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December 22, 1993



The opinion of the court was delivered by: ROBERT W. SWEET

Sweet, D. J.

 The Judicial Panel on Multidistrict Litigation ("MDL") consolidated and transferred to this Court on October 10, 1991, a number of actions arising out of the demise of partnerships affiliated with Integrated Resources, Inc. ("Integrated"), which filed for relief under Chapter 11 of the bankruptcy code, 11 U.S.C. §§ 101, et seq., in 1990. See In re Integrated Resources, Inc., 135 Bankr. 746, 748 (Bankr. S.D.N.Y. 1992), aff'd, In re Integrated Resources, Inc., 147 Bankr. 650 (S.D.N.Y. 1992). Pursuant to pretrial orders, the Defendants have moved to dismiss the complaints as set forth below ("Global Motion III"). The motions in the main are granted as described below.

 Since the transfer of the original actions, several others have been filed in the Southern District of New York or transferred by the Multidistrict Panel to this Court and consolidated with these proceedings ("Later Filed Actions"). There are presently pending 38 actions.

 The Parties and the Offering

 In general, the Plaintiffs in each of these actions bought limited partnership interests in ventures sponsored by Integrated or an entity associated with Integrated. The ventures were investment vehicles which bought, owned, operated, and leased residential and commercial real estate and equipment. The offer and sale of these interests was conducted in compliance with the requirements of Regulation D ("Req. D"), Rules 501-08, 17 C.F.R. 230.501-.508, of the Securities Act of 1933 ("1933 Act"), 15 U.S.C. §§ 77a, et seq., thereby exempting the transactions from the registration requirements of the 1933 Act. Since these transactions are not registered with the Securities and Exchange Commission (the "SEC"), the 1933 Act limits purchasers to those who qualify as "accredited investors."

 To qualify as a Reg. D accredited investor, a "natural person" must have "[an] individual net worth, or joint net worth with that person's spouse, at the time of his [or her] purchase [in excess of] $ 1,000,000" or:

had an individual income in excess of $ 200,000 in each of the two most recent years or joint income with that person's spouse in excess of $ 300,000 in each of those years and has a reasonable expectation of reaching the same income level in the current year[.]

 Rule 501(a)(5) & (6). A trust qualifies for accredited-investor status if it has "total assets in excess of $ 5,000,000, not formed for the specific purpose of acquiring the securities offered, whose purchase is directed by a sophisticated person . . .," Rule 501(a)(7), to wit, one who "has such knowledge and experience in financial and business matters that he [or she] is capable of evaluating the merits and risks of the prospective investment .," Rule 506(b)(2)(ii).

 The purpose of these requirements is to facilitate and expedite specially designed offerings, while at the same time offsetting the danger posed by the lack of SEC scrutiny of the offer and sale by precluding those from participating in the offering who are inexperienced purchasers of securities and unable to afford professional advice regarding the merits and risks of purchasing the offered securities. Each of the investors in the Integrated partnerships was required to represent in writing that he or she qualified for Reg. D accredited-investor status and met the additional financial criteria set forth in the "Who May Invest" section of the confidential private placement memorandum ("PPM") issued for each partnership. *fn1"

 The investors were also warned in the respective partnership PPMs of various financial risks involved with each partnership investment. The following statement from the first paragraph of the Clovine Associates Limited Partnership PPM is typical:

The tax consequences of an investment in the Partnership, the absence of Cash Flow from such investment for at least the first four years of the operation of the Partnership and the illiquidity of such investment make the purchase of Interests suitable only for investors who have substantial net worth and substantial taxable income, and an Interest should be purchased only as a long-term investment.

 Clovine PPM at 1.

 Additionally, each PPM contained a section entitled "Risk Factors," in which the various risk factors of the investment were set forth, including, for example, restrictions on transferability and the possible lack of a market for the investment interests; the possible unavailability of tax benefits and changes in the tax law; risks arising from the terms and conditions of purchase money notes, mortgages, and leases; the possible inability to refinance the project; the possible lack of available sources of funds for the operating partnership; risks arising from leveraged financing and the ownership of the specific property; the possible inability to sell the project; and the possible adverse effects of technological developments in competing equipment.

 The limited partnerships were highly leveraged, and the Plaintiffs allege they were promised considerable tax savings through debt financing and, after the initial debt was paid off, considerable profits from rental income from the buildings and equipment. The Plaintiffs further allege that the investments had no prospects for success from their inception and served no other economic purpose than to Provide the Defendants with millions of dollars of profit in sales proceeds, fees, and other commissions.

 In each of the pending actions, different configurations of corporate and corporate officers are named as Defendants. However, the four most significant corporate defendants are briefly described below.

 Defendant Integrated Resources Equity Corporation ("IREC"), a Delaware corporation with its principal place of business in New York, New York, is a wholly-owned subsidiary of Integrated and acted as the participating broker-dealer which sold many of the plaintiffs their limited partnership interests.

 Defendant Resources Funding Corporation ("RFC"), a wholly-owned subsidiary of Integrated, was the entity through which many of the limited partnerships acquired their operating interests in the various limited partnerships.

 Defendant Integrated Financial Inc., a corporation organized under the laws of the State of Delaware, was a wholly-owned subsidiary of Integrated and sold limited partnership interests to many of the Plaintiffs.

 Prior Proceedings

 On February 3, 1992, this Court entered a "Pre-Trial Order No. 1" ("Pre-Trial Order") which, among other things, established an initial motion and discovery schedule for all actions subject to the MDL Order. The Pre-Trial Order created four separate global motion categories relating to the pending cases: (1) statutes of limitations governing the federal securities claims ("Global Motion I"), (2) the legal sufficiency of the federal securities claims ("Global Motion II"), (3) the legal sufficiency of the federal RICO claims ("Global Motion III"), and (4) all Global Motion I, II, III motions applicable to the Later Filed Actions ("Global Motion IV"). The Pre-Trial Order also consolidated the briefing and hearing schedules for Global Motions I and II and Global Motions III and IV.

 Additionally, the Pre-Trial Order stayed the production of documents to the Plaintiffs by various parties pending the disposition of the Global Motions. *fn3" The Pre-Trial Order also stayed the depositions of parties, except as to the Plaintiffs' deposition of Landauer Associates, Inc., in Clovine/Ellingson, pending the disposition of the Global Motions and the completion of document discovery.

 On January 8, 1993, this Court decided Global Motions I and II. See In re Integrated Resources Real Estate Ltd. Partnerships Sec. Litig., 815 F. Supp. 620 (S.D.N.Y. 1993) ("Global I" and/or "Global II"). On July 20, 1993, the parties filed with this Court a stipulated order dismissing the RICO claims in 13 of the original 18 actions subject to Global Motions I and II.

 Thus, at this stage, Global Motion III, which seeks to dismiss the RICO claims, applies only to the following actions:

Ellingson v. Kanzar Associates, 91 Civ. 6967 ("Clovine/Ellingson") (filed March 14, 1991, in the Southern District of Ohio, Western Division);
Bloomfield v. Resources Funding Corporation, 91 Civ. 8530 ("Two Tier") (filed December 18, 1991, in the Southern District of New York);
Neuman v. Integrated Resources Equity Corp., 92 Civ. 0023, ("Net Lease") (filed January 2, 1992, in the Southern District of New York);
Pate v. RAM Administration, Inc., 91 Civ. 8529 ("RAM/Pate") (filed December 18, 1991, in the Southern District of New York);
Barron v. Miami Executive Towers Associates, 89 Civ. 8369 ("Miami Towers") (filed December 18, 1989, in the Southern District of New York).

 Global Motion IV, applying Global Motion I, II and III to the later filed action, only concerns the Miami Towers action as § 10(b) claims were not alleged in the Two Tier, Net Lease, and RAM/Pate actions and were dismissed with prejudice against Clovine/Ellingson in Global I, 815 F. Supp. at 648.

 Pursuant to the schedule established in the Pre-Trial Order, as amended, the "Anderson Kill" and "Integrated" Defendants (the "Moving Defendants") *fn4" moved to dismiss Plaintiffs' federal claims under the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. §§ 1961, et seq., in the subject actions pursuant to Fed. R. Civ. P. Rules 9(B), 12(b) and 12(c), on April 6, 1992. *fn5" Most of the Individual Defendants joined in these motions and either adopted the reasoning of the Anderson Kill and Integrated Defendants or submitted their own papers.

 As agreed upon by counsel, opposition papers, supplemental briefs and letter briefs were received by the Court through July 30 and oral argument was scheduled for July 21, 1993. Because of jury deliberations in an unrelated case and vacation schedules, no argument was held, and the motions were considered submitted as of that date.

 Global Motion III -- Federal RICO Claims


 On Global Motion III, the many Defendants seek an order dismissing Plaintiffs' RICO claims on numerous grounds, with prejudice, pursuant to Fed. R. Civ. Proc. 12(b), 12(c), and 9(b). For the reasons set forth below, Global Motion III is granted in part and denied in part.

 1. RICO Is Not Unconstitutionally Vague

 The Moving Defendants in four of the five (Clovine/Ellingson, Two Tier, Net Lease, RAM/Pate) remaining Global Motion III actions argue that civil RICO claims have disintegrated into a judicial "Rorschach test," *fn6" and, in effect, ask this Court to hold civil RICO claims unconstitutionally vague. The gravamen of Defendants' argument is that RICO is vague because it leads to inconsistent adjudication and it fails to provide adequate notice to civil litigants. Defendants' treatment would have the courts only apply RICO to a "core" area of conduct encompassed by organized crime settings.

 The genesis of Defendants' challenge lies in Justice Scalia's dicta in his concurring opinion in H.J. Inc. v. Northwestern Bell Tel. Co., 492 U.S. 229, 256, 106 L. Ed. 2d 195, 109 S. Ct. 2893 (1989) (Scalia, J., concurring) ("That the highest Court in the land has been unable to derive from this statute anything more than today's meager guidance bodes ill for the day when [a constitutional] challenge is presented."). Following up Justice Scalia's sentence in H.J., the Moving Defendants contend that RICO is constitutionally vague as applied in civil litigation, citing the vagueness standard set forth by the Supreme Court in Connally v. General Constr. Co.. See Connally v. General Constr. Co., 269 U.S. 385, 391, 70 L. Ed. 322, 46 S. Ct. 126 (1926) (holding a statute is unconstitutionally vague if it "forbids or requires the doing of an act in terms so vague that men of common intelligence must necessarily guess at its meaning and differ as to its application").

 Of course, it is the H.J. majority who rejected such a challenge to the RICO statute. The H.J. Court specifically determined that "congress drafted RICO broadly enough to encompass a wide range of criminal activity, taking many different forms and likely to attract a broad array of perpetrators operating in many different ways" and that "it would be counterproductive and a mismeasure of congressional intent now to adopt a narrow construction of the statute's pattern element that would require proof of an organized crime nexus." H.J., 492 U.S. at 249. This language has led subsequent courts to analyze the majority opinion in H.J., written by Justice Brennan, as a resolution of Defendants' perceived constitutional question. See, e.g., Kauffmann v. Yoskowitz, No. 85 Civ. 8414, 1990 U.S. Dist. LEXIS 3752, at *2 (S.D.N.Y. Apr. 6, 1990) (declining to find RICO unconstitutional as, in Judge Leisure's words "Justice Blackmun [sic] felt it possible to develop a workable definitional framework for the application of RICO, and set forth to do so. His efforts received the support of the majority of the Court, which apparently also believed that such a framework would result in a workable and prior application of the statute by lower courts.").

 Notwithstanding Defendants' projection of Jungian analysis into securities litigation, the courts in this Circuit have quite consciously declined to find RICO constitutionally vague on numerous occasions. See, e.g., United States v. Coonan, 938 F.2d 1553, 1561-62 (2d Cir. 1991), cert. denied, 112 S. Ct. 1486 (1992); United States v. Coiro, 922 F.2d 1008, 1017 (2d Cir.) ("We have previously found that RICO was not unconstitutionally vague in a variety of applications, see United States v. Ruggiero, 726 F.2d 913, 923 (2d Cir.), cert. denied, 469 U.S. 831 (1984), United States v. Huber, 603 F.2d 387, 393 (2d Cir. 1979) cert denied, 445 U.S. 927, 63 L. Ed. 2d 759, 100 S. Ct. 1312 (1980); United States v. Parness, 503 F.2d 430, 440-42 (2d Cir. 1974), cert denied, 419 U.S. 1105, 42 L. Ed. 2d 801, 95 S. Ct. 775 (1975), and we so find here, notwithstanding comments in the concurring opinion in H.J. Inc. See 109 S. Ct. at 2909 (Scalia, J., concurring)."), cert. denied, 111 S. Ct. 2826 (1991); Bingham v. Zolt, 823 F. Supp. 1126, 1132 (S.D.N.Y. 1993) (relying on "the clearly established law in this Circuit establishing the constitutionality of the RICO Act."); Farberware, Inc. v. Groben, 764 F. Supp. 296, 308 (S.D.N.Y. 1991) ("This court has previously rejected invitations by litigants to declare the RICO pattern requirement void for vagueness, and repeats it earlier statement that 'no Court has found RICO so unmanageable either for the Court or the litigants that it must fail a constitutional test.'") (citations omitted); Norstar Bank v. Pepitone, 742 F. Supp. 1209, 1213 (E.D.N.Y. 1990) (disagreeing with Scalia's concurrence in H.J. "this Court believes that it would be presumptuous for it to hold the RICO statute unconstitutional at this time."); United States v. Paccione, 738 F. Supp. 691, 698 (S.D.N.Y. 1990) ("Since the specific allegations in the indictment here and settled precedent remove this case from Justice Scalia's foreboding analysis, this court declines defendants' invitation [to find RICO unconstitutionally vague]."); In re Adelphi Inst., Inc., 112 Bankr. 534, 537 (Bankr. S.D.N.Y. 1990) ("Although that [H.J.] concurrence expresses concern with ambiguity in the "pattern of racketeering" requirement, the Second Circuit has previously considered and rejected similar vagueness challenges to the twenty-year old statute.") (citations omitted).

 The Moving Defendants' contention that the "weaknesses of RICO are actually more pronounced in civil actions than in Federal criminal prosecutions," Def.'s Mem. of Law at 27, is contrary to the customary heightened constitutional scrutiny for criminal, as opposed to civil, litigants. This point was underscored by the Honorable Eugene H. Nickerson who concluded that the Second Circuit had determined that the RICO statute not unconstitutionally vague for criminal defendants because, as he emphasized, "in a civil case the [constitutional] vagueness standards are even less strict." United States v. Local 295, Int'l Bhd. of Teamsters, No. 90-970, 1991 U.S. Dist. LEXIS 3029, at *5 (E.D.N.Y. Mar. 7, 1991) (citing Village of Hoffman Estates v. Flipside, Hoffman Estates, 455 U.S. 489, 102 S. Ct. 1186, 1193, 71 L. Ed. 2d 362 (1982)). But see Beauford v. Helmsley, 865 F.2d 1386, 1393 (2d Cir. 1989) ("And notwithstanding our own views that the RICO provisions cast too wide a net with respect to the civil actions that may be brought, . . . it is clear that Congress was aware that persons having no association with organized crime would be ensnared by RICO. . . . Thus, Congress made the legislative judgment, as it was entitled to do and which must be given deference, that in order to reach members of organized crime, it was worth reaching other offenders as well.") (citations omitted), cert. denied, 493 U.S. 992, 107 L. Ed. 2d 537, 110 S. Ct. 539 (1989).

 Viewed in light of precedent, RICO is neither unconstitutionally void for vagueness as applied to civil litigants in general, nor as applied in this action.

 II. Certain Plaintiffs' RICO Claims Are Time Barred

 In Global Motion III, the Moving Defendants seek to dismiss Plaintiffs' RICO claims in Clovine/Ellingson, Two-Tier, Net Lease and RAM/Pate as barred by application of the four year RICO statute of limitations. *fn7" For simplicity's sake, the general legal principles governing the statute of limitations issues will be set forth first. These principles will then be applied to the four complaints on a case-by-case basis.

 When Congress passed the RICO statute in 1970, it failed to institute a specific limitations period for actions under the statute. In the civil arena, the ensuing confusion regarding the applicable limitations period remained unsettled until the Supreme Court issued its decision in Agency Holding which held a uniform four year period as borrowed from federal anti-trust law in the Clayton Act, 15 U.S.C. § 15(b), would be the applicable period for civil RICO claims. See Agency Holding Corp. v. Malley-Duff Assocs. Inc., 483 U.S. 143, 97 L. Ed. 2d 121, 107 S. Ct. 2759 (1987) ("Agency Holding"). The Supreme Court, however, expressly refused to reach the question of when the four year limitations period begins to accrue.

 In the wake of the Agency Holding, the Circuits have split on the question of when the limitations period begins to run to such an extent that, so far, at least five differing theories of accrual have been generated. See, e.g. Paul B. O'Neill, "Mother of Mercy, Is This the Beginning of RICO?": The Proper Point of Accrual of a Private Civil RICO Action, 65 N.Y.U. L. Rev. 170 (1990); Mary S. Humes, RICO and a Uniform Rule of Accrual, 99 Yale L.J. 1399 (1990). *fn8" Commentators have criticized these five disparate rules of accrual and some have even proposed alternative theories. See, e.g., O'Neill, supra, at 234-36 (proposing the "pattern formation rule" in which the running of the statutory period is postponed until the plaintiff first discovers or should have discovered the facts relating to two predicate acts necessary to bring a civil RICO action).

 The Second Circuit, however, has firmly adopted an "accrual discovery" interpretation for civil RICO'S four year limitations period. *fn9" Under the accrual discovery rule a new cause of action accrues when the defendant commits a violation injuring the plaintiff and is not necessarily determined by the plaintiff's discovery of that violation. In effect, "a plaintiff's action accrues against a defendant for a specific injury on the date that plaintiff discovers or should have discovered that injury . . . the logical end result is that a plaintiff may sue for any injury he discovers or should have discovered within four years of the commencement of his suit, regardless when the RICO violation causing such injury occurred." Bankers Trust Co. v. Rhoades, 859 F.2d 1096, 1103 (2d Cir. 1988) ("Bankers Trust") (holding that a new cause of action accrues each time plaintiff discovers new injury in the pattern), cert. denied, 490 U.S. 1007, 104 L. Ed. 2d 158, 109 S. Ct. 1642 (1989). Accordingly, a plaintiff may only bring a claim for damages suffered which he or she reasonably should have discovered in the four years prior to the suit, even though the alleged misrepresentations or omissions causing the damages might have occurred prior to that period. *fn10"

 Bankers Trust's seemingly liberal RICO discovery rule has evolved in the district courts, especially those in the Southern District, to incorporate a stricter due diligence standard. As a result, over the past half decade since Bankers Trust, the district courts have established a pragmatic "objective" discovery accrual rule for RICO claims. *fn11" Cf. Global I, 815 F. Supp. at 637-38 ("objective" test adopted for inquiry notice in securities fraud claims). The RICO limitations test here, then, is an objective one, to wit, when a reasonable person should have discovered the RICO injury, the RICO statute of limitations will start to run. "Just as the plaintiff has the right to a reasonable time in which to bring his claim, so a defendant enjoys the right eventually to be free of stale claims." Humes at 1407 (citing United States v. Kubrick, 444 U.S. 111, 117, 62 L. Ed. 2d 259, 100 S. Ct. 352 (1979)).

 In the securities context, district courts in the Second Circuit have ruled that a plaintiff is placed on inquiry notice by his or her actual or constructive knowledge of facts or circumstances indicating that an investment may have gone awry.

On a motion to dismiss, when the facts alleged in the complaint indicate that, with reasonable diligence, plaintiffs should have uncovered the alleged fraud prior to the limitations period, the claim will be time-barred.

 Griffin v. McNiff, 744 F. Supp. 1237, 1255 (S.D.N.Y. 1990) (citing Armstrong v. McAlpin, 699 F.2d 79, 88 (2d Cir. 1983)), aff'd, 996 F.2d 303 (2d Cir. 1993); see also McCoy v. Goldberg, 748 F. Supp. 146 (S.D.N.Y. 1990) (holding RICO claim accrued at time plaintiff discovered or should have discovered injury caused by violation); Construction Technology, Inc. v. Lockformer Co., 704 F. Supp. 1212 (S.D.N.Y. 1989) (holding RICO claims accrued at time plaintiff discovered or should have discovered the racketeering injury.); Testone v. Niagara Mohawk Power Corp., 91- CV-1042, 1992 U.S. Dist. LEXIS 3743, at *23 (N.D.N.Y. Mar. 26, 1992) ("Facts that should arouse suspicion . . . are equated with actual knowledge." Donahue, 633 F. Supp. at 1443).

 In Stevens v. Equidyne Extractive Industries 1980,12 this Court found that the plaintiffs' RICO claims accrued on the dates of the offering memorandum and the dates the transaction closed as basis for when the alleged RICO violation occurred. Stevens v. Equidyne Extractive Indus. 1980, 694 F. Supp. 1057, 1067 (S.D.N.Y. 1988). *fn13" But see Cruden v. Bank of New York, 957 F.2d 961, 978 (2d Cir. 1992) (denying defendants' motion to dismiss on RICO statute of limitations because plaintiffs' RICO cause of action accrued at time of default, not at time of alleged fraudulent transfers); Landy v. Mitchell Petroleum Technology Corp., 734 F. Supp. 608, 625 (S.D.N.Y. 1990) (finding "the injury, not racketeering activity which triggers the statute of limitation for a RICO action.").

 Such an objective discovery RICO limitations rule is consistent with the Second Circuit's determination that the test for the discovery of fraud usually is an objective one.

"The means of knowledge are the same thing in effect as knowledge itself." Wood v. Carpenter, 101 U.S. 135, 143, 25 L. Ed. 807 (1879). "Where the circumstances are such as to suggest to a person of ordinary intelligence the probability that he has been defrauded, a duty of inquiry arises, and if he omits that inquiry when it would have developed the truth, and shuts his eyes to the facts which call for investigation, knowledge of the fraud will be imputed to him." Higgins v. Crouse, 147 N.Y. 411, 416, 42 N.E. 6 (1895).

 Armstrong v. McAlpin, 699 F.2d 79, 88 (2d Cir. 1983) (applying objective test to securities fraud action).

 In a case comparable to Integrated, in which two hundred individual plaintiffs sought to recover their losses as limited partners in shopping centers organized throughout the country, the Honorable Louis J. Freeh noted that:

 Ackerman v. National property Analysts, Inc., No. 92 Civ. 022, 92 Civ. 1298, 1992 U.S. Dist. LEXIS 13502, at *15 (S.D.N.Y. Sept. 9, 1992). The then Judge Freeh continued to state that "where the offering materials contain considerable warnings and disclaimers, as in this case, plaintiffs are on notice of their injuries at the time of purchase." Id. at *16 (citations omitted).

 Under the objective inquiry rule for RICO claims, notice may be derived from: (1) the offering memorandum, Dolan v. Rothschild Reserve International, Inc., 1991 WL 155770, at *1 (S.D.N.Y. Aug. 8, 1991) ("A reading of the PPM, the document which the complaint asserts that Dolan relied on, shows that each of the facts, transactions and events set out in the amended complaint as creating a cause of action, was fully disclosed in the PPM. As a matter of law then, plaintiff reasonably discovered what he alleges as fraud at the time of his investment."); (2) partnership communications, Marlow v. Gold, No. 89 Civ. 8589, 1991 U.S. Dist. LEXIS 8106, at **24-27 (S.D.N.Y. Jun. 6, 1991) (holding plaintiff's notice potential fraud, or RICO claims, are time barred as fact sheet he relied upon referred to PPM); and (3) public knowledge. See Global I, 815 F. Supp. at 640.

 Applying a similar objective inquiry rule, courts in this District have determined that inquiry notice, once established, bars RICO claims. See, e.g., Henkind v. Brauser, [1989 Transfer Binder]Fed. Sec. L. Rep. (CCH) P 94,488, P 93,122 (S.D.N.Y. 1989) (Defendants' alleged predicate acts occurred at moment Plaintiff purchased securities.). Center Cadillac Inc. v. Bank Leumi Trust Co., 808 F. Supp. 213, 225 (S.D.N.Y. 1992) (barring RICO claims on injuries which occurred or should have been discovered more than four years in the past); But see Landy v. Mitchell Petroleum Technology Corp., 734 F. Supp. 608, 618 (S.D.N.Y. 1990) (holding securities, but not RICO, statute of limitations had tolled due to their respective standards). *fn14"

 As noted in Testone v. Niagara Mohawk Power Corp., No. 91 CV-1042, 1992 U.S. Dist. LEXIS 3743, at *22 (N.D.N.Y. Mar. 26, 1992), "on a motion to dismiss, when the facts alleged in the complaint indicate that, with reasonable diligence, plaintiffs should have uncovered the alleged fraud prior to the limitations period, the claim will be time[-]barred." (quoting Griffin v. McNiff, 744 F. Supp. 1237, 1255 (S.D.N.Y. 1990). "The test as to when fraud should with reasonable diligence have been discovered is an objective one." Armstrong v. McAlpin, 699 F.2d 79, 88 (2d Cir. 1983). Thus, "the commencement of the statutory period does not await a plaintiff's 'leisurely discovery of the full details of the alleged scheme.'" Phillips v. Levie, 593 F.2d 459 (2d Cir. 1979), quoting Klein v. Bower, 421 F.2d 338, 343 (2d Cir. 1970); see also Berry Petroleum Co. v. Adams & Peck, 518 F.2d 402, 410 (2d Cir. 1975).

 Only factual allegations of fraudulent concealment will toll the four year RICO statute of limitations period under the objective discovery rule. The plaintiff must show an affirmative act on the part of the defendant to conceal the harm from the plaintiff in order to toll the statute of limitations since "mere ignorance of evidence on which to establish a claim is not enough." Cf. Moviecolor Ltd. v. Eastman Kodak Co., 288 F.2d 80, 87 (2d Cir. 1961) (Friendly, J.) (holding that the doctrine of fraudulent concealment may toll the accrual of a cause of action in the antitrust context). *fn15" Similarly, in civil RICO securities cases, several courts in the Southern District have held that "[a] RICO cause of action accrues on the date of the last sale to plaintiffs, subject to tolling for fraudulent concealment." Gould v. Berk & Michaels, P.C., 89 Civ. 5036, 1990 U.S. Dist. LEXIS 3655 at *16 (S.D.N.Y. Apr. 4, 1990); See also Glick v. Berk & Michaels, P.C., No. 90 Civ. 4230, 1991 U.S. Dist. 10347, at *35 (S.D.N.Y. July 26, 1991); Mazza v. Berk & Michaels, P.C., No. 90 Civ. 4066, 1991 U.S. Dist. LEXIS 3033, at *13-14 (S.D.N.Y. Mar. 8, 1991).

 Accordingly, the doctrine of fraudulent concealment does not apply in circumstances where there is no basis to allege an omission since it "cannot be invoked where plaintiffs have notice of the facts underlying their claims." O'Brien v. National Property Analysts Partners, 719 F. Supp. 222, 232 n.11 (S.D.N.Y. 1989); see also Gould v. Berk & Michaels, P.C., No. 89 Civ. 5036, 1990 U.S. Dist. LEXIS 3655, at *15 (S.D.N.Y. Apr. 4, 1990). "[A] plaintiff must demonstrate that it remained ignorant of the cause of action until a point in time less than four years prior to the commencement of the action, such ignorance not being attributable to any lack of diligence on the part of the plaintiff." Companhia Siderurgica Nacional v. D.B. Organ Co., No. 90 Civ. 5661, 1991 U.S. Dist. LEXIS 6848, at *15-16 (S.D.N.Y. May 22, 1991) (citing State of New York v. Hendrickson Bros., Inc., 840 F.2d 1065, 1083 (2d Cir. 1988), cert denied, 488 U.S. 848, 102 L. Ed. 2d 101, 109 S. Ct. 128 (1988)). *fn16" The issue, then, turns on whether the plaintiff had notice, or had notice that would have spurred a reasonable investor to inquire, about the alleged fraudulent acts.

 A. Clovine/Ellingson Plaintiffs' RICO Claims Are Time Barred

 The Clovine/Ellingson action arises from a Connecticut limited partnership organized to acquire two parcels of land with several office buildings and to conduct various site improvements thereupon in Cincinnati, Ohio. Third Am. Compl. P 24. Integrated Resources Equity Corporation, a wholly-owned subsidiary of integrated, was the selling agent through which the Partnership sold its limited partnership interests to the Clovine/Ellingson Plaintiffs. Third Am. Compl. P 5. Only "Accredited Investors" under Regulation D of the Securities Act of 1933 were allowed to participate in the investment. *fn17"

  The Third Amended Clovine/Ellingson Complaint alleges, among other items, *fn18" that the Defendants' acts are a "scheme" to obtain income in violation of the federal securities and mail fraud laws constituting a racketeering activity within the meaning of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. §§ 1961(1)(B) and (1)(D). *fn19" The Clovine/Ellingson Complaint further alleges that Defendants misrepresented the Partnership's future viability and withheld market information regarding local vacancy and occupancy rates, overbuilding and unfavorable absorption rates. Third Am. Compl. PP 33 - 58. Specifically, the Complaint contends that Defendants overstated the projected future absorption rate and additionally failed to disclose that office vacancy rates in downtown Cincinnati at the time of the offering were approximately 17.9 to 19.1%. Third Am. Compl. P 39. In addition, the Defendants allegedly continued the fraud by sending "misleading letters to each limited partner . . . giving highly optimistic reports while misleading the members of the class." Third Am. Compl. P 59. In alleging RICO injuries, the Plaintiffs contend:

the defendants caused the plaintiff's (sic) loss by investing money taken from Plaintiffs by securities fraud, a racketeering activity, in Clovine's real estate. The loss was also caused by the subsequent control of that partnership by the Integrated Defendants. The Integrated Defendants did not give the plaintiff limited partners information from which they might have been able to substitute management which would have acted in their interests; for instance, by selling the buildings prior to initiation of foreclosure proceedings. *fn20"

 Mot. for Leave to Am., at 3-4; Third Am. Compl. P 69B.

 The Clovine/Ellingson Complaint alleges that Defendants' correspondence subsequent to the offering furthered their purported RICO conspiracy. As a factual basis for these allegations, the Complaint cites an excerpted language from the Clovine Partnership correspondence:

The market in Cincinnati is very competitive due to an overabundance of new space that, to date has not been absorbed. Nonetheless, it is expected that absorption will increase at a faster pace than in the recent past.

 Third Am. Compl. P 60(b) (citing Def.s' Letter To Limited Partners, 12/19/86). The Complaint characterizes the statements in the December 19, 1986 letter as "projecting long term tightening of the market, which was contrary to the known facts and hence, clearly not going to happen in the foreseeable future." Id. In short, Plaintiffs complain that long term business projections did not materialize in the short run, a concededly frustrating event, but not a legally sufficient predicate act for RICO purposes. The only injury alleged by the Plaintiffs is the actual loss on their investment.

 The Moving Defendants seek dismissal on two grounds: first, that the alleged fraud was merely an omission, corrected within a few months; and second, that the correction placed Plaintiffs on inquiry notice and as a result, the action is time barred.

 The Plaintiffs were placed on inquiry notice when they invested in the Partnership due to the statements made in the Clovine Offering Memorandum *fn21" rather than in 1989 when they were advised of the necessity for asbestos removal. *fn22" The Offering Memorandum, indeed, immediately emphasizes the risky nature of the investments as early as the second page:


 Clovine Assocs. PPM, at ii.

 Indeed, cautionary language is scattered throughout the PPM *fn23" and the ensuing partnership correspondence. Allegations in the Complaint itself show that as a matter of law, the Plaintiffs knew or should have known of the acts they allege are fraudulent at the time of their investment, or at least as of receiving Defendants' letter of February 26, 1986, outlining the vacancy rates in Cincinnati. *fn24" Third Am. Compl. P 60(b); Rocano Aff., Ex. F, Def. Mot. to Dismiss at 3. The driving force behind the Clovine/Ellingson Complaint's allegations of fraud are that the Defendants failed to tell the Plaintiffs of the Cincinnati vacancy rates. Plaintiffs were expressly told that the market occupancy rates were 80% -- thus the vacancy rates were 20% -- and were put on inquiry notice by the letter. See Anisfeld v. Cantor Fitzgerald & Co., 631 F. Supp. 1461, 1465-66 (S.D.N.Y. 1986) (holding that investors complaining of § 10(b) violations due to misrepresentation of occupancy rate were placed on inquiry note by the Investment Memorandum, financial statements, and correspondence).

 Later Clovine investor correspondence from December of 1986 also served to alert Plaintiffs of their claims. In a letter to the investors, the Defendants reported that the average occupancy rate for Cincinnati had remained at 83%, or a 17% vacancy rate and that the office real estate market was "very competitive." Rocano Aff., Ex. F. at 3. Therefore, the Plaintiffs' contentions that the Defendants fraudulent misrepresented the occupancy rates in the Cincinnati real estate market cannot stand. Plaintiffs were on inquiry notice of the very facts they claim to be the fraud as early as February, but no later than the end of 1986, nearly five years before filing their Complaint.

 Even if Plaintiffs were not actually aware of the alleged fraud, the combination of the PPM and the subsequent letters placed Plaintiffs "on notice that there were matters that should be investigated." Dolan v. Rothschild Reserve Int'l, Inc., No. 90 Civ. 1003, 1991 WL 155770, at *2 (S.D.N.Y. Aug. 8, 1991); accord Henkind, [1989 Transfer Binder] Fed. Sec. Law Repts. (CCH), P 94,488 at P 93,122 (S.D.N.Y. 1989) (RICO claim accrued when "reasonable investor" would have inquired). As in Dolan, "plaintiffs' mere conclusory allegations that they were unable to discover the fraud are insufficient to raise a material issue of fact on the subject of discovery." Dolan at *2.

 Plaintiffs are, by definition, sophisticated investors, once on inquiry notice they were under an obligation to learn more about the alleged market conditions or file suit within the statue of limitations. Cf. Marlow, No. 89 Civ. 8589, 1991 U.S. Dist. LEXIS 8106, at *28 (S.D.N.Y. Jun. 6, 1991) (taking into account the sophistication of the investor when considering notice); Treacy v. Simmons, No. 89 Civ. 7052, 1991 U.S. Dist. LEXIS 5362, at **11-16 (S.D.N.Y. Apr. 23, 1991) (investor's failure to read risks disclosed in prospectus upon reliance on broker's oral statements "unjustifiable"; plaintiff's assertion that he is unsophisticated investor rejected given his business background).

 Once Plaintiffs are placed on inquiry notice of their RICO claims, alleged subsequent reassurances cannot be invoked to further toll the limitations period. Marlow, No. 89 Civ. 8589, 1991 U.S. Dist. LEXIS 8106, at **9-30 (S.D.N.Y. Jun. 6, 1991). Thus, once notified of their potential RICO claims, Plaintiffs "may not rely on allegations of fraudulent concealment to avoid the limitations bar unless they exercised due diligence in attempting to ascertain the facts related to the alleged fraud, but were nevertheless unable or prevented from discovering the nature of their claim." Griffin, 744 F. Supp. at 1256. In short, "Plaintiffs bear the burden of proving that they exercised reasonable diligence once events trigger[] a duty of inquiry." Henkind v. Brauser, [1989 Transfer Binder]Fed. Sec. L. Rep. (CCH) P 94,488, P 93,122 (S.D.N.Y. 1989).

 Here, the Clovine/Ellingson Plaintiffs have neither alleged any reasonable diligence in inquiring about their claims, nor have they alleged affirmative conduct by Defendants to prevent Plaintiffs from discovering the facts underlying their present claims. As pointed out above, the record establishes that Plaintiffs were placed on inquiry notice of the facts underlying their sole alleged RICO injury more than four years before filing their actions. As a result, the Clovine/Ellingson Plaintiffs' RICO claims are time-barred.

 B. Two-Tier Plaintiffs' RICO Claims are Time Barred

 The Two-Tier RICO Complaint, brought on behalf of 118 Plaintiffs, was filed on December 19, 1991. The Complaint asserts securities, mail and wire fraud as predicate acts for RICO claims concerning the syndication of five real estate limited partnerships in 1983 and 1984. *fn25" The gravamen of the Complaint alleges that:

Contrary to the portrayal of investment in the Partnerships as containing certain safeguards and guarantees, however, the Partnerships had none of these protections since defendants' actions, in total contradiction to the representations made to plaintiffs, stripped the Partnerships of these safeguards by negotiating the assets (i.e. the limited partners' contributions and promissory notes) to third parties and "upstreaming" the cash obtained therefrom to Integrated for general corporate and other purposes that were unrelated to the partnerships.

 Compl. P 21.

 According to the Two Tier Complaint, Plaintiffs' alleged RICO injury occurred in February, 1990, with the announcement of Integrated's bankruptcy, Compl. P 29, and the "the fraudulent concealment by defendants, and plaintiffs' due diligence in attempting to uncover the true facts surrounding their investments, tolled the running of any applicable statute of limitations until. . . February 1990." Compl. P 34.

 Even assuming that the limited partnership notes are nonnegotiable, the Plaintiffs were placed on inquiry notice, if not actual notice, of facts the Plaintiffs now claim to be fraudulent and the injury occurred at the time of investment -- not at the time of Integrated declaration of bankruptcy. The Essex PPM, for example, disclosed to investors "RFC's ability to negotiate and/or pledge the notes." Essex PPM at 27. The PPM further described the notes as "unconditional" and "negotiable." Id. at 97. Further, investors were informed that:

The Notes (and any collateral securing them) may be negotiated or used as collateral for borrowings by the Partnership or any of its Affiliates, as the case may be, or for the payment of their respective obligations whether arising hereunder or otherwise. The Notes will be pledged to RFC to secure the payment of the Purchase price.

 Id. at 98. *fn27"

 The Complaint alleges that the Defendants committed a fraud by assigning allegedly non-negotiable notes and therefore the Plaintiffs could not be on notice because the Defendants violated the agreements upon which they relied. *fn28" These allegations are undermined, however, by the fact that the PPM stated that the limited partnership notes were indeed assignable and negotiable.

  The Plaintiffs' Memorandum of Law varies their Complaint's earlier misrepresentation allegations by claiming that in "the Two-Tier complaint . . . defendants failed to disclose in the Memoranda that they intended to use partnership notes or their proceeds . . . to prop up Integrated Resources without regard to partnership purposes or obligation." Pl. Mem. of Law at 47. The omission is therefore not the ability to negotiate the notes, but rather the intent to negotiate them for the benefit of Integrated. However it is viewed, the PPM placed the investors on inquiry notice that their notes could be negotiated for whatever purpose. Therefore, Plaintiffs knew or should have known of their alleged RICO injuries at the time of they purchased the notes in 1983 and 1984, and accordingly their RICO claims are time barred.

  C. Net Lease Plaintiffs' RICO Claims Are Time Barred

  The First Net Lease Complaint was filed on January 2, 1992, followed by an Amended Complaint on February 7, 1992. Plaintiffs filed a motion for leave to file their Second Amended Complaint on April 15, 1993. The Moving Defendants do not object to Plaintiffs' motion for leave to file the Second Amended Complaint, but have filed a motion to dismiss it in its entirety. Plaintiffs' motion for leave to file the Second Amended Complaint *fn29" is granted. The Moving Defendants' Motion to Dismiss the Second Amended Complaint's RICO claims, for the reasons set forth below, is also granted.

  The Net Lease Second Amended Complaint alleges that Defendants committed securities, mail and wire fraud predicate acts under RICO in seven limited partnership offerings *fn30" in which the six named Plaintiffs *fn31" invested. The named Plaintiffs invested in the limited partnerships in question between 1983 and 1984. Second Am. Compl PP 5-9. The Net Lease Complaint alleges RICO and state-law claims as a class action on behalf of investors in 150 similarly structured limited partnerships.

  The Net Lease Partnerships were syndicated between 1979 and 1985 to acquire commercial real estate properties that were leased back to the seller on a triple-net basis. The Complaint alleges the Net Lease Partnerships were structured as follows: an Integrated subsidiary purchased commercial real estate and resold it to the Partnership, with a portion of the purchase price deferred; a master lease was entered into between the Partnership and a second Integrated subsidiary that, in turn, subleased the property back to the original seller; a third Integrated subsidiary guaranteed the rental payments owed to the Partnership by the second Integrated subsidiary under the master lease. Second Am. Compl. PP 22-29.

  The Complaint further contends that:

the Offering Materials . . . did not disclose that Integrated would not be able to fund the demand notes if it did not syndicate new partnerships and therefore the value of the guarantees was also contingent on the constant formation of new syndications -- a Ponzi scheme.

  Second Am. Compl. P 53. In short, the Complaint alleges that the master lease guarantees given by Integrated subsidiaries to the Partnerships were "entirely illusory and of no force and effect", Second Am. Compl. P 49, since Integrated's financial arrangements and the transactions involving the Partnerships were allegedly structured with the specific intent of depriving the guarantor-subsidiaries of the required funds to fulfill their obligations, Second Am. Compl. PP 44-49, and finally, Defendants "fraudulently concealed their fraud." *fn32" Second Am. Compl. P 57.

  However, Integrated disclosed these accounting methods in Its Annual Form 10-K statements filed with the Securities and Exchange Commission ("SEC"). *fn33" The existence of the Form 10-Ks and other documents were described in the Net Lease Partnerships' Offering ...

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