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Globe Wholesale Tobacco Distributors Inc. v. Worldwide Wholesale Trading Inc.

September 28, 2007

GLOBE WHOLESALE TOBACCO DISTRIBUTORS INC., PLAINTIFFS,
v.
WORLDWIDE WHOLESALE TRADING INC., ET AL., DEFENDANTS.



The opinion of the court was delivered by: Lewis A. Kaplan, District Judge.

MEMORANDUM OPINION

Plaintiff, Globe Wholesale Tobacco Distributors, Inc. ("Globe"), is a wholesale agent and dealer of tobacco products. Defendants are (1) Worldwide Wholesale Trading, Inc. ("WWT"), a competitor of Globe, (2) Worldwide Marketing Partners, LLC ("WMP"), (3) Miguel Mayor, and (4) Eduardo Mayor. Globe brings this civil action under the Racketeer Influenced and Corrupt Organizations Act ("RICO")*fn1 based on defendants' allegedly unlawful conduct in the wholesale purchase and sale of cigarettes and cigars. Globe seeks also to recover as assignee certain monies allegedly owed to its assignor by WWT. Defendants move to dismiss all claims.*fn2

Facts

I. The Amended Complaint

The following facts are taken from the amended complaint*fn3 and presumed true for purposes of this motion.

Miguel and Eduardo Mayor, father and son, together control and direct the operation of WWT,*fn4 which has sold cigarettes and cigars to retail dealers at prices lower than their competitors.*fn5 The price advantage "has caused Globe and other wholesale dealers to lose business to [WWT] and [WWT] has gained sales and market share at the expense of Globe and other competitors."*fn6 According to the complaint, the defendants, along with other wholesale distributors, have acted with the intent to injure Globe and other competitors.*fn7

WWT allegedly has obtained its price advantage by: (1) inducing and granting unlawful rebates on the purchase and sale of cigarettes, resulting in below-cost prices in violation of Article 20-A of the New York Tax Law,*fn8 (2) transporting and selling cigarettes bearing counterfeit tax stamps,*fn9 and (3) purchasing, transporting, and selling untaxed cigars.*fn10 In order to conceal these activities, Miguel Mayor, Eduardo Mayor, and WWT caused false state and federal tax returns to be filed,*fn11 WMP concealed contraband cigarettes and cigars,*fn12 and revenue was diverted from WWT to WMP, Miguel Mayor, and Eduardo Mayor.*fn13

Plaintiff sues under RICO and state law. As the only alleged basis of federal jurisdiction is the RICO claims, they are the first object of attention.

The first of the RICO claims is asserted against Miguel Mayor and Eduardo Mayor and is based on alleged violations of 18 U.S.C. § 1962(c).*fn14 The second is asserted against all defendants and is based on alleged violations of 18 U.S.C. § 1962(a). As to both claims, the alleged enterprise is WWT, WMP, or both together.*fn15 According to the plaintiff, the RICO predicate acts relate to the three alleged means by which defendants obtain their price advantage.

II. Proceedings

Plaintiff filed the initial complaint on April 12, 2006.*fn16 On November 7, 2006, this Court granted the defendants' motion to dismiss and granted leave to amend.*fn17 It held that the plaintiff had failed to plead predicate acts, which were several alleged mail and wire fraud violations, with sufficient particularity.

Plaintiff filed the amended complaint on November 28, 2006. It repeats the same predicate acts of fraud as the initial complaint*fn18 and asserts three new predicate acts. The matter is before the Court on defendants' motion to dismiss the amended complaint.

Discussion

I. Standard

When deciding a motion to dismiss, the Court ordinarily accepts as true all well-pleaded factual allegations and draws all reasonable inferences in the plaintiff's favor.*fn19 In order to survive such a motion, however, "the plaintiff must provide the grounds upon which his claim rests through factual allegations sufficient 'to raise a right to relief above the speculative level.'"*fn20 In addition, Federal Rule of Civil Procedure 9(b) requires that ...


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