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Brookhaven Town Conservative Committee v. Walsh

United States District Court, E.D. New York

June 15, 2017

Brookhaven Town Conservative Committee, Plaintiffs,
v.
Edward M. Walsh, Jr., Defendants.

          MEMORANDUM AND ORDER

          JOSEPH F. BIANCO United States District Judge

         Plaintiff 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.

         This is 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 . . . .” Id.

         Subsequently, 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).

         For the 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.

         I. Background

         A. Factual Background

         The 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.

         Plaintiff 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. ¶ 21.)

         Defendant 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.)

         Specifically, 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).)

         For 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.)

         Plaintiffs 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.)

         B. Procedural Background

         Plaintiff 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 No. 21).

         Thereafter, 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 parties' submissions.

         II. Standard of Review

         In 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)). ...


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