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LORENTZEN v. CURTIS

August 27, 1998

FRED LORENTZEN, Plaintiff, against W. ROBERT CURTIS, ESQ. and CURTIS & RIESS-CURTIS, P.C., Defendants. W. ROBERT CURTIS, ESQ. and CURTIS & REISS-CURTIS, P.C., Third-Party Plaintiffs, -against- THE HOME INSURANCE COMPANY; RISK ENTERPRISE MANAGEMENT LIMITED; VINCENT VITIELLO, ESQ.; FREDERICK L. MILLER, ESQ.; RONALD F. BARTA, ESQ.; CONRAD CYRIAX, ESQ.; SCHIAVETTI, GEISLER, CORGAN, SOSCIA, DeVITO, GABRIELE & NICHOLSON; RICHARD BAKER, ESQ.; and JOHN DOES 1-40; Third-Party Defendants.


The opinion of the court was delivered by: PARKER

MEMORANDUM DECISION AND ORDER

 BARRINGTON D. PARKER, JR., U.S.D.J.

 Third-party plaintiffs, W. Robert Curtis, Esq. and his law firm, Curtis & Reiss-Curtis, P.C. (collectively, "Curtis"), commenced this action against Third-party defendants The Home Insurance Company ("Home"); Risk Enterprise Management Limited ("REM"); Vincent Vitiello, Esq.; Frederick L. Miller, Esq.; Ronald F. Barta, Esq.; Conrad Cyriax, Esq.; Schiavetti, Geisler, Corgan, Soscia, DeVito, Gabriele & Nicholson; Richard Baker, Esq.; and John Does 1-40 asserting violations of the Racketeer Influenced and Corrupt Organizations Act of 1970 ("RICO"), 18 U.S.C. § 1962(c), common law fraud, and seeking indemnification and contribution.

 Third-party defendants removed the action to this Court pursuant to 28 U.S.C. §§ 1331 and 1441, on the basis that the third-party complaint alleged RICO violations under 18 U.S.C. § 1961 et seq. Third-party defendants now move pursuant to Rule 12(b) Fed. R. Civ. P. to dismiss Curtis' amended third party complaint, and for sanctions. See Fed. R. Civ. P. 11. In addition, Fred K. Lorentzen, the first-party plaintiff in this action, moves to remand, or in the alternative, to sever and remand the original action from that now pending in federal court. For the reasons that follow, third-party defendants' motion to dismiss Curtis' RICO claim is granted, and their motion for sanctions is denied. The remaining claims are remanded to state court pursuant to 28 U.S.C. § 1441.

 BACKGROUND

 In deciding a motion pursuant to Rule 12(b), the court is, of course, obligated to construe the pleadings in the plaintiff's favor. Mills v. Polar Molecular Corp., 12 F.3d 1170, 1174 (2d Cir. 1993); Bankers Trust Co. v. Rhoades, 859 F.2d 1096, 1098 (2d Cir. 1988); CutCo Indus., Inc. v. Naughton, 806 F.2d 361, 365 (2d Cir. 1986). The following facts are accordingly construed.

 Curtis & Reiss-Curtis, P.C. is a New York law firm that exclusively represents clients who have been injured by attorneys. W. Robert Curtis, Esq. contends that his firm has been the target of the unpermitted practices and fraudulent schemes of Home, an insurance company that wrote professional liability insurance contracts for attorneys during the relevant time period, and REM, a claims adjusting firm that has been retained by Home to close out existing claims.

 Defendants John Does 1-10 are the claims adjusters, their supervisors, and managers employed by Home, and include Vincent Vitiello, Esq.; Frederick L. Miller, Esq.; Ronald F. Barta, Esq.; and Conrad Cyriax, Esq. Curtis alleges that the claims adjusters select defense counsel for its insureds from a panel of law firms concentrating in legal malpractice defense. Defendants John Does 11-20 are the law firms selected by Home/REM and include the law firm of Schiavetti, Geisler, Corgan, Soscia, DeVito, Gabriele & Nicholson, among others. John Does 21-30 are the attorneys employed by the law firms and include Richard Baker, Esq. John Does 31-40 are claims adjusters, their supervisors, and managers employed by REM, and include Frederick L. Miller, Esq.; Ronald F. Barta, Esq.; and Conrad Cyriax, Esq.

 Underlying this lawsuit is a legal malpractice action brought by the plaintiff, Fred Lorentzen, and his brother, Krist, against their former attorneys, W. Robert Curtis and his law firm, Curtis & Reiss-Curtis, P.C. Curtis originally represented Lorentzen in a legal malpractice action brought against Andrew DePodwin, Esq. ("Lorentzen I "). Home/REM had insured DePodwin and defended him against Lorentzen's lawsuit. Curtis contends that although Home/REM learned early in the litigation that Lorentzen I could likely be settled for $ 50,000 and that Lorentzen's claim for liability was strong, Home/REM took a "no pay" position in Lorentzen's lawsuit, asserting that the claim was meritless. Curtis alleges that despite the likelihood of settlement, Home/REM spent in excess of $ 100,000 to destroy Lorentzen's claims, and Curtis was forced to spend over $ 120,000 to complete discovery and prepare the case for trial. When Lorentzen refused to pay any further discovery costs, Curtis withdrew from the action.

 David M. Bushman, Esq. became Lorentzen's new attorney. Curtis alleges that Home/REM deceived Bushman regarding its settlement position, caused Curtis & Reiss-Curtis, P.C. to give up its $ 70,000 charging lien, and caused Lorentzen to lose $ 20,000 in the prosecution of his case against DePodwin. Lorentzen then sued Curtis for malpractice, asserting that Curtis had spent too much time and money prosecuting Lorentzen I, and wrongfully disclosed to opposing counsel that Lorentzen I could have been settled for $ 50,000, which compelled Lorentzen to compromise his case.

 Curtis commenced an action against third-party defendants, contending that Home/REM financed a variety of misconduct designed to defeat malpractice claims brought against its insureds and in violation of RICO. As previously noted, third-party defendants removed the action to this Court. Specifically, Curtis' Amended Third-Party Complaint alleges that Home/REM takes a position of "resist" or "no pay" on most, if not all, claims; that Home/REM destroys the physical evidence of its insured's wrongs by tampering with the case file; that Home/REM refuses to give discovery as required by the rules of civil procedure; that Home/REM refuses to produce required insurance information; that Home/REM refuses to produce defendants for depositions and engages in misconduct during depositions. Curtis also alleges that Home/REM coaches false testimony from non-party witnesses and influences their testimony; that Home/REM drafts affidavits containing perjury; that Home/REM creates false evidence and tampers with evidence; that Home/REM brings frivolous and unnecessary motions and requires excessive motion practice for economic purposes. Finally, Curtis alleges that Home/REM makes misrepresentations to the court and opposing counsel; that Home/REM misrepresents the law and the facts to the court; that Home/REM disobeys court orders; and that Home/REM engages in unfair and dishonest settlement practices. Curtis also seeks recovery from third-party defendants for common law fraud and seeks indemnification and contribution.

 With respect to his RICO claim, Curtis seeks treble damages, interest, and attorneys' fees and costs, contending that he was damaged by 1) being required to invest $ 70,000 in Lorentzen's suit against DePodwin "to save it from destruction" and having its $ 70,000 charging lien destroyed; 2) losing time worth $ 50,000 to respond to unnecessary litigation and the deceptive settlement tactics financed by Home/REM in Lorentzen I ; 3) losing time worth more than $ 25,000 to respond to the improper adjusting of its coverage by Home/REM through Frederick L. Miller, Esq.; 4) losing time worth more than $ 65,000 to defend itself in this lawsuit; and 5) paying excessive premiums likely to exceed $ 300,000 because of claims financed or created by Home/REM. In addition, Curtis seeks damages exceeding $ 510,000, plus $ 3,000,000 in punitive damages, for his common law fraud claim, and seeks indemnification and contribution from the third-party defendants should Lorentzen prevail against Curtis in this case.

 DISCUSSION

 Curtis asserts that the third-party defendants' actions violate 18 U.S.C. § 1962(c), a provision of RICO that provides:

 
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 enterprise's affairs through a pattern of racketeering activity or collection of unlawful debt.

 "Racketeering activity" includes any act indictable under the mail fraud statute. See 18 U.S.C. § ...


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