United States District Court, S.D. New York
OPINION AND ORDER
KATHERINE POLK FAILLA, United States District Judge
deal to sell her business went awry, Plaintiff Lesley Duval
brought this action against Joseph and Debra Albano
(together, the “Albanos”) and a company they
controlled, Axis Sports Media, Inc. (“AXIS, ” and
with the Albanos, “Defendants”). Plaintiff
advanced civil claims under 18 U.S.C. § 1962, the
Racketeer Influenced and Corrupt Organizations Act (commonly
known as “RICO”), as well as common-law claims
for breach of contract, anticipatory breach of contract,
fraud, unjust enrichment, and declaratory judgment. In brief,
Plaintiff alleges that the Albanos operated a network of
associated shell corporations (including AXIS) for the
purpose of defrauding businesses and consumers alike, and
that Plaintiff herself was defrauded into selling them The
Manhattan Cocktail Classic (“MCC”), a business
Plaintiff had founded.
moved to dismiss the Complaint on January 23, 2017, and their
motion was fully briefed as of March 24, 2017. For the
reasons that follow, Defendants' motion is denied.
The Sale of MCC
is the founder and former owner of Lesley Townsend LLC, doing
business as MCC, an event production company that produced
“high-end liquor and cocktail events, including its
eponymous annual gala event” that was held in New York
City every year from 2009 to 2014. (Compl. ¶ 16).
about March of 2014, Joseph Albano approached Plaintiff
“with a proposal to purchase MCC.” (Compl. ¶
17). “Mr. Albano represented himself at the time as an
experienced event production executive with an extensive
history of buying and selling brands and companies.”
September 9, 2014, Plaintiff entered into a purchase
agreement (the “Purchase Agreement”) “with
The Cocktail Classic LLC (‘Buyer LLC'), a shell
company formed by the Albano Defendants for the sole purpose
of purchasing MCC from [Plaintiff].” (Compl. ¶
18). “Under the terms of the Purchase Agreement, the
Buyer LLC agreed to purchase [Plaintiff's] entire
membership interest in MCC for a total purchase price of
$908, 000 (‘Purchase Price'), to be paid in
quarterly installments of $37, 500 over a period of six
years.” (Id. (citing Compl., Ex. A,
was a New York corporation formed by Debra Albano in 2012.
(Compl. ¶ 37 & Ex. G). According to Plaintiff, it
was used by the Albanos to impart a patina of legitimacy to
the transaction: “As part of the transaction to
transfer ownership of MCC from [Plaintiff] to the Buyer LLC
..., [Joseph] Albano proposed that AXIS would guaranty
payment of the Purchase Price to [Plaintiff].”
(Id. at ¶ 19). “The Guaranty Agreement
was, by its own terms, ‘an unconditional guaranty of
payment.'” (Id. (citing Compl., Ex. B,
¶ 2)). It provided that “[t]o induce the Seller to
enter into the Purchase Agreement, ” AXIS, the
Guarantor, “absolutely, conditionally and irrevocably
guarantee[d] to [Plaintiff, ] the Seller[, ] ... the due and
punctual payment, observance, performance and discharge
of” the Purchase Price. (Compl., Ex. B, ¶ 1). Of
particular significance to the instant litigation, AXIS
“represent[ed] and warrant[ed] that ... [it] ha[d] the
financial capacity to pay and perform its obligations”
under the agreement. (Id. at ¶ 6).
Albano signed the Guaranty Agreement on behalf of AXIS as its
President. (Compl. ¶ 21; see also id., Ex. B).
He also “represented to [Plaintiff] that he intended to
rely upon AXIS's event production experience to continue
producing the MCC festival successfully ... in order to
induce [Plaintiff] to enter into the MCC [sale transaction]
and to gain control of the valuable MCC brand.”
(Id. at ¶ 22).
reliance on these representations, Plaintiff
“transferred all interest in MCC to the Buyer
LLC” on September 9, 2014. (Compl. ¶ 23; see
also Id. at ¶ 18). An initial payment of $45, 000
was paid with a check signed by Debra Albano “from a
corporate entity named ‘WSOG LLC.'”
(Id. at ¶ 23). “On December 15, 2014, the
Buyer LLC made a quarterly payment to [Plaintiff] in the
amount of $37, 500, ” also using a check signed by
Debra Albano. (Id.; see also Compl., Ex.
that, no further payments were made. To date, the Buyer LLC
has not made any additional quarterly payment as required
under the Purchase Agreement, and AXIS has “defaulted
on its obligation under the Guaranty Agreement to guaranty
payment by the Buyer LLC.” (Compl. ¶ 26). The MCC
festival has not been produced since MCC was purchased.
(Id. at ¶¶ 28, 31). Instead, Joseph Albano
“has made repeated representations regarding attempts
to re-sell the company to third-party buyers”
(id. at ¶ 28), and “indicated on at least
two occasions that he [did] not have the funds to satisfy his
companies' obligations and ... intend[ed] to default on
the future quarterly obligations” (id. at
The Albanos' Additional Alleged
to Plaintiff, the failed MCC transaction was the proverbial
tip of the iceberg of Defendants' fraudulent conduct: She
alleges that “[b]eginning at least as early as 2013,
and continuing through [the filing of the Complaint], the
Albano Defendants have made numerous false statements on the
AXIS website, ” including “misrepresentations
about AXIS's size as an organization, office location,
history of operations, clients roster, and events
produced.” (Compl. ¶ 70). The AXIS website
indicates that the company has been helping its clients
“to achieve their objectives by using sports as a
winning communication tool” for over fifteen years.
(Id. at ¶ 32; see also id., Ex. D).
Indeed, the website lists as AXIS's clients and partners
Miller Lite, Citibank, Red Bull, the Pro Football Hall of
Fame, Patrón Tequila, Tiffany & Co., Lowe's,
and American Airlines. (Id. at ¶ 32; see
also id., Ex. D). The website also indicates that AXIS
has a “creative and production team of
professionals” that includes “graphic designers,
producers, technical product managers, script writers,
videographers, video editors, video and audio engineers,
lighting directors, creative directors, and set designers
with ‘decades of knowledge and experience.'”
(Id. at ¶ 32; see also id., Ex. E).
And AXIS issued a September 3, 2014 press release announcing
its production of a year-long Professional Boxing Tour, the
first event of which was to be a prize fight at Mohegan Sun
Arena in October 2014. (Id. at ¶ 33; see
also id., Ex. F).
contends that, in reality, “AXIS is shell company with
no assets and ... no employees or clients.” (Compl.
¶ 33). The company could not have been in business for
over fifteen years because “the entity was only created
in 2012.” (Id.). The October 2014 prize fight
at Mohegan Sun is not listed in the public professional
records of the boxers alleged to have participated in it.
(Id.). Indeed, AXIS “has not produced any
events in its entire history as a company.”
(Id. at ¶ 40). What is more,
although the AXIS website states that the company's
corporate address is located on West 40th Street in New York,
New York and also suggests that the company has offices in
Atlanta and Los Angeles, AXIS's Certificate of
Incorporation, the [New York State Department of State]
website, and the ‘Notices' provision in the
Guaranty Agreement all list the company's address at the
residence of the Albano Defendants in Locust Valley, New
(Id. at ¶ 34).
to Plaintiff, the WSOG entity from the accounts of which the
initial payment to Plaintiff was drawn is also mired in
fraud. WSOG LLC was organized in Delaware on March 7, 2014.
(Compl. ¶ 45). Another WSOG entity was organized in New
York on March 2, 2016. (Id.; id., Ex. J).
Its address for service of process is a Bayville, New York
property owned by Debra Albano. (Id.; see also
id., Ex. J, K).
alleges that “since at least as early as 2014, and
continuing through the present, the Albano Defendants have
made numerous false representations on the WSOG Website about
the current operations of WSOG, ” including
“misrepresentations about WSOG's history of
operations since the Albano Defendants took control of the
WSOG Website and the WSOG brand.” (Compl. ¶ 70).
For example: “The WSOG Website advertises that the
company engages in online gambling activities as well as an
annual live three-day golfing event in which finalists are
eligible to win a $250, 000 grand prize.” (Id.
at ¶ 43). A July 22, 2014 press release on the WSOG
website announced “the creation of a partnership
between WSOG and AXIS to launch a ‘contest for golfing
bloggers, '” the winner of which “would
receive a trip to the September 2014 World Series of Golf
tournament weekend” at Mohegan Sun. (Id. at
¶ 46; see also id., Ex. H). The WSOG website in
2015 and 2016 has maintained different iterations of a
membership signup that solicits the payment of a membership
fee with no specified benefits of membership. (Id.
at ¶¶ 46-47; see also id., Ex. H, L).
alleges that neither the Mohegan Sun event nor “the
series of subsequent WSOG events that the WSOG Website claims
occurred throughout 2014 and 2015” ever took place.
(Compl. ¶ 46). And the membership signup is simply
“a scheme designed to trick unsuspecting golf and poker
enthusiasts into providing credit card information to WSOG
and paying a ‘membership fee' to WSOG for
non-existent goods and services.” (Id. at
Other Albano-Related Entities
alleges that her claims of fraud are bolstered by the
Albanos' connection “to approximately one dozen
inactive companies in New York and Nevada, ” all of
which “were opened and either closed or abandoned since
2001.” (Compl. ¶ 49). “There is little
evidence that any of these companies ever conducted any
actual business.” (Id.).
specific example, Plaintiff recites that, in 2014, Joseph
Albano and one of the Albanos' Nevada entities, Envy
Digital Entertainment Inc. (“Envy”), were sued in
New Jersey Superior Court by the National Football League
Alumni Association (the “NFLAA”), which alleged
that it had given Envy and Joseph Albano hotel rooms and
Super Bowl tickets in exchange for the production of an NFLAA
awards show that Envy and Joseph Albano ultimately revealed
themselves as unable to produce. (Compl. ¶ 50). The
NFLAA also alleged that Envy and Joseph Albano dramatically
misrepresented the progress of that production when asked
about it. (Id.).
filed her Complaint on October 6, 2016, raising civil RICO
claims against the Albanos and common-law claims against all
Defendants. (Dkt. #1). On November 16, 2016, Defendants
requested that the Court schedule a pre-motion conference to
discuss Defendants' contemplated motion to dismiss. (Dkt.
#23). That conference was held on December 7, 2016. (Dkt.
#28). Afterward, the Court set a briefing schedule for
Defendants' motion. (Dkt. #27).
filed their motion on January 23, 2017. (Dkt. #33-34).
Plaintiff filed her opposition to Defendants' motion on
February 24, 2017 (Dkt. #35), and Defendants filed their
reply on March 24, 2017 (Dkt. #37).
12, 2017, Plaintiff filed a letter requesting that the Court
take judicial notice of a case that she alleges
“reveals a new piece of the Albano Defendants'
fraudulent scheme.” (Dkt. #38). Defendants opposed
Plaintiff's request on June 13, 2017. (Dkt. #39).
principal argument is that Plaintiff has overstated her case
- that she has attempted, through artful pleading, to
transform a run-of-the-mill business dispute into a
racketeering enterprise, and thereby obtain treble damages
and attorney's fees. To contextualize its explanation of
why this argument fails, the Court will outline in this
section the complexity of the RICO statute, demonstrating
both the statute's nuances and their interplay with the
pleading requirements of the Federal Rules of Civil
asserts violations of RICO's third and fourth substantive
prohibitions against “racketeering activity.”
(See Compl. ¶¶ 81-93). The third
prohibition, contained in Section 1962(c), makes it
“unlawful for any person employed by or associated with
any enterprise engaged in, or the activities of which affect,
interstate or foreign commerce, to conduct or participate,
directly or indirectly, in the conduct of such
enterprise's affairs through a pattern of racketeering
activity.” 18 U.S.C. § 1962(c). A plaintiff
bringing a civil RICO claim under Section 1962(c) must allege
that (i) the defendant has violated the substantive RICO
statute; and (ii) the plaintiff was injured in her business
or property by reason of a violation of Section 1962.
See, e.g., Spool v. World Child Int'l
Adoption Agency, 520 F.3d 178, 183 (2d Cir. 2008). To
make out a substantive RICO violation, in turn, a plaintiff
must allege the (i) conduct (ii) of an enterprise (iii)
through a pattern (iv) of racketeering activity. See,
e.g., Sedima, S.P.R.L. v. Imrex Co., Inc., 473
U.S. 479, 496 (1985); Cruz v. ...