to circulate fraudulent budgets for the approval of the entities' members, and to solicit funds, see id. PP 209, 212-213, and the failure to file required tax returns with the federal and state tax authorities. See id. P 214.
On September 30, 1993, the plaintiff commenced the instant action by filing a pro se complaint in the United States District Court for the Eastern District of New York. The complaint names 40 separate defendants, and asserts federal question jurisdiction on the basis of civil RICO, relying exclusively upon 18 U.S.C. § 1962(c) as the substantive basis for recovery thereunder. For purposes of RICO, the plaintiff contends that there are two separate enterprises: (i) the "Iakovos enterprise," named after Archbishop Iakovos, and (ii) the "Passias enterprise," named after George Passias, the head priest of the St. Nicholas Church. The plaintiff also asserts state-law causes of action for: violations of the New York Religious Corporation statute, libel and defamation of character, intentional infliction of emotional distress, and fraud. He further asserts that various persons related to the parish council of the St. Nicholas Church, and the William Spyropoulos School, including its school board and its PTA, breached fiduciary duties that they owed to him by failing to uphold his right to participate in the election for a position on the parish council, in December 1992, and by failing to investigate his allegations of impropriety.
Separate motions to dismiss have been filed in this action by (i) the Archdiocese, Archbishop Iakovos, and Bishop Alexios of the Archdiocese, and (ii) the remaining defendants. The plaintiff, in turn, has moved to amend his complaint in the event that it is dismissed, in whole or in part, with respect to any of the defendants. He also has submitted supplemental briefs and letters to the Court from time to time.
I. Standards Governing Rule 12(b) Motion to Dismiss
A district court should grant a motion to dismiss under Rule 12(b) of the Federal Rules of Civil Procedure 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. v. Northwestern Bell Tel. Co., 492 U.S. 229, 249-50, 109 S. Ct. 2893, 2906, 106 L. Ed. 2d 195 (1989) (quoting Hishon v. King & Spalding, 467 U.S. 69, 73, 104 S. Ct. 2229, 2232, 81 L. Ed. 2d 59 (1984)). In applying this standard, a district court must "read the facts alleged in the complaint in the light most favorable" to the plaintiff, and accept these allegations as true. Id. at 249, 109 S. Ct. at 2906; see Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S. Ct. 1683, 1686, 40 L. Ed. 2d 90 (1974). This standard applies not only to motions to dismiss pursuant to Fed. R. Civ. P. 12(b)(6) for failure to state a claim, but also to motions to dismiss pursuant to Fed. R. Civ. P. 12(b)(1) for jurisdictional defect resulting from the plaintiff's lack of standing. See Scheuer, 416 U.S. at 236, 94 S. Ct. at 1686; see also Hecht v. Commerce Clearing House, Inc., 897 F.2d 21, 22-23 (2d Cir. 1990) (Allegations of complaint must be assumed as true for purposes of evaluating standing.). In addition, the Supreme Court has instructed that where, as in the instant case, the plaintiff is proceeding pro se, the district court must liberally construe the complaint's allegations. See Haines v. Kerner, 404 U.S. 519, 520, 92 S. Ct. 594, 596, 30 L. Ed. 2d 652 (1972).
II. Analysis of Plaintiff's RICO Claims
In the instant case, the plaintiff asserts that the Court has federal question jurisdiction over this case on the basis of civil RICO, as a result of the defendants' alleged violations of 18 U.S.C. § 1962(c).
"RICO renders criminally and civilly liable 'any person' [a] who uses or invests income derived 'from a pattern of racketeering activity' to acquire an interest in or to operate an enterprise engaged in interstate commerce, [18 U.S.C.] § 1962(a); [b] who acquires or maintains an interest in or control of such an enterprise 'through a pattern of racketeering activity,' § 1962(b); [c] who, being employed by or associated with such an enterprise, conducts or participates in the conduct of its affairs 'through a pattern of racketeering activity,' § 1962(c); or, finally, [d] who conspires to violate [any of] the first three subsections of [18 U.S.C.] § 1962, § 1962(d)." H.J. Inc. v. Northwestern Bell Tel. Co., 492 U.S. 229, 232-33, 109 S. Ct. 2893, 2897, 106 L. Ed. 2d 195 (1989). "RICO provides for drastic remedies: conviction for a violation of RICO carries severe criminal penalties and forfeiture of illegal proceeds, 18 U.S.C. § 1963 . . . and a person found in a private civil action to have violated RICO is liable for treble damages, costs, and attorney's fees, 18 U.S.C. § 1964(c)." H.J. Inc., 492 U.S. at 233, 109 S. Ct. at 2897.
The plaintiff alleges that the defendants violated 18 U.S.C. § 1962(c) by committing a pattern of predicate acts of mail fraud, indictable under 18 U.S.C. § 1341. "To establish a civil RICO claim for violation of § 1962(c), a plaintiff must show that he was injured by defendants' (1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity." Azrielli v. Cohen Law Offices, 21 F.3d 512, 520 (2d Cir. 1994) (internal quotes omitted). Section 1961(1) defines "racketeering activity" to include conduct that is "chargeable" or "indictable" under a host of state and federal laws, including 18 U.S.C. § 1341, the federal mail fraud statute. See 18 U.S.C. § 1961(1). RICO broadly defines "enterprise" in § 1961(4) to "include any individual, partnership, corporation, association, or other legal entity, and any union or group of individuals associated in fact although not a legal entity." 18 U.S.C. § 1961(4). Relevant to the instant action, nowhere in either § 1962(c), or in the RICO definitions in § 1961, is there any indication to suggest that a nonprofit religious or educational organization cannot constitute an enterprise for purposes of the statute. Cf. National Organization for Women, Inc. v. Scheidler, 127 L. Ed. 2d 99, 114 S. Ct. 798, 804 (1994) (An enterprise for purposes of RICO does not need to have an economic motive.).
As a threshold issue, however, the Court first must determine whether the plaintiff has standing to bring the claims he asserts in his complaint. The RICO civil liability provision, 18 U.S.C. § 1964(c), confers standing on "any person injured in his business or property by reason of a violation of section 1962." 18 U.S.C. § 1964(c).
"Thus, in order to have standing, a plaintiff must show: (1) a violation of section 1962; (2) injury to business or property; and (3) causation of the injury by the violation." Hecht v. Commerce Clearing House, Inc., 897 F.2d 21, 23 (2d Cir. 1990) (citations omitted).
The second and third elements of the above formulation warrant some discussion. With regard to the second element, the injury complained of must be to business or property, and moreover, such business or property must belong to the plaintiff. See 18 U.S.C. § 1964(c) (providing a cause of action to "any person injured in his business or property by reason of a violation of section 1962") (emphasis added). Thus, emotional distress is not cognizable under RICO because it does not constitute an injury to business or property. Further, a plaintiff generally will not be permitted to bring a suit under RICO, in a personal capacity, where the injury he alleges has been incurred by an association or organization of which he is a member, and any derivative injury to him is no different from that sustained by similarly situated members of the same association or organization. See Bass v. Campagnone, 838 F.2d 10, 12 (1st Cir. 1988) (Plaintiff union members lacked standing to sue under RICO "because they alleged an injury sustained by all of the members of the local collectively, rather than themselves individually;" since the local had not sued in its own right, the complaint of the union members in Bass was dismissed.); see also Manson v. Stacescu, 11 F.3d 1127, 1130-31 (2d Cir. 1993) (Certain creditors of debtor corporation lacked standing to bring RICO claims alleging that the defendants had looted the corporation to the point of bankruptcy, because the injuries sustained by these creditors were derivative to those caused by the alleged RICO violations.), cert. denied, 130 L. Ed. 2d 206, 115 S. Ct. 292 (1994); Roeder v. Alpha Indus., 814 F.2d 22, 29 (1st Cir. 1987) (A suit under RICO alleging injuries to the corporation "can only be brought by the corporation itself or by a shareholder suing derivatively on behalf of the corporation."); Rand v. Anaconda-Ericsson, Inc., 794 F.2d 843, 849 (2d Cir.) (The legal injury caused by the defendants' alleged RICO predicate acts was to the firm, and not to its shareholders, and accordingly, the shareholders lacked standing to assert a RICO claim.), cert. denied, 479 U.S. 987, 93 L. Ed. 2d 582, 107 S. Ct. 579 (1986). This rule recognizes that a RICO claim essentially is an asset of the association or organization that has been injured through a violation of 18 U.S.C. § 1962, and that the prosecution of a RICO suit by a single member in his own right would impair the rights of other similarly situated members, as well as prior claimants, to this asset. See Rand, 794 F.2d at 849.
The third element, which requires the plaintiff to allege that the violation of § 1962 caused his injury, overlaps to some extent with the second. This overlap inheres in view of the Supreme Court's enunciation that, where the plaintiff's injury is a remote consequence of a violation of § 1962, the plaintiff, depending upon the circumstances, might not be entitled to sue under RICO. See Holmes v. Securities Investor Protection Corp., 503 U.S. 258, 112 S. Ct. 1311, 1319, 117 L. Ed. 2d 532 (1992).
Rather, a plaintiff must demonstrate "proximate causation" in order to recover under RICO; that is to say, the plaintiff must establish that the relationship between the defendants' conduct and the injury claimed is not too remote. See id. at 1318, 1322. In this regard, the Second Circuit Court of Appeals has stated that "the RICO pattern or acts proximately cause a plaintiff's injury if they are a substantial factor in the sequence of responsible causation, and if the injury is reasonably foreseeable or anticipated as a natural consequence." Hecht, 897 F.2d at 23-24 (citations omitted). It therefore follows that where a plaintiff alleges that his business or property has been injured through a fraud visited upon an association or organization of which he is a member, proximate causation would be lacking except to the extent that the plaintiff can show that he has sustained some separate injury to his business or property that arises apart from his status in relation to the subject association or organization. Cf. Roeder, 814 F.2d at 30 ("It is only where the injury sustained to one's stock is peculiar to him alone, and does not fall alike upon other stockholders, that one can recover as an individual.") (internal quotes omitted).
Applying the foregoing principles to the instant case, the Court concludes that the plaintiff lacks standing to assert a RICO claim in his own right, because he fails to allege facts in his complaint that, if true, would establish that the defendants' conduct has caused injury to "his business or property." 18 U.S.C. § 1964(c) (emphasis added). Although the plaintiff claims that the defendants have misappropriated funds from various nonprofit organizations of which he is a member, the injury to business or property that he alleges is not his injury, but rather, the injury sustained by the subject organizations. Therefore, if the plaintiff wishes to vindicate the rights of these organizations, he must bring suit on their behalf in a derivative or representative capacity. This distinction is not without substantial consequences; because the plaintiff's maintenance of a derivative or representative action directly affects the rights of similarly situated persons, the Federal Rules of Civil Procedure entrust the courts with a fiduciary responsibility to ensure that the plaintiff fairly and adequately represents the interests of members similarly situated in enforcing the rights of the organization on behalf of which the suit is brought. See Fed. R. Civ. P. 23.1, 23.2; cf. Rand, 794 F.2d at 849 (A RICO action to recover for injury to the corporation "is a corporate asset, and shareholders cannot bring it in their own names without impairing the rights of prior claimants to such assets."). Thus, for example, it may be necessary to ensure that the plaintiff is represented by counsel in view of the proliferated rights at stake.
Further, the plaintiff's assertion that the defendants caused him emotional distress is not cognizable for purposes of RICO, because such does not constitute an injury to business or property. Thus, the plaintiff's allegations of emotional injury do not accord him standing to bring suit under RICO.
There is one final matter that the Court wishes to address in connection with its determination that the plaintiff lacks standing to bring suit under RICO. The Court notes that, in summarizing his RICO causes of action set forth in Counts I and II of his complaint, the plaintiff, on two separate occasions, alleges in general terms that the defendants' conduct "directly harmed the plaintiff's pecuniary interest." See Complaint PP 231, 238. The plaintiff further alleges an injury to his pecuniary interest in the demand-for-judgment section of his complaint. In view of the comprehensiveness of the factual allegations within the complaint, which omit any reference to injury to plaintiff's business or property, the Court regards these conclusory allegations of injury to pecuniary interest to be insufficient to withstand a motion a dismiss, notwithstanding the fact that the plaintiff is proceeding pro se. The Court takes this view, having carefully reviewed the factual allegations in the complaint, because it appears that the plaintiff's conclusory allegations of pecuniary loss refer to the losses sustained by the organizations of which he is a member, and for which, as previously discussed, the plaintiff lacks standing to bring suit in a personal capacity. Cf. National Organization for Women, Inc. v. Scheidler, 127 L. Ed. 2d 99, 114 S. Ct. 798, 803 (1994) ("'At the pleading stage, general factual allegations of injury resulting from the defendant's conduct may suffice, for on a motion to dismiss, [the Court] presume[s] that general allegations embrace those specific facts that are necessary to support the claim.'") (emphasis added) (quoting Lujan v. Defenders of Wildlife, 504 U.S. 555, 112 S. Ct. 2130, 2137, 119 L. Ed. 2d 351 (1992)).
In sum, therefore, viewing the complaint as a whole, the plaintiff's conclusory allegations of injury to pecuniary interest are clearly contrary to the detailed factual allegations that he pleads, which omit any reference to injury to business or property that he has sustained in his own right. Accordingly, these conclusory allegations cannot afford the plaintiff the standing to sue that his factual allegations so unequivocally belie. Insofar as the RICO counts provide the sole basis for original federal jurisdiction, the plaintiff's pendent state-law claims also must be dismissed, since the Court is without subject matter jurisdiction to adjudicate the plaintiff's remaining claims. See 28 U.S.C. § 1367(c)(3).
III. Plaintiff's Motion to Amend His Complaint
Having determined that the plaintiff's complaint is unable to withstand the defendants' motions to dismiss, the Court now must consider whether it should grant the plaintiff leave to amend his complaint.
"'In order for an application to amend a pleading to be denied, the nonmovant must demonstrate either bad faith on the part of the moving party, the futility of the claims asserted within the application, or undue prejudice to the nonmovant.'" Persaud v. Exxon Corp., 867 F. Supp. 128, 135 (E.D.N.Y. 1994) (quoting Katzman v. Sessions, 156 F.R.D. 35, 38 (E.D.N.Y. 1994)). The defendants are unable to make the requisite showing at this juncture of the litigation. Specifically, the Court is unpersuaded by the defendants' argument that it would be futile to allow the plaintiff to amend his complaint. It seems to the Court that the defects in pleading previously discussed may be cured through adherence to the considerations set forth in this Memorandum and Order. In addition, the defendants' concern regarding the plaintiff's failure to plead a proper RICO enterprise could be remedied, by pleading as RICO enterprises, the various nonprofit organizations that the plaintiff alleges to have been conducted through a pattern of racketeering activity. Further, any failure on the part of the plaintiff to distinguish between a "RICO person" and a "RICO enterprise," which generally would be fatal to a claim asserted under 18 U.S.C. § 1962(c), could be remedied by pleading a cause of action under 18 U.S.C. § 1962(a), which does not require the "RICO person" and the "RICO enterprise" to be two separate entities. See Official Publications, Inc. v. Kable News Co., 884 F.2d 664, 668 (2d Cir. 1989) ("Under § 1962(a), it may be possible for a defendant to also be the enterprise."). Thus, the Court is unable to conclude at this juncture that it would be futile to allow the plaintiff to file an amended complaint. Accordingly, plaintiff's motion for leave to file an amended complaint is granted.
In accordance with the foregoing, the Court enters the following orders in this action:
(1) The defendants' motions to dismiss the plaintiff's complaint are GRANTED and the complaint is dismissed in its entirety as against all defendants. Fed. R. Civ. P. 12(b)(1).
(2) The plaintiff's motion for leave to amend his complaint is GRANTED. Fed. R. Civ. P. 15(a). The plaintiff is directed to file his amended complaint within sixty days of the docketing of this Memorandum and Order.
Joanna Seybert, U.S.D.J.
Dated: Uniondale, New York
June 5, 1995