United States District Court, S.D. New York
KENNETH RADCLIFFE, an individual, CRACKERJACK CLASSICS, LLC, a limited liability company, Plaintiffs,
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.
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.
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
Ottaviani introduced Defendant William Wright, an investor,
to Plaintiff Kenneth Radcliffe and non-parties Joseph
Radcliffe and Dennis Radcliffe 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.
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.
December 9, 2016, Plaintiffs commenced this action against
Defendants Wright, Keystone, Stevens, WDLF, and CGrowth
Capital, Inc. 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.
Withdrawal of RICO Claim
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.
Subject Matter Jurisdiction
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).