The opinion of the court was delivered by: Scheindlin, District Judge
Manhattan Telecommunications Corporation, Inc. d/b/a Metropolitan
Telecommunications a/k/a MetTel ("MetTel") brings this action against
DialAmerica Marketing, Inc. ("DialAmerica"), Art Conway, Frank Conway,
and John Redinger (collectively, "Individual Defendants"), seeking to
recover damages it suffered as a result of defendants' alleged fraudulent
billing scheme. Plaintiff asserts three claims, only one of which arises
under federal law. Specifically, plaintiff contends that defendants have
engaged in a pattern of racketeering activity in violation of the
Racketeer Influenced and Corrupt Organizations Act ("RICO"),
18 U.S.C. § 1961 et seq.*fn1 Plaintiff also asserts pendent state
law claims for common law fraud and breach of contract. Defendants now
move to dismiss pursuant to Federal Rules of Civil Procedure 12(b)(1),
12(b)(2), and 12(b)(6). For the reasons stated below, defendants' motion
to dismiss is granted pursuant to Rules 12(b)(6) and 12(b)(1).
MetTel is a leading integrated communications provider that focuses on
delivering voice and data services to the residential and business
markets. See Amended Complaint ("Am. Compl.") ¶¶ 5, 10. In November
1998, MetTel commenced negotiations with DialAmerica, a provider of
telemarketing services.*fn2 See id. ¶¶ 6, 12. Over the course of
these negotiations, Frank Conway, an Account Executive for DialAmerica,
represented that DialAmerica would bill MetTel only for the hours that
DialAmerica's teleservice representatives ("TSRs") were actually engaged
in telephone sales for MetTel; would not charge MetTel for training its
TSRs; and would charge MetTel a flat rate of $27 per hour per TSR. See
id. ¶¶ 14, 15, 16.
In reliance on Frank Conway's oral representations, MetTel entered into
an agreement with DialAmerica for telemarketing services. See id. ¶
17. However, no agreement was memorialized until approximately four
months later, on April 5, 1999. See id. ¶ 22.
In mid-October 2000, MetTel discovered, during a visit to one of
DialAmerica's service centers, that DialAmerica's TSRs worked fewer hours
than shown on DialAmerica's reports and invoices. See id. ¶¶ 32-33.
On November 3, 2000, following MetTel's complaints to DialAmerica, "Frank
Conway finally admitted that DialAmerica, together with and through the
Individual Defendants, in the regular course of conducting its business,
adds hours to the bills of customers who pay hourly rates in order to
cover costs such as TSRs' breaks and . . . training." Id. ¶ 36.
Redinger, Frank Conway's supervisor, later admitted to the same practice
of overbilling clients. See id. ¶¶ 9, 48. Art Conway, DialAmerica's
president and controlling shareholder, is alleged to direct and control
DialAmerica's fraudulent billing practices. See RICO Statement ¶
Plaintiff filed its complaint on February 23, 2001. The Amended
Complaint and RICO. Statement were filed on March 15, 2001. In Claim I of
the Amended Complaint, plaintiff pleads a RICO claim under
18 U.S.C. § 1962(c) ("section 1962(c)"). Plaintiff maintains that all
of the defendants were employed by or associated with an enterprise
consisting of DialAmerica, MetTel and other unnamed DialAmerica customers
who pay hourly rates to DialAmerica. See Am. Compl. ¶ 53.
Furthermore, plaintiff alleges that by their fraudulent billing scheme,
defendants conducted or participated in the affairs of the alleged
enterprise through a pattern of racketeering activity consisting of mail
and wire fraud. See id. ¶ 54. In Claim II for common law fraud
against DialAmerica and Frank Conway, plaintiff asserts that Frank
Conway, on behalf of DialAmerica, made knowingly false representations
with the intent to deceive MetTel into contracting with DialAmerica. See
id. ¶¶ 63-72. Finally, Claim III charges DialAmerica with breach of
contract. See id. ¶¶ 73-81.
Dismissal of a complaint for failure to state a claim pursuant to Rule
12(b)(6) is proper only where "it appears beyond doubt that the plaintiff
can prove no set of facts in support of [its] claim which would entitle
[it], to relief." Harris v. City of New York, 186 F.3d 243, 247 (2d Cir.
1999); see also Cooper v. Parsky, 140 F.3d 433, 440 (2d Cir. 1998) ("The
task of the court in ruling on a Rule 12(b)(6) motion is merely to assess
the legal feasibility of the complaint, not to assay the weight of the
evidence which might be offered in support thereof.") (quotation marks
and citation omitted). To properly rule on a 12(b)(6) motion, the Court
must accept as true all material facts alleged in the complaint and draw
all reasonable inferences therefrom in the nonmovant's favor. See
Harris, 186 F.3d at 247. However, "bald assertions and conclusions of law
will not suffice" to defeat even the liberal standard applied to a Rule
12(b)(6) motion. Tarshis v. Riese Org., 211 F.3d 30, 35 (2d Cir. 2000).
To properly state a RICO claim for damages under section 1962(c), a
plaintiff must allege: (1) a violation of the RICO statute; (2) an injury
to business or property; and (3) that the injury was caused by the RICO
violation. See De Falco v.
Bernas, 244 F.3d 286, 305 (2d Cir. 2001)
Section 1962(c) makes it unlawful
for any person employed by or associated with any
enterprise engaged in, or the activities of which
affect, interstate or foreign commence, to conduct
or participate, directly or indirectly, in the
conduct of such enterprise's ...