The opinion of the court was delivered by: Gershon, District Judge.
In this action brought under the Racketeer Influenced and
Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961 et seq.,
and New York State law, the Fischer defendants*fn1
("defendants") and the plaintiffs seek summary judgment. Their
motions were referred to the Honorable Steven M. Gold, Magistrate
Judge, for report and recommendation. Judge Gold, who has a
thorough familiarity of this case through his supervision of
lengthy pretrial proceedings and involvement in prior motions,
has now filed a Report recommending that defendants' motion be
granted. Judge Gold found that plaintiffs have failed to identify
admissible evidence sufficient to raise genuine questions of fact
for trial with respect to their claims that defendants violated
RICO and that the remaining claims, brought under the court's
supplemental jurisdiction, should be dismissed without prejudice.
For the reasons stated below, the Report and its recommendations
are adopted in their entirety.
Before the magistrate judge plaintiffs principally relied on
summaries and purported quotations from depositions set forth by
their attorney, Peter A. Joseph, Esq., in a 134-page affidavit.
not present to Judge Gold the depositions themselves; nor did
they submit the central documents upon which they rely, with
authenticating affidavits. Despite plaintiffs' unfounded claims
to the contrary, the materials submitted to Judge Gold, are, for
the most part, without evidentiary value and are insufficient
under Rule 56 of the Federal Rules of Civil Procedure to defeat
what Judge Gold correctly found to be the evidentiary showing
made by the defendants that a RICO claim could not be
established. Judge Gold set forth the applicable law with clarity
and then carefully and exhaustively analyzed the plaintiffs'
contentions that there is an evidentiary basis for their RICO
claims which requires a trial. Indeed, even though the plaintiffs
are proceeding with counsel, and not pro se, Judge Gold has
given them every possible opportunity to meet the showing made by
the defendants. For example, he allowed them to answer the motion
some nine months after it was brought, and he reviewed
transcripts of depositions which plaintiffs claim support them,
even though the plaintiffs had failed to submit those
Judge Gold properly rejected plaintiffs' claim that his rulings
on discovery excused them from submitting deposition transcripts.
Plaintiffs claim that defendants had the burden of submitting
accurate copies of the deposition transcripts upon which
plaintiffs rely. Such a claim has no basis in law, nor in any
of the rulings made by Judge Gold to accommodate the plaintiffs
by requiring the defendants to make available to plaintiffs any
transcripts upon which defendants were relying.
Turning to the merits, Judge Gold found that:
This Court's concern with plaintiffs' failure to
support their opposition to summary judgment with
deposition transcripts is substantive as well as
procedural. To the limited extent that, although not
submitted by plaintiffs, the actual transcripts of
the testimony cited in the Joseph affidavit have been
made available to the Court, comparisons between the
testimony "quoted" in the Joseph affidavit and the
original transcripts reveals that significant words
have been omitted, sentences have been quoted out of
order, and statements have been taken out of context.
Report at 19. Judge Gold then proceeded to analyze each of
plaintiffs' claims in detail, noting that either there is a total
failure of proof or that the claimed proof, upon examination,
does not support the plaintiffs' position. Among other things, he
correctly found that findings in other cases which plaintiffs
claim are usable against the defendants under the doctrines of
res judicata or collateral estoppel are not determinative of the
issues presented in this case.
In plaintiffs' objections to the Report, they continue to rely
on the inadmissible Joseph affidavit's hearsay allegations as to
the content of depositions. As before, plaintiffs rely on
unsupported allegations of fact, proffer as facts grossly
misleading characterizations of the evidence, challenge the
credibility of witnesses whose depositions are relied upon by the
defendants without offering countervailing admissible proof, and
refer to still further inadmissible evidence such as newspaper
In addition, they now point to what they claim is additional
evidence of the defendants' wrongdoing and ask the court to
consider it even though it was not presented to Judge Gold.
Plaintiffs claim that they should be permitted to supplement the
record and, finally, offer what they assert will be evidentiary
facts to defeat the summary judgment motion. They offer no sound
basis in support of supplementation. For example, they suggest
that, since the complaint refers the court to "the public record"
of various deeds and mortgages, they "were uncertain whether or
not the Magistrate in such an instance, would appoint a master to
investigate the records in question," see Letter of Peter A.
Joseph, Esq., dated December 11, 1998, and use
this as an excuse for why they did not previously produce the
deeds and mortgages themselves. Their claim that they were
prejudiced by Judge Gold's failure to rule on a contempt motion
for sanctions against the defendants and other parties and
non-parties made in early 1997 is equally meritless. Even
assuming arguendo that the motion was not fully resolved (but
see Docket Entry # 185 of April 10, 1997), its lack of
resolution was never presented to Judge Gold as a basis for
denying defendants' motion for summary judgment. That is,
plaintiffs neither claimed that resolution of the contempt motion
for sanctions was necessary to their ability to respond to the
motion for summary judgment, nor did they claim that the absence
of particular discovery prejudiced their ability to respond to
the motion. On the contrary, plaintiffs themselves moved for
summary judgment on the ground that the facts prove defendants'
Given the history of this case, it would be an abuse of the
invaluable role played by magistrate judges in reviewing
dispositive motions to reopen the record to give plaintiffs yet
another opportunity to fulfill their obligation to submit
admissible evidence. This court's review of a magistrate judge's
report and recommendation is de novo, and the court is
permitted, in its discretion, to accept supplemental evidence.
See 28 U.S.C. § 636(b)(1); Fed. R.Civ.P. 72(b); Hynes v.
Squillace, 143 F.3d 653, 656 (2d Cir. 1998), cert. denied, ___
U.S. ___, 119 S.Ct. 246, 142 L.Ed.2d 202 (1998). But it is well
established that the court may also decline to exercise its
discretion to allow such supplementation. Thus, the Second
Circuit in Hynes noted that:
[W]e have upheld the exercise of the district court's
discretion in refusing to allow supplementation of
the record upon the district court's de novo review.
See, e.g., Paddington Partners v. Bouchard,
34 F.3d 1132, 1137-38 (2d Cir. 1994) (finding no abuse of
discretion in district court's refusal to consider
supplemental evidence); Pan American World Airways,
Inc. v. International Bhd. of Teamsters,
894 F.2d 36, 40 n. 3 (2d Cir. 1990) (holding that district
court did not abuse its discretion in denying
plaintiff's request to present additional testimony
where plaintiff "offered no justification for not
offering the testimony at the hearing before the
magistrate"); see also Wallace v. Tilley,
41 F.3d 296, 302 (7th Cir. 1994) ("It is not in the interests
of justice to allow a party to wait until the Report
and Recommendation or Order has been issued and then
submit evidence that the party had in its possession
but chose not to submit. Doing so would allow parties
to undertake trial runs of their motion, adding to
the record in bits and pieces depending upon the
rulings or recommendation they received.") (internal
quotation marks and citations omitted).
143 F.3d at 656. As similarly noted in Paterson-Leitch Co. v.
Massachusetts Mun. Wholesale Elec. Co., 840 F.2d 985 (1st Cir.
Systemic efficiencies would be frustrated and the
magistrate's role reduced to that of a mere dress
rehearser if a party were allowed to feint and weave
at the initial hearing, and save its knockout punch
for the second round. In addition, it would be
fundamentally unfair to permit a litigant to set its
case in motion before the magistrate, wait to see
which way the wind was blowing, and — having received
an unfavorable recommendation — shift gears before
the district judge.
840 F.2d at 991. Here, plaintiffs offer no sound basis for
reopening the record. The request to reopen is denied.
For the above-stated reasons, I adopt Magistrate Judge Gold's
Report and Recommendation in its entirety and direct that the
Complaint against the Fischer defendants be dismissed.
REPORT AND RECOMMENDATION
Plaintiffs, the Crown Heights Jewish Community Council, Inc.
(the "Council") and Chevra Machziket H'Shechuna, Inc. ("CMH"),
bring this action pursuant to the Racketeer Influenced and
Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961 et seq.,
alleging that, together with others, defendant David Fischer
engaged in a scheme to defraud plaintiffs in connection with
various real estate transactions involving property in the Crown
Heights section of Brooklyn, New York.*fn1 Plaintiffs also
claim, pursuant to New York State law, that defendant Fischer
breached a fiduciary duty he owed to them, and that Fischer
committed various state law crimes, including grand larceny,
falsification of business records, and filing of false
The "Fischer Defendants"*fn2 now move for summary judgment,
claiming that plaintiffs have failed to raise a genuine issue of
material fact for trial and that defendants are therefore
entitled to judgment as a matter of law. Defendants also seek
dismissal of the complaint pursuant to Federal Rule of Civil
Procedure 37, arguing that plaintiffs have failed to comply with
proper discovery demands and have provided false and misleading
disclosure to defendants. Finally, defendants seek an order
dismissing the complaint on the grounds that plaintiffs lacked
the requisite authority to bring this lawsuit, and an order
disqualifying the law firm of Israel Weinstock from representing
plaintiffs in this action based on that firm's alleged violation
of Disciplinary Rule 5-105.
Plaintiffs cross-move for summary judgment, claiming that the
evidence relied upon by defendants in support of their motion
fully proves the allegations of plaintiffs' complaint. See Aff.
of Peter A. Joseph in Opp'n to "Fischer Defs.'" Mot. for Summ.J.
and in Support of Pls' Cross-Mot. For Summ.J. ¶ 1(ii) ("Joseph
Aff."). Plaintiffs also seek sanctions against defendants'
counsel, pursuant to Federal Rules of Civil Procedure 56(g) and
11(c), claiming that defendants' attorney Eli Feit submitted his
affidavit in support of defendants' motions in bad faith.
The complaint in this case was filed on July 2, 1992. On August
28, 1992, defendants moved to dismiss the complaint on a variety
of grounds, including their contention that plaintiffs' RICO
claims were time-barred because they were not brought within the
applicable four-year statute of limitations. Defendants also
sought to strike various portions of the complaint, to disqualify
plaintiffs' counsel, and to impose sanctions on plaintiffs. See
Defs.' Notice of Motion, Docket Entry 7.
The parties engaged in extensive discovery from July 1995 until
April 1997. On June 16, 1997, the Fischer Defendants filed the
motion for summary judgment now pending before the Court. See
Docket Entry 216. Plaintiffs did not serve their opposition to
defendants' motion, or their own cross-motion for summary
judgment, until March 16, 1998, and these documents were not
filed with the Clerk of the Court until May 7, 1998. See Docket
For the reasons stated below, I respectfully recommend that
defendants' motion for summary judgment be granted. I therefore
do not reach the other pending motions.
Plaintiffs, invoking this Court's federal question jurisdiction
pursuant to 28 U.S.C. § 1331, allege in this action that
defendants have violated RICO, and seek relief in the form of
treble damages and attorney's fees pursuant to
18 U.S.C. § 1964(c). The Fischer Defendants contend that, despite four years
of discovery, plaintiffs are unable to point to any admissible
evidence to support the central allegations of their complaint.
See Aff. of Eli Feit in Supp. of Mot. for Summ.J. and Other
Relief ("Feit Aff.") ¶¶ 3-4. Specifically, defendants contend
that plaintiffs have failed to come forward with any admissible
evidence indicating that defendants in fact engaged in a "pattern
of racketeering activity" by committing the underlying predicate
acts charged in the complaint. Defendants further contend that
plaintiffs lack standing because they are unable to demonstrate
that they suffered any particular injury to their business or
property which was proximately caused by defendants' conduct.
Thus, defendants argue, no genuine issue of material fact remains
for trial, and they are entitled to judgment as a matter of law.
A. Elements of a RICO Claim
To maintain a civil RICO claim, a plaintiff must establish: 1)
that a RICO "enterprise" existed; 2) that the defendant committed
predicate acts falling within one or more of the categories
enumerated in Section 1961; 3) that these predicate acts
constituted a "pattern of racketeering activity;" and 4) that
there is a nexus between the defendant, the pattern of
racketeering activity, and the enterprise. See 18 U.S.C. § 1961,
1962; Bernstein v. Misk, 948 F. Supp. 228, 234 (E.D.N Y
1997). Further, plaintiffs pleading a RICO violation must
demonstrate standing, by showing that they were injured in their
business or property, and that these injuries were proximately
caused by the conduct constituting the alleged pattern of
racketeering activity. See 18 U.S.C. § 1964(c); Holmes v.
Securities Investor Protection Corp., 503 U.S. 258, 268, 112
S.Ct. 1311, 1317, 117 L.Ed.2d 532 (1992); Bernstein, 948
F. Supp. at 234.
A "pattern of racketeering activity" consists of at least two
predicate racketeering acts, occurring within ten years of each
other. See 18 U.S.C. § 1961(5). Violations of any of a wide
variety of state and federal laws may qualify as "racketeering
activity" under the RICO statute. See 18 U.S.C. § 1961(1).
Plaintiffs in this case assert that defendants have engaged in
racketeering activity by violating the mail fraud statute,
18 U.S.C. § 1341, and by conducting monetary transactions in
property derived from "specified unlawful activity" in violation
of 18 U.S.C. § 1957. See Compl. ¶¶ 151, 152, 161-63, 175-77,
In addition to the violations of federal law described above,
plaintiffs contend that defendants engaged in various acts
prohibited under New York State law that constitute further
"racketeering activity" under Section 1961(1). Specifically,
plaintiffs claim that defendants committed grand larceny in the
first degree in violation of New York Penal Law Section 155.42;
falsified business records in violation of New York Penal Law
Section 175.10; and offered false instruments for filing in
violation of New York Penal Law Section 175.35. See Compl. ¶¶
164-168. However, the only state law crimes which constitute
predicate acts of racketeering activity under Section 1961 are
those acts "chargeable under State law and punishable by
imprisonment for more than one year," which involve "murder,
kidnaping, gambling, arson, robbery, bribery, extortion, dealing
in obscene matter, or dealing in a controlled substance or listed
chemical." 18 U.S.C. § 1961(1)(A). None of the state law crimes
enumerated by plaintiff fall within this definition.*fn4 Nor do
any of these state law offenses constitute "specified unlawful
activity" as defined by Section 1956(c)(7). Accordingly, the only
viable predicate acts of racketeering activity charged in the
complaint are the alleged violations of Sections 1341, pertaining
to mail fraud, and 1957, pertaining to monetary transactions in
property derived from specified unlawful activity.
1. Section 1341: Mail Fraud
To prove that defendants committed mail fraud in violation of
18 U.S.C. § 1341, plaintiffs must show the following: 1) the
existence of a scheme or artifice to defraud; 2) defendants'
knowing or intentional participation in the scheme; and 3) use of
the mails in furtherance of the scheme. See S.Q.K.F.C., Inc. v.
Bell Atlantic Tricon Leasing Corp., 84 F.3d 629, 633 (2d Cir.
1996) (citing United States v. Gelb, 700 F.2d 875, 879 (2d Cir.
1983), cert. denied, 464 U.S. 853, 104 S.Ct. 167, 78 L.Ed.2d
152 (1983)); Congregacion de la Mision Provincia de Venez. v.
Curi, 978 F. Supp. 435, 445 (E.D.N.Y. 1997). To establish intent,
plaintiff must demonstrate that some actual harm or injury was
contemplated by the schemer. See United States v. Chandler,
98 F.3d 711, 714 (2d Cir. 1996); In re Seizure of All Funds in
Accounts in Names Registry Pub. Inc., 68 F.3d 577, 580 (2d Cir.
1995). Although intent may be inferred from circumstantial
evidence, see S.Q.K.F.C. Inc., 84 F.3d at 634; United States
v. William Savran & Assocs., Inc., 755 F. Supp. 1165 (E.D.N Y
1991), acts done inadvertently or in good faith do not constitute
mail fraud. See O'Malley v. New York City Transit Auth.,
896 F.2d 704, 706 (2d Cir. 1990).
2. Section 1957: Monetary Transactions in Property Derived
from Specified Unlawful Activity
In addition to their allegations of mail fraud, plaintiffs
contend that defendants engaged in racketeering activity by
committing violations of Section 1957. To establish that
defendants have engaged in money laundering activity prohibited
by Section 1957, plaintiffs must prove 1) that defendants
knowingly conducted a monetary transaction in criminally derived
property; 2) that the property had a value greater than $10,000;
and 3) that the property was in fact derived from "specified
unlawful activity." See 18 U.S.C. § 1957(a).
In this case, plaintiffs' allegations of "specified unlawful
activity" include mail fraud, which as indicated above is itself
a RICO predicate act, see 18 U.S.C. § 1961(1), and may also
form the basis of a money laundering charge. See
18 U.S.C. § 1956(c)(7)(A) (listing violations of RICO as "specified unlawful
activity"). Plaintiffs' allegations of "specified unlawful
activity" also include violations of 18 U.S.C. § 1014, see
18 U.S.C. § 1956(c)(7)(D) (listing a violation of Section 1014 as a
specified unlawful activity for money laundering). Section 1014
makes it unlawful for a person knowingly to make a false
statement to a financial institution for the purpose of
influencing a financial institution's decision. However, the
false statement need not be material. See United States v.
Wells, 519 U.S. 482, 117 S.Ct. 921, 137 L.Ed.2d 107 (1997).
As discussed above, violations of Section 1014 do not by
themselves qualify as RICO predicate acts. See
18 U.S.C. § 1961(1); see also Meridian Mortgage Corp. v. Spivak, No. Civ.A
91-3932, 1993 WL 193364, at *8 n. 4 (E.D.Pa. 1993). Therefore, to
maintain a RICO claim against defendants, plaintiffs must prove
not only that defendants violated Section 1014, but also that
defendants knowingly engaged ...