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KIMM v. LEE

United States District Court, S.D. New York


January 13, 2005.

MICHAEL S. KIMM, Plaintiff,
v.
CHANG HOON LEE, CHAMP, INC., IN CHUL YEON, SAFENET, INC., CHUNG SENG KOH, JOON HWAN LEE, KOREA CENTRAL DAILY, JIN SE KIM, SEGYE TIMES, JASON YOON, BERGEN NEWS, d/b/a KOREAN BERGEN NEWS, WMBC-TV,[fn1] JOHN DOES/JANE DOES 1-10, and ABC COMPANIES 1-10, Defendants.

The opinion of the court was delivered by: HAROLD BAER, JR., District Judge

*fn1 On October 21, 2004, Kimm and defendant WMBC-TV entered into a stipulation and order of discontinuance, which was "so ordered" by the Court on that same date. Accordingly, WMBC-TV's cross-claim, which was not explicitly addressed in the stipulation, is dismissed.

OPINION & ORDER

Plaintiff Michael S. Kimm ("Kimm") filed suit against the above-listed individual, corporation, and media defendants in which he alleged violations of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961 et seq., and state law claims for breach of fiduciary duty and defamation based on the defendants' alleged conspiracy to destroy his professional name and reputation. Defendants Inchol Yon ("Yon"),*fn2 Safenet Communications Corp. (collectively, "the Safenet defendants"), Chang Hoon Lee ("Hoon"), and Champ International Gift and Award (sued as "Champ, Inc.") (collectively, "the Champ defendants") filed counterclaims against Kimm, which allege defamation and frivolous or vexatious litigation. Present before the Court are a number of motions. Defendants Jin Se Kim, the Segye Times (collectively, "the Seyge defendants"),*fn3 Chung Seng Koh ("Koh"), the Safenet defendants, and the Champ defendants have moved to dismiss the complaint. In addition, Kimm has moved to dismiss the counterclaims filed against him by the Safenet and Champ defendants and to strike the defendants' pleadings. For the reasons set forth below, the defendants' motions to dismiss are granted and Kimm's motion to dismiss and strike the pleadings is granted in part and denied in part as moot. I. BACKGROUND

  The pertinent facts as alleged in the Complaint are as follows. Kimm is a lawyer who has practiced in New York and New Jersey for the last fourteen years. During the course of his career, he has provided extensive pro bono services to, inter alia, members of the Korean communities in New Jersey and the New York metropolitan area. In the 1990s, towns in Bergen County, New Jersey adopted ordinances that restricted the use of "foreign language" signs in business storefronts and the operation of Korean karaoke clubs. Kimm represented a group of Korean businesses pro bono and asserted federal civil rights claims on their behalf to challenge these ordinances. Thereafter, the Palisades Police Department allegedly began to unlawfully enforce another ordinance, this one against Korean barbershops and beauty salons. Chang Won Lee ("Won"),*fn4 who was then the President of the Palisades Park Chamber of Commerce ("Chamber of Commerce"), organized a group of eleven barbershops and beauty salons ("Kimm's former clients" or "his former clients") to challenge the enforcement of the ordinance. After several discussions, Kimm agreed to represent this group of barbershops and beauty salons for a fee. In August 1997, Kimm filed suit in the District of New Jersey and obtained a preliminary injunction on consent.*fn5

  During May and June of 1998, Kimm met with Won on several occasions and Won requested that Kimm be his "personal lawyer." Kimm's refusal allegedly prompted Won "to retaliate against [Kimm] by engaging in a long campaign of extortionate threats, defamation, innuendo, and actions which were ultra vires to the Chamber of Commerce's lawful purposes. . . ." Compl. ¶ 42. According to Kimm, "Won . . . made it his personal `mission' to lodge numerous acts of vicious attacks against [Kimm's] professional name and reputation." Id. ¶ 43. As part of this design, Won allegedly persuaded Kimm's former clients not to cooperate with Kimm in his prosecution of the action to challenge enforcement of the ordinance against the barbershops and beauty salons and instead to work with another attorney Won had apparently retained, who filed suit to challenge enforcement of the ordinance in Bergen County Superior Court. Notwithstanding the clients' refusal to participate, Kimm proceeded to trial. The district court ultimately dismissed the case in February 1999 based on the inadequate evidence of continuous unlawful discrimination by Palisades Park.

  In July 2000, Kimm attempted to collect his legal fees and costs and presented his bill to the Chamber of Commerce. Kimm's effort to collect was allegedly thwarted by Won (who was at this time just a member of the Chamber of Commerce), who allegedly told Kimm's former clients not to pay Kimm and accused Kimm of unethical conduct by seeking to be paid for his services. When the Chamber of Commerce informed Kimm it considered the fee dispute a private dispute between him and his former clients, Kimm filed suit in Bergen County State Court against his former clients for attorneys' fees and costs.*fn6

  In March 2001, Koh was elected the next President of the Chamber of Commerce and in August 2001, he used funds from the Chamber of Commerce to retain a lawyer to defend Kimm's former clients in the fee suit. During the pendency of the fee suit, Koh, Yon, Won, and others held a series of meetings and advised Kimm's former clients that Kimm's lawsuit for his fees and costs was unethical and illegal and that they should not pay Kimm. During August 2001 and December 2002, Koh, Yon, and Lee allegedly used interstate wires and the U.S. mails to transmit legal and other papers pertaining to the fee litigation that contained false statements. On at least two occasions during August and September 2001, an unspecified defendant used the telephone to threaten a witness. Following a bench trial, the Superior Court found Kimm's former clients liable for Kimm's fees and costs. That suit was on appeal at the time the Complaint in the instant action was filed.

  During "the second half of 2003, defendants began to escalate their vicious, unfounded, malicious attacks against [Kimm] by disseminating false `news' stories in print and television media . . . placing [Kimm] in a false and defamatory light." Compl. ¶ 70. Kimm asserts that the defendants have "disseminated more than two dozen false stories" and "have agreed, expressly or tacitly, that they will continue to do so `until Michael Kimm is forced out of the Korean community.'" Id. ¶ 71. In furtherance of the alleged conspiracy, Kimm avers that in July 2003, Won, Yon, and other purported community leaders, met with reporters from the Korea Central Daily News, Segye Times, and other New York based newspapers at a karaoke club in Palisades Park and bribed them with expensive alcohol (at a cost of approximately $2,000) and a female "social partner" to induce them to "to manufacture `news articles' attacking [Kimm's] professional name and reputation." Id. ¶ 72; see also id. ¶¶ 73-74. Thereafter, the fruits of this meeting allegedly emerged in false and defamatory articles in The News Hankook, Korea Central Daily News, Segye Times, The Bergen News, and in "numerous other Korean newspapers and other Korean media outlets." Id. ¶ 75J. As a result of the foregoing, Kimm seeks $5 million in compensatory damages, $5 million in punitive damages, and $15 million in statutory treble damages, as well as attorneys' fees and costs.

  II. DISCUSSION

  A. Standard of Review

  On a motion to dismiss, the Court "accept[s] all of plaintiff's factual allegations in the complaint as true and draw[s] inferences from those allegations in the light most favorable to the plaintiff." Desiderio v. Nat. Ass'n of Sec. Dealers, Inc., 191 F.3d 198, 202 (2d Cir. 1999). "The court's function on a Rule 12(b)(6) motion is not to weigh the evidence that might be presented at a trial but merely to determine whether the complaint itself is legally sufficient." Goldman v. Belden, 754 F.2d 1059, 1067 (2d Cir. 1985). Therefore, "a complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46 (1957). The complaint "need only meet the requirements of our `simplified notice pleading standard [which] relies on liberal discovery rules and summary judgment motions to define disputed facts and issues and to dispose of unmeritorious claims.'" Courtenay Communications Corp. v. Hall, 334 F.3d 210, 213 (2d Cir. 2003) (quoting Swierkiewicz v. Sorema N.A., 534 U.S. 506, 512 (2002)) (alteration in original).

  B. Plaintiff's Claims

  In Counts One, Two, and Three, Kimm alleges that Won, Yon, and Koh violated 18 U.S.C. §§ 1962(a)-(c). In Count Four, Kimm avers that all of the defendants committed a RICO conspiracy in violation of 18 U.S.C. § 1962(d). Section 1964(c) authorizes suit under RICO by "[a]ny person injured in his business or property by reason of a violation of section 1962." A substantive RICO claim "requires (1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity." Sedima, S.P.R.L. v. Imrex Co., Inc., 473 U.S. 479, 496 (1985). Racketeering activity consists of a statutorily defined list of acts, including, inter alia, conduct that is indictable under the wire and mail fraud statutes, 18 U.S.C. §§ 1341, 1342, and the Hobbs Act, 18 U.S.C. § 1951, which prohibits interference with commerce by robbery or extortion. 18 U.S.C. § 1961(1). A pattern of racketeering activity "requires at least two acts of racketeering activity" within a ten year period. 18 U.S.C. § 1951(5). As for the RICO conspiracy claim alleged in Count Four, "the requirements . . . are less demanding: A `conspirator must intend to further an endeavor which, if completed, would satisfy all of the elements of a substantive? offense, but it suffices that he adopt the goal of furthering or facilitating the [scheme].'" Baisch v. Gallina, 346 F.3d 366, 376 (2d Cir. 2003) (quoting Salinas v. United States, 522 U.S. 52, 65 (1997)).

  To support his RICO claims, Kimm has alleged that the Chamber of Commerce constitutes a RICO enterprise, as defined by 18 U.S.C. § 1961(4), and alternatively or in addition, that an association-in-fact of Yon, Koh, and Won, and the other defendants constitutes an enterprise. As for the pattern of racketeering activity, Kimm avers that between May 1998 and July 2004 and continuing thereafter, Koh, Yon, and Won mailed documents that contained false information about the fee dispute, made false statements about him to his former clients and newspaper reporters via telephone, and caused newspaper articles to be disseminated through the U.S. mails and wires that contained false information. Finally, Kimm contends that Koh, Yon, and Won made repeated threats to Kimm that if his fee suit were not dropped, he would be banished from the Korean community. All this was allegedly undertaken in furtherance of the defendants' alleged scheme to destroy Kimm's professional reputation.

  The defendants, not surprisingly, have raised a number of issues with respect to these contentions. However, I need only address their arguments with respect to the sufficiency — or lack thereof — of the requisite predicate acts, an essential element in a RICO claim. Though Kimm has pleaded the predicate acts of mail fraud, wire fraud, and Hobbs Act extortion, they are — at best — thinly clothed defamation claims. The predicate acts alleged to constitute mail and wire fraud consist solely of the alleged transmission of false information to "destroy [Kimm's] professional name and reputation." Compl. ¶¶ 84, 86, 88, 90, 92. Moreover, Kimm has alleged that the purpose of the alleged RICO enterprise was to, inter alia, obtain and preserve political power and business gain, to promote the enterprise, and enhance the business activities of certain members. These allegations do not constitute properly pleaded violations of the wire and mail fraud statutes, which prohibit, inter alia, "any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses" by use of the U.S. mails or wires. 18 U.S.C. §§ 1341, 1343. "The mail and wire fraud statutes do not define `scheme to defraud,' but it has been described as a plan to deprive a person `of something of value by trick, deceit, chicane or overreaching.'" United States v. Autuori, 212 F.3d 105, 115 (2d Cir. 2000) (quoting McNally v. United States, 483 U.S. 350, 358 (1987)). Essential to any scheme to defraud is the "the requisite scienter (or fraudulent intent) on the part of the defendant." Id.

  Kimm falters on the two critical components of a mail or wire fraud claim. First, Kimm has not alleged a "scheme to defraud." Instead, he has merely alleged that the false information was transmitted via the wires and mails to harm his business and reputation. It is plain that "[i]ntent to injure is not the equivalent of intent to defraud." Kredietbank, N.V. v. Joyce Morris, Inc., No. Civ. A. 84-1903, 1986 WL 5926, at *4 (D.N.J. Jan. 9, 1986), aff'd, 808 F.2d 1516 (3d Cir. 1986). As another court has said:

Defamation is "[a]n intentional false communication, either published or publicly spoken, that injures another's reputation or good name." Black's Law Dictionary 288 (Abridged 6th ed. 1991). Fraud is "[a]n intentional perversion of truth for the purpose of inducing another in reliance upon it to part with some valuable thing belonging to him or to surrender a legal right." Id. at 455.
Chovanes v. Thoroughbred Racing Ass'n, No. Civ. A. 99-185, 2001 WL 43780, at *5 (E.D. Pa. Jan. 18, 2001) (alteration in original).
Though Kimm may well have suffered reputational injury as a result of the defendants' alleged acts, no one was "induced to part with anything of value as a result." Id. Moreover, there is no indication in the pleadings that Kimm, Kimm's former clients, or anyone else relied upon the allegedly false statements. Metromedia Co. v. Fugazy, 983 F.2d 350, 368 (2d Cir. 1992) ("In the context of an alleged RICO predicate act of mail fraud, . . . to establish the required causal connection, the plaintiff[i]s required to demonstrate that the defendant's misrepresentations were relied on."); Ideal Steel Supply Corp. v. Anza, 373 F.3d 251, 263 (2d Cir. 2004), petition for cert. filed, 73 USLW 3216 (Sept. 28, 2004) (No. 04-433), (ruling that a RICO claim may lie "where the scheme depended on fraudulent communications directed to and relied on by a third party rather than the plaintiff.").

  Second, Kimm has not alleged actionable harm under the mail or wire fraud statutes. As one court has noted, "while one can be compensated under the law for injury to one's reputation, that compensation is not based on an injury to what has commonly been known as `property.'" United States v. Ferrara, 701 F.Supp. 39, 43 (E.D.N.Y. 1988), aff'd, 868 F.2d 1268 (2d Cir. 1988) (internal citation omitted). Particularly relevant to this case, the Ferrara court further reasoned that "if one's reputation — standing alone — could be construed as property, then any ordinary defamation action could be brought under the mail fraud statute — a startling proposition." Id. Following this reasoning, another court ruled that damage to the plaintiff's reputation and his resulting inability to secure employment was a personal injury as opposed to a property injury and thus not actionable under the mail and wire fraud statutes. Roitman v. New York City Transit Authority, 704 F. Supp. 346, 348-49 (E.D.N.Y. 1989).*fn7

  This is certainly not the first attempt to spin an alleged scheme to harm a plaintiff's professional reputation into a RICO claim. E.g., Marks v. City of Seattle, No. C03-1701P, 2003 WL 23024522, at *1 (W.D. Wash. Oct. 16, 2003) (alleging a racially-motivated conspiracy to undermine their employment positions); Mansmann v. Smith, No. Civ. A. 96-5768, 1997 WL 145009, at *2 (E.D. Pa. March 21, 1997) (alleging a scheme to put plaintiff psychologists out of business and discredit them within the professional and general community); Manax v. McNamara, 660 F. Supp. 657, 658 (W.D. Tex. 1978), aff'd, 842 F.2d 808 (5th Cir. 1988) (alleging a conspiracy to harm plaintiff's medical practice). Appropriately, such claims are rarely successful because it is firmly established that defamation and many other similar allegations do not provide the requisite predicate for RICO violations. E.g., Contes v. City of New York, No. 99 Civ. 1597, 1999 WL 500140, at *8 (S.D.N.Y. July 14, 1999) ("Defamation is not a predicate act under § 1961."); Mount v. Ormand, No. 91 Civ. 125, 1991 WL 191228, at *2 (S.D.N.Y. Sept. 18, 1991) ("Section 1961(1) does not include defamation? [or] libel . . . as predicate acts. . . .").*fn8

  It is unfortunate — to say nothing of expensive and time consuming — to have watched the proliferation of alleged RICO claims. While some show a degree of creativity, they are more frequently an effort to construct a treble damage suit from what, at best, is a civil wrong, something that was never the intention of those who drafted the statute in the Justice Department or of Congress when it became law. Organized Crime Control Act of 1970, Pub.L. No. 91-451, § 1, 84 Stat. 922, 1073 (1970) (Statement of Findings and Purpose) ("It is the purpose of this Act to seek the eradication of organized crime in the United States by strengthening the legal tools in the evidence-gathering process, by establishing new penal prohibitions, and by providing enhanced sanctions and new remedies to deal with the unlawful activities of those engaged in organized crime."); Russello v. United States, 464 U.S. 16, 25 (1983) ("The legislative history clearly demonstrates that the RICO statute was intended to provide new weapons of unprecedented scope for an assault upon organized crime and its economic roots."). Indeed, another court in this District has found that a plaintiff, like Kimm, came "perilously close to violating Rule 11 in his pleading of . . . RICO claims" because, inter alia, "[t]he insufficiency of a defamation charge as a RICO predicate act is ascertainable from the face of the statute." Creed Taylor, Inc. v. CBS, Inc., 718 F. Supp. 1171, 1180 (S.D.N.Y. 1989). In sum, Kimm's allegations do not fall within the scope of the mail and wire fraud statutes, whose purpose is "to punish wrongful transfers of property from the victim to the wrongdoer, not to salve wounded feelings." Monterey Plaza Hotel Ltd. P'ship v. Local 483 of Hotel Employees & Rest. Employees Union, AFL-CIO, 215 F.3d 923, 927 (9th Cir. 2000).

  The predicate acts alleged to constitute Hobbs Act extortion are on equally precarious footing. Here, Kimm contends that Koh, Yon, and Won repeatedly threatened him and other persons that "if [Kimm's] [f]ee [s]uit w[as] not `voluntarily dropped,' [Kimm] would be `banished from the Korean community." Compl. ¶ 94. While surely it must be difficult to have such strife in one's own ethnic community, the Hobbs Act was enacted to address something significantly more violent and sinister. The Hobbs Act penalizes, inter alia, "[w]hoever . . . obstructs, delays, or affects commerce . . . by robbery or extortion . . . or commits or threatens physical violence to any person or property in furtherance of a plan or purpose to do anything in violation of this section." 18 U.S.C. §§ 1951 (a). Extortion, in turn, is defined as "the obtaining of property from another, with his consent, induced by wrongful use of actual or threatened force, violence, or fear, or under color of official right." 18 U.S.C. § 1951(b)(2). Nothing in the Complaint remotely approximates an offense under this section. Kimm has not alleged any affect upon commerce, but perhaps more fundamentally, he has failed to allege any threat of force, violence, or fear. Suffice to say, the alleged conduct falls significantly short of Hobbs Act extortion.

  As Kimm has not alleged a legally sufficient substantive RICO claim, his RICO conspiracy claim in Count Four cannot survive. Citadel Mgmt., Inc. v. Telesis Trust, Inc., 123 F. Supp. 2d 133, 156 (S.D.N.Y. 2000) ("[A] RICO conspiracy claim cannot stand where, as here, the elements of the substantive RICO provisions are not met."). Having concluded that Kimm's federal claims must be dismissed, I decline to exercise supplemental jurisdiction over his state law claims.

  C. Defendants' Counterclaims

  The Safenet and Champ defendants have filed five counterclaims against Kimm, which are largely duplicative. Suffice to say that the first three counterclaims allege, in essence, that this lawsuit constitutes frivolous litigation and seek attorneys' fees, costs, and sanctions. The fourth and fifth counterclaims appear to allege defamation. As these defendants have not referenced a specific statute, rule or claim with regard to their frivolous litigation counterclaims it is unclear what precisely affords them the relief they seek. I decline both to impose sanctions under either Fed.R.Civ.P. 11 or 29 U.S.C. § 1927 and to exercise supplemental jurisdiction over the state law counterclaims. However, should Kimm wish to file an amended complaint, he must apply for leave to do so and submit a letter to Chambers on or before January 21, 2005 that outlines how he thinks the deficiencies in his current pleadings can be remedied.*fn9

  III. CONCLUSION

  For the foregoing reasons, defendants' motions to dismiss the Complaint are granted and Kimm's motion to dismiss the counterclaim is granted, but the portion of his motion that seeks to strike the defendants' pleadings is denied as moot. The Clerk of the Court is instructed to close these motions and any remaining motions.

  SO ORDERED.


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