the Manor.
The individual defendants have been licensed to operate the Manor for at least twenty years. According to the complaint, since 1972, Rockland Manor has been cited by the Department of Social Services ("DSS"), a state agency charged with the regulation of adult homes, for numerous violations of state regulations. These violations cover areas such as admission standards, resident protections, food service, resident services, and environment standards.
The Manor serves various individuals including former residents of county and state-run psychiatric facilities, homeless persons, and private citizens who voluntarily admit themselves. Defendants describe the Manor as a sort of half-way house for mentally and emotionally disturbed people. The Manor charges its boarders a monthly rent. Many of its residents receive financial assistance from state and/or federal programs.
Plaintiffs' complaints about the standard of services provided by the Manor are extensive. A mere sampling of the allegations in the complaint describes a dirty, poorly-operated facility with little regard for the care of the residents who are often incapable of caring for themselves. For example, general allegations in the complaint include, among other things, that defendants failed to provide nutritionally balanced and adequate meals, that the kitchen is unsanitary, that food is improperly stored, that the facility is in a state of disrepair, and that the staff, insufficient in number, is inadequately trained. In addition, plaintiffs claim that illegal drug transactions occur at the facility and that crack vials routinely litter the floors.
Plaintiff Trautz asserts that he was a resident of the Manor from November 1989 until July 1990. During his stay, he claims that his living conditions bordered on the inhumane. He alleges that his bedroom was infested with cockroaches and waterbugs and that he would awake during the night to find these vermin crawling on him. He claims that he received clean sheets and pillowcases only once a month and that his roommate, who was incontinent, received sheets only once a week despite the fact that they were continually soaked with urine. Other allegations concern the lack of security, the theft of personal property, the lack of privacy, and the existence of only two showers for eighty residents. Trautz claims that on more than one occasion he was propositioned by prostitutes who were present in the facility. Floyd Rhein, the other named plaintiff, claims that he lived at the Manor for roughly five years and asserts similar allegations.
The complaint, brought by the proposed class representatives and Disability Advocates, Inc., a not-for-profit corporation which provides advocacy and legal representation to people diagnosed with mental illness, asserts ten causes of action.
The federal claims are based on violations of the RICO statutes, 18 U.S.C. § 1961 et. seq.; the Rehabilitation Act, 29 U.S.C. § 794; civil rights under 42 U.S.C. § 1983; conspiracy under 42 U.S.C. § 1985(3); the due process clauses of the Fifth and Fourteenth Amendments; and the equal protection clause of the Fourteenth Amendment. Plaintiffs also bring pendent state claims for negligence, intentional infliction of emotional distress, breach of contract, and violation of § 235-b of the New York Real Property Law. The defendants are moving to dismiss the complaint in its entirety.
As is often stated, a court can only dismiss a complaint where "it appears beyond doubt that plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45, 2 L. Ed. 2d 80, 78 S. Ct. 99 (1957); Branum v. Clark, 927 F.2d 698, 705 (2nd Cir. 1991). In reviewing a motion to dismiss under Fed.R.Civ.P. 12(b)(6), we must accept all the facts alleged in the plaintiffs' complaint as true. Cruz v. Beto, 405 U.S. 319, 322, 31 L. Ed. 2d 263, 92 S. Ct. 1079 (1972).
On a motion to dismiss for failure to state a claim upon which relief can be granted, the court generally does not have authority to consider matters outside the pleadings. LaBounty v. Adler, 933 F.2d 121, 123 (2d Cir. 1991). Although defendants have submitted an affidavit along with the motion papers, this is outside the pleadings and the court shall not consider it in deciding this motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(6).
a. Standing and Proximate Cause Issues
Defendants object to the RICO claims on several grounds. They begin by attacking the RICO claims en masse that plaintiffs lack standing to bring any RICO claims because they have not alleged injury in fact as required under the civil RICO statute. To have standing, plaintiffs must show "(1) a violation of § 1962; (2) injury to business or property; and (3) causation of the injury by the violation." Hecht v. Commerce Clearing House, Inc., 897 F.2d 21, 23 (2d Cir. 1990). In County of Suffolk v. LILCO, 907 F.2d 1295 (2d Cir. 1990), the Second Circuit held that in a case involving mail fraud, plaintiff must show that the misrepresentations were relied upon and caused the injuries alleged. Id. at 1311. Thus, to have standing under RICO, plaintiffs must show that their injuries were proximately caused by defendants' RICO predicate acts. Sedima, S.P.R.L. v. Imrex Co., Inc., et. al., 473 U.S. 479, 495, 87 L. Ed. 2d 346, 105 S. Ct. 3275 (1985).
Plaintiffs generally allege that defendants committed mail and wire fraud "to defraud the residents of their money [and] property." According to paragraph 112(c) of the complaint, "DSS has relied on these false or fraudulent representations of the defendants in the issuance of the initial Operating Certificate and subsequent renewals." The wire fraud was allegedly achieved through defendants' fraudulent appropriation of the residents' money while failing to provide them with adequate services. As a result of both mail and wire fraud, plaintiffs claim that they have suffered injury from "living in hazardous, degrading, filthy and dangerous conditions."
Defendants argue that the false representations alleged by plaintiffs were directed at the DSS in defendants' efforts to obtain an operating license. Therefore, defendants contend that even if true, such fraud constitutes a fraud against the government, not against the plaintiffs. Defendants argue that the deceived and the injured are two distinct groups with no causal connection (the government was allegedly deceived for a license and the patients were allegedly injured by the Manor's living conditions).
Plaintiffs respond that DSS's reliance upon defendants fraudulent representations by mail enabled the Manor to maintain operations and continue taking plaintiffs' money while providing substandard services. Plaintiffs also claim that the wire fraud involved depositing plaintiffs' checks into their personal accounts, an act directly tied to plaintiffs' injuries.
The issue is whether this is close enough causation for a civil RICO claim. Because the alleged mail frauds were not directed at plaintiffs but rather at the DSS, the causal relationship with plaintiffs' injuries is not direct. Using the mails to fraudulently obtain a license, if true, might have enabled defendants to enact and maintain their scheme to defraud plaintiffs into paying good money for substandard care. While the court might infer this chain of causation, plaintiffs have not explicitly alleged this in their complaint. As a result, plaintiffs fail to allege a causal connection between defendants' mail fraud on DSS and the injuries plaintiffs sustained. Thus, because plaintiffs lack standing to bring the mail fraud claim, we dismiss this claim.
The alleged wire fraud is more closely tied to the injuries that plaintiffs allege. Unlike the mail fraud claim, plaintiffs' wire fraud claim alleges that defendants committed fraud directly against plaintiffs, rather than the DSS. Plaintiffs further allege that they were deprived of their property, namely their personal income, as a direct result of defendants' wire fraud. Although plaintiffs make general allegations, they specifically identify only one instance of allege wire fraud, namely that "around April 1990 the defendants unlawfully opened, signed, cashed, and deposited into defendants' account, plaintiff Trautz' Internal Revenue Service refund check in the amount of approximately $ 150.00." while there may be a sufficient causal connection between the fraud and plaintiff's injuries to support standing, we do not perceive any use of the wires.
At this point, we note that to establish a pattern of racketeering activity, at least two predicate acts must be alleged against the defendant. Sedima, 473 U.S. at 495. This circuit has stated that to sustain a RICO claim, a plaintiff must allege that the defendant agreed to commit at least two predicate acts of racketeering. U.S. v. Teitler, 802 F.2d 606, 613 (2d Cir. 1986).
Because plaintiffs' mail fraud claim is dismissed, plaintiffs are left with only their one specific pleading of wire fraud. This one predicate act is insufficient to sustain a RICO claim. Alleging at least two predicate acts is the basis of a RICO claim and plaintiffs' entire RICO claim must fall without it. In addition to this general failure in plaintiff's RICO pleading, we will also find deficiencies in plaintiffs' pleading particular to the individual subsections of RICO.
Section 1962(a) states that it is ...