in 1986, and did not meet the continuity requirement for RICO predicate acts. Plaintiffs assert that they now have information showing predicate acts throughout 1987 and 1988. Thus, assert plaintiffs, the holding of Vannest I, should not prevent them from reasserting their RICO claims.
Under Fed. R. Civ. P. 15(a) the Court has discretion to grant a plaintiff leave to amend his pleadings, and leave to amend "shall be freely given when justice so requires." "Justice does so require unless the plaintiff is guilty of undue delay or bad faith or unless permission to amend would unduly prejudice the opposing party." SS. Silberblatt, Inc. v. East Harlem Pilot Block, 608 F.2d 28, 42 (2d Cir. 1979). A court may deny leave to amend where the amended pleading is considered futile, and an amendment is considered futile if the amended pleading fails to state a claim." Tri-State Judicial Services, Inc. v. Markowitz, 624 F. Supp. 925, 926 (E.D.N.Y. 1985).
In this case I deny plaintiffs' motion for leave to amend because I find that plaintiffs are guilty of undue delay and that defendants would be unduly prejudiced by this amendment. I also conclude that the proposed amendment would be futile.
The actions alleged to have been discovered recently by plaintiffs consist of representations by Sage, Rutty to Karpus in 1987 and 1988 that "after market" units in the Pfeiffer House building were available when, in fact, the units had never been sold in the first instance. Also, plaintiffs allege that PNC was still receiving investors' funds, as escrow agent for the partnership, in 1987 and 1988, long after its term under the original escrow agreement was scheduled to expire. These acts, say plaintiffs, demonstrate an ongoing conspiracy to defraud them.
That Sage, Rutty allegedly made inaccurate representations to the plaintiffs (through Karpus) in 1987 and 1988 is not a recently discovered event. Plaintiffs were aware as early as June 1993 that the 1987 and 1988 purchases were not aftermarket sales, as they alleged such in their amended complaint. See Amended Complaint at PP 63-65. Thus, this information is approximately four years old: not recently discovered by any definition (except possibly in archeological matters). Plaintiffs offer no reason why they waited nearly four years to act on this allegedly critical information. This constitutes undue delay.
Since June 1993, extensive discovery has taken place. Throughout this time discovery has proceeded without any contemplation of a RICO claim because previously I had dismissed it, with prejudice. To allow plaintiffs to amend now and reassert their RICO claim would subject defendants to significant hardship. The extensive discovery that has just been completed would possibly need to be reopened and refocused based upon the existence of the purported new claim. This lawsuit arises out of securities purchased first in 1986 more than a decade ago. I find that reintroducing a RICO claim at this late date would be unduly prejudicial.
Finally, I do not find that the actions cited by plaintiffs would state a RICO claim in any event. Plaintiffs have advanced nothing new to suggest that their RICO claim should be reinstated. I decline to reexamine my prior determination dismissing this claim.
As for PNC's alleged involvement receiving monies after 1986, I am unpersuaded that this demonstrates any predicate act of conspiracy. As stated above, Kenver had authority -- pursuant to the partnership documents -- to enter into agreements on behalf of the partnership. Thus, there is nothing inherently wrongful or suspicious about any arrangements that may have been made between the partnership and PNC at any time. While the Court is unaware of the reasons for PNC to be receiving investment funds after 1986, this fact alone cannot serve as the basis for a claim of predicate acts under RICO. Indeed, plaintiffs have failed to articulate with any specificity why PNC's involvement as escrow agent after 1986 may constitute fraud.
For all the above reasons, plaintiffs' motion for leave to amend is denied.
4) PNC's Motion for Sanctions:
Finally, PNC moves the Court to sanction plaintiffs pursuant to Fed.R.Civ.P. Rule 11. PNC asserts that the plaintiffs' attempt to reassert the RICO claim previously dismissed with prejudice, over one month after the deadline for bringing motions, is sanctionable conduct.
Plaintiffs assert that their request to reinstate the RICO claim is not sanctionable because their original RICO claim was dismissed after only minimal discovery and the extensive discovery that has since taken place has provided evidence that the RICO claim should be reinstated.
While I disagree with plaintiffs' conclusion, I do not believe plaintiffs have acted in bad faith or without a reasonable belief that their position was warranted by existing law. See Fed.R.Civ. P. 11. Accordingly, I deny PNC's request for sanctions.
For all the above reasons, Sage, Rutty's motion for partial summary judgment (152) is granted in part and denied in part; PNC's motion for summary judgment (151) is granted in its entirety; the plaintiffs' cross-motion to amend the amended complaint (165) is denied; and PNC's motion for sanctions (175) is denied.
IT IS SO ORDERED.
DAVID G. LARIMER
UNITED STATES DISTRICT COURT
Dated: Rochester, New York
March 31, 1997.