basis from which to infer scienter on behalf of the Individual defendants, including adequate allegations of motive and opportunity and conscious behavior. See Ouaknine, 897 F.2d at 80. Moreover, the allegations upon belief are substantiated satisfactorily by the detailed factual allegations. See DiVittorio, 822 F.2d at 1248. Therefore, the motions of the Union defendants, CCP, Purcigliotti and the Individual defendants to dismiss the state law fraud claims for failure to comply with Rule 9(b) are denied.
A. CCP, Purcigliotti and the Individual Defendants
The Individual defendants, CCP and Purcigliotti assert that the filing and processing of workers' compensation claims is protected conduct and therefore cannot constitute predicate acts under RICO. These defendants further argue that to allow such conduct to constitute the predicate act would circumvent the purposes of the anti-retaliation provision in the Workers' Compensation Law, N.Y. Work. Comp. Law § 120,
and "chill" filings with the Board. Plaintiffs contend, however, that the defendants' acts of mail fraud, and not the filing and prosecution of claims, are alleged to be the predicate acts under RICO. (Amended Complaint PP 81-82, 683.) Plaintiffs additionally argue that, in any event, under WCL § 120 they are no longer the employer and they have neither discharged nor discriminated against any (former) employee for bringing a workers' compensation claim.
In the Amended Complaint plaintiffs allege that defendants' acts of mail fraud, detailed at Appendix B of the Amended Complaint, constitute the predicate acts under RICO (Amended Complaint P 674 (alleging that "commission of thousands of acts of mail fraud" constitutes unlawful acts forming the "pattern of racketeering activity").) As stated above, a violation of the federal mail fraud statute, 18 U.S.C. § 1341, constitutes "racketeering activity." McLaughlin, 962 F.2d at 190.
Defendants offer no support for their proposition that a federal mail fraud violation in the context of a workers' compensation proceeding is protected activity and not actionable in federal court. Moreover, plaintiffs' action would come under the exception provided in Section 120 of the Workers' Compensation Law, since a "valid reason" for the action is alleged to exist. Finding that the Workers' Compensation Law specifically does not prohibit an employer from basing a federal cause of action against an employee on alleged acts of mail fraud committed in the context of a workers' compensation claim,
and finding such an extension of the Workers' Compensation statute to be inappropriate, I reject this argument of the Individual defendants, CCP and Purcigliotti.
Relying on Tolisano v. Texon, 75 N.Y.2d 732, 551 N.Y.S.2d 197, 550 N.E.2d 450 (N.Y. 1989), Stingle argues that he cannot be liable for his testimony or the reports on which this testimony is based because he is absolutely immune under the witness immunity doctrine. Plaintiffs, on the other hand, rely on a recent Second Circuit case, Dory v. Ryan, 25 F.3d 81 (2d Cir. 1994), which holds that absolute immunity does not apply to alleged conspiracies to present false testimony. In Tolisano, 75 N.Y.2d 732, 551 N.Y.S.2d 197, 550 N.E.2d 450, the New York Court of Appeals reversed the decision of the lower court for the reasons stated in the dissent to the lower court opinion. That dissent noted that a physician witness could not be held liable for his opinion testimony or the examination and report which formed the bases for the opinion because the absolute witness privilege applied. See Tolisano v. Texon, 144 A.D.2d 267, 533 N.Y.S.2d 874, 877 (1st Dep't 1988). The dissent also recognized, however, that there are exceptions to this privilege, as, for example, when perjured testimony is "the means to accomplishing a larger fraudulent scheme." Id. Similarly, in Dory, 25 F.3d at 83, the Second Circuit explained that witnesses are not immune where there is an alleged conspiracy to present false testimony.
In the instant case, the Amended Complaint alleges that Dr. Stingle submitted false audiograms, reports and testimony as a part of a large scheme to defraud plaintiffs. (Amended Complaint PP 25, 62, 63, 68.) Therefore, accepting, as I must, the allegations of the Amended Complaint as true, Stingle's motion to dismiss on the basis of absolute immunity is denied. See Tolisano, 533 N.Y.S.2d at 877; Dory, 25 F.3d at 83.
IV. Failure to State a Claim under RICO
In deciding a motion to dismiss pursuant to Fed. R. Civ. P. 12(b)(6), the factual allegations of the complaint must be accepted as true. See, e.g., Square D Co. v. Niagara Frontier Tariff Bureau, 476 U.S. 409, 411, 90 L. Ed. 2d 413, 106 S. Ct. 1922 (1986); Scheuer v. Rhodes, 416 U.S. 232, 236, 40 L. Ed. 2d 90, 94 S. Ct. 1683 (1974); Conley v. Gibson, 355 U.S. 41, 45-46, 2 L. Ed. 2d 80, 78 S. Ct. 99 (1957). In considering such motions, the complaint shall be read liberally, drawing all inferences in favor of the pleader. See Conley, 355 U.S. at 45-46. Indeed, the motion to dismiss should be denied "unless it appears to a certainty that a plaintiff can prove no set of facts entitling him to relief." Ryder Energy Dist. Corp. v. Merrill Lynch Commodities, 748 F.2d 774, 779 (2d Cir. 1984).
The Individual defendants argue that the Amended Complaint fails to allege a "pattern of racketeering activity" as required under § 1962(c). The standard for alleging a pattern was set out by the Supreme Court in H.J. Inc. v. Northwestern Bell Telephone Co., 492 U.S. 229, 106 L. Ed. 2d 195, 109 S. Ct. 2893 (1989). To satisfy RICO'S pattern requirement, a complaint must allege that the predicate acts are related, "and that they amount to or pose a threat of continued criminal activity." Id. at 239 (emphasis in original). To establish relatedness, a complaint must allege that the predicate acts "'have the same or similar purposes, results, participants, victims, or methods of commission or otherwise are interrelated by distinguishing characteristics and are not isolated events.'" Id. at 240 (quoting 18 U.S.C. § 3575(e)). The Court of Appeals has held that relatedness may be shown by "temporal proximity, or common goals, or similarity of methods, or repetitions." United States v. Indelicato, 865 F.2d 1370, 1382 (2d Cir.) (en banc), cert. denied, 493 U.S. 811, 107 L. Ed. 2d 24, 110 S. Ct. 56 (1989).
In this case, the Amended Complaint alleges that defendants (a) committed thousands of acts of mail fraud, (b) that each defendant committed at least two of these acts, (c) as part of the criminal association effectuating the fraudulent scheme involving all defendants. (Amended Complaint PP 80, 82-83.) Therefore, similar purpose, results, and method, as well as a common victim are all alleged. Accepting the allegations as true, there is no question that the Amended Complaint in this action meets the relatedness requirement of RICO. See, e.g., H.J. Inc., 492 U.S. 229 (predicate acts of bribery related by a common purpose--to influence public utility commissioners); Beauford v. Helmsley, 865 F.2d 1386, 1392 (2d Cir.) (thousands of acts of mail fraud had necessary relatedness where made to same persons and had same goal), vacated and remanded for further consideration in light of H.J. Inc., 429 U.S. 229 (1989), original decision adhered to, 893 F.2d 1433 (2d Cir.), cert. denied, 493 U.S. 992 (1989)
The tougher test, however, is whether the Amended Complaint sufficiently alleges continuity. Under H.J. Inc., 492 U.S. 229 "'continuity' is both a closed- and open-ended concept" and may refer to "a closed period of repeated conduct." Id. at 241. Continuity over a closed period may be demonstrated by alleging "a series of related predicates extending over a substantial period of time." Id. The Court of Appeals noted in Beauford, 865 F.2d at 1391, that even where "but one scheme" is alleged, a RICO pattern may still exist.
As stated above, the Amended Complaint alleges thousands of acts of mail fraud, an activity that "began no later than March 1991 [and] has continued since that time and through the present, and threatens to continue into the future." (Amended Complaint P 683.) The fraudulent acts are alleged to have furthered the overall scheme to defraud the plaintiffs, (id.), and therefore are not isolated or sporadic events. See, e.g., Com-Tech Assoc. v. Computer Assoc. Int'l, 753 F. Supp. 1078, 1091 (E.D.N.Y. 1990) (single overall scheme with single victim sufficient so long as predicate acts are related and sufficiently continuous), aff'd, 938 F.2d 1574 (2d Cir. 1991). Plaintiffs' allegations of thousands of related acts of mail fraud occurring over a three year period, which are alleged to continue to occur, are sufficient to satisfy RICO's pattern requirement.
B. Operation or Management of the RICO Enterprise
Under the RICO statute, an enterprise is defined as "any . . . individual, partnership, . . . or other legal entity . . . or group of individuals associated in fact although not a legal entity." 18 U.S.C. § 1961(4). In United States v. Turkette, 452 U.S. 576, 69 L. Ed. 2d 246, 101 S. Ct. 2524 (1981), the Supreme Court stated that a RICO enterprise "is proved by evidence of an ongoing organization, formal or informal, and by evidence that the various associates function as a continuing unit." Id. at 583.
In this case, the Amended Complaint alleges four enterprises: (i) association-in-fact of all defendants, (Amended Complaint P 672); (ii) association-in-fact of CCP, Purcigliotti and Stingle ("professional enterprise"), (id. P 681); (iii) CCP, (id. P 691); and, (iv) Dr. Walter Stingle, P.C. (id. P 700.) The Union defendants assert that the Amended Complaint fails to allege association-in-fact enterprises because it lacks a sufficient factual basis to suggest an ongoing concern. All defendants additionally argue that the Amended Complaint does not allege sufficiently their operation or management of any of the four enterprises.
1. Association-in-Fact Enterprise
The Court of Appeals instructed in United States v. Coonan, 938 F.2d 1553 (2d Cir. 1991), cert. denied, 112 S. Ct. 1486 (1992) (quoting United States v. Bagaric, 706 F.2d 42, 55 (2d Cir.), cert. denied, 464 U.S. 840 (1983)), that "the existence of an association-in-fact is oftentimes more readily proven by 'what it does, rather than by abstract analysis of its structure.'" Id. at 1550. Furthermore, proof used to establish a pattern of predicate racketeering acts may be relied on to demonstrate the existence of the enterprise. See Coonan, 938 F.2d at 1560 (citing United States v. Indelicato, 865 F.2d 1370, 1383-84 (2d Cir.) (en banc), cert. denied, 493 U.S. 811, 107 L. Ed. 2d 24, 110 S. Ct. 56 (1989)). In the context of a motion to dismiss, and for the same reasons that I found in part IVA above that a sufficient pattern is alleged, the Union defendants' motion to dismiss on the grounds that the Amended Complaint fails sufficiently to allege association-in-fact enterprises is denied.
2. Operation or Management
In Reves v. Ernst & Young, 122 L. Ed. 2d 525, 113 S. Ct. 1163 (1993), the Supreme Court addressed the question of the meaning of the terms "conduct or participate" in the "conduct" of a RICO enterprise's affairs under § 1962(c). The Court held that the defendant "must have some part in directing [the] affairs" of the alleged enterprise. Id. at 1170. The Court adopted an "operation or management test," whereby one will not be liable under § 1962(c) "unless one has participated in the operation or management of the enterprise itself." Id. at 1172. Furthermore, the Court explained that this level of participation will not exclude from liability low-level participants "who are under the direction of upper management." Id. at 1173. Accordingly, under Reves, mere participation in the affairs is not enough -- there must be allegations that defendants have "some part in directing those affairs." Id. at 1170 (emphasis in original.)
Aside from the general allegations that "the defendants conceived of and implemented" the scheme, including "coordinating and orchestrating the filing and prosecution of false individual workers' compensation claims (Amended Complaint, PP 2-3), Stingle's individual participation in the scheme is laid out in paragraphs 60-68 of the Amended Complaint. The extent of his role is summarized as follows: performing the audiograms, taking no steps to ensure accuracy, falsely certifying the audiograms, and directing a copy of his conclusions to CCP for transmission to the Board. (Amended Complaint PP 62-67.)
As to the association-in-fact enterprise of all defendants and the professional enterprise, the Amended Complaint also alleges:
Purcigliotti, CC&P, the Individual Defendants, and Stingle, among other things described above, further directed the Enterprise'S affairs by knowingly framing the respective fraudulent C-3's and false medical reports in a manner intended to render Tribune and New York News with liability for those claims without regard to the truth.
(Amended Complaint PP 673, 682.)
As to the Stingle enterprise, the Amended Complaint alleges:
Stingle is the sole shareholder of the stingle Enterprise, but in operating this professional corporation has retained numerous employees, including nurses, technicians, and other support staff personnel. Stingle has operated and managed the Stingle Enterprise as described in detail in paragraphs 1 through 668 above. Among other things described above, stingle issued false and misleading medical reports in hundreds of workers' compensation claims involving the Individual Defendants and in furtherance of the unlawful scheme.