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March 20, 2001


The opinion of the court was delivered by: Spatt, District Judge.


This case originated with a 99-page, 1087-paragraph amended complaint in which a pro se plaintiff, Joseph Bologna ("Bologna" or the "plaintiff"), individually and doing business as U.S.A. Development, raises 57 causes of action against Allstate Insurance Company ("Allstate" or a "defendant"), Philip Genova ("Genova" or a "defendant"), George Loue ("Loue" or a "defendant"), Dennis Meehan ("Meehan" or a "defendant"), Anne Iguanti ("Iguanti" or a "defendant"), Gary Pace ("Pace" or a "defendant") (collectively, the "Allstate defendants"), Sears, Roebuck and Co. ("Sears" or a "defendant"), James North ("North" or a "defendant") (collectively, the "Sears defendants"), Pro-Tech Construction, Inc. ("Pro-Tech" or a "defendant"), John Varanelli ("Varanelli" or a "defendant"), Lucille Varanelli ("L. Varanelli" or a "defendant") (collectively, the "Pro-Tech defendants"), Feldman & Rudy, P.C. ("Feldman & Rudy" or a "defendant"), Brian Rudy ("Rudy" or a "defendant") (collectively the "Rudy defendants"), Hoffman Construction ("Hoffman Construction" or a "defendant"), Robert Hoffman ("Hoffman" or a "defendant") (collectively, the "Hoffman defendants"), and all Quality Vendor Program Members ("QVPM's" or a "defendant") (collectively, the "defendants"). Presently before the Court are two motions to dismiss the complaint: one brought by the Allstate and Sears defendants and the other brought by the Rudy defendants.


Unless otherwise stated, the following facts are from the plaintiffs amended complaint. On September 18, 1993 a fire caused substantial damage to property owned by Rose Scavo ("Scavo") at 11 Colonial Place, Centereach, New York (the "premises"). The premises was insured against fire loss by Allstate. The Centereach Fire Department declared the premises unsafe for habitation due to extensive damage caused by the fire and the resulting unsafe conditions. In addition, the Long Island Lighting Company cut the electricity to the premises.

On September 22, 1993, Scavo and Bologna, Scavo's son-in-law and the owner and operator of USA Development, entered into a contract (the "General Management Agreement"), whereby the plaintiff agreed to perform and manage all restoration of the damaged property including subcontracting any of the restoration that he could not do on his own. The General Management Agreement, which governed the restoration, stated that the "General Manager shall act in the stead of the Owner in all matters pertaining to the Property until repairs are complete, all funds are collected, all creditors are paid, and all aspects of the project are completed." In addition, the Agreement stated that the "General Manager shall cause to be restored the dwelling and real property to at least its condition before the fire loss" (see amended complaint, ex. 3, p. 1). Under the Agreement, the plaintiff had a duty to pay the expenses to restore the property, and he relied on a fair settlement of the insurance claims to meet these obligations.

On September 20, 1993, the plaintiff reported the fire to Genova, an Allstate claims adjuster. The plaintiff and Genova agreed to meet at the premises on September 22, 1993 (the "site meeting"). Genova also asked Bologna for permission to invite Varanelli, an independent contractor and a principal of Pro-Tech, to the site meeting so that Bologna could meet Varanelli and determine whether he wanted to subcontract some of the work to him. Bologna agreed to include Varanelli in the site meeting.

Genova, Varanelli and the plaintiff met at the premises on September 22, 1993, and agreed to record the meeting on audiotape. During the meeting, Genova inspected the premises and opened two personal property claims files. The first was for damaged personal property, and the second for missing or destroyed property. The plaintiff gave Genova an inventory of the destroyed and damaged personal property. He included receipts for and photographs of the property and set forth their estimated replacement values.

Bologna alleges that Varanelli told him that Pro-Tech was a "Sears Restoration Contractor," and that although Allstate was recommending Pro-Tech for the repair work, Pro-Tech would be working for Bologna, not Allstate. The plaintiff retained Pro-Tech to represent his interest, to provide an estimate of repair costs, and to perform emergency repairs to secure the property. Thereafter, Pro-Tech performed emergency repairs at the property.

On November 2, 1993, the plaintiff received the repair estimate from Sears, Pro-Tech, and Varanelli. The plaintiff alleges that Genova acknowledged that the estimate was too low, but claimed that it was to ensure that Pro-Tech would get the job and said that the shortfall would be made up later. On November 10, 1993, the plaintiff discharged Pro-Tech. On November 12, 1993, Bologna hired a public adjuster, Howard Cohen, who concluded that the prior estimate was substantially undervalued.

The complaint alleges that the repair work performed by Pro-Tech, Sears, and Varanelli was "inferior and substandard" and that Allstate and Genova "did not properly supervise or inspect the repairs." As a result, the plaintiff claims that the Town of Brookhaven required that the work be redone. In April 1994, Allstate and Bologna entered into an Appraisal Agreement through the American Arbitration Association, pursuant to which Allstate and Bologna agreed to select separate impartial appraisers to evaluate the loss to the property. Allstate's attorneys, the defendant Feldman & Rudy, selected defendant Hoffman Construction, the principal of which is defendant Hoffman as its impartial appraiser. Bologna selected Frank T. Porco ("Porco"), a public adjuster. Hoffman evaluated the loss at $57,000 while Porco appraised the loss at $150,000. When the parties could not settle the difference, an arbitration award was made in the sum of $88,491.28. The plaintiff commenced restoration work on the property on October 4, 1995, and substantially completed the work in July 1997.

On November 17, 1995, Bologna, acting pursuant to a power of attorney, commenced an action in the name of Rose Scavo in the Supreme Court of the State of New York, Suffolk County, against Allstate and Genova (the "state complaint"). The state complaint alleges that Genova handled the claim for Allstate and met with Bologna at the loss site on September 22, 1993. The state complaint further alleges that Genova insisted that Bologna use a specific contractor, namely Varanelli's Pro-Tech, to perform the estimates and repairs, and that a failure to do so would result in "adverse consequences." The state complaint maintains that Varanelli's estimates were grossly insufficient but would be supplemented by additional funds if Bologna agreed to accept the lower bid. The state complaint further contends that Bologna would receive kickbacks if he agreed to employ Varanelli. According to the state complaint, Bologna hired a public adjustor, an act that caused Allstate and Genova to retaliate by cutting off funding for the repairs. The state complaint further alleges that Allstate obtained a fraudulently low bid for the arbitration from Hoffman, who was a biased estimator, and that the resultant arbitration award was fraudulent.

The state complaint raised causes of action sounding in fraud, bad faith, breach of duty, bad faith fraud, breach of contract, deceptive business practices, and punitive damages. On appeal, the Second Department found that the complaint stated a claim for deceptive business practices and breach of contract in connection with the adjustment of a first-party insurance claim. See Scavo v. Allstate Ins. Co., 238 A.D.2d 571, 657 N.Y.S.2d 193 (2d Dept. 1997).

On September 14, 1998, the plaintiff commenced this action. The amended complaint alleges 57 causes of action. In particular, Bologna claims breach of contract (1st, 6th, 9th, 16th causes of action) negligence 2d 4th 7th, 10th, 13th, 15th, 17th, 33rd, 34th, 35th 36th, 37th, 38th, 39th, 40th, 41st 42d 43rd, 44th, 45th, 46th, 49th, 50th, causes of action), fraud (3rd 5th 8th, 11th, 14, 18th 53rd causes of action), false advertising (12th cause of action), breach of warranty (12th cause of action), discrimination (32nd cause of action), insurance fraud (47th and 48th causes of action), mail fraud (51st cause of action), and wire fraud (52nd cause of action) by the Allstate, Sears, Pro-Tech, Rudy, Hoffman, and QVPM defendants, and their defendant employees. The amended complaint also sets forth RICO and antitrust causes of action (54th and 55th causes of action and 19th, 20th, 21st, 22d 23 rd, 24th 25th, 26th, 27th, 28th, 29th, and 30th causes of action, respectively) in addition to a claim that the defendants violated two different sections of New York's General Business Law (31st and 56th causes of action). Lastly, in his 57th cause of action, the plaintiff claims that he is entitled to punitive damages.

The plaintiffs contract and negligence claims allege that Sears, Pro-Tech, and Varanelli failed to represent him properly in his dealings with Allstate; provided a dishonest estimate of repair costs; failed to obtain the necessary construction permits; and negligently performed emergency repairs. Bologna further alleges that Allstate and Genova are also responsible for the allegedly "substandard" reconstruction work, because they failed to supervise and inspect the reconstruction. Bologna also claims that Genova and Allstate intentionally delayed the settlement of his claim and threatened to terminate his policy in an attempt to avoid having to pay the lost rents and to coerce Bologna into accepting a lower settlement figure. Bologna further maintains that Allstate should have reimbursed him for his personal property destroyed in the New York fire that he claims was insured by his Florida policy.

With regard to the fraud causes of action, the plaintiff asserts that at the site meeting, Varanelli told him he was employed by Sears and would like Bologna to hire him as the reconstruction contractor for the premises. Bologna claims that Varanelli also advised him that he was present at the site meeting to represent Bologna's interest. Bologna alleges that Genova encouraged him to hire Varanelli to perform the reconstruction. According to Bologna, the statements made by Genova and Varanelli were false because they did not indicate that Varanelli's interests were aligned with those of Genova and Allstate in that Allstate was a subsidiary of Sears. Bologna claims that he relied on Genova and Varanelli's statements and permitted Varanelli to repair the premises. However, according to the plaintiff, Varanelli's work was of such inferior and substandard quality that it did not meet requirements of the Town Code, and Bologna was forced to redo the repair work at his own expense.

The plaintiffs antitrust claims allege that the defendants were engaged in a conspiracy that operated under the name, "Quality Vendor Program (`QVP')". By the terms of this alleged conspiracy, the defendants agreed that only "approved" contractors, QVPM's, would be retained to do restoration work on buildings insured by Allstate. Thus, when an Allstate-insured building, suffered damage, the claimant was forced to hire a QVPM to do the repair work. Once hired, QVPMs submitted estimates that were severely undervalued and repairs that were grossly inferior. Bologna alleges that the substandard estimates and reconstructions worked to Allstate's benefit. Bologna further alleges that Allstate demanded that the QVPM's pay a fee or kickback to retain their membership in the QVP.

According to the plaintiff, the QVP enabled the defendants to fix prices in the market for restoration work on Allstate-insured buildings, create a monopoly for repair work performed in the Allstate claimants' market, and exclude competition from other contractors by giving the reconstruction contracts for work on Allstate-insured buildings exclusively to QVPMs. In addition, Bologna claims that Sears illegally tied its products to Allstate insurance contracts by giving claimants a 5% discount on all Sears merchandise purchased for the purpose of repairing or replacing items and structures insured by Allstate. The plaintiff maintains that any contractor that was not a QVPM was forced to spend more money than a QVPM to win a contract to repair an Allstate-insured building.

Bologna alleges that Pro-Tech and Sears are the QVPMs relevant to the case at hand, because Pro-Tech is a Sears Restoration Contractor, Pro-Tech performed the repair work on the premises, and Sears owns Allstate, which insured the premises. Bologna maintains that the QVP excluded his company, USA Development, from the Allstate claimants market and prevented USA Development from receiving the contract for repairs on the premises.

With respect to his discrimination claim, the plaintiff alleges that the defendants were involved in a scheme to favor a minority group of contractors, agents and claimants. Bologna asserts that QVPM contractors received contracts to repair Allstate-insured buildings, while non-QVPM contractors did not. He also alleges that the defendants treated one Alexandria Johnson, an Allstate claimant, in a favorable manner, by overestimating the value of her property, due to her relationship with Meehan, Varanelli, and other Allstate employees. The plaintiff asserts that he did not receive the same favorable treatment, because he did not have such a relationship with Allstate representatives. Bologna claims that the defendants' conduct was arbitrary, irrational, not reasonably related to a legitimate purpose, and violated his Fourteenth Amendment rights.

The plaintiffs insurance fraud claim alleges that the defendants gave the plaintiff a false estimate of the cost of repair and false documents. Bologna's claims that the plaintiffs violated the New York General Business Practices Law consist of (1) an allegation that the defendants engaged in deceptive business practices in violation of section 349; and (2) an allegation that the defendants had formed a monopoly in violation of Article 22.

Finally, the plaintiff contends that the defendants violated the RICO statute by using QVPM's to perform appraisals, thereby manipulating the amount of the appraisals and ensuring that only QVPM's receive the repair contracts for Allstateinsured buildings. Bologna's mail and wire fraud claims allege that the defendants used the mails and interstate telecommunications lines to communicate with one another and advance their fraudulent schemes.


A. Standard of Review

On a motion to dismiss for failure to state a claim, the Court should dismiss the complaint pursuant to Rule 12(b)(6) if it appears beyond doubt that the plaintiff can prove no set of facts in support of his complaint which would entitle him to relief. See King v. Simpson, 189 F.3d 284, 286 (2d Cir. 1999); Bernheim v. Litt, 79 F.3d 318, 321 (2d Cir. 1996). The Court must accept all factual allegations in the complaint as true and draw all reasonable inferences in favor of the plaintiff. See Koppel v. 4987 Corp., 167 F.3d 125, 127 (2d Cir. 1999); Jaghory v. New York State Dep't of Educ., 131 F.3d 326, 329 (2d Cir. 1997). The issue to consider is not whether a plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support the claims. See Villager Pond, Inc. v. Town of Darien, 56 F.3d 375, 378 (2d Cir. 1995). The Court must confine its consideration "to facts stated on the face of the complaint, in documents appended to the ...

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