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Reich v. Betancourt Lopez

United States Court of Appeals, Second Circuit

May 26, 2017

THE HON. OTTO J. REICH, OTTO REICH ASSOCIATES, LLC, Plaintiffs-Appellants,
v.
LEOPOLDO ALEJANDRO BETANCOURT LOPEZ, PEDRO JOSE TREBBAU LOPEZ, Defendants-Appellees.

          Argued: March 10, 2017

         Plaintiff-Appellant Otto J. Reich is the principal of a (co-plaintiff) consulting firm specializing, inter alia, in fighting government corruption. He alleges that he and his firm were victims of an effort to discredit them by persons connected to a Venezuelan energy company that was in litigation with one of Reich's clients. This appeal is taken from the dismissal of his RICO and state law claims against the principals of the Venezuelan energy company, and we affirm the rulings of the District Court for the Southern District of New York (Oetken, J.). Dismissal of the RICO claims under Rule 12(b)(6) was proper because Reich failed to allege that the defendants engaged in a "pattern of racketeering activity": of his two theories, one fails because the predicate acts posed no continuing threat of racketeering; the other fails because the predicate acts he chose were insufficiently related to each other. We also affirm dismissal of the state law claims because Reich could not establish personal jurisdiction over either defendant.

          JEFFREY ERNEST GRELL, Grell Feist Prince PLC, Minneapolis, Minnesota, for Appellants The Hon. Otto J. Reich and Otto Reich Associates, LLC.

          FRANK H. WOHL (with Jonathan D. Lamberti, on the brief), Lankler Siffert & Wohl LLP, New York, New York for Appellee Leopoldo Alejandro Betancourt Lopez.

          JOSEPH A. DEMARIA, Fox Rothschild LLP, Miami, Florida for Appellee Pedro Jose Trebbau Lopez.

          Before: JACOBS and DRONEY, Circuit Judges, and STANCEU, Chief Judge, U.S. Court of Int'l Trade. [*]

          DENNIS JACOBS, Circuit Judge:

         Plaintiff-Appellant Otto J. Reich is the principal of a (co-plaintiff) consulting firm specializing, inter alia, in fighting government corruption. He alleges that he and his firm were victims of an effort to discredit them by persons connected to a Venezuelan energy company that was in litigation with one of Reich's clients. This appeal is taken from the dismissal of his RICO and state law claims against the principals of the Venezuelan energy company, and we affirm the rulings of the District Court for the Southern District of New York (Oetken, J.). Dismissal of the RICO claims under Rule 12(b)(6) was proper because Reich failed to allege that the defendants engaged in a "pattern of racketeering activity": of his two theories, one fails because the predicate acts posed no continuing threat of racketeering; the other fails because the predicate acts he chose were insufficiently related to each other. We also affirm dismissal of the state law claims because Reich could not establish personal jurisdiction over either defendant.[1]

         I

         We take all the allegations in the complaint as true, as we must on a motion to dismiss.

         Plaintiffs allege that Derwick Associates, a Venezuelan energy company, has stolen billions of dollars from the Venezuelan government. It allegedly bribes Venezuelan officials in order to secure energy contracts at inflated rates without public bidding, then subcontracts out the actual work while keeping a substantial profit. Derwick is run by Leopoldo Alejandro Betancourt Lopez ("Betancourt"), Pedro Jose Trebbau Lopez ("Trebbau"), and Francisco D'Agostino Casado ("D'Agostino"), the three original defendants in this case.

         Plaintiff Otto Reich was the U.S. ambassador to Venezuela in the 1980s. He now runs a consulting agency focused on government relations and anti- corruption; it is the co-plaintiff with Reich in this suit (we refer to them collectively as "Reich").

         In 2012, the Derwick principals filed two state court defamation lawsuits against a Venezuelan bank that they believed was threatening to expose Derwick's criminal activities. The Venezuelan bank then hired Reich to help assist its defense of the defamation suits. Concerned about the assistance Reich might provide the bank, the Derwick principals undertook to break up the relationship. An agent of Derwick called one of the bank's largest shareholders to tell him falsely that Reich was secretly working for Derwick, thus inducing the bank to terminate its relationship with Reich. Around the same time, one of the Derwick principals called another of Reich's clients, Eligio Cedeño, to deliver the same falsehood: that Reich was working for Derwick. Cedeño also terminated his relationship with Reich. Reich's firing by Cedeño and the Venezuelan bank cost him tens of thousands of dollars monthly in consulting fees.

         Reich filed suit against Betancourt, Trebbau, and D'Agostino in July 2013 bringing RICO and various state law claims. (D'Agostino has since been dismissed from the case pursuant to a stipulation of dismissal.) In a series of rulings, the district court dismissed the RICO claims for failure to state a claim and the state law claims for lack of personal jurisdiction.

         II

         We review de novo the dismissal of a complaint for failure to state a claim upon which relief can be granted. Commercial Cleaning Servs., L.L.C. v. Colin Serv. Sys., Inc., 271 F.3d 374, 380 (2d Cir. 2001).

         RICO imposes liability on individuals working for an "enterprise" that commits certain predicate crimes that amount to a "pattern of racketeering activity." 18 U.S.C. §§ 1962, 1964. Reich has alleged an "enterprise": Derwick Associates. And he has alleged predicate crimes covered by RICO: wire fraud arising from the false phone calls, [2] and violations of the Travel Act arising from the bribery of Venezuelan officials. 18 U.S.C. § 1961(1). This case turns on whether those predicate acts amount to a "pattern of racketeering activity."

         The Supreme Court has interpreted that phrase to require both that the RICO predicates pose a threat of continuous criminal activity and that they be related to each other. H.J. Inc. v. Nw. Bell Tel. Co., 492 U.S. 229, 239 (1989). Since RICO only requires a combination of two or more predicate acts, 18 U.S.C. § 1961(5), Reich can mix-and-match predicate acts in an attempt to identify a pattern of racketeering activity that has both "continuity" and "relatedness." He argues that two combinations of predicate acts each meet the pattern requirements. His first theory is that the requisite pattern is formed by the two acts of wire fraud alone: the false phone call to the bank shareholder and the false phone call to Cedeño. His second theory is that the requisite pattern is formed by the acts of wire fraud combined with the Travel Act violations.[3] Both putative patterns include a wire fraud claim, which matters because "RICO claims premised on mail or wire fraud must be ...


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