The opinion of the court was delivered by: Hurley, Senior District Judge
Plaintiff Christa Ritter ("Plaintiff") filed the present action alleging that defendants William Klisivitch ("Klisivitch"), Colette Klisivitch, Zvi Grinbaum, Frances Trotto, ITM World Group LLC, 127360 Canada, Inc., 142456 Canada, Inc., WVDAC Holdings Inc., and International Textiles Machines Canada, Ltd. (collectively, "Defendants") engaged in a civil RICO conspiracy involving, inter alia, bankruptcy fraud, wire fraud, and mail fraud to prevent Plaintiff from collecting on several judgments she holds against Klisivitch. Plaintiff also alleges that the property transfers effected in the course of the conspiracy were fraudulent conveyances under state law, and asserts several other state law claims. Defendants move to dismiss the Amended Complaint pursuant to Federal Rule of Civil Procedure ("Rule") 12(b)(6). Plaintiff cross-moves for leave to amend pursuant to Rule 15(a) and for an Order pursuant to Rule 42 consolidating the above-captioned action with an action commenced by Plaintiff against Klisivitch and Colette Panebianco, docket no. 07-CV-1853. For the reasons stated below, Defendants' motion to dismiss is granted in part and denied in part. Plaintiff's cross-motion for leave to amend is granted in part and Plaintiff's cross-motion to consolidate this action with a later-filed suit is granted.
The following facts are taken from the Amended Complaint and are presumed true for purposes of this motion.
Plaintiff and Klisivitch were married on September 30, 1982. Klisivitch began divorce proceedings in 1994 in New York Supreme Court, Suffolk County. In April 2002, a final judgment of divorce was entered. On September 23, 2002, the state court issued an order which, inter alia, directed money judgments be entered against Klisivitch in Plaintiff's favor in the sums of: (1) $187,251.71, which constituted arrears and maintenance, arrears of mortgage payments, arrears of carrying charges of the marital residence, and counsel fees; (2) $183,500.00, which constituted arrears and counsel fees; and (3) $6,155.00 for additional counsel fees. Thereafter, on December 18, 2002, three judgments were entered against Klisivitch for $191,223.19, $187,391.50, and $6,285.72, constituting the above-referenced amounts plus interest.
On May 7, 2003, the state court issued a Qualified Domestic Relations Order ("QDRO") directing that Plaintiff be awarded $187,251.71, representing arrears Plaintiff was entitled to as of September 23, 2002, with interest at the rate of 9%, from Klisivitch's pension plan.
By order dated August 5, 2004, the New York Supreme Court directed Citicorp Investment Services to pay over the sum of $385,628.89 from Klisivitch's Individual Retirement Rollover Account ("IRRA") to Plaintiff. On August 20, 2004, Klisivitch filed a voluntary bankruptcy petition under Chapter 7 of the Bankruptcy Code in the Eastern District of New York, listing Plaintiff as a creditor, thereby staying Plaintiff's rights to collect on her judgments.
Plaintiff initiated this action in the New York State Supreme Court, Suffolk County, on September 11, 2006. By Notice of Removal dated October 12, 2006, the action was removed to this Court. Jurisdiction is premised upon both diversity and RICO. Plaintiff alleges that Defendants engaged in "a RICO enterprise scheme, namely the 'HATE RICO Enterprise,'" (Am. Compl. ¶ 132), whose activities included tax evasion, money laundering, financial institution fraud, insurance fraud, bankruptcy fraud, and obstruction of justice, all with the intended goal of preventing Plaintiff from collecting on her judgments. For example, Plaintiff alleges that Defendants committed mail fraud by using the United States mail to file fraudulent tax returns, false affidavits, and fraudulent information with financial institutions. Plaintiff further alleges that Defendants committed wire fraud by using interstate and foreign wires to transfer cash and assets. She also claims that Klisivitch filed false and fraudulent schedules in the bankruptcy proceeding, that Colette Panebianco and Klisivitch testified falsely in a deposition taken in the bankruptcy action, that Klisivitch testified falsely at a creditors' committee examination, and that Klisivitch directed his attorneys and agents to withhold inculpatory documents from discovery. The Amended Complaint also alleges "financial institution fraud" arising out of several defendants' alleged inflation of the value of property lost in a fire, thereby obtaining insurance benefits from Zurich American Insurance Company greatly in excess of the actual loss of property.
The individual defendants are alleged to have participated in the scheme, in part, as follows: (1) Klisivitch fraudulently diverted money by transferring cash to Colette Panebianco which was used by her to acquire real property; (2) Ms. Panebianco filed a fraudulent mortgage application and commitment in connection with that property; (3) Zvi Grinbaum signed and transmitted a fraudulent gift letter in connection with the purchase of this property by falsely stating that he gifted a sum of money to Klisivitch; (4) Zvi Grinbaum obtained monies as dividends funneled through the defendant companies without consideration; (5) Frances Trotto assisted her daughter Colette Panebianco in acquiring real property for no consideration and obtained goods, services, and cash without consideration; and (6) Klisivitch evaded personal and business income taxes, stole money from his retirement plan, a portion of which Plaintiff was entitled to, illegally funneled money through his companies, and submitted false affidavits in the state court proceeding.
The company defendants are alleged to have participated in the scheme by, inter alia, receiving and laundering money via wire, acquiring property without payment of the proper tax, and fraudulently writing off personal expenses of the individual defendants as legitimate business expenses.
The victims are alleged to be mortgage companies with whom Defendants allegedly filed false information, the IRS, the New York State Department of Taxation and Finance, and Zurich American Insurance Company, although Plaintiff is alleged to be the primary intended victim." (Id. ¶ 173.)
With regard to damages, Plaintiff alleges that as a result of Defendants' actions, she has incurred counsel fees, "which counsel [fees] were and are necessary to secure her rights to collect the judgments duly docketed against William Klisivitch, and to collect and enforce the provisions of the QDRO." (Id. ¶ 337.) She further alleges that her damages include the penalties and interest accruing on the judgments. (Id. ¶ 338.)
In addition to her RICO claims, Plaintiff asserts that Defendants fraudulently transferred assets pursuant to N.Y. Debtor and Creditor Law, tortiously interfered with the collection of assets, and are liable for fraud, prima facie tort, and intentional infliction of emotional distress.
III. Klisivitch's Bankruptcy Action
Plaintiff moved to dismiss Klisivitch's bankruptcy case on the ground that he filed it in bad faith. On June 27, 2007, Plaintiff's motion was granted and Klisivitch's petition was dismissed. Thereafter, Klisivitch appealed the dismissal of his bankruptcy case to this Court and on June 17, 2008, Judge Sandra J. Fueurstein vacated the Bankruptcy Court's dismissal order and remanded the case to the Bankruptcy Court for reconsideration of Plaintiff's motion to dismiss.
Defendants move to dismiss the Amended Complaint in its entirety. Plaintiff cross-moves for leave to amend and for an Order consolidating this action with a later-filed suit, docket no. 07 CV 1853. Attention will first be directed to Defendants' motion and the applicable standards.
I. Motion to Dismiss: Legal Standards
Rule 8(a) provides that a pleading shall contain "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). The Supreme Court recently clarified the pleading standard applicable in evaluating a motion to dismiss under Rule 12(b)(6). In Bell Atl. Corp. v. Twombly, -- U.S. --, 127 S.Ct. 1955 (2007), the Court disavowed the well-known statement in Conley v. Gibson, 355 U.S. 41 (1957) that "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." Id. at 45-46.
Instead, to survive a motion to dismiss under Twombly, a plaintiff must allege "only enough facts to state a claim to relief that is plausible on its face." 127 S.Ct. at 1974.
While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do. Factual allegations must be enough to raise a right to relief above the speculative level, on the assumption that all the allegations in the complaint are true (even if doubtful in fact).
Id. at 1964-65 (citations and internal quotation marks omitted).
The Second Circuit has stated that Twombly does not require a universally heightened standard of fact pleading, but "instead requir[es] a flexible 'plausibility standard,' which obliges a pleader to amplify a claim with some factual allegations in those contexts where such amplification is needed to render the claim plausible." Iqbal v. Hasty, 490 F.3d 143, 157-58 (2d Cir. 2007). In other words, Twombly "require[s] enough facts to 'nudge [plaintiffs'] claims across the line from conceivable to plausible.'" In re Elevator Antitrust Litig., 502 F.3d 47, 50 (2d Cir. 2007) (quoting Twombly, 127 S.Ct. at 1974).*fn1 As always, the Court must "accept all factual allegations in the complaint and draw all reasonable inferences in the plaintiff's favor." ATSI Commcn's, Inc. v. Shaar Fund, Ltd., 493 F.3d 87, 98 (2d Cir. 2007).
"RICO is a broadly worded statute that 'has as its purpose the elimination of the infiltration of organized crime and racketeering into legitimate organizations operating in interstate commerce.'" Attorney Gen. of Canada v. R.J. Reynolds Tobacco Holdings, Inc., 268 F.3d 103, 107 (2d Cir. 2001) (quoting S. Rep. No. 91-617, at 76 (1969)). "Because the mere assertion of a RICO claim has an almost inevitable stigmatizing effect on those named as defendants, courts should strive to flush out frivolous RICO allegations at an early stage of the litigation." Bell v. Hubbert, No. 95 Civ. 10456, 2007 WL 60513, at *5 (S.D.N.Y. Jan. 8, 2007) (citations and internal quotation marks omitted).
"To establish a RICO claim, a plaintiff must show: (1) a violation of the RICO statute, 18 U.S.C. § 1962; (2) an injury to business or property; and (3) that the injury was caused by the violation of Section 1962." DeFalco v. Bernas, 244 F.3d 286, 305 (2d Cir. 2001) (citations and internal quotation marks omitted). Thus, to state a claim under the civil RICO statute, "a plaintiff has two pleading burdens." Moss v. Morgan Stanley, Inc., 719 F.2d 5, 17 (2d Cir. 1983). First, the complaint must allege that the defendant has violated "the substantive RICO statute . . . commonly known as 'criminal RICO.'" Id. In order to meet this initial burden, a plaintiff must plead "the existence of seven constituent elements: (1) that the defendant (2) through the commission of two or more acts (3) constituting a 'pattern' (4) of 'racketeering activity' (5) directly or indirectly invests in, or maintains an interest in, or participates in (6) an 'enterprise' (7) the activities of which affect interstate or foreign commerce." See id. Allegations in support of predicate acts sounding in fraud, such as mail or wire fraud, must satisfy the rigors of Rule 9(b). See Mills v. Polar Molecular Corp., 12 F.3d 1170, 1176 (2d Cir. 1993); Zhu v. First Atl. Bank, No. 05 Civ. 96, 2005 WL 2757536, at *3 (S.D.N.Y. Oct. 25, 2005). Second, a plaintiff must allege that the injury to business or property occurred by reason of a violation of the criminal RICO statute. See Moss, 719 F.2d at 17.
B. Plaintiff has Standing to Assert her RICO Claims
Defendants' primary argument is that Plaintiff lacks standing to assert her RICO claims. A plaintiff has standing to bring a RICO claim only if she has been "injured in h[er] business or property" by the conduct constituting the RICO violation and only when her "actual loss becomes clear and definite." See Denney v. Deutshe Bank AG, 443 F.3d 253, 266 (2d Cir. 2006) (citation and internal quotation marks omitted). Defendants argue that Plaintiff's allegations fail under both requirements. The Court will address Defendants' arguments in turn.
1. Plaintiff has Sufficiently Alleged Causation and Reliance
The RICO statute provides that any person injured "by reason of a violation of section 1962" may maintain a civil RICO suit. 18 U.S.C. § 1964(c). The phrase "by reason of" requires a plaintiff to allege that his injury was "both factually and proximately caused by the alleged RICO violation." See DeFalco, 244 F.3d at 329.
Citing Anza v. Ideal Steel Supply Corp., 547 U.S. 451 (2006), Defendants argue that Plaintiff has failed to allege that her injuries, viz. her inability to collect on the judgments, would not have occurred absent the alleged predicate acts. Defendants also argue that Plaintiff cannot establish ...