opportunity for further discovery pursuant to Fed.R.Civ.P. 56(f).
Summary judgment is appropriate where, as here, "there is no
genuine issue as to any fact and . . . the moving party is
entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c);
see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-52,
106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Although the movant
carries the burden of demonstrating the absence of any genuine
issue of material fact, the party opposing summary judgment must
"do more than simply show that there is some metaphysical doubt
as to the material facts." Matsushita Elec. Indus. Corp. v.
Zenith Radio Corp., 475 U.S. 574, 586-87, 106 S.Ct. 1348. The
non-moving party must enumerate "specific facts and circumstances
supported by depositions, affidavits based on personal knowledge,
and admissions" that create a rational inference in his favor and
may not rely on conclusory allegations or denials. General Elec.
Co. v. New York State Dept. of Labor, 936 F.2d 1448, 1452 (2d
In considering defendants' motion for summary judgment, the
Court views all facts and construes all rational inferences
derived therefrom in the light most favorable to plaintiff. See
United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993,
8 L.Ed.2d 176 (1962). However, absent a showing of a genuine
issue of material fact by plaintiff, it is appropriate for the
Court to grant summary judgment, for "a complete failure of proof
concerning an essential element of the nonmoving party's case
necessarily renders all other facts immaterial." Celotex Corp.
v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265
Plaintiff's Motion for Default Judgment
As an initial matter, the Court must address two procedural
issues raised by plaintiff. First, plaintiff argues that he is
entitled to a default judgment pursuant to Fed.R.Civ.P. 55(b)(2)
because of Midas's failure to file an answer to his amended
complaint within the time required by Fed. R.Civ.P. 12(a).
Dispositions of motions for entries of defaults and default
judgments are left to the sound discretion of the district court
because it is in the best position to assess the individual
circumstances of a given case and to evaluate the credibility and
good faith of the parties. See Shah v. New York State Dept. Civ.
Serv., 168 F.3d 610, 615 (2d Cir. 1999). In the exercise of this
discretion, the district court must be mindful of the strong
policy favoring resolution of cases on their merits; defaults are
generally disfavored and reserved for rare occasions. See Enron
Oil Corp. v. Diakuhara, 10 F.3d 90, 95-6 (2d Cir. 1993). The
district court may consider a variety of factors including
whether the defaulting party's failure to plead or otherwise
defend was merely technical or resulted from bad faith, the
possibility of prejudice to the plaintiff, the merits of the
plaintiff's substantive claim, the sufficiency of the complaint,
the sum at stake, whether the default was due to excusable
neglect, and whether court would feel obliged to set aside
default on defendant's motion. See Pinaud v. County of Suffolk,
52 F.3d 1139, 1152 (2d Cir. 1995) (citing 10 James W. Moore et
al. Moore's Federal Practice ¶ 55.20[b]); Enron Oil Corp.,
10 F.3d at 96; Lindsey v. Prive Corp., 161 F.3d 886, 893 (5th
Cir. 1998). Here, the time that elapsed between denial of the
Midas's Rule 12(b)(6) motion to dismiss and motion for summary
judgment was very brief. Indeed, Midas stated its intention to
move for summary judgment on December 8, 1995, at oral argument
on the motion to dismiss. On December 15, 1995, this Court denied
the motion to dismiss, and thereafter, on April 1, 1996, in
accordance with the Court's scheduling order, Midas filed its
motion for summary judgment. Furthermore, the lack of an amended
answer in this case resulted in no prejudice to plaintiff where
Midas's Local Civil Rule 3(g) Statement clearly framed the issues
and fully responded to plaintiff's allegations
in the amended complaint. Therefore, the Court denies plaintiff's
motion for a default judgment.
Plaintiff's Rule 56(f) Cross-Motion
Plaintiff also argues that Midas's motion for summary judgment
is premature because the Court has afforded plaintiff
insufficient opportunity to conduct discovery. Plaintiff's
argument is governed by Rule 56(f), Fed.R.Civ.P., which states in
[S]hould it appear from the affidavits of a party
opposing [summary judgment] that the party cannot for
reasons stated present by affidavit facts essential
to justify the adverse party's opposition, the Court
may refuse an application for summary judgment or may
order a continuance to permit . . . discovery to be
Fed R.Civ.P. 56(f). In assessing the sufficiency of a Rule 56(f)
affidavit, the Court considers the nature of the uncompleted
discovery, whether the facts sought are reasonably expected to
create a genuine issue of material fact, what efforts the affiant
has made to obtain those facts, and why those efforts were
unsuccessful. See Hudson River Sloop Clearwater, Inc. v.
Department of Navy, 891 F.2d 414, 422 (2d Cir. 1989);
Burlington Coat Factory Warehouse Corp. v. Esprit De Corp.,
769 F.2d 919, 926 (2d Cir. 1985).
Although the Court has stayed discovery in this action,
plaintiff's reliance upon Rule 56(f) is without merit, as the
facts upon which Midas's summary judgment motion rests are
clearly facts within the knowledge of plaintiff, requiring no
discovery. As noted above and as set forth in greater detail
hereafter, Midas's motion turns principally upon whether
plaintiff relied upon Midas's alleged misrepresentations and
whether Midas ever made extortionate threats to plaintiff or PMC.
Clearly, plaintiff does not need discovery from Midas to prove
that PMC relied upon Midas's misrepresentations or that Midas
threatened PMC. Furthermore, assuming arguendo that plaintiff
required discovery from Midas to demonstrate the existence of a
triable issue of fact, plaintiff in fact enjoyed the opportunity
for extensive discovery in the related litigation in state court.
Therefore, because plaintiff offers no persuasive argument that
he requires any discovery to oppose Midas's motion, the Court
denies plaintiff's request for further discovery and proceeds
with a resolution of Midas's motion on the merits.
Plaintiff's Fraud Claim
Plaintiff claims that he was fraudulently induced to enter the
seven trademark and franchise agreements with Midas through
Midas's alleged misrepresentations that plaintiff would receive
an exclusive, delineated trade market area for each franchise.
See Feeley Aff. ¶ 14. Under New York law, a plaintiff seeking
to recover damages for fraud must prove a material
misrepresentation or omission of fact known to be false by
defendant, made by defendant for the purpose of inducing
plaintiff's reliance, and upon which plaintiff reasonably relied,
causing him injury. See Lama Holding Co. v. Smith Barney, Inc.,
88 N.Y.2d 413, 421, 646 N.Y.S.2d 76, 668 N.E.2d 1370 (1996); see
also New York Univ. v. Continental Ins. Co., 87 N.Y.2d 308, 318,
639 N.Y.S.2d 283, 662 N.E.2d 763 (1995); Rosario-Suarz v.
Wormuth Bros. Foundry, 233 A.D.2d 575, 578, 649 N.Y.S.2d 225
(3rd Dept. 1996).
In the instant case, plaintiff fails to establish justifiable
reliance upon Midas's alleged misrepresentations. The parties'
franchise agreements expressly preserved Midas's right to open
additional muffler shops "at any location or locations whatever."
Although plaintiff alleges that Midas represented to plaintiff
that PMC would receive an exclusive market area for each
franchise, the agreements at issue also expressly provided that
there are "no representations not contained herein" and
that the contract "supersedes all prior written agreements."
Def.Ex. B ¶ 2; Def. Ex. C ¶ 1.2. Under New York law, plaintiff
could not have reasonably relied upon Midas's alleged
misrepresentations where these misrepresentations clearly
contradicted the express terms of the parties' written contracts
and these contracts included integration clauses. See
Manufacturers Hanover Trust Co. v. Yanakas, 7 F.3d 310, 316 (2d
Cir. 1993) (applying New York law); Citibank N.A. v. Plapinger,
66 N.Y.2d 90, 495 N.Y.S.2d 309, 485 N.E.2d 974 (1985); Danann
Realty Corp. v. Harris, 5 N.Y.2d 317, 320-21, 184 N.Y.S.2d 599,
157 N.E.2d 597 (1959).
Representative of the New York courts' application of this rule
is the decision of the Appellate Division, Second Department, in
Manchester Equip. Co. v. Panasonic Industrial Co., 141 A.D.2d 616,
617-18, 529 N.Y.S.2d 532 (2d Dept. 1988). In that case, a
distributor brought an action against Panasonic for selling
products directly to the distributor's customers. The distributor
claimed that it had received oral assurances from Panasonic that
it would not make any such direct sales. However, the parties'
distributorship contract contained a non-exclusivity clause,
similar to the one in this case, which stated that Panasonic
reserved the unrestricted right to make direct sales of the
products to anyone, anywhere. The contract also contained an
integration clause stating that there were no "representations .
. . covenants, agreements or collateral understandings between
the parties not expressly contained in the contract." See
Panasonic Industrial Co., 141 A.D.2d at 617, 529 N.Y.S.2d 532.
In reversing the lower court's decision and granting Panasonic's
motion to dismiss, the Appellate Division, Second Department,
ruled that the distributor could not show reasonable reliance
because its allegations of fraud were inconsistent with the
express terms of the contract. See id.
Plaintiff seeks to distinguish the instant case by arguing that
the integration and non-exclusivity clauses in the franchise
contracts were not sufficiently specific to bar his fraud claims.
First, plaintiff claims that the integration clauses contained in
the contracts were of a general, boilerplate nature.
Additionally, plaintiff argues that any disclaimer of reliance
upon Midas's representations regarding exclusive market areas was
merely implicit and thus did not foreclose plaintiff's reasonable
reliance upon the representations. However, the Court finds
plaintiff's arguments without merit. Even assuming the
integration clause was general in nature, it did not stand alone
and must be read in conjunction with the non-exclusivity clause.
Indeed, while the integration clause states generally that the
parties have made no representations not contained in the
contract, the non-exclusivity clause clearly and unequivocally
addresses the very subject of Midas's alleged misrepresentations.
When these clauses are read together, it is clear that the
plaintiff's reliance was not justified. Thus, the Court must
grant Midas's motion for summary judgment dismissing plaintiff's
Plaintiff's RICO Claims
Plaintiff also alleges RICO claims arising from Midas's alleged
scheme to induce PMC through fraudulent misrepresentations to
enter into the franchise agreements and then extort money from
PMC by threatening to open new shops in PMC's market area.
Specifically, plaintiff alleges multiple instances of mail and
wire fraud in violation of 18 U.S.C. § 1341 and 1343, multiple
instances of extortion in violation of 18 U.S.C. § 2 and 1951,
and interstate travel in aid of extortion in violation of
18 U.S.C. § 2 and 1952. See Compl. ¶ 238. Plaintiff's RICO claims
must fail however, for plaintiff has failed to show any RICO
predicate acts committed by Midas that caused PMC or plaintiff
To recover on a civil claim for damages under RICO, a plaintiff
must show (1) a violation of 18 U.S.C. § 1962; (2) injury to
plaintiff's business or property; and (3)
causation of the injury by the violation. See Powers v. British
Vita, P.L.C., 57 F.3d 176, 187 (2d Cir. 1995); First Nationwide
Bank v. Gelt Funding Corp., 27 F.3d 763, 766 (2d Cir. 1994);
Hecht v. Commerce Clearing House, Inc., 897 F.2d 21, 22 (2d
Cir. 1990). Plaintiff's extortion claims fail to satisfy the
first element requiring a violation of section 1962, and
plaintiff's fraud claims fail to satisfy the third element
because the alleged fraud caused plaintiff no injury.
To establish a violation of section 1962, a plaintiff must
satisfy seven constituent elements: (1) that the defendant (2)
through the commission of two or more acts (3) constituting a
"pattern" (4) of "racketeering activity" (5) directly or
indirectly invests in, or maintains an interest in, or
participates in (6) an "enterprise" (7) the activities of which
affect interstate commerce. See 18 U.S.C. § 1962(a)-(c) (1994);
see Moss v. Morgan Stanley, 719 F.2d 5, 17 (2d Cir. 1983).
Plaintiff's extortion claims under RICO fail because they lack a
requisite element needed for a violation of section 1962 — that
the defendant engaged in "racketeering activity."
"Racketeering activity" within the meaning of the statute is
defined in section 1961(1). Although extortion is listed in
section 1961(1)(a) and (b) as a valid predicate act of
racketeering, plaintiff does not put forth evidence of duress
sufficient to support a claim of extortion as a matter of law.
Under federal law, extortion requires the obtaining of property
from another, with his consent, induced either by wrongful use of
actual or threatened force, violence or fear, or under color of
official right. See 18 U.S.C. § 1951(a)(2). These same elements
are required under New York law. See People v. Dioguardi,
8 N.Y.2d 260, 267, 203 N.Y.S.2d 870, 877, 168 N.E.2d 683, 688
(1960) (noting that the language used in 18 U.S.C. § 1951 was
patterned after New York's statutory definition of the elements
Such duress was not present here as Midas's alleged
extortionate threats were merely the exercise by Midas of its
right to create new franchises, a contractual right expressly
conferred by the non-exclusivity clause of the franchise
agreements between the parties. Threats to act in accordance with
one's legal rights do not and cannot constitute duress. See
Kamerman v. Steinberg, 891 F.2d 424, 432 (2d Cir. 1989);
Teachers Insur. Annuity Assoc. v. Wometco Enter., Inc.,
833 F. Supp. 344, 348 (S.D.N.Y. 1993); Hammelburger v. Foursome Inn
Corp., 54 N.Y.2d 580, 594 n. 4, 446 N.Y.S.2d 917, 431 N.E.2d 278
(1981). Therefore, plaintiff's RICO extortion claim must fail.
Plaintiff also asserts predicate acts of mail and wire fraud
under RICO, alleging that the same activities on the part of
Midas that form the basis for his common law fraud claim also
amount to a violation of RICO, 18 U.S.C. § 1962(a)(b)(c)(d).
See Compl. ¶¶ 233-243. Midas argues that because plaintiff
cannot show reasonable reliance upon Midas's alleged
misrepresentations, he cannot establish RICO predicate acts of
mail and wire fraud. This argument ignores the well-established
rule that the common law requirement of justifiable reliance is
not an element of wire or mail fraud under federal law. See
Neder v. United States, 527 U.S. 1, 119 S.Ct. 1827, 1841, 144
L.Ed.2d 35 (1999). Therefore, since the applicable mail and wire
fraud statutes do not require the element of justifiable
reliance, plaintiff does sufficiently allege predicate acts of
racketeering activity based solely on his allegations of
misrepresentations by Midas and thus satisfies the first element
of a claim under RICO.
Although justifiable reliance is not necessary to establish
predicate acts of mail and wire fraud, plaintiff must nonetheless
establish justifiable reliance to satisfy a different element of
his RICO claim, that of injury to plaintiff's business or
property. After a plaintiff shows that defendant has violated
section 1962, he must
further show that the predicate act caused the injury for which
plaintiff seeks recovery. See Powers, 57 F.3d at 188;
Metromedia Co. v. Fugazy, 983 F.2d 350, 368 (2d Cir. 1992).
RICO provides that "any person injured in his business or
property by reason of a RICO violation may bring a civil action
to recover treble damages." 18 U.S.C. § 1964(c). Courts have
interpreted the phrase "by reason of" to require that there be a
causal connection between the prohibited conduct and the
plaintiff's injury. See Powers, 57 F.3d at 188; First
Nationwide Bank, 27 F.3d at 766; Standardbred Owners Ass'n v.
Roosevelt Raceway Assocs., 985 F.2d 102, 104 (2d Cir. 1993);
Fugazy, 983 F.2d at 368. Where mail or wire fraud is the RICO
predicate act, plaintiff must show justifiable reliance to
establish causation. See Fugazy, 983 F.2d at 368.
Thus, plaintiff's fraud claims under RICO must fail, if not
because plaintiff has failed to establish predicate acts, then
because plaintiff as a matter of law cannot prove causation. As
set forth above, plaintiff could have relied upon Midas's
misrepresentations only by disregarding the express terms of the
franchise contracts and thus as a matter of law could not have
justifiably relied upon these misrepresentations. Therefore,
Midas is entitled to summary judgment on plaintiff's RICO mail
and wire fraud claims.
Plaintiff's Claim for Tortious Interference with the Danbury
Plaintiff further alleges that Midas tortiously interfered with
PMC's attempted acquisition of Danbury Exhaust by persuading
Danbury Exhaust not to sell to PMC and encouraging other Midas
franchisees to make offers to purchase the Danbury Exhaust
franchise. See Pl. 3(g) Stmt. ¶ 2(d); Compl. ¶ 266. New York
law imposes liability for interfering with the prospective
economic advantage of another only where defendant's interference
is motivated solely by malice, where the defendant creates or
continues an unlawful restraint of trade, or where the defendant
employs wrongful means. See Guard-Life Co. v. S. Parker Hardware
Manuf. Co., 50 N.Y.2d 183, 191, 428 N.Y.S.2d 628, 406 N.E.2d 445
(1980). Plaintiff suggests that based on the affidavits, there is
adequate proof that Midas used wrongful means to interfere with
PMC's prospective business relationship with Danbury Exhaust and
that Midas's sole motive was to injure PMC.
Plaintiff does not set forth in detail the manner by which
Midas allegedly interfered with plaintiff's acquisition of
Danbury Exhaust, stating only that Midas sought to persuade
Danbury Exhaust not to sell its franchise to plaintiff. There is
no allegation in the complaint or any evidence in the record that
suggests that Midas employed any wrongful means to so persuade
Danbury Exhaust. The only wrongful means claimed by plaintiff are
Midas's alleged misrepresentations and threats to plaintiff that
formed the basis for plaintiff's fraud and RICO claims. However,
as discussed above, Midas's alleged misrepresentations do not
constitute fraud, nor were its alleged threats sufficient to
constitute duress. Therefore, plaintiff's claim that Midas used
unlawful or wrongful means to interfere with its prospective
business relationship with Danbury Exhaust is without merit.
Furthermore, even if Midas's means were wrongful, these alleged
misrepresentations and threats were directed to plaintiff, not
Danbury Exhaust. A claim for tortious interference with a
prospective business relationship turns upon the pressure or
influence exercised by defendant over the party with whom
plaintiff sought to establish a business relationship. See
G.K.A. Beverage Corp. v. Honickman, 55 F.3d 762, 768 (2d Cir.
1995); Piccoli v. Calvin Klein Jeanswear Co., 19 F. Supp.2d 157,
167 (S.D.N.Y. 1998). A plaintiff cannot state a claim for
tortious interference by claiming that the defendant wrongfully
induced plaintiff to forego a business opportunity.
See id. Plaintiff has presented no evidence that Midas ever
employed any wrongful means to dissuade Danbury Exhaust from
selling its franchise to PMC.
The Court also rejects plaintiff's claim that Midas was
motivated solely by a desire to injure PMC. Assuming, arguendo,
that Midas was motivated in part by such a desire, plaintiff in
his own affidavit admits that one goal of Midas's alleged
wrongful conduct was to "expand their overall market share."
See Feeley Aff. ¶ 6. Plaintiff could not possibly prove at
trial that Midas's sole motive was to injure plaintiff and that
Midas was not motivated at least in part by a desire to enhance
its market position and ultimately its profits. Because New York
law requires plaintiff to show that defendant acted solely from a
desire to injure plaintiff, the Court must grant summary judgment
to Midas on this claim. See Guard-Life Corp., 50 N.Y.2d at 191,
428 N.Y.S.2d 628, 406 N.E.2d 445.
Plaintiff's Claim for Tortious Interference with Plaintiffs'
Relationship with PMC's Shareholders
Plaintiff's final claim alleges that Midas tortiously
interfered with plaintiff's business relationship with PMC's
other shareholders, causing a rift between them. See Feeley
Aff. ¶ 38. This claim again rests upon the same alleged
misrepresentations and threats by Midas that formed the basis for
plaintiff's fraud and RICO claims. As discussed above with
respect to plaintiff's claim that Midas tortiously interfered
with the Danbury Exhaust acquisition, Midas's alleged conduct was
neither fraudulent nor extortionate and thus not wrongful. In
addition, plaintiff offers no evidence that Midas intended by its
conduct to damage plaintiff's relationship with the other PMC
shareholders or that Midas was motivated solely by malice. Thus,
Midas is clearly entitled to summary judgment dismissing
For the reasons set forth above, the Court grants Midas's
motion for summary judgment dismissing this action and denies
plaintiff's cross-motions for default judgment, for summary
judgment, and for further discovery. The Clerk of the Court is
directed to enter Judgment accordingly and to close this action.
It is SO ORDERED.