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Radcliffe v. Wright

United States District Court, S.D. New York

June 28, 2018

KENNETH RADCLIFFE, an individual, CRACKERJACK CLASSICS, LLC, a limited liability company, Plaintiffs,
v.
WILLIAM WRIGHT, an individual, KEYSTONE FINANCIAL MANAGEMENT, INC., a corporation, ROBERT STEVENS, an individual, and SOCIAL LIFE NETWORK, INC., a corporation, Defendants.

          MEMORANDUM OPINION AND ORDER

          GREGORY H. WOODS UNITED STATES DISTRICT JUDGE.

         In September 2014, Defendant William Wright held a meeting with Plaintiff Kenneth Radcliffe and others to solicit funds to “clean up” a shell company named SEWC to make it more marketable for a future merger. In exchange for their financial support, Wright promised Radcliffe and Plaintiff Crackerjack Classics, LLC-a limited liability company of which Radcliffe is a member-a controlling interest in SEWC after the anticipated merger. Relying on Wright's representations, Radcliffe and Crackerjack wired $50, 000 and $25, 000, respectively, to Defendant Keystone Financial Management, Inc., which Wright controlled. Rather than using the Plaintiffs' funds solely for the benefit of SEWC, however, Wright misappropriated $24, 000. Plaintiffs never received any interest in SEWC or the entity into which it ultimately merged, and despite numerous requests, have not received a refund of their investment.

         Plaintiffs brought this action asserting a violation of the federal Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. § 1962(c), and various state common law claims. Defendants have moved to dismiss pursuant to Fed.R.Civ.P. 12(b)(1) for lack of subject matter jurisdiction and Fed.R.Civ.P. 12(b)(6) for failure to state a claim on which relief can be granted. In their opposition to Defendants' motion, Plaintiffs withdrew their RICO claim-the only claim arising under federal law. Because neither Plaintiff has alleged an amount in controversy sufficient to establish diversity jurisdiction, and the damages they claim cannot be aggregated, Defendants' motion to dismiss for lack of subject matter jurisdiction is granted.

         I. BACKGROUND

         Frank Ottaviani introduced Defendant William Wright, an investor, to Plaintiff Kenneth Radcliffe and non-parties Joseph Radcliffe and Dennis Radcliffe[1] in the late summer of 2014. Amended Complaint (“Am. Compl.”) (ECF No. 41) ¶¶ 12-13. In September 2014, Wright traveled to New York for a meeting with the Radcliffes and Ottaviani. Id. ¶ 13. The purpose of the meeting was to secure funding for the “clean up” and reorganization of a publicly traded shell company, SEWC, in anticipation of a merger. Id. ¶ 54(2). Wright represented to Plaintiffs that their funds would be used exclusively for the clean up of SEWC, and that they would be repaid for their investment with a “valuable controlling position” in the company after its reorganization and merger. Id. ¶ 15. To that end, on September 12, 2014, Plaintiff Crackerjack Classics, LLC (“Crackerjack”) wired $25, 000 to Defendant Keystone Financial Management, Inc. (“Keystone”), a corporation of which Wright is a principal and majority shareholder. Id. ¶¶ 7, 18. Soon after, Wright warned that Crackerjack would be in jeopardy of losing the deal if Wright did not immediately receive an additional $50, 000. Radcliffe Decl. ¶ 6. On October 7, 2014, Radcliffe made the requested $50, 000 payment to Wright out of his personal account. Am. Compl. ¶ 19. Plaintiffs incurred an additional $30 each in banking fees as a result of these transactions. Id. ¶¶ 18-19.

         Upon receipt of Plaintiffs' funds, Wright transferred $10, 000 to Ottaviani and $14, 000 to himself as “commission[s], ” and transferred the balance to Defendant Robert Stevens, who was acting as a “receiver” for SEWC. Id. ¶ 21. Plaintiffs never received any interest in SEWC or the entity into which it ultimately merged, Defendant Social Life Network, Inc. (hereinafter referred to by its trading symbol, “WDLF”). Id. ¶¶ 22, 36. Wright, on the other hand, “has received shares in WDLF in exchange for having transferred $51, 000 of Plaintiffs' funds to Stevens.” Id. ¶ 34. Despite numerous requests, Plaintiffs have yet to receive a refund of their investment. Id. ¶ 24. Plaintiffs now allege that Wright “never intended the SEWC transaction to come to fruition, ” and that he has “repeatedly and continuously used Keystone as a vehicle for Defendants' fraudulent conduct.” Id. ¶¶ 28, 38.

         II. PROCEDURAL HISTORY

         On December 9, 2016, Plaintiffs commenced this action against Defendants Wright, Keystone, Stevens, WDLF, and CGrowth Capital, Inc.[2] Compl. (ECF No. 1). In June 2017, Plaintiffs amended their complaint, bringing claims for: (1) a violation of the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1962(c); (2) unjust enrichment; (3) fraud; and (4) civil conspiracy. Am. Compl. ¶¶ 40-63. On September 15, 2017, Defendants moved to dismiss Plaintiffs' action pursuant to Fed.R.Civ.P. 12(b)(1) and 12(b)(6). Defs.' Mot. to Dismiss (ECF No. 51). Plaintiffs opposed Defendants' motion on October 6, 2017, and in their opposition, Plaintiffs affirmatively withdrew their federal RICO claim. Pls.' Mem. Opp'n to Defs.' Mot. to Dismiss (“Pls.' Opp'n”) (ECF No. 57), at 6-8. On October 13, 2017, Defendants submitted a reply to Plaintiffs' opposition. Defs.' Reply Mem. in Supp. of Mot. to Dismiss (ECF No. 60).

         V. DISCUSSION

         A. Withdrawal of RICO Claim

         Plaintiffs have effectively withdrawn their RICO claim, which was the only basis for the Court to exercise federal question jurisdiction under 28 U.S.C. § 1331. In their opposition, Plaintiffs wrote that they voluntarily withdrew their RICO claim, noting that they no longer had a legal basis to sustain arguments in support of it. See Pls.' Opp'n at 6, 8 (conceding that Defendants no longer “satisf[ied] the test for open-ended continuity” and that Defendants no longer “pose[d] any threat of continuing criminal activity”). Defendants contest Plaintiffs' withdrawal of the RICO claim, requesting instead a dismissal of the claim with prejudice under Fed.R.Civ.P. 12(b) or 41(a)(2). However, under Fed.R.Civ.P. 41(a)(1)(A)(i), if the opposing party has not yet served either an answer or a motion for summary judgment, a plaintiff may dismiss claims without leave of the court or the opposing parties' consent by filing a notice of dismissal. “It is well established that a motion to dismiss under Rule 12 does not terminate the right of dismissal by notice.” Arndt v. UBS AG, 342 F.Supp.2d 132, 136 (E.D.N.Y. 2004) (internal citations, quotation marks, and alterations omitted). Therefore, Plaintiffs effectively withdrew their RICO claim, and that claim is dismissed without prejudice.

         B. Subject Matter Jurisdiction

         Defendants have moved to dismiss this action under Fed.R.Civ.P. 12(b)(1). “‘A case is properly dismissed for lack of subject matter jurisdiction under Rule 12(b)(1) when the [Court] lacks the statutory or constitutional power to adjudicate it.'” Luckett v. Bure, 290 F.3d 493, 496 (2d Cir. 2002) (quoting Makarova v. United States, 201 F.3d 110, 113 (2d Cir. 2000)). The plaintiff bears the burden of establishing jurisdiction in a Rule 12(b)(1) motion, and the plaintiff must meet that burden by a preponderance of the evidence. Aurecchione v. Schoolman Transp. Sys., Inc., 426 F.3d 635, 638 (2d Cir. 2005). “‘[J]urisdiction must be shown affirmatively, and that showing is not made by drawing from the pleadings inferences favorable to the party asserting it.'” Morrison v. Nat'l Austl. Bank Ltd., 547 F.3d 167, 170 (2d Cir. 2008) (quoting APWU v. Potter, 343 F.3d 619, 623 (2d Cir. 2003)). “In resolving a motion to dismiss for lack of subject matter jurisdiction under Rule 12(b)(1) a district court may consider evidence outside the pleadings.” Id. (citing Makarova, 201 F.3d at 113).

         a. Amount ...


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