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GIULIANO v. EVERYTHING YOGURT

April 28, 1993

THOMAS A. GIULIANO and MICHELE N. GIULIANO, Plaintiffs,
v.
EVERYTHING YOGURT, INC. and, RICHARD NICOTRA, Defendants.



The opinion of the court was delivered by: I. LEO GLASSER

 GLASSER, United States District Judge.

 Plaintiff franchisees commenced this civil action under the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1961 et seq. ("RICO"), against a corporate franchisor and its principal. Defendants move to dismiss the complaint under Fed. R. Civ. P. 8(a), 9(b) and 12(b)(6). For the following reasons, defendants' motion is denied in part and granted in part.

 FACTS

 Defendant Everything Yogurt, Inc. ("EYI"), a New Jersey corporation, operates a chain of yogurt stores and food stores nationwide under the trade names of "Everything Yogurt" ("EY") "Bananas" and "South Philly Steaks and Fries." In addition, EYI franchises stores under those trade names to interested individuals. Defendant Richard Nicotra is a director and shareholder of EYI. *fn1"

 In a prolix second Amended Complaint, *fn2" plaintiffs state, with excess particularity, predicate acts of mail fraud and wire fraud involving statements that defendants allegedly made to five prospective and eventual EY franchisees from 1987 through 1989. Since many of plaintiffs' allegations do not appear to rise to the level of actionable fraud, only the salient allegations of fraud will be detailed here. The alleged defrauded franchisees include plaintiffs, John and Judith LaBarbara ("LaBarbaras"); Michael Collins, his wife Heidi Noun, and his sister Kathleen Collins ("Collins"); Allan C. Selserman; and Frank and Dawn Monteleone ("Monteleones"). *fn3"

 Plaintiffs allege that defendants committed fraud and used "bait and switch" tactics to induce LaBarbaras, Collins and plaintiffs to invest in EY franchises other than those originally proposed to those franchisees. Complaint PP 35, 52 (LaBarbaras); 84-86 (Collins) and 274 (plaintiffs). Next, plaintiffs allege that defendants intentionally and with deliberate disregard for the truth fraudulently detailed the expenses to be incurred, and overstated the gross income to be realized, in operating various franchises. Id. PP 53-65 (LaBarbaras) 136-139 (Collins); 191, 202-203 (Selserman); 241-243 (Monteleones), 330-332 (plaintiffs). Finally, defendants are alleged to have defrauded some of the franchisees by failing to supply them with franchise disclosure materials, as mandated by applicable state law, which would have influenced the decisions of those prospective franchisees whether or not to purchase an EY franchise. Id. PP 153-158, 171-172 (Collins), 208-210 (Selserman), and 238-239 (Monteleones).

 Defendants move to dismiss the complaint on the grounds that (1) the predicate acts of mail and wire fraud have not been alleged with the requisite particularity mandated by Fed. R. Civ. P. 9(b); (2) the pleading violates the "short and plain statement" requirement of Fed. R. Civ. P. 8(a); and (3) plaintiffs have not sufficiently pleaded a RICO enterprise. In addition, defendants move to dismiss the third count on the ground that plaintiffs have not demonstrated that they were injured by reason of the alleged § 1962(a) violation and they move to dismiss the second count on the grounds that plaintiffs have not pleaded a RICO conspiracy with the requisite particularity nor have they alleged that they were injured by reason of the alleged conspiracy. For the following reasons, defendants' motion is denied as to the first count, but is granted as to the second and third counts.

 DISCUSSION

 1. Rules 9(b) and 8(a)

 Federal Rule of Civil Procedure 9(b) provides:

 
In all averments of fraud or mistake, the circumstances constituting fraud or mistake, shall be stated with particularity. Malice, intent, knowledge, and other conditions ...

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