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THAI AIRWAYS INTL. LTD. v. UNITED AVIATION LEASING

February 7, 1994

THAI AIRWAYS INTERNATIONAL LTD., Plaintiff,
v.
UNITED AVIATION LEASING B.V., UNITED AVIATION SERVICES, INC., SAFWAN KUZBARI, CHAFIC KUZBARI, MAHER A. KUZBARI, and JOHN DOES 1-10, Defendants.



The opinion of the court was delivered by: MICHAEL B. MUKASEY

 MICHAEL B. MUKASEY, U.S.D.J.

 Plaintiff Thai Airways International Ltd. brings this action under the civil provisions of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. §§ 1961-1968, and the laws of New York State. Defendants United Aviation Leasing B.V. ("UAL") and United Aviation Services, Inc. ("UAS"), the only defendants that have been served, have moved to dismiss the complaint for failure to state a claim upon which relief can be granted, Fed. R. Civ. P. 12(b)(6), lack of subject matter jurisdiction, Fed. R. Civ. P. 12(b)(1), and failure to plead fraud with sufficient particularity, Fed. R. Civ. P. 9(b). Because the complaint fails to state a claim under RICO, in part because of insufficient allegations of fraud, the RICO claims are dismissed pursuant to Rule 12(b)(6). Further, because this court's pendent jurisdiction over the state-law claims depends upon its federal question jurisdiction over the RICO claims, see 28 U.S.C. § 1367(a), the state-law claims are dismissed pursuant to Rule 12(b)(1).

 I.

 All the parties before the court are foreign entities. The allegations in the complaint are taken as true for current purposes. Thai Airways is a Thai corporation with its principal place of business in Bangkok, Thailand. (Complt P 1) UAL is a Dutch corporation with its principal place of business in Switzerland, and UAL's parent corporation, UAS, is a Panamanian corporation with its principal place of business in Switzerland. (Def. Mem. at 1-2) In addition, the named individual defendants are all alleged to be Syrian citizens residing in Switzerland. (Complt PP 4-6)

 This action arises from a business transaction involving UAS and UAL (collectively, "United Aviation") and Thai Airways. Relevant parts of the transaction, as alleged by Thai Airways, begin in January 1989, when Thai Airways entered into two aircraft lease agreements with UAL. (Complt P 12) The lease agreements obligated Thai Airways to pay UAL an $ 800,000 security deposit for each of the two aircraft, to be refunded upon termination of the lease. (Complt P 13) In March 1989, UAS executed two agreements in which it guaranteed UAL's obligations under the lease agreements, including its obligations to refund the security deposits. (Complt P 16)

 In early 1989, Thai Airways wired $ 1.6 million in various installments to a UAL bank account in New York. (Complt P 18) Upon receipt of the security deposits, UAL transferred the funds to Switzerland, commingled them with UAL's general operating funds, and disbursed them through foreign commerce to UAS affiliates and to Safwan Kuzbari, Chafic Kuzbari, and Maher A. Kuzbari (collectively, the "Kuzbaris"), who are officers of UAS and UAL. (Complt P 19) Since May 1992, UAS has continued to transfer its assets through foreign commerce, in part to avoid repaying Thai Airways its security deposit. (Complt PP 29, 33)

 In anticipation of the termination of the lease agreements, Thai Airways by letter dated January 27, 1992 demanded that UAL return its security deposits. (Complt P 23) UAL responded that severe losses had depleted the cash reserves of the "UAS Group," and consequently UAL would not be able to return the security deposits upon the expiration of the lease agreements. (Complt P 24)

 Thai Airways' initial attempts to collect on the UAS guarantee were addressed mistakenly to a Delaware corporation affiliated with UAS ("UAS-Delaware") with the same name as UAS, "United Aviation Services, Inc." (Complt PP 26-27) Although Thai Airways does not explicitly say so, its confusion between UAS and UAS-Delaware may have stemmed, at least in part, from an opinion of counsel that UAL delivered around the time the lease agreements were executed. This opinion stated that "United Aviation Services, Inc." is a Panamanian corporation. However, the lease agreements provide that copies of notices to UAL were to be sent to "United Aviation Services, Inc." in Uniondale, New York. (Complt P 17) Apparently because UAS-Delaware is located in Uniondale and has the same name as UAS, Thai Airways concluded that UAS-Delaware was the same entity as UAS. Because of Thai Airways' confusion, when UAS-Delaware went into bankruptcy, Thai Airways mistakenly believed that UAS had gone into bankruptcy and, as a result, Thai Airways "did not institute suit against UAS[] and, instead, continued collection efforts only against UAL." (Complt P 29) At no time did the Kuzbaris, UAL, UAS, UAS-Delaware, or any other UAS affiliate inform Thai Airways that UAS-Delaware was different from UAS. (Complt PP 28, 32)

 II.

 RICO provides a civil remedy to any person "injured in his business or property" by another person's defined participation in an enterprise through a "pattern of racketeering activity." 18 U.S.C. § 1962, 1964(c). *fn1" Under RICO, "racketeering activity" includes acts indictable under 18 U.S.C. § 1341 (mail fraud), *fn2" 18 U.S.C. § 1343 (wire fraud), *fn3" and 18 U.S.C. § 2314 (transportation of converted money). *fn4" 18 U.S.C. 1961(1)(B). A pattern of racketeering activity requires the commission within a ten-year period of two such predicate acts. 18 U.S.C. § 1961(5). However, this is a minimum requirement. H.J. Inc. v. Northwestern Bell Tel. Co., 492 U.S. 229, 109 S. Ct. 2893, 2899, 106 L. Ed. 2d 195 (1989) (citing Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 496 n. 14, 87 L. Ed. 2d 346, 105 S. Ct. 3275 (1985)). In addition, a pattern requires that "the racketeering predicates are related, and that they amount to or pose a threat of continued criminal activity." 109 S. Ct. at 2900 (emphasis in original). At the pleading stage, if the threat of continuing racketeering activity is inferable from the complaint, then whether "defendants' actions are continuing in nature or isolated or sporadic will be the subject of proof at trial." Procter & Gamble Co. v. Big Apple Indus. Bldgs., Inc., 879 F.2d 10, 18 (2d Cir. 1989), cert. denied, 493 U.S. 1022, 110 S. Ct. 723, 107 L. Ed. 2d 743 (1990).

 On a motion to dismiss a RICO claim, the court must consider the facts in the light most favorable to the plaintiff, and may dismiss the case only if "it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations." H.J. Inc., 109 S. Ct. at 2906 (citing Hishon v. King & Spalding, 467 U.S. 69, 73, 81 L. Ed. 2d 59, 104 S. Ct. 2229 (1984)). Such consideration is "limited to facts stated on the face of the complaint and in documents appended to the complaint or incorporated in the complaint by reference, as well as to matters of which judicial notice may be taken." Hertz Corp. v. City of New York, 1 F.3d 121, 125 (2d Cir. 1993).


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