are a regular way of conducting defendant's ongoing legitimate business." H.J. Inc., 492 U.S. at 242-43. For several reasons, Pier Connection has failed to make the requisite showing.
First, Plaintiffs cannot establish open-ended continuity by alleging that the effects of predicate acts extend into the future. Rather, there must be a threat that the acts themselves will be repeated. "Past criminal conduct must give an indication of future or continuing criminal conduct, not future repercussions." Rini v. Zwirn, 886 F. Supp. 270, 300 (E.D.N.Y. 1995). In Rini, former town employees whose jobs were eliminated sued the town and various former town officials, alleging violations of federal civil rights statutes, RICO violations, and common law fraud. To support their RICO claims (based on predicate acts of mail fraud, wire fraud, conspiracy and extortion), the plaintiffs argued that the defendants' scheme "continue[d] to cause many employees of the Town to disavow affiliation with" a certain political party. The court found these continuing effects irrelevant to the plaintiffs' task of establishing continuity. Absent allegations that any future predicate acts were likely to occur, the plaintiffs had not adequately alleged open-ended continuity. The court therefore dismissed the plaintiffs' RICO claims. Id. See also Cullen v. Paine Webber Group, Inc., 689 F. Supp. 269, 275 n.10 (S.D.N.Y. 1988) (rejecting argument that the "continuing effect of [a] fraud . . . renders the enterprise ongoing" and stating that the critical factor in determining whether an enterprise is continuing is "the terminal quality of the [enterprise's] goal, not of its effects").
In essence, Pier Connection argues that Defendants would continue to reap the benefits of having defamed Plaintiffs, and of having solicited Plaintiffs' customers for Neutral while still employed by Plaintiffs. See Plaintiffs' Memorandum of Law in Opposition to Defendants' Motion to Dismiss ("Plaintiffs' Mem.") at 20-21. Put continuing to reap such benefits is not itself a predicate act; it is only an effect of the alleged acts of wire fraud.
Second, Pier Connection has not adequately established open-ended continuity because it has not alleged a threat that the predicate acts will be repeated. A simple statement that the "scheme continues to date," Complaint P 238, without more, does not suffice.
For example, in Thai Airways Int'l Ltd. v. United Aviation Leasing B.V., 891 F. Supp. 113, 119 (S.D.N.Y. 1994), aff'd, 59 F.3d 20 (2d Cir. 1995), an airline sued aircraft lessors under RICO. The plaintiff airline alleged that the lessors unlawfully converted security deposits proffered under airplane lease agreements and committed wire fraud by causing the plaintiff to transmit the security deposits. The court held that without an allegation that the defendants continued to convert funds, the "facts do not justify the inference that defendants' acts carry the threat of continuing into the future, or represent their ordinary way of doing business." Thai Airways, 891 F. Supp. at 119.
In Ochs v. Shearson Lehman Hutton Inc., 768 F. Supp. 418 (S.D.N.Y. 1991), plaintiffs asserted RICO claims based on predicate acts involving the allegedly fraudulent sale of limited partnership interests. In an attempt to demonstrate continuity, plaintiffs alleged that defendants were continuing to offer limited partnership investments to investors throughout the country. The court found such allegation insufficient to show open-ended continuity. "The most that can be said for this aspect of the pleading is that it alleges the defendants . . . are continuing to do business." Id., 768 F. Supp. at 426. The court found "plaintiffs' concept of a 'threat of continuing racketeering activity' . . . far too conjectural to satisfy the requirements of RICO pleading. Something more concrete . . . is required." Id. Similarly, in the instant case, nothing pier Connection has pled demonstrates a threat that Defendants' racketeering activity will continue.
See also Polycast Technology Corp. v. Uniroyal, Inc., 792 F. Supp. 244, 267-68 (S.D.N.Y. 1992) (finding no open-ended continuity based on an eight-month scheme in which defendants allegedly gave plaintiffs materially misleading information in connection with the sale of a subsidiary, where plaintiffs made no suggestion that defendants proposed further fraudulent sales, and where defendants had not formed a long-term association for the purpose of engaging in criminal activity).
Finally, Plaintiffs' claim of open-ended continuity fails because Pier Connection has alleged no facts that would allow the Court to infer that Defendants committed anything other than a single fraudulent scheme. "To infer a threat of repeated fraud from a single alleged scheme would in effect render the pattern requirement meaningless." Continental Realty Corp. v. J.C. Penney Co., 729 F. Supp. 1452, 1455 (S.D.N.Y. 1990). In Continental Realty, the plaintiff's allegations with respect to a failed real estate transaction supported an open-ended scheme on their face. However, the court refused to find open-ended continuity. The court noted that "nothing in the Defendants' actions suggest[ed] 'a distinct threat of long-term racketeering activity.'" Id. at 1455, citing H.J. Inc., 492 U.S. at 242. As in Continental Realty, the plaintiffs in the instant case have "fail[ed] to provide any factual support for [their] contention that [Defendants'] fraudulent activity will continue in the future." Continental Realty, 729 F. Supp. at 1455. See also Deem v. Lockheed Corp., 1991 U.S. Dist. LEXIS 13216 at *27, 1991 WL 196171, at *9 (S.D.N.Y. Sept. 25, 1991) (finding no threat of continuity "since there is no indication that defendants committed these same or similar acts before[,] or that they committed them after" completing the scheme against the plaintiffs).
B. Closed-ended continuity
Plaintiffs also argue that they have pled closed-ended continuity sufficiently to form the basis of their RICO claims. Plaintiffs allege predicate acts beginning on June 4, 1993 and ending on March 25, 1994. RICO Statement at 8, 13. Thus, as Plaintiffs conceded at oral argument (see Tr. at 15), Defendants' scheme lasted no more than ten months.
Closed-ended continuity may be demonstrated by showing a "series of related predicates extending over a substantial period of time." H.J. Inc., 492 U.S. at 242. The H.J. Inc. Court did not define "substantial," beyond stating that predicate acts extending over a few weeks or months and threatening no future criminal conduct do not satisfy this requirement." Id. In working with the "few weeks or months" standard, the Second Circuit has contrasted racketeering activity that is inherently unlawful (such as murder, obstruction of justice, narcotics trafficking and embezzlement) with racketeering activity "in furtherance of endeavors that are not inherently unlawful, such as frauds in the sale of property." United States v. Aulicino, 44 F.3d 1102, 1111 (2d Cir. 1995). With respect to the latter, "the courts generally have found no threat of continuing criminal activity arising from conduct that extended over [periods] even longer" than a few weeks or months. Id.
In the instant case, there is no contention that Defendants engaged in racketeering activity that is inherently unlawful. Nonetheless, a ten-month span is not an insufficient length of time, as a matter of law, to constitute a closed-ended continuous pattern for RICO purposes. "There is no bright line test for determining precisely what period of time is 'substantial' for purposes of finding the continuity necessary to establish a RICO pattern." Metromedia Co. v. Fugazy, 983 F.2d 350, 369 (2d Cir. 1992), cert. denied, 124 L. Ed. 2d 662, 113 S. Ct. 2445 (1993). To be sure, case law exists to support Plaintiffs' contention that ten months may be a sufficient period of time. See, e.g., Azrielli v. Cohen Law Offices, 21 F.3d 512, 521 (2d Cir. 1994) (finding that closed-ended continuity had been established by pleading that securities were sold in violation of securities laws several times within one year); Farberware, Inc. v. Groben, 764 F. Supp. 296, 306 (S.D.N.Y. 1991) (stating that "the pleading of repeated similar acts over a ten-month period adequately alleges a continuing scheme to defraud plaintiff"). On the other hand, there are many cases holding that ten months is too short a period of time to constitute a pattern. See, e.g., Continental Realty Corp. v. J.C. Penney Co., 729 F. Supp. 1452, 1454-55 (S.D.N.Y. 1990) (holding that several acts of mail and wire fraud committed during a period of more than one year "occurred over too short a time period to constitute" a closed-ended scheme) Mathon v. Marine Midland Bank, N.A., 875 F. Supp. 986, 998 (E.D.N.Y. 1995) (finding that allegations of wire and mail fraud lasting from 14-15 months did not constitute a pattern of criminal activity under RICO); Mead v. Schaub, 757 F. Supp. 319, 323 (S.D.N.Y. 1991) (holding that an alleged scheme to defraud plaintiff did not meet the requirement of continuity even though it spanned a period of five years).
In any event, a scheme's duration alone is not dispositive. Rather, the court must examine the "overall context in which the acts took place." United States v. Kaplan, 886 F.2d at 542. This context includes the number of victims of the scheme and the number and extent of the perpetrators' goals. Numerous cases reveal that district courts in this Circuit, when deciding whether plaintiffs have pled a closed-ended continuous pattern under RICO, routinely consider such contextual issues as well as the duration of a scheme. See, e.g., Mathon, 875 F. Supp. at 998 (citing the limited goal and single victim of defendants' scheme, in addition to the scheme's limited duration, in deciding whether the acts complained of constitute a closed-ended pattern of criminal activity); Zaloom v. Trupin, No. 86-465, 1992 U.S. Dist. LEXIS 14825, 1992 WL 279365 (S.D.N.Y. Sept. 30, 1992) (citing the existence of only one victim and one injury, along with the short duration of the alleged racketeering acts, in finding that plaintiff had failed to establish [closed-ended] continuity) Mead, 757 F. Supp. at 323 (citing defendants' single goal of depriving plaintiff of his client base); Deem, 1991 U.S. Dist. LEXIS 13216, 1991 WL 196171 at *9-10 (finding no closed-ended continuity where all predicate acts were part of a single scheme with a limited nature--to deprive the plaintiff of a finder's fee); Continental Realty, 729 F. Supp. at 1455 (citing the limited nature of the perpetrators' goal and the presence of only one victim; holding that no closed-ended continuity exists).
The above-described cases resemble the instant case in significant ways. As a single firm in the garment trade (Complaint P 1), Plaintiffs are the sole victim of Defendants' scheme. Plaintiffs make no allegation, for example, that Defendants have pursued a similar scheme against other garment industry competitors. Further, despite Pier Connection's attempt to characterize Defendants' actions as a multi-faceted and complex scheme (Plaintiffs' Mem. at 20), the Complaint demonstrates that Defendants engaged in one scheme whose single goal was to seize control of Pier Connection's business. That Defendants used several different tactics to achieve this goal does not turn Defendants' scheme into one with multiple goals and/or victims, and does not mandate a finding of continuity sufficient to support a RICO claim. As in Continental Realty, all of Defendants' actions were directed toward a single goal. When considered together with the fact that Pier Connection alleges predicate acts spanning only ten months, the Complaint fails to allege closed-ended continuity. As the facts, taken as true, do not establish that Defendants engaged in a continuous pattern of racketeering activity, Plaintiffs' RICO claims must be dismissed.
For the foregoing reasons, Defendants' motion to dismiss the RICO claims is granted. There is no purpose to granting leave to replead as Plaintiffs conceded that they cannot identify any predicate acts other than those already described in the Amended Complaint and RICO Statement. Tr. at 16. Accordingly, as there is no longer any basis for the exercise of federal jurisdiction, the case is remanded to the state court.
Shira A. Scheindlin
Dated: New York, New York
September 28, 1995