The opinion of the court was delivered by: SPATT
In this civil RICO action, the defendant Deer Park Sand & Gravel Corp. ("Deer Park") moved the Court, pursuant to Fed. R. Civ. P. 12(b)(6) for an order dismissing the tenth and eleventh counts of the plaintiffs' complaint, which, respectively, set forth the plaintiffs' civil RICO and RICO conspiracy claims. Deer Park contends that the amended complaint fails to state a cause of action upon which relief may be granted and also fails to plead fraud with particularity as required by Fed. R. Civ. P. 9(b). Following the submission of the Deer Park's motion, approval was given by the Court for the plaintiffs to serve and file an amended complaint naming additional party defendants. The parties agreed that Deer Park's motion would be addressed to the amended complaint, the allegations of which are identical to the original complaint.
This case arises from the construction of a residential complex on property owned by the plaintiffs located at Furrows Road in Holbrook, New York.
The plaintiffs are several affiliated New York corporations engaging in site development and construction: Hamlet Golf Development Corp. ("Hamlet"); Holiday Management Associates, Inc. ("Holiday Management"); Colony at Holbrook, Inc. ("Colony"); and Holiday Organization, Inc. ("Holiday"), (collectively the "plaintiffs").
The defendants are individuals and New York corporations that participated in the construction, excavation, and transportation activities at the site owned by the plaintiffs.
B. The events giving rise to the complaint
The amended complaint alleges that the plaintiffs owned property in Holbrook, New York, for which they had plans to develop. These plans included construction of a residential complex known as "The Colony at Holbrook." Annexed to the amended complaint is a written contract dated February 2, 1989 between the plaintiffs and Strata Developers to perform work at the site, including the excavation of eight rainwater collection ponds. The plaintiffs entered into two separate contracts with defendant Tojaelco, each dated November 5, 1990, for final excavating and lining the ponds as well as clearing, grading and excavation of other areas of the property. The amended complaint alleges that the defendant "transporters," including Deer Park, were hired by the excavators. The plaintiffs allege that the collective
defendants . . . engaged in a systematic scheme [whereby] Strata, Strata Developers, Tojaelco, Rutter, Rubin and Mrs. Rubin [the excavators] would first excavate the pond[s] an unknown number of feet below the level or grade provided for in the plaintiffs' plans; in return for payment of a fee to the excavators, Augusiewicz, P&N, Nizzari, Deer Park, Horan and Underhill [the transporters] would then transport to the site and deposit unknown materials which may have included solid waste, and construction and demolition debris and other unknown types of wastes into the ponds prepared by the excavators; the ponds would then be covered, lined and graded according to the plaintiffs' plans by the excavators; the transporters would then transport the soil and gravel which had been excavated; the soil and gravel were then also sold for a profit by either the excavators or the transporters.
The amended complaint alleges that in November of 1992, the New York State Department of Environmental Conservation (the "DEC") discovered that solid waste material was allegedly being deposited at the site. Accordingly, the DEC cited the plaintiffs Holiday and Colony as owners of the property for "owning and/or operating a solid waste management facility without a permit[,] for violations of Articles 17, 27 and 71 of the New York State Environmental Law[, and for violating] Part 360 of Title 6 of the Rules and Regulations of the State of New York. . . ." Amended Compl. P 39. Annexed to the amended complaint is a consent order dated October 27, 1993, entered into by the plaintiffs and the DEC, which required, among other things, that the plaintiffs incur the clean-up costs for the removal of solid waste from the site and pay penalties and fines.
The plaintiffs commenced this action on or about March 6, 1995, claiming that the collective defendants acted in violation of the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1961-1965 ("RICO"). Specifically, the plaintiffs alleged violations of 18 U.S.C. § 1962(c) & (d). They further asserted supplemental jurisdiction pursuant to 28 U.S.C. § 1367(a) for their state law claims of fraud and deceit, negligent misrepresentation, continuing trespass, continuing private and public nuisance, breach of contract, conversion, negligence, unjust enrichment, indemnity and restitution.
The defendant Deer Park moved to dismiss counts ten and eleven of the amended complaint, which contain plaintiffs' RICO claims, under Rule 12(b)(6) for failure to state a cause of action and for failure to comply with the particularity requirements of Rule 9(b). Specifically, defendant argues that 1) the amended complaint fails to state a RICO claim upon which relief can be granted; 2) the amended complaint fails to state the predicate RICO acts of mail and wire fraud with particularity; and 3) in the absence of the RICO claim, the Court should not exercise supplemental jurisdiction over the plaintiff's state claims. In the alternative, Deer Park moves for a more definite statement pursuant to Rule 12(e).
A. Pleading a civil RICO cause of action
The plaintiffs' tenth claim is based on section 1962(c) of Title 18. Under this section,
it shall be unlawful for any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprises's affairs through a pattern of racketeering activity or collection of unlawful debt.
18 U.S.C. § 1962(c). Section 1964(c) of Title 18 creates a private right of action for individuals injured as a result of a violation of Section 1962.
The threshold pleading requirements of a private action under Section 1962 of the RICO statute were set forth in Moss v. Morgan Stanley, Inc., 719 F.2d 5, 17 (2d Cir. 1983), cert. denied, 465 U.S. 1025, 104 S. Ct. 1280, 79 L. Ed. 2d 684 (1984), as follows:
To state a claim for damages under RICO a plaintiff has two pleading burdens. First, he must allege that the defendant has violated the substantive RICO statute, 18 U.S.C. § 1962 (1976), commonly known as "criminal RICO." In so doing, he must allege the existence of seven constituent elements: (1) that the defendant (2) through the commission of two or more acts (3) constituting a "pattern" (4) of "racketeering activity" (5) directly or indirectly invests in, or maintains an interest in, or participates in (6) an "enterprise" (7) the activities of which affect interstate or foreign commerce. 18 U.S.C. § 1962(a)-(c). Plaintiff must allege adequately defendant's violation, of section 1962 before turning to the second burden -- i.e., invoking RICO's civil remedies of treble damages, attorneys fees and costs. See Bays v. Hunter Savings Association, 539 F. Supp. 1020, 1023 (S.D. Ohio 1982). To satisfy this latter burden, plaintiff must allege that he was "injured in his business or property by reason of a violation of section 1962."
Deer Park contends that 1) the amended complaint fails to plead the requisite predicate acts of racketeering activity, in this case mail fraud, wire fraud, and interstate transportation of stolen property with sufficient particularity under Rule 9(b); 2) that the amended complaint fails to allege a RICO enterprise, and, even if an enterprise is alleged, the plaintiffs have not plead that Deer Park conducted the affairs of the enterprise; 3) the amended complaint fails to allege a pattern of racketeering activity; and 4) the plaintiffs fail to plead that the alleged RICO violations are the proximate cause of their injuries. The Court will address each of these arguments.
1. Predicate acts of racketeering activity
Establishing that a defendant has engaged in a pattern of racketeering activity requires a showing that the defendant has committed at least two predicate acts that are among the offenses' delineated in section 1961. See e.g., Center Cadillac, Inc. v. Bank Leumi Trust Co., 808 F. Supp. 213, 227 (S.D.N.Y. 1992); Laverpool v. New York City Transit Authority, 760 F. Supp. 1046, 1058 (E.D.N.Y. 1991). The Plaintiffs contend that Deer Park has engaged in the predicate acts of mail fraud in violation of 18 U.S.C. § 1341; ...