The opinion of the court was delivered by: Matsumoto, United Statesdistrict Judge:
In a fifty-eight page, two hundred and sixty paragraph amended complaint attaching one hundred fifty-four pages of exhibits, Curtis & Associates, P.C. (the "Curtis Law Firm"), and
W. Robert Curtis, Sc.D., J.D. ("Curtis"), (together, "plaintiffs"), bring seventeen causes of action against The Law Offices of David M. Bushman, Esq., David M. Bushman, Attorney at Law, and David M. Bushman, Esq. (collectively, the "Bushman defendants"); Jeffrey Levitt, Esq. and Jeffrey Levitt, Attorney at Law, (collectively, the "Levitt defendants"); Herbert Monte Levy, Esq. and Law Offices of Herbert Monte Levy, Esq. (collectively, the "Levy defendants"); Eileen DeGregorio ("DeGregorio"), Janet Turansky Callaghan ("Turansky"); and Stevi Brooks Nichols ("Nichols");*fn1 (together "defendants"). Plaintiffs seek recovery under the Racketeer Influenced and Corrupt Organizations ("RICO") statute, 18 U.S.C. § 1961 et seq., for economic damages allegedly caused to their business and property (the "federal claims"), as well as damages under various New York statutory and common law causes of action (the "state law claims"). (See ECF No. 2, Amended Verified Complaint ("Complaint" or "Compl.").) Pursuant to 28 U.S.C. § 1331(a), federal question jurisdiction is predicated solely on the first ten causes of action which arise under the federal RICO statute. (Id. ¶ 4.)*fn2
The Bushman defendants, the Levitt defendants, the Levy defendants, DeGregorio, Turansky, and Nichols each move separately to dismiss the amended complaint on a variety of grounds, including for failure to state a claim upon which relief can be granted pursuant to Federal Rule of Civil Procedure 12(b)(6) ("Rule 12(b)(6)"), and plaintiffs oppose.
Additionally, after defendants' various motions to dismiss had been fully briefed and were pending before the court, plaintiffs sought and received permission from the court to move to amend/correct/supplement the complaint, plaintiffs so moved, and defendants all opposed. Plaintiffs also move to disqualify Herbert Monte Levy, Esq. ("Levy") as counsel for defendant DeGregorio, and Jeffrey Levitt, Esq. ("Levitt") as counsel for defendant Turansky, and Levy and Levitt oppose. Finally, defendants Levitt and Turansky move for sanctions against plaintiffs pursuant to Federal Rule of Civil Procedure 11 ("Rule 11").
For the reasons that follow, the motions to dismiss are granted in their entirety as to the federal RICO causes of action and the court declines to exercise supplemental jurisdiction with respect to the state law causes of action. The motion to amend or supplement the complaint is denied as futile, the motions to disqualify Levitt and Levy as counsel are denied as moot, and the motion for sanctions is denied.
A court considering a motion to dismiss pursuant to Rule 12(b)(6) must accept all well-pleaded factual allegations of a complaint as true, but need not give any effect to legal conclusions couched as factual allegations. Starr v. Sony BMG
Music Entm't, 592 F.3d 314, 321 (2d Cir. 2010). The factual allegations*fn3 of the Complaint and the incorporated documents*fn4 are as follows.
Plaintiff Curtis is an attorney licensed in the State of New York and the principal of the Curtis Law Firm, a New York professional corporation with an office in Manhattan.*fn5 (Compl. ¶ 7-8.) Since 1987, plaintiffs allege that the Curtis Law Firm and its predecessor firm have been "the only law firm[s] in the United States" to concentrate their practice on "representing clients injured by attorneys." (Id. ¶ 7.)
DeGregorio, Turansky, and Nichols are each former clients of the Curtis Law Firm. (Id. ¶¶ 12-14.) Bushman, Levitt, and Levy, are attorneys licensed to practice in the State of New York. (Id. ¶¶ 11, 15, 16.) Bushman practices law in Nanuet, New York through entities named the Law Offices of David M. Bushman, Esq. and David M. Bushman, Attorney At Law (id. ¶¶ 9-10), Levitt practices law in Amityville, New York through an entity named Levitt Attorney at Law (id. ¶15), and Levy practices law in Manhattan through an entity named Law Offices of Herbert Monte Levy (id. ¶ 16).*fn6 At various times, the Bushman defendants, the Levy defendants, and the Levitt defendants have each allegedly represented or counseled plaintiffs' former clients DeGregorio, Turansky, and Nichols in those clients' respective litigation against plaintiffs in New York State Court in Westchester County. (See, e.g., id. ¶¶ 49-51, 62, 104, 120, 124, 128.)
Tracing the evolution of DeGregorio, Turansky, and Nichols from Curtis Law Firm client to adversary, the Complaint organizes its allegations under headings "The Corruption of Defendant DeGregorio," "The Corruption of Defendant [Turansky]," and "The Corruption of Stevi Brooks Nichols." This discussion follows that organization.
B.The "Corruption" of Defendant DeGregorio
In December 2001, DeGregorio retained the Curtis Law Firm on an hourly fee basis to prosecute legal malpractice claims against her former divorce attorneys ("matrimonial malpractice claims"). (Compl. ¶ 43.) The Curtis Law Firm also appeared on DeGregorio's behalf in her ongoing matrimonial case. (Id. ¶ 45.) Despite a few early victories by the Curtis Law Firm, ultimately all of DeGregorio's matrimonial malpractice claims were dismissed on appeal. (Id. ¶¶ 46-47.)
At the time of this dismissal, DeGregorio had an outstanding legal bill with the Curtis Law Firm for $120,000. (Id. ¶ 48.) The Curtis Law Firm offered to settle DeGregorio's bill for $60,000 but DeGregorio rejected the settlement offer. (Id.) Instead, DeGregorio retained the Bushman Law Offices to represent her on a contingent basis and filed a malpractice complaint "based on false allegations" against the Curtis Law Firm seeking disgorgement of all fees paid to the Curtis Law Firm exceeding $100,000. (Id. ¶¶ 49-51, 56.)
The Curtis Law Firm notified its insurance carrier of this malpractice claim. (Id. ¶ 52.) In addition, the Curtis Law Firm counterclaimed against DeGregorio for legal fees. (Id.
¶ 57.) The Curtis Law Firm also made a separate motion for a quantum meruit hearing to "determine the fair and reasonable value of the legal services rendered to" DeGregorio by the Curtis Law Firm while litigating the matrimonial malpractice claims. (Id. ¶ 66); see also DeGregorio v. Bender, 52 A.D.3d 645, 646 (N.Y. App. Div. 2d Dep't 2008) (describing history of fee dispute in DeGregorio's matrimonial malpractice action). Following that hearing, the state court awarded the Curtis Law Firm legal fees in the sum of $94,017.70. Bender, 52 A.D.3d at 646. On appeal, however, the Second Department reversed, finding that the hearing court had "failed to consider and give appropriate weight to all the relevant factors involved in valuing legal services, including the court's own finding of ethical violations committed by Curtis." Id.
In the course of prosecuting DeGregorio's "phony" malpractice claim against the Curtis Law Firm and defending against the Curtis Law Firm's fee claims, the Bushman Law Offices, Bushman Attorney at Law, and DeGregorio engaged in various "litigation activities." (Compl. ¶¶ 58, 60.) According to the complaint, these "litigation activities," constitute mail fraud. (Compl. ¶¶ 58, 60.) Specifically, in order to advance the "scheme to litigate" DeGregorio's alleged "fee obligation" to the Curtis Law Firm, the Bushman defendants allegedly committed mail fraud by mailing to the court, other parties, witnesses, or counsel: (1) a Reply to the Counterclaims asserted by the Curtis Law Firm on February 9, 2007; (2) a Notice for Discovery on February 9, 2007; (3) a Cross-Notice to Take Deposition on February 9, 2007; (4) a Verified Bill of Particulars on February 22, 2007; (5) a letter regarding a subpoena served on a witness on June 14, 2007; (6) an Affirmation in Opposition to the Curtis Law Firm's Motion to Disqualify Bushman on March 17, 2007; (7) an Affirmation in Opposition to a Cross-Motion dated March 28, 2005; (8) a cover letter for Respondent's Post-Trial Brief dated September 15, 2006; (9) a cover letter transmitting Respondent's Proposed Counter-Judgment and Affirmation in Support dated October 13, 2006; (10) a letter to the court requesting a 90-day extension of time dated October 21, 2005; (11) a letter regarding service by fax dated November 9, 2006; and (12) a letter regarding DeGregorio's ability to satisfy any potential judgment dated December 29, 2006.*fn7 (Id. ¶¶ 58(A)-(E)-60(A), 68(A), 72(A)-(B), 78(A)-(C), Ex. 7.)
After the Curtis Law Firm successfully moved to disqualify Bushman in DeGregorio's malpractice action against the Curtis Law Firm, the Levy Law Offices was substituted as DeGregorio's counsel. (Id. ¶¶ 59, 61-62.) The Levy Law Offices then negotiated a settlement of DeGregorio's malpractice action against Curtis. (Id. ¶ 62.) The complaint alleges that by engaging in "litigation activity" to "advance the fee dispute with the Curtis Law Firm," the Levy defendants and DeGregorio also committed mail fraud. (Id. 81, 88.) Specifically, the complaint alleges that the Levy defendants and DeGregorio engaged in mail fraud by mailing the following documents to the court, other parties, or counsel: (1) a letter to adjourn a motion filing deadline dated January 10, 2008; (2) sworn statements by DeGregorio opposing a fee hearing and the disqualification of Bushman as her attorney dated November 2, 2004 and March 26, 2005, respectively; (3) a letter to the court submitting a replacement Appellant's brief on May 31, 2007; (4) a handwritten note to the Appellate Division "misrepresenting" an agreement between the parties regarding the contents of the record dated July 26, 2007; (5) a letter to the Appellate Division regarding adjourning deadlines dated September 11, 2007; (6) a Notice of Settlement dated July 7, 2008; (7) a Notice of Entry by the Levy Law Office dated August 5, 2008; (8) an Answering Affirmation of Levy dated October 14, 2008; and (9) an Order to Show Cause with Affirmation of Levy dated October 2, 2008. (Id. ¶¶ 64(A), 69, 81(A)-(C), 88(A)-(D).) The complaint further alleges that this mail fraud by the Levy defendants and DeGregorio is "ongoing" because the fee dispute between the Curtis Law Firm and DeGregorio has not yet been resolved and is "on the eve of trial."*fn8 (Id. ¶ 88(E).)
C.The "Corruption" of Defendant Turansky
Turansky retained the Curtis Law Firm in June of 2002 to represent her in her divorce case. (Id. ¶ 89.) Turansky then retained the Curtis Law Firm to represent her in a quantum meruit hearing demanded by one of her former divorce attorneys to address his $28,000 retaining and charging lien. (Id. ¶¶ 90-93.) The twenty-eight day quantum meruit hearing was terminated by the court's issuance of a directed verdict in Turansky's favor on February 7, 2004. (Id. ¶¶ 97, 102.) Turansky then authorized the Curtis Law Firm to represent her in opposing the appeal of that directed verdict. (Id. ¶¶ 98-99.)
During the course of the earlier quantum meruit hearing, Turansky stopped paying her legal fees to the Curtis Law Firm, which then totaled $282,829.52. (Id. ¶ 96.) On November 29, 2004, on the same day that the Curtis Law Firm completed oral argument at the Second Department regarding the appeal from the directed verdict, Turansky terminated the Curtis Law Firm "for cause." (Id. ¶ 101.) Turansky terminated the Curtis Law Firm allegedly after conferring with Bushman, who advised her that she could avoid paying the Curtis Law Firm's legal fees if she made the termination "for cause" and sued the Curtis Law Firm for malpractice. (Id. ¶ 102-103.) Bushman also allegedly offered to represent Turansky for a "nominal fee" to defend any fee claims against her by the Curtis Law Firm and on a contingent basis to prosecute a malpractice action against the Curtis Law Firm. (Id.)
Turansky retained Bushman and filed a legal malpractice complaint containing "knowingly false allegations" against the Curtis Law Firm in December 2004. (Id. ¶¶ 104, 106.) The Curtis Law Firm notified its carrier of this malpractice action and counterclaimed for fees. (Id. ¶¶ 105, 115.)
By prosecuting Turansky's legal malpractice action against the Curtis Law Firm and defending Turansky against the Curtis Law Firm's fee claims, Bushman engaged in certain "litigation activities" which plaintiffs allege constitute mail fraud. (Id. ¶ 113.) Specifically, the Complaint alleges that Bushman committed mail fraud by mailing to the court, parties, or counsel: (1) an Affirmation in Opposition to Motion to Dismiss dated February 17, 2005; (2) an Affirmation in Opposition to Motion to Dismiss dated March 24, 2005; (3) a Verified Bill of Particulars dated July 26, 2005; (4) a Supplemental Verified Bill of Particulars dated October 4, 2005;
(5) an Affirmation in Opposition to Motion for Summary Judgment dated February 7, 2006; (6) an Affirmation in Opposition to total Disqualification dated February 13, 2006; and (7) a Motion to Dismiss Third-Party Complaint dated August 7, 2006. (Id. ¶ 113.) Additionally, Turansky allegedly engaged in mail and wire fraud by: (1) mailing a letter on February 26, 2007 to the Court regarding her preference to have Bushman represent her in defending against plaintiffs' fees counterclaims; (2) making "repeated phone calls" from Connecticut to Bushman in New York during several days prior to February 26, 2007; (3) mailing "upon information and belief, numerous letters" to Bushman; (4) presenting a "completely false affidavit" within a Notice of Motion dated February 22, 2009 and mailed by Levitt; and (5) committing "numerous other" unspecified acts of mail and wire fraud. (Id. ¶¶ 113(H), 115(A)-(C), 124(E).)
The Curtis Law Firm succeeded in obtaining summary judgment in Turansky's malpractice action against Curtis, but lost its fee action against Turansky when the judicial hearing officer determined that Turansky owed no fees to the Curtis Law Firm. (Id. ¶¶ 114, 116.) According to plaintiffs, the judicial hearing officer's determination relied upon "false testimony" by Turansky which tracked the "false claims" contained in Turansky's malpractice action against the Curtis Law Firm. (Id.
¶ 116.) After the judicial hearing officer's determination, the charging lien by the Curtis Law Firm on Turansky's equitable distribution was released by court order and Turansky allegedly invested the funds in a property in Connecticut.*fn9 (Id. ¶ 117.) Later, on appeal, the Second Department reversed and remanded the judicial hearing officer's determination for a new hearing on the Curtis Law Firm's fee claims against Turansky.*fn10 (Id. ¶ 119.)
After Bushman was disqualified as Turansky's attorney, Bushman allegedly recruited Levitt to substitute as the attorney for Turansky at the Second Department and for the rehearing. (Id. ¶¶ 112, 120, 124.) Levitt, allegedly with the assistance of Bushman, also committed mail and wire fraud in the course of representing Turansky by mailing: (1) a Notice of Motion and request for jury trial dated June 14, 2008; and (2) an Omnibus Notice of Motion dated February 22, 2009 seeking to preclude or delay a deposition and containing both an Amended Reply to
Counterclaims and an affidavit by Turansky. (Id. ¶ 124(A, CE).)*fn11 Finally, plaintiffs allege that because the litigation regarding the fee dispute is ongoing, "this mail fraud and wire fraud [on the part of Bushman, Levitt, and Turansky] is ongoing." (Id. ¶ 124(F).)
D.The "Corruption" of Defendant Nichols
Nichols became a client of the Curtis Law Firm on a contingency fee basis by a written agreement dated October 14, 1998. (Id. Ex. 20 at 1.) Nichols disputed $150,000 in fees allegedly earned by the Curtis Law Firm. (Id. ¶ 128.) On December 3, 2003, Nichols discharged the Curtis Law Firm allegedly for cause, and proceeding pro se, thereafter commenced a legal malpractice action against plaintiffs and others by a verified complaint dated January 9, 2009. (Id. ¶ 125, Ex. 19 at ¶ 14, Ex. 20 at 3.) The Curtis Law Firm notified its malpractice insurer of this new claim. (Id. ¶ 126.)
Plaintiffs allege that Nichols has committed mail and wire fraud by mailing her verified complaint from Colorado, where she resides, to the New York Courts, as well as by mailing and faxing letters dated February 6, 17, 23, and 24, 2009 to various New York State judges and others. (Id. ¶¶ 14, 130(A)-(F).) Because Nichols is currently defending a motion to dismiss her complaint, plaintiffs allege that this "mail and wire fraud is ongoing." (Id. ¶ 130(G).)
Moreover, plaintiffs allege that "[u]pon information and belief, Bushman has counseled and guided Nichols through her false and extreme accusations of wrong-doing" against the Curtis Law Firm. (Id. ¶ 127.) Plaintiffs conclusorily maintain that the "contents" of the various letters and pleadings mailed and faxed by Nichols "disclose a participation and association [on the part of Nichols] with the Bushman Law Office in the fraudulent schemes devised by Bushman." (Id. ¶¶ 127, 130.)
E.The "Corruption" of Various Non-Parties
Plaintiffs also allege that three other non-parties were "corrupted" by Bushman and stopped paying for legal fees owed to the Curtis Law Firm. (See id. ¶¶ 17-19.)
First, Fred Lorentzen ("Lorentzen"), a former Curtis Law Firm client who had signed an hourly retainer, stopped paying the Curtis Law Firm for his legal services in 1996 when he owed it $50,000. (Id. ¶ 20.) Bushman then commenced an action on behalf of Lorentzen against Curtis and others ("Lorentzen action"). (Id. ¶ 22.) The Curtis Law Firm's insurance carrier paid more than $300,000 in defense costs prior to the settlement of the Lorentzen action, purportedly for a $25,000 payment to Lorentzen by Bushman's carrier. (Id. ¶¶ 26-27.)
Similarly, Katheryn Boone ("Boone") retained the Curtis Law Firm under an hourly retainer agreement to represent her in a malpractice action against her former matrimonial attorney. (Id. ¶¶ 30-31.) In 2004, Boone stopped paying the Curtis Law Firm for legal services when she owed approximately $25,000 in fees. (Id. ¶ 31.) After the Curtis Law Firm was granted leave to withdraw, Bushman became Boone's attorney and continues to represent her in her matrimonial action. (Id. ¶ 32.) According to plaintiffs, Bushman has "indicated" that if the Curtis Law Firm seeks to collect the fees allegedly owed by Boone, Boone will counterclaim with a malpractice action against the Curtis Law Firm. (Id. ¶ 33.) The Curtis Law Firm has notified its malpractice insurer of this potential claim. (Id. ¶ 34.)
Finally, Edward King ("King") retained the Curtis Law Firm in 1997 under an hourly retainer agreement to represent him in a malpractice action against his former entertainment attorney. (Id. ¶¶ 35-39.) King stopped paying the Curtis Law Firm for legal services in 2005 when he owed it approximately $80,000 in fees. (Id. ¶ 39.) Bushman allegedly appeared "informally" as a legal malpractice attorney on behalf of King at a quantum meruit hearing regarding King's allegedly owed fees. (Id. ¶ 40.) During that hearing, Bushman "guided King through articulating false claims of malpractice on the record" and "counsel[ed]" King on how to testify "untruthfully." (Id. ¶
40.) The court ultimately reduced the amount of fees King owed to the Curtis Law Firm but found that King had not terminated the Curtis Law Firm "for cause." (Id. ¶ 41, Ex. 3.) The Curtis Law Firm notified its insurance carrier of a ...