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July 31, 2001


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 early December 1998, DialAmerica began performing telemarketing services for MetTel. See id. ¶ 20. Each day, DialAmerica would transmit reports to MetTel via electronic mail showing the number of hours worked by DialAmerica's TSRs. See id. ¶ 25. DialAmerica also mailed monthly invoices to MetTel. See id. ¶ 26. Between December 1998 and September 2000, MetTel paid in excess of $2.6 million to DialAmerica for its telemarketing services. See id. ¶ 27.

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 ¶ 6(c).*fn3

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).


A. The RICO Claim

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 ...

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