acts, because the essence of § 1962(a) is the investment of racketeering income. Id. The Wolff Defendants argue that FIAC has not alleged, and cannot demonstrate, that the Wolff Defendants' investment of racketeering income in the Enterprise "proximately caused" injury to FIAC's business. I find the Wolff Defendants' arguments to be without merit.
FIAC has satisfied § 1962(a) by alleging that (1) the Wolff Defendants, with others, acted as an enterprise associated-in-fact, (2) each of the Wolff Defendants caused money and property to be obtained from FIAC through a pattern of racketeering activity, and (3) the money and property were used, at least in part, to fund the alleged Enterprise. (See Compl. PP 1-3, 30-60). Additionally, the cases cited by the Wolff Defendants in support of their arguments are inapposite. In those cases, the plaintiffs were not the intended targets of the racketeering activity. The courts, therefore, held that the plaintiffs had failed to establish a link between defendant's RICO actions and plaintiff's injury. See, e.g., Holmes v. Securities Investor Prot. Corp., 503 U.S. 258, 264-68, 117 L. Ed. 2d 532, 112 S. Ct. 1311 (1992); In re American Express Co. Shareholder Litig., 39 F.3d 395 (2d Cir. 1994). Here, however, FIAC was an intended target of the Wolff Defendants' RICO actions. Thus, FIAC has sufficiently alleged that its injuries were proximately caused by the Wolff Defendants' violation of § 1962(a).
b) § 1962(b) Claim
The Wolff Defendants next argue that FIAC has not alleged, and cannot demonstrate, injury to its business proximately caused by the Wolff Defendants' "acquisition" of an interest in an enterprise as required by § 1962(b). They assert that FIAC's § 1962(b) claim is insufficient because the complaint only alleges that the Wolff Defendants acquired an interest in FIAC's "property." The Wolff Defendants argue that § 1962(b) requires defendants to acquire an interest in a RICO enterprise, and that "property" cannot constitute a RICO enterprise. Creed Taylor, Inc. v. CBS, Inc., 718 F. Supp. 1171, 1178 (S.D.N.Y. 1989).
To state a claim under § 1962(b), a plaintiff must allege that "(1) [it suffered] an injury (2) resulting from the acquisition or control of an enterprise (3) acquired through a pattern of racketeering activity." Constellation Bank, 1995 U.S. Dist. LEXIS 1105, 1995 WL 42285, at *4. Allegations that the interest or control was acquired by arranging financing for the continued operation of the enterprise satisfies this requirement. Id. Although the Wolff Defendants correctly state that FIAC alleges the acquisition of its "property" in paragraph 99 of the complaint, this is irrelevant. As I stated previously, when examining the sufficiency of FIAC's RICO claim I must not look at isolated paragraphs but rather at the complaint as a whole. The complaint, rather than any specific paragraph of the complaint, does allege that each defendant shared in arranging for financing for the Enterprise. (See generally Compl. PP 29-66). Thus, the complaint adequately pleads that each of the defendants "acquired or maintained, directly or indirectly, an interest in or control of" the Enterprise. FIAC has, therefore, sufficiently pleaded a violation of § 1962(b).
c) § 1962(c) Claim
To establish a civil RICO claim for a violation of § 1962(c) a plaintiff must "show that an injury was caused by defendant's '(1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity.'" Constellation Bank, 1995 U.S. Dist. LEXIS 1105, 1995 WL 42285, at *4 (quoting Cullen v. Margiotta, 811 F.2d 698, 712-13 (2d Cir.), cert. denied, 483 U.S. 1021, 107 S. Ct. 3266, 97 L. Ed. 2d 764 (1987)). The Wolff Defendants claim that FIAC's complaint fails to make this showing for two reasons. First, they assert that FIAC has failed to allege that each of the Wolff Defendants participated in two predicate acts and that the predicate acts were not alleged with the particularity required by 9(b). I have already considered and rejected these claims and so there is no need to deal with them again here. Second, the Wolff Defendants allege that FIAC has failed to show that the Enterprise and the persons committing the RICO acts are separate entities. This claim is also rejected.
The Second Circuit has held that a solitary entity cannot, as a matter of law, simultaneously constitute both the RICO person whose conduct is prohibited and the entire RICO enterprise whose affairs are impacted by the RICO person. Riverwoods Chappaqua v. Marine Midland Bank, N.A., 30 F.3d 339, 344 (2d Cir. 1994); Cullen, 811 F.2d at 729. Likewise, the RICO enterprise cannot consist merely of a corporation associated with its employees or agents carrying on the regular affairs of the corporation. Riverwoods, 30 F.3d at 344. Nevertheless, an entity can be both the RICO person and one of a number of the members of the RICO enterprise. Cullen, 811 F.2d at 729-30.
The Wolff Defendants argue that FIAC has failed to allege that there is a separate RICO person and enterprise. They claim that the Enterprise here consists solely of CIC and its employees or its agents. This argument, however, is incorrect. FIAC has properly pleaded a separate RICO enterprise and person. The complaint alleges that the RICO enterprise in this case consists of the named defendants and other entities -- not named as defendants but nevertheless mentioned in the complaint as co-conspirators -- associated-in-fact. (Compl. P 1). While there is some overlap between the Enterprise and the defendants, this is not dispositive. Cullen, 811 F.2d at 729-30. Also, although CIC was the alleged vehicle through which the Enterprise conducted its racketeering activities, this does not mean it must also be considered the RICO enterprise. FIAC has pleaded an enterprise separate and distinct from CIC. (Compl. P 1). Thus, FIAC has not failed to plead a separate RICO enterprise and person and has properly pleaded a violation of § 1962(c).
d) § 1962(d) Claim
To state a claim under § 1962(d) a plaintiff must plead as to each alleged co-conspirator (1) an agreement to join the conspiracy, (2) what that co-conspirator did in furtherance of the conspiracy, and (3) that the co-conspirator knowingly participated in the same. Hecht v. Commerce Clearing House, Inc., 897 F.2d 21, 25 (2d Cir. 1990); United States v. Ruggiero, 726 F.2d 913, 923 (2d Cir.), cert. denied, 469 U.S. 831 (1984). A defendant's "agreement" may be manifested by an assent "to commit predicate acts of racketeering," Constellation Bank, 1995 U.S. Dist. LEXIS 1105, 1995 WL 42285, at *4 (quoting Trautz v. Weisman, 819 F. Supp. 282, 289 (S.D.N.Y. 1993)), and can also be inferred from circumstantial evidence of the defendant's status in the enterprise or knowledge of the wrongdoing. Morrow v. Black, 742 F. Supp. 1199, 1208 (E.D.N.Y. 1990). In addition, it is important to note that, notwithstanding the Wolff Defendants' claims to the contrary, the pleading of conspiracy -- apart from the underlying predicate acts -- is measured under the standards of Fed. R. Civ. P. 8(a), and not the stricter standards of 9(b). Hecht, 897 F.2d at 26 n.4.
FIAC meets these standards. The complaint alleges that (1) each of the defendants agreed to join the conspiracy to defraud FIAC and others (by showing that each defendant "manifested . . . an assent 'to commit predicate acts of racketeering and by showing the defendant's status in the Enterprise, (2) that each of the defendants committed acts of mail and wire fraud in furtherance of the conspiracy, and (3) that the defendants knowingly participated in the same. (See Compl. PP 2-4, 7-21, 49-59, 99-101, 103-04, & 107). Thus, FIAC has adequately pleaded a claim under § 1962(d).
III. Pendent State Law Claims
In addition to the RICO claim, FIAC alleges nine separate state law claims against the defendants. The Wolff Defendants argue that FIAC has failed to sufficiently plead any of these claims. While the Wolff Defendants offer no new arguments to substantiate this claim, they do reiterate some of the same grounds they offered in support of their motion to dismiss the RICO count. Hence, for the same reasons I discussed in relation to the RICO count, the state law claims are dismissed as to all defendants except Wolff, CIC, Thomas Tyndall, and Mark Karasick. The same facts and allegations that supported FIAC's RICO claim against these four defendants, however, are also sufficient to allow FIAC's state law claims to survive the motion to dismiss.
IV. Motion to Disqualify FIAC's Counsel.
The Wolff Defendants have also moved to disqualify Patterson, Belknap, Webb & Tyler LLP ("PBW&T") as FIAC's counsel. PBW&T began representing FIAC approximately two weeks prior to the closing of the first deal between FIAC and CIC. (Gianninoto Aff. at PP 4-5). At that time, PBW&T assumed an active role in the review of the loan and guaranty documents used to consummate the deal. (Id. at 4-7). The Wolff Defendants allege that because of this representation, PBW&T has professional interests in this action that directly conflict with the interests of FIAC. Specifically, the Wolff Defendants argue that FIAC may have a malpractice claim against PBW&T based on PBW&T's review of the closing documents. The Wolff Defendants also argue that since the defendants may have a claim for contribution against PBW&T, PBW&T will not be able to fairly and adequately represent FIAC in this lawsuit. I disagree with both arguments.
Disqualification of a party's chosen counsel is a "drastic measure." Motown Record Corp. v. Mary Jane Girls, Inc., 118 F.R.D. 35, 38 (S.D.N.Y. 1987). Motions to disqualify opposing counsel are viewed with disfavor because they impinge on a party's right to employ the counsel of its choice. Stratavest Ltd. v. Rogers, 903 F. Supp. 663, 666 (S.D.N.Y. 1995). Additionally, the "drastic remedy" of disqualification is subject to strict scrutiny because of the strong potential to "stall and derail the proceedings, redounding to the strategic advantage of one party over another." S & S Hotel Ventures Ltd. Partnership v. 777 S.H. Corp., 515 N.Y.S.2d 735, 738 (N.Y. 1987). Hence, the moving party bears the "heavy burden [in] proving [the] facts required for disqualification." Evans v. Artek Sys. Corp., 715 F.2d 788, 794 (2d Cir. 1983). The Wolff Defendants' motion to disqualify fails to satisfy this heavy burden.
PBW&T's involvement with the FIAC-CIC deals was limited to the review of the loan agreements and guaranty. (Gianninoto Aff. at PP 4-8). PBW&T was not responsible for ensuring that defendants would not violate the RICO laws or commit fraud. The crux of FIAC's complaint is that the defendants intentionally defrauded them. The Wolff Defendants have alleged no facts that would demonstrate any negligence on the part of PBW&T, much less satisfy the heavy burden required in a motion to disqualify.
The Wolff Defendants' argument that they might assert affirmative defenses alleging that PBW&T was somehow negligent or might assert a third-party claim against PBW&T for contribution is also unavailing. First of all, the Wolff Defendants have offered no facts to support their allegation that PBW&T's actions may have somehow contributed to FIAC's losses in this case. Moreover, except for one of the state law claims, all of FIAC's claims allege intentional conduct on the part of the defendants, and contribution is generally not available to "any tortfeasor who has intentionally caused the harm." See Anderson v. Local Union No. 3, Int'l Bhd. of Elec. Workers, 582 F. Supp. 627, 632 (S.D.N.Y.), aff'd, 751 F.2d 546, 549 (2d Cir. 1984). Thus, the Wolff Defendants have failed to demonstrate that the "drastic remedy" of disqualifying FIAC's chosen counsel is warranted and their motion to do so is therefore denied.
For the foregoing reasons, the motion to dismiss is granted as to Slovie Wolff, Rachell Skydell, Manhattan Management, Inc., Chadwick Funding Company and Burham Corp., N.V. and denied as to Emanuel Wolff, CIC, Mark Karasick and Thomas Tyndall. In addition, the motion to disqualify Patterson, Belknap, Webb & Tyler LLP as counsel for FIAC is denied.
The parties are ordered to appear for a status conference on March 28, 1997, at 10:00 a.m.
Dated: New York, New York
February 21, 1997
United States District Judge
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