United States District Court, E.D. New York
MEMORANDUM AND ORDER
F. BIANCO United States District Judge
Brookhaven Town Conservative Committee (“BTCC”),
along with several individuals and corporate entities
(collectively, “plaintiffs”), brings this action
against defendants Edward M. Walsh, Jr.
(“Walsh”), Suffolk County Conservative Party of
New York State (the “SCCP”), Suffolk County
Conservative Chairman's Committee H.K., and Suffolk
County Conservative Chairman's Club (collectively,
(“defendants”). Plaintiffs allege (1) an 18
U.S.C. § 1962(c) cause of action predicated on mail and
wire fraud claims that stem from Walsh's purported
diversion of monetary donations; and (2) a New York State law
fraudulent inducement claim.
plaintiff BTCC's third attempt to plead a claim under the
Racketeer Influenced and Corrupt Organizations
(“RICO”) Act. By Memorandum and Order dated March
23, 2016 (the “Memorandum and Order”), the Court
dismissed BTCC's First Amended Complaint
(“FAC”) but granted leave to re- plead. See
Brookhaven Town Conservative Comm. v. Walsh, No.
14-CV-6097 (JFB) (ARL), 2016 WL 1171583, at *1 (E.D.N.Y. Mar.
23, 2016). The Court concluded that BTCC had failed to allege
a cognizable RICO injury based on the “the loss of its
Wilson-Pakula authority”-an authorization given by a
New York political party that allows an individual not
registered with that party to run as its candidate in a given
election- because BTCC “had no right to the
Wilson-Pakula authority in the first place.”
Id. at *1, 6. However, “in an abundance of
caution, ” the Court permitted BTCC to file another
pleading containing “additional factual allegations
with respect to the alleged diversion of its funds.”
Id. at *7. The Court concluded that “it may be
possible to allege a RICO injury based upon” such
conduct, but cautioned that “it is entirely unclear
that plaintiff could plausibly allege all of the elements of
a civil RICO claim under this theory . . . .”
on April 22, 2016, BTCC-together with plaintiffs Cartier,
Bernstein, Auerbach & Dazzo, P.C.; Homeside Realty Group,
Inc.; Johannesen & Johannesen, PLLC; Linda Boswell;
Donald S. Sullivan; Brocato & Byrne, LLP; and Vincent
Finnegan-filed a Second Amended Complaint
(“SAC”), which principally alleges that Walsh
committed mail and wire fraud by siphoning plaintiffs'
contributions to the SCCP for his personal use. Defendants
now move to dismiss the SAC pursuant to Federal Rules of
Civil Procedure 9(b), 12(b)(1), and 12(b)(6).
reasons set forth below, the Court again dismisses
plaintiffs' RICO claim for failure to plead mail and wire
fraud with the requisite particularity. Given plaintiffs'
evident inability to state a plausible RICO claim despite
multiple attempts to do so, this dismissal is with prejudice.
Finally, the Court declines, in its discretion, to exercise
supplemental jurisdiction over plaintiffs' New York State
law claim and dismisses that cause of action without
prejudice to re-filing in state court.
Court takes the following facts from the SAC. (ECF No. 22.)
The Court assumes these facts to be true for purposes of
deciding this motion and construes them in the light most
favorable to plaintiffs as the non-moving party.
BTCC is the governing body of the Town of Brookhaven
Conservative Committee. (SAC ¶ 1.) BTCC was organized to
conduct “a local political committee for purposes of
promoting, screening, and nominating local candidates with
conservative values within the Town of Brookhaven” and
to raise money to support such candidates. (Id.
Walsh has been the Chairman of the SCCP since 2006.
(Id. ¶¶ 10, 27.) The SCCP is the governing
body of the Suffolk County Committee of the Conservative
Party of New York State. (Id. ¶ 11.) After
Walsh was elected as Chairman of the SCCP, he “caused
to be formed” the political committees of defendants
Suffolk County Conservative Chairman's Club (the
“SCCCC”) and Suffolk County Conservative
Chairman's Committee H.K. (the “SCCCHK”);
both are controlled by Walsh. (Id. ¶¶
12-15, 28-29.) Plaintiffs allege that Walsh's
“purposes, among others, are to increase his political
clout in Suffolk County by absolutely and exclusively
controlling the affairs of the BTCC (and similar committees
within the County) and by diverting funds intended for the
SCCP to his own purposes” through mail and wire fraud.
(Id. ¶¶ 24, 31.)
plaintiffs assert that, in or around 2009, Walsh
“during the course of a Suffolk County Conservative
Party Executive Committee meeting, placed a Resolution on the
record granting himself a $65, 000 per year annual
stipend” that the SCCP Executive Committee unanimously
approved. (Id. ¶ 30.) Further, at least twice a
year since becoming Chairman, Walsh has sent fundraising
announcements to members of all town committees and other
registered conservatives by electronic and paper mail.
(Id. ¶¶ 32, 34.) Walsh uses the SCCP's
official seal and party mailing list to advertise and
fundraise. (Id. ¶ 33.) The recipients of those
fundraising announcements, including plaintiffs, donated
money to advance the political goals of the SCCP.
(Id. ¶ 37; see also Id . ¶¶
38-45 (delineating specific contributions made by plaintiffs
in response to Walsh's solicitations).)
instance, plaintiffs contend that fundraisers were held on or
about June 20, 2011; October 19, 2011; October 30, 2012;
April 1, 2014; and October 29, 2014. (Id.
¶¶ 62-66.) They allege that the invitations for
those fundraisers stated that checks should be made out to
the SCCCC, which is controlled exclusively by Walsh without
oversight by other SCCP members. (Id.)
further allege that the money received through those
fundraisers is deposited into the bank accounts of either the
SCCCHK or SCCCC, which are under Walsh's control, and
that Walsh's monthly SCCP stipend of $5, 117.00 is paid
through those contributions. (Id. ¶¶
46-47.) Walsh purportedly created both of these entities
“to receive and divert funds intended to be contributed
to the SCCP.” (Id. ¶¶ 35-36.)
Plaintiffs further allege that Walsh receives other funds for
his benefit through the SCCCHK and the SCCCC that were never
authorized by the SCCP Executive Committee, such as $1, 200
per month for his car, gas reimbursement, insurance
reimbursement, and miscellaneous office expenses.
(Id. ¶¶ 48-49, 67.) Plaintiffs assert
that, during 2013 and 2014, the majority of SCCCHK and
SCCCC's expenditures were for Walsh's individual
gain; specifically, SCCCHK's July 2014 disclosure to the
New York State Board of Elections showed that of the $44,
950.13 in total expenditures, $41, 711.87 was used for
Walsh's personal benefit. (Id. ¶ 68.)
BTCC commenced this action on October 17, 2014 (ECF No. 1)
and filed the FAC on November 24, 2014 (ECF No. 9).
Defendants moved to dismiss on March 13, 2015 (ECF No. 16),
and after the parties fully briefed that motion and the Court
heard oral argument, the Court issued the Memorandum and
Order dismissing the RICO claim with leave to re-plead (ECF
plaintiffs filed the SAC on April 22, 2016. (ECF No. 22.)
Defendants moved to dismiss that pleading on September 20,
2016 (ECF No. 29); plaintiffs filed their opposition on
December 23, 2016 (ECF No. 32); and defendants replied on
January 28, 2017 (ECF No. 34). The Court held oral argument
on February 8, 2017 (ECF No. 35) and has fully considered the
Standard of Review
reviewing a motion to dismiss pursuant to Federal Rule of
Civil Procedure 12(b)(6), the Court must accept the factual
allegations set forth in the complaint as true and draw all
reasonable inferences in favor of the plaintiff. See
Cleveland v. Caplaw Enters., 448 F.3d 518, 521 (2d Cir.
2006); Nechis v. Oxford Health Plans, Inc., 421 F.3d
96, 100 (2d Cir. 2005). “In order to survive a motion
to dismiss under Rule 12(b)(6), a complaint must allege a
plausible set of facts sufficient ‘to raise a right to
relief above the speculative level.'” Operating
Local 649 Annuity Trust Fund v. Smith Barney Fund Mgmt.
LLC, 595 F.3d 86, 91 (2d Cir. 2010) (quoting Bell
Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). ...