The opinion of the court was delivered by: Seybert, District Judge
On September 29, 2008, Plaintiff Jet One Group, Inc. brought suit against Defendants Halcyon Jet Holdings, Inc., Halcyon Jets, Inc. (collectively, "Halcyon"), Alfred S. Palagonia, Mitchell Blatt*fn1 , Mark Hader, Jan E. Chasen and Gregory D. Cohen. The remaining Defendants have now moved to dismiss Plaintiff's claims, and for sanctions against Plaintiff's counsel. For the foregoing reasons, Defendants' motion to dismiss is GRANTED with leave to replead the RICO and state law claims, and Defendants' motion for sanctions is DENIED WITHOUT PREJUDICE.
Plaintiff and Halcyon are both in the same business of brokering private jet flights for clients. Compl. ¶¶ 7, 8. In 2007, then-Halcyon CEO Palagonia, Cohen, and Christian Mattis approached Plaintiff and suggested purchasing all or part of Plaintiff. Compl. ¶ 12. Plaintiff refused to enter into negotiations, allegedly because it was concerned about "Palagonia's reputation and criminal background." Compl. ¶¶ 16-17. Following this refusal, Halcyon recruited Hader, one of Plaintiff's employees, and paid him $50,000 to leave Plaintiff's employ and provide Halcyon with Plaintiff's confidential and proprietary information, including computer records. Comp. ¶ 22.
In May 2008, Halcyon again approached Plaintiff, through Blatt and Cohen. By that time, Blatt was Halcyon's CEO, and Blatt and Cohen informed Plaintiff that Palagonia "was no longer involved in the management of Halcyon." Compl. ¶¶ 24-26. In reliance upon these representations, Plaintiff entered into merger negotiations. Compl. ¶ 28. However, unbeknownst to Plaintiff, "Palagonia was secretly continuing to run and make all final executive decisions on behalf of Halcyon." Compl. ¶ 24.
Negotiations commenced, and the parties eventually negotiated a letter of intent setting forth the terms of a proposed sale of Plaintiff to Halcyon. Compl. ¶ 31. As part of these negotiations, Defendants were given access to Plaintiff's brokers/sales people and customer lists. Compl. ¶ 43. Defendants, for their part, covenanted to not solicit any private aviation business from Plaintiff's clients for a period of one year. Compl. ¶ 44.
Plaintiff contends that Halcyon entered into the merger negotiations solely as a rouse to enable it to gain access to Plaintiff's confidential information. Plaintiff claims that Halcyon never intended to acquire Plaintiff and, in fact, "did not have sufficient funds nor the access to sufficient funds to consummate the transaction." Compl. ¶¶ 34, 35. Plaintiff further alleges that, once given access to Plaintiff's brokers, Halcyon began recruiting them to leave Plaintiff's employ, informing them that it would never consummate the merger transaction set forth in the letter of intent. Compl. ¶¶ 47-50. These brokers then left Plaintiff's employ to join Halcyon, and took with them Plaintiff's confidential and proprietary customer lists. Compl. ¶¶ 51-52. In violation of its non-solicitation agreement, Halcyon then contacted Plaintiff's customers and advised them that, given Halcyon's forthcoming merger with Plaintiff, "all future travel should be booked through Halcyon." Compl. ¶ 53. Thus, "[w]ithin a few weeks thereafter, plaintiff was left with no brokers and no customers." Compl. ¶ 55. Having acquired Plaintiff's brokers and customers, Halcyon then privately informed Plaintiff that it was terminating the letter of intent, although it made no public announcement to that effect. Compl. ¶ 57. Shortly thereafter, Halcyon terminated Blatt's employment, as it no longer needed a "front man" for Palagonia. Compl. ¶¶ 59-60.
Aside from this main alleged scheme, Plaintiff also makes a few other scattered allegations. Plaintiff alleges that Hader "forged a check belonging to plaintiff and converted such funds." Compl. ¶ 23. Plaintiff alleges that Halcyon interfered with Plaintiff's relationships with a broker and an advertising entity. Compl. ¶¶ 29-30. And Plaintiff further alleges that Halcyon deceived Plaintiff into sponsoring a polo event by falsely promising to co-sponsor the event, thereby obliging Plaintiff to pay $150,000. Compl. ¶¶ 37-41.
Plaintiff filed suit, alleging two civil RICO counts (Counts I and II), conversion and theft of proprietary information (Count III), common law fraud (Count IV), tortious interference with its client relationships (Count V), violation of N.Y. Gen. Bus. L. § 349, and a violation of the Computer Fraud and Abuse Act (Count VI).
I. Standard of Review Under Rule 12(b)(6)
To withstand a motion to dismiss under Rule 12(b)(6), a complaint must plead facts sufficient "to state a claim for relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 127 S.Ct. 1955, 1974, 167 L.Ed. 2d 929 (2007). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, __ U.S. __, 129 S.Ct. 1937, 1949, 173 L.Ed. 2d 868 (2009) (reversing the Second Circuit's decision in Iqbal v. Hasty, 490 F.3d 143 (2d Cir. 2007)). "The plausibility standard is not akin to a 'probability requirement,' but it asks for more than a sheer possibility that a defendant has acted unlawfully." Id. Thus, "[w]here a complaint pleads facts that are merely consistent with a defendant's liability, it stops short of the line between possibility and plausibility of entitlement to relief." Id. (internal citations and quotations omitted). Examining whether a complaint states a plausible claim for relief is "context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Id. at 1950. "But where the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct," a complaint fails to state a claim. Id. The plaintiff's factual allegations, in short, must show that the plaintiff's claim is "plausible," not merely "conceivable." Id. at 1951.
In applying the plausibility standard set forth in Twombly and Iqbal, a court "assume[s] the veracity" only of "well-pleaded factual allegations," and draws all reasonable inferences from such allegations in the plaintiff's favor. Id. at 1950.
Pleadings that "are no more than conclusions," however, "are not entitled to the assumption of truth." Id.
II. Plaintiff's RICO Claims must be Dismissed
A. For now, the Halcyon Entities are Proper Defendants
As an initial matter, Defendants argue that Plaintiff's RICO claims against Halcyon must be dismissed because the Halcyon entities cannot be both a RICO "enterprise" and defendants. This argument takes two forms. First, Defendants argue that Plaintiff's have not properly pled the existence of a RICO enterprise at all, because the individual defendants are all Hacylon directors, officers or employees, and thus are insufficiently "distinct" from Hacylon itself. Second, Defendants contend that -- even if Plaintiff does plead the existence of a RICO enterprise, the Halcyon entities are not proper defendants. For purposes of this motion, each of these arguments is without merit.
Defendants' first argument depends upon Riverwoods Chappaqua Corp. v. Marine Midland Bank, 30 F.3d 339, 344 (2d Cir. 1994). But, as Plaintiff's point out, the Supreme Court expressly limited Riverwoods reach in Cedric Kushner Promotions, Ltd. v. King, 533 U.S. 158, 121 S.Ct. 2087, 150 L.Ed. 2d 198 (2001). There, the Supreme Court expressly held that a RICO enterprise exists when a corporate officer or employee "conducts the corporation's affairs in a RICO-forbidden way." Id. at 163. In such a circumstance, the corporate officer or employee functions as the "person" controlling the RICO "enterprise." Applying Cedric Kushner, Second Circuit courts have repeatedly recognized that corporate officers and employees are sufficiently distinct from the corporation itself so as to render them RICO "persons," and the corporations they control RICO "enterprises." See, e.g., City of New York v. Smokes-Spirits.com, Inc., 541 F.3d 425, 447-449 (2d Cir. 2008); Allstate Ins. Co. v. Rozenberg, 590 F. Supp. 2d 384, 391 (E.D.N.Y. 2008). Here, Plaintiff sufficiently pleads that Hacylon functioned as the "enterprise." Compl. ¶ 62. And Plaintiff also sufficiently pleads that "[e]ach of the defendants" (and, thus, each of the Individual Defendants) were the "persons" who conducted the enterprise through a pattern of racketeering activity. Compl. ¶¶ 61, 70. Thus, Plaintiff's Complaint satisfies RICO's distinctiveness requirement, at least with respect to the Individual Defendants.
It is less clear whether the Hacylon Defendants themselves can be named as RICO defendants. Cedric Kushner reiterated the Supreme Court's previous holding that RICO "depends on showing that the defendants conducted or participated in the conduct of the enterprise's affairs, not just their own affairs." 533 U.S. at 163. In so doing, Cedric Kushner strongly suggests that, although RICO controlling persons face RICO liability, the RICO enterprise itself does not. More recently, however, in Smokes-Spirits.com, Inc., the Second Circuit held that a plaintiff stated RICO claims against "primary enterprises" consisting of "defendant Smokes-Spirits.com, with defendant Michael Klee as the alleged RICO person,"; "defendant Nexicon, with defendants Richard Urrea, Daniel Urrea, and certain non-defendant individuals as the alleged RICO persons"; "defendant Hemi Group, with defendant Kai Gachupin as the alleged RICO person,"; and "defendant NCCigarettes.com, with defendants XFire, Scott Herring, and Jeff Reinhardt as the alleged RICO persons." 541 F.3d at 448 (emphasis supplied). The Second Circuit did not explain in any detail how or why a RICO enterprise itself can be a RICO defendant and face RICO liability. But it nevertheless expressly held that a plaintiff can assert a RICO claim if it ...