a. Pattern of Racketeering Activity
In order to prove a pattern of racketeering activity under RICO, Plaintiffs must show, at least, two
related racketeering acts, that occurred in the last ten years, which "amount to or pose a threat of continued criminal activity." H.J. Inc., 492 U.S. at 237-39; GICC Capital Corp. v. Technology Fin. Group, Inc., 67 F.3d 463, 465 (2d Cir. 1995), cert. denied, 135 L. Ed. 2d 1067, 116 S. Ct. 2547 (1996). Relatedness and continuity combine to discern whether a pattern exists. H.J. Inc., 492 U.S. at 243. Relatedness is defined as "acts that have the same or similar purposes, results, participants, victims or methods of commission, or otherwise are interrelated by distinguishing characteristics and are not isolated events." Id. at 240.
"'Continuity' is both a closed- and open-ended concept, referring either to a closed period of repeated conduct, or to past conduct that by its nature projects into the future with a threat of repetition." H.J. Inc., 492 U.S. at 241; GICC, 67 F.3d at 465-66. Closed-ended continuity may be demonstrated "by proving a series of related predicates extending over a substantial period of time." H.J. Inc., 492 U.S. at 242; GICC, 67 F.3d at 466, 467 (citing only two instances where the 2d Circuit has found closed-ended continuity -- one for acts occurring over a period of eight years and the other for a two year period.) Acts that extend "over a few weeks or months and threaten no future criminal conduct [will] not satisfy the requirement [because] Congress was concerned in RICO with long-term criminal conduct." H.J. Inc., 492 U.S. at 242; GICC, 67 F.3d at 466.
Here, the parties proceed under the assumption that closed-ended continuity is alleged.
See GICC, 67 F.3d at 466. The Court must therefore look to the period of time in which the alleged acts occurred. However, "in determining whether continuity exists the court should not limit its consideration to the duration of the scheme, but should also look at the overall context in which the acts took place," Pier Connection, Inc. v. Lakhani, 907 F. Supp. 72, 75 (S.D.N.Y. 1995); see also United States v. Kaplan, 886 F.2d 536, 542-43 (2d Cir. 1989), cert. denied, 493 U.S. 1076, 107 L. Ed. 2d 1033, 110 S. Ct. 1127 (1990), including the number of victims and participants, and the number, variety and extent of the defendant's goals, and whether there are separate schemes. GICC, 67 F.3d at 467; Pier Connection, 907 F. Supp. at 78.
Plaintiff must show that the Defendants' acts were neither "isolated nor sporadic." GICC, 67 F.3d at 467; see, e.g., Pier Connection, 907 F. Supp. at 78 ("The Complaint demonstrates that Defendants engaged in one scheme whose single goal was to seize control of [plaintiffs'] 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."); Mathon, 875 F. Supp. at 998 ("this case involves a single transaction involving one alleged victim, albeit two persons, one real estate transaction, a limited goal, no threatened future action, and no allegation of long-term criminal conduct"); Mead v. Schaub, 757 F. Supp. 319, 323 (S.D.N.Y. 1991) ("A critical factor in determining whether the predicates are 'continuing' under RICO is the terminable quality of the goal or purpose of the enterprise.").
The Partner Defendants argue that Plaintiffs' RICO claim should be dismissed because Plaintiffs have failed to allege a closed-ended pattern of racketeering activity. The Court agrees.
Plaintiffs allege in their fifth cause of action, that, from 1992 to 1994, the Partner Defendants engaged in a scheme to defraud Plaintiffs by filing four
fraudulent tax returns, on behalf of only 41 West and Pater, by intentionally failing to take exemptions on those tax returns. (Compl. PP 33, 47, 56-60.) When mailed, the Plaintiffs claim the Partner Defendants engaged in mail fraud. (Compl. P 60-63.) These acts were done for a single wrongful goal -- to "defraud Plaintiffs" (Pls.' Mem. Law at 13), by depriving them of post-tax profits. (Compl. P 58.) Plaintiffs argue that such conduct was related because there were four acts each with the "same purpose (to defraud plaintiffs), achieving the same results (defrauding plaintiffs), [with] the same participants (defendants), the same victims (plaintiffs), and utilizing the same method (mail fraud) . . . . and they were in furtherance of the same scheme." (Pls.' Mem. of Law at 13.) To establish continuity the Plaintiffs simply state that these three acts occurred over a period of three years. (Pls.' Mem. of Law at 13.)
Whereas the Plaintiffs' allegations may establish that the acts were related; they do not survive the continuity requirement.
Although continuity is "centrally a temporal concept," GICC, 67 F.3d at 468; H.J. Inc., 492 U.S. at 242, courts may also analyze other factors to determine whether the acts were isolated and sporadic. See supra. The four acts at issue here appear to be annual mailings of allegedly fraudulent tax returns. Although courts have found periods of time shorter than three years to be sufficient to satisfy the continuity requirement, those cases did not address singular, annual acts.
The Court finds that Plaintiffs' allegations do not suffice to fulfill the continuity requirement.
Even if the fact that the acts occurred over a three-year period would suffice to fulfill a temporal requirement, more is required to satisfy the continuity factor. The Plaintiff must allege facts that show the Court that the acts were neither sporadic nor isolated. First, although two acts are necessary they are per se not sufficient to show a pattern. Sedima, 473 U.S. at 496 n.14. "Section 1961(5) concerns only the minimum number of predicates necessary to establish a pattern; and it assumes that there is something to a RICO pattern beyond simply the number of predicate acts involved." H.J. Inc., 492 U.S. at 238. After all, by the term itself, a pattern requires more than two acts. Id. Committing two "widely separated and isolated criminal offenses" does not subject a person to RICO. Id. at 239. Here, there were only four acts which occurred over a three year period. An average of one act per year is a sporadic event. Furthermore, there is nothing more than a single alleged scheme with a single, wrongful, narrow goal where only some of the Plaintiffs were the victims, where no future activity is threatened, and where the damages are unclear. This narrow class of alleged victims is not the kind of broad-based unlawful activity that RICO was design to address. Pier Connection, 907 F. Supp. at 78 (RICO complaint dismissed where plaintiffs made no allegation that defendants "pursued a similar scheme against other . . . industry competitors."). Furthermore, although it is not necessary to allege multiple schemes, a court is still permitted to consider the number of schemes in order to ensure that the alleged activity is not sporadic. GICC, 67 F.3d at 467. Here, there was only one. The Court finds that the activities alleged by Plaintiffs are not the type of substantial and continuous activities that RICO was meant to prevent.
As far as either Cause of Action Four or Five can be said to allege a cause of action pursuant to 18 U.S.C. § 1962(d), although Plaintiffs never even cite § 1962(d), it is also dismissed as to both sets of Defendants.
B. Plaintiffs' Request to Amend the Complaint
Rule 15(a) of the Federal Rules of Civil Procedure provides that "leave [to amend a pleading] shall be freely given when justice so requires." Fed. R. Civ. P. 15(a); See also Mathon, 875 F. Supp. at 1002 (citations omitted). However, if there is a threat of undue delay, bad faith, futility or prejudice to defendants, leave to amend may be denied. Mathon, 875 F. Supp. at 1002 (citations omitted).
Plaintiffs submit a 24-page affidavit,
filed in the ongoing actions before Justice Gammerman, which they claim, without explanation, shows they can properly replead the deficiencies of the Complaint. (Pls.' Mem. Law at 25.) The Court finds that repleading would be futile in this case. Nevertheless, should they choose so to do, Plaintiffs are given the opportunity to replead, within 20 days of the date of this Order. Plaintiffs must also submit, at the same time, a response to the attached RICO Statement. No extensions of time will be granted. Plaintiffs are advised to consider the applicability of Rule 11 to any further pleadings alleging RICO claims. Defendants are to answer or move within 20 days of the service of the Amended Complaint, if any.
C. State Law Claims
The Court having dismissed all claims over which it had jurisdiction, now dismisses the Plaintiff's state law claims pursuant to 28 U.S.C. § 1367(c)(3).
The Court must determine whether it is appropriate to retain the remaining state law claims under supplemental jurisdiction. Section 1367(a) states in pertinent part:
the district courts shall have supplemental jurisdiction over all other claims that are so related to claims in the action within such original jurisdiction that they form part of the same case or controversy under Article III of the United States Constitution.
Section 1367(c) provides, however, four exceptions to the rule. A district court may decline to exercise jurisdiction if
(1) the claim raises a novel or complex issue of State law,