The opinion of the court was delivered by: CAROL E. HECKMAN
REPORT AND RECOMMENDATION
This case was referred to the undersigned for all pretrial proceedings and to hear and report on all dispositive motions pursuant to 28 U.S.C. § 636(b)(1). Currently pending before the Court are Defendants' joint motion to dismiss the complaint for failure to state a claim under the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961 et seq., and Defendant Detroit Coke's motion to dismiss for lack of personal jurisdiction. Detroit Coke has agreed to hold the latter motion in abeyance pending the outcome of the former motion. In addition, Defendants Tonawanda Coke and J.D. Crane have withdrawn their pending motion to dismiss for lack of personal service, without prejudice.
For the reasons set forth below, Defendants' motion to dismiss the RICO claim should be granted and the case should be remanded to state court.
This case was originally commenced in state court. The complaint states five claims arising under state law and one claim alleging a violation of the federal RICO statute, 18 U.S.C. § 1962(c). All of the claims are based on Detroit Coke's failure to pay Plaintiff for the erection of a filter "baghouse" at Detroit Coke's plant in Detroit, Michigan.
On July 27, 1992, the Defendants removed the case to federal court under 28 U.S.C. § 1441(a) based on the federal RICO claim. Defendants now move to dismiss the RICO claim on various grounds and to remand the remaining state claims to state court.
Since this is a motion to dismiss under Fed.R.Civ.P. 9(b) and 12(b)(6), the complaint must be taken as true. Miree v. DeKalb County, Georgia, 433 U.S. 25, 27, 53 L. Ed. 2d 557, 97 S. Ct. 2490 n.2 (1977). According to the complaint, on March 1, 1991, Plaintiff was contacted by Defendant McNamara who, acting individually and as an agent for the Carondelet Coke Co. (not a party to this action) and Defendants Tonawanda Coke and the Coyne Group, negotiated and executed a purchase order for the dismantling of a baghouse at Carondelet's St. Louis, Missouri plant. A baghouse is a structure in which coke production exhaust is filtered prior to passing through the emissions stack into the outside air. The filtered coke particulants are collected in bags and disposed of. The baghouse was dismantled between March and May, 1991, and Plaintiff was paid in full for this work.
Thereafter, on approximately July 1, 1991, McNamara contacted Plaintiff to arrange for the re-erection of the dismantled baghouse at Detroit Coke's Michigan facility. McNamara did not sign the purchase order issued by Detroit Coke for this work. The baghouse was erected between July and September, 1991.
Plaintiff submitted an invoice dated August 23, 1991, for $ 45,072.00. Based on assurances from McNamara that all invoices would be paid, Plaintiff continued to perform work on the baghouse at an additional value of $ 78,797.42.
Plaintiff alleges that, on September 2, 1991, it was advised by Detroit Coke that no money had been allocated for payment of the baghouse invoices. Between September 3 and 5, McNamara advised Plaintiff that payment would be made by September 6. Having received no payment on September 6, Plaintiff threatened to quit. Plaintiff was also advised by Detroit Coke on September 6 that any payment would have to come from McNamara and Defendant Crane, the President of Detroit Coke. McNamara promised payment by September 9 or 10, and again promised payment by September 15. Detroit Coke closed for business on September 12, 1991. No payment has been made to Plaintiff for the erection of the baghouse.
In its state court complaint dated June 12, 1992, Plaintiff alleges that this course of action by Defendants resulted in damages in the amount of $ 123,869.42 based on (1) breach of contract, (2) negligence, (3) fraud, (4) unjust enrichment, (5) conversion, and (6) RICO. Plaintiff further alleges that Defendants used a similar scheme to defraud at least 12 other contractors into providing goods and services to Detroit Coke without any intention of paying.
On January 22, 1991, Plaintiff filed a RICO case statement (Item 5) pursuant to this Court' standing order.
1. RICO's Pleading Requirements.
Plaintiff's civil RICO cause of action asserts that the Defendants were associated with an "enterprise" which, through a "pattern of racketeering activity," fraudulently arranged commercial transactions -- such as the erection of the baghouse -- without intending to pay for the goods and services provided. Plaintiff alleges that the enterprise defrauded Plaintiff into providing labor and materials for the baghouse, and fraudulently induced Plaintiff into continuing to do the work, in violation of 18 U.S.C. $ 1962 subsections (a), (b), (c) and (d). The predicate criminal acts are alleged to be mail fraud (18 U.S.C. § 1341) and wire fraud (18 U.S.C. § 1343).
In order to state a civil claim for damages under RICO, Plaintiff faces two distinct pleading burdens. First, it must allege that Defendants violated the substantive RICO statute,
commonly known as "criminal RICO." Moss v. Morgan Stanley Inc., 719 F.2d 5, 17 (2d Cir 1983), cert. denied, 465 U.S. 1025 (1984). As stated by the Second Circuit in Moss:
In so doing, [a plaintiff] must allege the existence of seven constituent elements: (1) that the defendant (2) through the commission of two or more acts (3) constituting a "pattern" (4) of "racketeering activity" (5) directly or indirectly invests in, or maintains an interest in, or participates in (6) an ...