UNITED STATES DISTRICT COURT 

SOUTHERN DISTRICT OF NEW YORK 

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RITCHIE CAPITAL MANAGEMENT, L.L.C., 

RITCHIE RISK-LINKED STRATEGIES TRADING 

(IRELAND), LIMITED, RITCHIE RISK-LINKED 

STRATEGIES TRADING (IRELAND) II, 

LIMITED, WALKERS SPV LIMITED, as 

trustee for Ritchie Risk-Linked Life 

Strategies Trust I and Ritchie Life 

Strategies Master Trust, and RITCHIE 

RISK-LINKED STRATEGIES TRADING, LTD., 

Plaintiffs, 

-vCOVENTRY FIRST LLC, THE COVENTRY GROUP, 

INC., MONTGOMERY CAPITAL, INC., LST I 

LLC, ALAN BUERGER, CONSTANCE BUERGER, 

REID S. BUERGER, ANTONIO MUNIZ, ALEX 

SELDIN, NEAL JACOBS, EILEEN SHOVLIN, 

and JIM DODARO, 

Defendants. 

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07 Civ. 3494 (DLC) 

OPINION & ORDER

Appearances: 

For Plaintiffs: 

Lawrence S. Robbins 

Gary A. Orseck 

Daniel R. Walfish 

Rachel S. Li Wai Suen 

Robbins, Russell, Englert, Orseck & Untereiner LLP 

1801 K Street, N.W., Suite 411 

Washington, DC 20006 

Thomas P. Puccio 

Law Offices of Thomas P. Puccio 

230 Park Avenue 

New York, NY 10169 

For Defendants: 

George A. Borden 

Of Counsel 

Dane H. Butswinkas 

Case 1:07-cv-03494-DLC Document 41 Filed 07/17/2007 Page 1 of 27
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Robert M. Cary 

David A. Forkner 

Williams & Connolly, LLP 

725 Twelfth Street, N.W. 

Washington, D.C. 20005 

DENISE COTE, District Judge: 

 The defendants have moved to dismiss this RICO complaint, 

filed on May 2, 2007. Their motion is granted, with a limited 

leave to amend. This is essentially a breach of contract claim 

governed by two complex agreements negotiated between 

sophisticated parties. The plaintiffs’ effort to add other 

statutory and common law claims largely fails. 

Background

 The following is drawn from the complaint and the two 

contracts which underlie this lawsuit, each of which is integral 

to the complaint. The parties are engaged in the life 

settlements industry, a secondary market for life insurance 

policies. The industry operates as follows. Paying a sum of 

money that is more than the price an owner of a life insurance 

policy would receive if a policy were returned to the issuing 

insurance company, and yet less than the death benefit, a buyer 

acquires the policy and continues to pay premiums until the 

insured’s death. The buyer then receives the death benefit, and 

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if the costs of paying premiums have been less than the death 

benefit, makes a profit. 

The plaintiffs allege that the four corporate defendants, 

which they refer to collectively as Coventry, are leading 

players in the life settlements industry, having purchased over 

1,300 life insurance policies representing more than $3 billion 

in death benefits between 2001 and 2005. Beginning in 2005, 

plaintiff Ritchie Capital Management, L.L.C. (“Ritchie Capital”) 

entered into negotiations with Coventry to purchase policies. 

At some point it contributed the majority of the financing that 

Coventry used to purchase policies, while Coventry exercised its 

expertise in analyzing which policies should be purchased and in 

servicing purchased policies. Ritchie Risk-Linked Strategies 

Trading (Ireland), Limited (“Ritchie I”) and Ritchie Risk-Linked 

Strategies Trading (Ireland) II, Limited (“Ritchie II”) sent 

money to Coventry to buy the policies that Coventry acquired, 

and the policies were then transferred “to plaintiffs.” After 

purchasing the policies, Ritchie I and II sent money to pay the 

monthly premiums in the amounts that Coventry determined were 

owed, and Coventry arranged for those funds to be disbursed to 

the issuing life insurance companies. 

The first agreement between the parties governing this 

arrangement is the September 8, 2005 agreement between Ritchie I 

and defendant LST 1 LLC (“LST”) signed by defendant Alex Seldin 

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(“Seldin”). A second agreement dated December 15, 2005, was 

executed between Richie II and LST, and signed again by Seldin. 

The two agreements contain the following three representations, 

among others, by the seller LST: 

The consummation of the transactions contemplated 

by this Agreement and the fulfillment of the terms 

hereof will not violate any United States federal, 

state or local law or regulation . . . . 

There is no action, suit or proceeding before or 

by any court, regulatory body, administrative agency 

or other governmental agency or body, domestic or 

foreign, now pending, or to the Seller’s knowledge, 

threatened, against or affecting the Seller or its 

assets or properties: . . . seeking any determination 

or ruling that might materially and adversely effect 

[sic] the performance by the Seller of its obligations 

under . . . this Agreement. 

. . . . 

All Life Settlement Policies . . . have been [] 

Originated by the Seller . . . in one or more 

transactions that in all material respects were in 

accordance with and in compliance with all applicable 

United States federal, state and local laws, rules and 

regulations applicable to life settlement transactions 

and the purchase and resale of life insurance policies 

. . . . 

Section 7.12 of each agreement contained the following 

integration clause: 

. . . [T]his Agreement sets forth the entire 

understanding of the parties hereto relating to the 

subject matter hereof, and all prior understandings, 

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written or oral, are superseded by this Agreement. . . 

. The Purchaser [Ritchie I or II] expressly 

acknowledges that the Seller [LST] has not made any 

representations and warranties other than as set forth 

herein and in the other Transaction Documents. The 

Purchaser represents and warrants to the Seller that, 

independently and without reliance upon the Seller 

(other than its reliance on the Seller’s 

representations, warranties and covenants set forth in 

the Transaction Documents) and based upon such 

documents and information as it has deemed 

appropriate, it has made and will continue . . . to 

make its own appraisal of and investigation into the 

business, operations, . . . financial and other 

conditions . . . of the Seller, and its own decision 

to enter into this Agreement and to take, or omit to 

take, action under any Transaction Document. Except 

for items specifically required to be delivered 

hereunder, the Seller shall not have any duty or 

responsibility to provide the Purchaser or any of its 

Affiliates any information that comes into the 

possession of the Seller or any of its officers, 

directors, employees . . . or Affiliates. 

Finally, the agreements had New York choice of law and 

forum selection clauses. They also waived the right to a jury 

trial for any action or cause of action “arising out of or in 

any way related to this agreement.” 

The complaint alleges that the defendants engaged in fraud 

by both defrauding the insureds, and concealing from the 

plaintiffs that dishonesty and an ongoing investigation of the 

fraud being conducted by the Attorney General of the State of 

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New York (“Attorney General”). Coventry defrauded the insureds 

by bribing brokers, who assisted Coventry in acquiring the 

policies from insureds, not to act on bids for the policies 

placed by Coventry’s competitors. Coventry also falsified 

documents to conceal from the insureds the amount paid in 

brokerage commissions. The plaintiffs learned of this scheme in 

October 2006, when the Attorney General sued Coventry. Coventry 

first revealed the existence of an investigation to the 

plaintiffs in June 2006.1

 In conversations in June 2006, Seldin 

implied that Coventry was not engaged in precisely the conduct 

which was the target of an Attorney General’s subpoena. 

The plaintiffs allege that the defendants conspired with 

each other to defraud the insureds through acquiring policies in 

a rigged bidding process and to induce institutional investors 

like Ritchie Capital to acquire the policies. They list 

purported violations of the federal mail and wire fraud 

statutes, 18 U.S.C. §§ 1341 & 1343. In addition to repeating 

allegations from the lawsuit filed by the Attorney General 

concerning the fraud on the insureds, the complaint contains two 

RICO predicate acts related to the deception of the plaintiffs. 

The first asserts that during the negotiations of the two 

 

1

 While the complaint alleges that Coventry disclosed the 

investigation in June 2007, it appears that the plaintiffs 

intended to allege that the disclosure was made to them in June 

2006. 

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agreements with Ritchie I and II, defendants Seldin, Reid 

Buerger, and Antonio Muniz (“Muniz”) sent emails which contained 

the following misrepresentations: that the transactions the 

parties were about to enter would not violate federal or state 

law; that no proceeding before any government agency was then 

proceeding to “the Seller’s knowledge” which would affect the 

performance of the Seller under the contemplated agreements; 

that the Seller had perfected ownership in each policy; and that 

the purchases of the policies were in compliance with laws 

applicable to life settlement transactions and the purchase and 

resale of life insurance policies. The second relevant 

predicate act asserts that in June 2006, defendant Reid Buerger 

misrepresented to plaintiffs the nature of the Attorney 

General’s investigation. 

Insofar as damages are concerned, the complaint asserts 

that the value of the policies purchased by Ritchie I and II has 

greatly diminished “since the New York Attorney General’s action 

was commenced.” It contends that the plaintiffs had anticipated 

profiting from the sale of the policies to others in a 

securitization transaction, and for that purpose had obtained a 

pre-sale report and rating from the Moody’s service on a number 

of the policies. Moody’s withdrew its rating because of the 

Attorney General’s investigation. By interfering with the 

resale value of the policies, the defendants harmed not only 

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Ritchie I and II, but the plaintiffs that own or are 

beneficially interested in Ritchie I and II. The complaint also 

asserts that Coventry owed fiduciary duties to these other 

plaintiffs. 

The complaint contains seven causes of action. The first 

three are RICO claims pleaded against all of the defendants. A 

fraud claim and a fraudulent inducement claim are pleaded 

against the Coventry defendants, Alan and Reid Buerger, Muniz, 

and Seldin. Finally, breach of fiduciary duty and breach of 

contract claims are pleaded against the Coventry defendants. 

The plaintiffs seek, inter alia, $700 million, and demand a jury 

trial. The October 26, 2006 complaint filed by the Attorney 

General against Coventry First LLC, Montgomery Capital, Inc., 

the Coventry Group, Inc., and Reid Buerger is attached as an 

exhibit. 

Discussion

 The defendants seek dismissal of this lawsuit for failure 

to state a claim and for lack of personal jurisdiction over each 

of the individual defendants and two of the corporate 

defendants. They also move to strike the demand for a jury 

trial. As of now it may be that only two of the plaintiffs -- 

Ritchie I and II –- will succeed in stating a claim, and that 

claim is a breach of contract claim against the corporate 

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defendants. It is therefore unnecessary at this time to reach 

the issue of personal jurisdiction over the individual 

defendants. Moreover, since Ritchie I and II have waived their 

right to a jury trial, it is unnecessary at this point to reach 

the jury demand issue.2

 Under the pleading standard set forth in Rule 8(a) of the 

Federal Rules of Civil Procedure, complaints must include “a 

short and plain statement of the claim showing that the pleader 

is entitled to relief.” Fed. R. Civ. P. 8(a)(2). “[A] 

plaintiff is required only to give a defendant fair notice of 

what the claim is and the grounds upon which it rests.” 

Leibowitz v. Cornell Univ., 445 F.3d 586, 591 (2d Cir. 2006). 

Rule 8 is fashioned in the interest of fair and reasonable 

notice, not technicality, and therefore is “not meant to impose 

a great burden upon a plaintiff.” Dura Pharms., Inc. v. Broudo, 

544 U.S. 336, 347 (2005). When considering a motion to dismiss 

under Rule 12(b)(6), a trial court must “accept as true all 

factual statements alleged in the complaint and draw all 

reasonable inferences in favor of the non-moving party.” 

McCarthy v. Dun & Bradstreet Corp., 482 F.3d 184, 191 (2d Cir. 

2007) (citation omitted). At the same time, “conclusory 

 

2

 The plaintiffs have not asked for leave to amend their 

complaint. Nonetheless, they will be granted leave to amend in 

those limited instances where it appears from the briefing that 

the plaintiffs may be able to cure identified defects in their 

pleading. 

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allegations or legal conclusions masquerading as factual 

conclusions will not suffice to defeat a motion to dismiss.” 

Achtman v. Kirby, McInerney & Squire, LLP, 464 F.3d 328, 337 (2d 

Cir. 2006) (citation omitted). A court must apply a “flexible 

‘plausibility standard,’ which obliges a pleader to amplify a 

claim with some factual allegations in those contexts where such 

amplification is needed to render the claim plausible.” Iqbal 

v. Hasty, --- F.3d ---, 2007 WL 1717803, at *9 (2d Cir. 2007) 

(citing Bell Atlantic Corp. v. Twombly, --- U.S. ---, 127 S.Ct. 

1955, 1968-69 (2007)). Although the focus should be on the 

pleadings, a court may also consider any written instrument 

attached to the complaint as an exhibit, “or any statements or 

documents incorporated in it by reference.” Rothman v. Gregor, 

220 F.3d 81, 88 (2d Cir. 2000) (citation omitted); see also

Cortec Indus., Inc. v. Sum Holding L.P., 949 F.2d 42, 47-48 (2d 

Cir. 1991). 

 Under Rule 9(b), “in all averments of fraud or mistake, the 

circumstances constituting fraud or mistake shall be stated with 

particularity.” Fed. R. Civ. P. 9(b). The Rule requires that a 

complaint “(1) specify the statements that the plaintiff 

contends were fraudulent, (2) identify the speaker, (3) state 

where and when the statements were made, and (4) explain why the 

statements were fraudulent.” Lerner v. Fleet Bank, N.A., 459 

F.3d 273, 290 (2d Cir. 2006). Under Rule 9(b) “[m]alice, 

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intent, knowledge, and other condition of mind of a person may 

be averred generally.” Fed. R. Civ. P. 9(b). Nonetheless, 

“plaintiffs must allege facts that give rise to a strong 

inference of fraudulent intent.” Lerner, 459 F.3d at 290 

(citation omitted). The inference “may be established either 

(a) by alleging facts to show that defendants had both motive 

and opportunity to commit fraud, or (b) by alleging facts that 

constitute strong circumstantial evidence of conscious 

misbehavior or recklessness.” Id. at 290-91 (citation omitted). 

I. Breach of Contract 

The complaint brings a breach of contract claim against 

each of the four corporate defendants. LST signed the two 

agreements at issue, and it is alleged to be a wholly owned 

subsidiary of Coventry First LLC (“Coventry First”), and an 

alter ego, agent, and instrumentality of the Coventry corporate 

family. Montgomery Capital, Inc. (“Montgomery Capital”) is the 

sole member of Coventry First. The Coventry Group, Inc. is the 

fourth corporate defendant, and is owned by Alan and Constance 

Buerger, who with others also own Montgomery Capital. 

 The complaint alleges that the following contractual 

commitments were breached by the four corporate defendants: that 

Coventry’s acquisition of polices complied with all laws, and 

that no government body was seeking to prevent the transactions 

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contemplated by the agreements or seeking a determination that 

might affect the performance of Coventry under the agreements; 

that Coventry would take all reasonable actions under applicable 

law to perfect its ownership of the policies before conveying 

them to Ritchie I or II; and that in acquiring the policies, 

Coventry had complied with law. 

 The defendants contend that only plaintiffs Ritchie I and 

II have standing to bring this claim; that only LST is properly 

named as a defendant since the complaint does not plead facts 

sufficient to pierce the corporate veil; and that the claim must 

be dismissed in its entirety since it does not allege the 

satisfaction of a condition precedent, that is, the agreements’ 

30-day notice provision. The plaintiffs concede that only 

Ritchie I and II may bring the breach of contract claim. 

 In New York, “[q]uestions relating to the internal affairs 

of corporations . . . are generally decided in accordance with 

the law of the place of incorporation.”3 United States v. Funds 

Held in the Name or for the Benefit of Wetterer, 210 F.3d 96, 

106 (2d Cir. 2000). LST is a Delaware limited liability 

 

3

 Federal choice of law rules would most likely also require 

application of the place of incorporation to a determination of 

whether to disregard the corporate form, “[s]ince choice of law 

rules seek to insure that a case will be resolved under the same 

rules of conduct whatever the forum, and that rights of foreign 

sovereigns will be respected.” Presbyterian Church of Sudan v. 

Talisman Energy, Inc., 453 F. Supp. 2d 633, 683 n.10 (S.D.N.Y. 

2006) (citing Lauritzen v. Larsen, 345 U.S. 571, 578 (1953)). 

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company. Therefore, the law of Delaware on piercing the 

corporate veil should be applied. 

 “Persuading a Delaware court to disregard the corporate 

entity is a difficult task.” Wallace ex rel. Cencom Cable 

Income Partners II, L.P. v. Wood, 752 A.2d 1175, 1183 (Del. Ch. 

1999) (citation omitted). “Piercing the corporate veil under 

the alter ego theory requires that the corporate structure cause 

fraud or similar injustice. Effectively, the corporation must 

be a sham and exist for no other purpose than as a vehicle for 

fraud.” Id. at 1184 (citation omitted). “To prevail on an 

alter ego theory of liability, a plaintiff must show that the 

two corporations operated as a single economic entity such that 

it would be inequitable . . . to uphold a legal distinction 

between them.” Fletcher v. Atex, Inc., 68 F.3d 1451, 1458 (2d 

Cir. 1995) (citation omitted). The plaintiffs have sufficiently 

alleged pursuant to Rule 8 their theories of liability for the 

three corporate defendants who did not sign the agreements. 

 The parties debate whether the agreements’ notice 

provision, which waives the right to bring a claim if notice is 

not given of a breach within 30 days of knowledge of the breach, 

is a condition precedent or subsequent, whether it constitutes 

an affirmative defense, and whether a plaintiff has the 

obligation to plead satisfaction of the provision. The 

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plaintiffs assert that they did comply with the notice provision 

and are prepared to prove that they did. 

Rule 9(c) directs that “[i]n pleading the performance or 

occurrence of conditions precedent, it is sufficient to aver 

generally that all conditions precedent have been performed or 

have occurred. A denial of performance or occurrence shall be 

made specifically and with particularity.” Fed. R. Civ. P. 

9(c). Some courts have found that this requires at least “a 

general averment of performance of a condition precedent.” See, 

e.g., Udell v. Berkshire Life Ins. Co. of Am., No. 

CV032721SJFKAM, 2005 WL 1243497, at *5 (E.D.N.Y. May 25, 2005). 

On the other hand, Rule 9(c) “does not in terms require the 

plaintiff to allege the performance or occurrence of conditions 

precedent; it simply permits a plaintiff to do so generally and 

requires specificity in the denial of any such allegation.” ICD 

Holdings S.A. v. Frankel, 976 F. Supp. 234, 243 (S.D.N.Y. 1997). 

Since the plaintiffs will be given leave to amend in any event, 

plaintiffs will be permitted to file an amended breach of 

contract claim containing a general declaration that Ritchie I 

and II satisfied the notice requirement. 

II. Breach of Fiduciary Duty 

 Each of the plaintiffs brings a breach of fiduciary duty 

claim against the four corporate defendants. The claim asserts 

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that the four defendants were partners, joint venturers, and coventurers of Ritchie Capital, which created a fiduciary duty to 

each of the plaintiffs. The defendants move to dismiss this 

claim based on the agreements’ express disclaimer of the 

creation of such relationships. Under the heading “Tax 

Classification,” the agreements provide that 

Nothing contained in this Agreement is intended to or 

shall be deemed or construed by the parties hereto or 

by any third person to create the relationship of 

principal and agent (including dependent agent) or of 

a partnership or joint venture. The parties hereto 

agree that they will not take any action contrary to 

the foregoing intention and agree to report the 

transaction for all tax purposes consistent with the 

foregoing intention unless and until determined to the 

contrary by an applicable tax authority. 

(Emphasis supplied.) 

 Where parties to a contract deal in an “arms length” 

commercial transaction, a fiduciary relationship will not be 

found “absent extraordinary circumstances.” Mid-Island Hosp., 

Inc. v. Empire Blue Cross & Blue Shield, 276 F.3d 123, 130 (2d 

Cir. 2002) (citation omitted).4

 Thus, a conventional business 

relationship “without more” is not converted into a fiduciary 

relationship “by mere allegation.” Oursler v. Women’s Interart 

Ctr., 566 N.Y.S.2d 295, 297 (App. Div. 1991); see also Northeast 

General Corp. v. Wellington Advertising, Inc., 624 N.E.2d 129, 

 

4

 Given the agreements’ choice of New York law and the parties’ 

joint reliance on New York law in this briefing, New York law 

will be applied to all common law claims unless there is a 

specific reason to decline to do so. 

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132-33 (N.Y. 1993). In fact, in this case, there was an express 

disclaimer of such a relationship. 

 The plaintiffs’ effort to avoid the contractual denial of a 

partnership and joint venture fails. They assert that the 

provision only applies to tax consequences since it is contained 

in a section of the agreements entitled “Tax Classification.” 

As another provision of the agreements provides, however, the 

contract headings are “for purposes of reference only and shall 

not otherwise affect the meaning or interpretation of any 

provision hereof.” 

 The plaintiffs next assert that the contract bar only 

applies to the signatories Ritchie I and II and not to nonsignatory plaintiffs. The remaining plaintiffs, however, have 

pleaded no adequate bases for establishment of a fiduciary 

relationship absent one between the defendants and Ritchie I and 

II. 

III. Fraud 

 A fraud claim is brought by all plaintiffs against the four 

corporate defendants as well as Alan and Reid Buerger, Muniz, 

and Seldin. It asserts that these defendants made material 

misstatements or omissions regarding both the circumstances 

under which owners of life insurance policies were induced to 

part with their policies, and the existence and target of the 

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Attorney General’s investigation. The defendants move to 

dismiss this claim on the ground that the complaint largely 

fails to identify misrepresentations made by particular 

defendants as required by Rule 9(b), and is in any event barred 

by the agreements’ integration clause. Insofar as the fraud 

claim rests on omissions, the defendants argue that the 

complaint fails to plead a duty to disclose, particularly given 

the express bar in the agreements. Finally, to the extent the 

fraud claim rests on misrepresentations or omissions concerning 

representations and warranties contained in the agreements, then 

these duplicate the breach of contract claim and are barred for 

that reason. 

 The defendants are correct that the complaint does not 

sufficiently identify speakers to survive scrutiny under Rule 

9(b)’s standards. If this were the only defect, however, the 

plaintiffs could be given an opportunity to cure. The defects 

in this claim, however, extend further. 

 Under New York law, a fraud claim will not lie if it arises 

“out of the same facts as plaintiff’s breach of contract claim.” 

Telecom Intl. Am., Ltd. v. AT & T Corp., 280 F.3d 175, 196 (2d 

Cir. 2001) (citation omitted). Even with the addition of the 

allegation that the “defendant never intended to perform” the 

contract, “the fraud claim is redundant and plaintiff’s sole 

remedy is for breach of contract.” Id. In order to succeed on 

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a fraud claim arising from a breach of contract, a plaintiff 

must show: (1) “a legal duty separate from the duty to perform 

under the contract”; (2) “a fraudulent misrepresentation 

collateral or extraneous to the contract”; or (3) “special 

damages that are caused by the misrepresentation and 

unrecoverable as contract damages.” Bridgestone/Firestone v. 

Recovery Credit Servs., 98 F.3d 13, 20 (2d Cir. 1996). The 

plaintiffs have not pointed to any separate legal duty to 

support the fraud claim or any special damages. Nor have they 

identified a representation collateral to the contract. The 

fraud claim appears to rest entirely on the subjects covered in 

the representations and warranties contained in the agreements. 

To the extent that there was a misrepresentation or omission in 

connection with those contractual representations and 

commitments, then that conduct must be pleaded as a breach of 

contract claim. The fraud claim is dismissed. 

IV. Fraudulent Inducement 

 The plaintiffs bring a fraudulent inducement claim against 

the four corporate defendants as well as Alan and Reid Buerger, 

Muniz, and Seldin for their misleading statements and 

concealments regarding Coventry’s practices in purchasing life 

insurance policies. The defendants make essentially the same 

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arguments in connection with this claim as they did in moving to 

dismiss the fraud claim. 

 The fraudulent inducement claim fails to meet the pleading 

requirements under Rule 9(b). Beyond that deficiency, however, 

the claim is explicitly barred by the agreements, in which 

Ritchie I and II acknowledge that LST had not made 

representations other than as set forth in the agreements. 

Under New York law, “a general merger clause is ineffective . . 

. to preclude parol evidence that a party was induced to enter 

the contract by means of fraud.” Mfrs. Hanover Trust Co. v. 

Yanakas, 7 F.3d 310, 315 (2d Cir. 1993). “When, however, the 

contract states that a contracting party disclaims the existence 

of or reliance upon specified representations, that party will 

not be allowed to claim that he was defrauded into entering the 

contract in reliance on those representations.” Id. “[W]here a 

party specifically disclaims reliance upon a particular 

representation in a contract, that party cannot, in a subsequent 

action for common law fraud, claim it was fraudulently induced 

to enter into the contract by the very representation it has 

disclaimed reliance upon.” Harsco Corp. v. Segui, 91 F.3d 337, 

345 (2d Cir. 1996) (citing Danann Realty Corp. v. Harris, 157 

N.E.2d 597, 599 (N.Y. 1959)). 

 The integration clause in the agreements that governed this 

commercial transaction bars the fraud claim; the plaintiffs 

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expressly disclaimed reliance on the very representations they 

now claim were fraudulent. In that clause, Ritchie I and II 

“expressly acknowledge[] that the Seller has not made any 

representation and warranties other than as set forth herein and 

in the other Transaction Documents.”5 The integration clause 

also specifically finds that “without reliance upon the Seller,” 

the purchaser “has made and will continue . . . to make its own 

appraisal of and investigation into the business, operations, . 

. . financial and other conditions . . . of the Seller.” 

Furthermore, although it is true that even without a fiduciary 

duty, “during the course of negotiations surrounding a business 

transaction, a duty to disclose may arise . . . where one party 

possesses superior knowledge, not readily available to the 

other, and knows that the other is acting on the basis of 

mistaken knowledge,” Lerner, 459 F.3d at 292 (citation omitted), 

the clause specifically dispels any duty of the seller to 

“provide the Purchaser or any of its Affiliates any 

information.” Since the acts which the plaintiffs allege the 

fraud induced were the entry into the two agreements that 

Ritchie I and II executed, the acknowledgment in the agreements 

is sufficient to bind not just the signatories but the other 

plaintiffs. 

 

5

 Transaction Documents are defined to include the Master Policy 

Purchase Agreement, the Servicing Agreement, and other documents 

to which the plaintiffs have not pointed in their complaint. 

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 Finally, the alleged fraudulent statements and omissions on 

which this claim hinges are statements which the plaintiffs also 

contend are encompassed by the agreements themselves, that is, 

that the transaction in which LST purchased the policies “were 

in accordance with and in compliance with all applicable United 

States federal, state and local laws, rules and regulations 

applicable to life settlement transactions and the purchase and 

resale of life insurance policies.” These representations or 

concealments are not extraneous to the contract, and therefore 

must be asserted as a breach of contract claim and not as a 

fraudulent inducement claim. See Bridgestone/Firestone, 98 F.3d 

at 20. 

V. RICO 

 The first three claims are brought against all defendants 

under RICO, 18 U.S.C. § 1962. A claim under Section 1962(a) 

alleges that Ritchie I and II are enterprises, and that the 

defendants received income or proceeds derived directly or 

indirectly from a pattern of racketeering activity, and used or 

invested that income and proceeds in the acquisition of an 

interest in or the establishment or operation of Ritchie I and 

II. A claim under Section 1962(c) alleges that two or more of 

the individual defendants or any one of the corporate defendants 

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is an enterprise,6

 and that the defendants are distinct from that 

enterprise and conducted or participated directly or indirectly 

in the conduct of the enterprise’s affairs through a pattern of 

racketeering activity with one exception. To the extent the 

enterprise consists of one corporate defendant, then that 

defendant is not alleged to have violated this provision of the 

law by conducting its own affairs. Finally, a claim under 

Section 1962(d) alleges that the defendants conspired to violate 

Section 1962(c), that is, to conduct the enterprises’ affairs 

through a pattern of racketeering activity. The definition of 

enterprise is taken from the Section 1962(c) claim except that, 

to the extent the enterprise consists solely of one corporate 

defendant, that corporate defendant is not charged with 

conspiring with others to conduct its own affairs. 

 The defendants proffer many grounds for dismissing the RICO 

claims. The complaint does not allege proximate causation since 

the harm it describes was caused by the disclosure of the policy 

origination practices to the market and not by the RICO 

violations. The plaintiffs have not alleged a clear and 

definite injury. Many of the plaintiffs seek to recover only 

because they had a beneficial interest in another plaintiff’s 

investment, which is insufficient to confer standing. With 

 

6

 The complaint asserts that there is an enterprise “consisting 

of all of the individual Defendants, or any combination thereof, 

or any of the corporate defendants alone.” 

Case 1:07-cv-03494-DLC Document 41 Filed 07/17/2007 Page 22 of 27
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respect to the Section 1962(a) claim, the complaint fails to 

allege an investment of income or proceeds in Ritchie I or II, 

which are the defined enterprises, or any investment by the 

individual defendants in the enterprises. The Section 1962(c) 

claim asserts tens of thousands of potential enterprises. 

Finally, no conspiracy can be alleged under Section 1962(d) 

since corporate employees and affiliates cannot conspire with 

each other. 

The Section 1962(a) claim must be dismissed. Section 

1962(a) reads in pertinent part: 

It shall be unlawful for any person who has received 

any income derived, directly or indirectly, from a 

pattern of racketeering activity . . . to use or 

invest, directly or indirectly, any part of such 

income, or the proceeds of such income, in acquisition 

of any interest in, or the establishment or operation 

of, any enterprise which is engaged in, or the 

activities of which affect, interstate or foreign 

commerce. 

18 U.S.C. § 1962(a) (emphasis supplied). The complaint alleges 

that LST sold the policies to Ritchie I and II. Assuming for 

the moment that the policies constitute “income” derived from 

racketeering activity, the issue becomes whether the complaint 

has adequately alleged that the policies were used or invested 

to “acquire an interest” in or to “establish or operate” either 

Ritchie I or II. 

 The plaintiffs do not contend that the sale of policies to 

Ritchie I and II constitutes the necessary acquisition of an 

Case 1:07-cv-03494-DLC Document 41 Filed 07/17/2007 Page 23 of 27
24

interest. “Under the plain language of this section, a 

violation of § 1962(a) consists of investing income derived from 

a pattern of racketeering activity to acquire an interest in, 

establish, or operate an enterprise; the violation is not 

established by mere participation in predicate acts of 

racketeering.” Ouaknine v. MacFarlane, 897 F.2d 75, 82 (2d Cir. 

1990). “[A] plaintiff must allege injury ‘by reason of’ 

defendants’ investment of racketeering income in an enterprise.” 

Id. at 82-83. 

The plaintiffs point to the following set of allegations in 

the complaint to support the Section 1962(a) claim. The 

complaint alleges that Coventry, which it elsewhere defines as 

the four corporate defendants, “jointly committed capital to, 

and became owners of subordinated securities in, Ritchie I and 

Ritchie II, which entitled . . . Coventry to receive the profits 

of Ritchie I and Ritchie II after other debts have been paid.”7

 

This is insufficient to state a Section 1962(a) claim. The 

complaint alleges that the policies were acquired through the 

pattern of racketeering activity, and it is the policies or the 

proceeds from those policies that must be used to acquire an 

interest in the enterprise. The separate investment of capital 

 

7

 This allegation would not support a claim against any of the 

individual defendants, and engages in impermissible group 

pleading as to the corporate defendants. 

Case 1:07-cv-03494-DLC Document 41 Filed 07/17/2007 Page 24 of 27
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to acquire subordinated securities in the enterprise is 

insufficient. And, of course, the alleged RICO injury is not 

alleged to have arisen from the investment made to acquire 

subordinated securities of Ritchie I and II. 

As for the remaining two RICO claims, the plaintiffs will 

be allowed to replead the Sections 1962(c) and (d) claims in 

order to identify with more specificity the enterprise or 

enterprises involved in those violations. The defendants 

estimate that the current formulation has about 40,000 

permutations. It is impossible to assess whether the complaint 

states a claim without having a more definite statement of the 

claim. As currently formulated, these two claims fail to give 

the defendants fair notice. 

VI. Personal Jurisdiction: Coventry Group, Inc. and Montgomery 

Capital, Inc. 

 Although defendants’ motion to dismiss has been granted on 

all counts, leave to replead has been granted on the breach of 

contract and two of the RICO claims. In addition, plaintiffs 

have sufficiently pled facts to pierce the corporate veil. 

Therefore, personal jurisdiction as to the Coventry Group, Inc. 

and Montgomery Capital, Inc. is considered here. 

 “In order to survive a motion to dismiss for lack of 

personal jurisdiction, a plaintiff must make a prima facie 

Case 1:07-cv-03494-DLC Document 41 Filed 07/17/2007 Page 25 of 27
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showing that jurisdiction exists.” Best Van Lines, Inc. v. 

Walker, 04-3924-cv, slip op. at 5, --- F.3d ----, 2007 WL 

1815511 (2d Cir. June 26, 2007) (citation omitted). Where, as 

here, there has been no discovery, the plaintiff need only make 

“legally sufficient allegations of jurisdiction” through its 

pleading and affidavits in order to survive a motion to dismiss. 

In re Magnetic Audiotape Antitrust Litig., 334 F.3d 204, 206 (2d 

Cir. 2003) (per curiam). 

 Personal jurisdiction has been sufficiently pled over the 

two corporate defendants based on plaintiffs’ claim for veil 

piercing. “It is true that the presence of a local corporation 

does not create jurisdiction over a related, but independently 

managed, foreign corporation. . . . However, when the activities 

of the parent show a disregard for the separate corporate 

existence of the subsidiary, New York jurisdiction may be 

asserted.” Volkswagenwerk Aktiengesellschaft v. Beech Aircraft 

Corp., 751 F.2d 117, 120 (2d Cir. 1984). Furthermore, the New 

York long-arm statute provides jurisdiction over acts committed 

“in person or through an agent,” N.Y. C.P.L.R. 302(a). 

 Personal jurisdiction has not sufficiently been pled in the 

complaint as to the remaining RICO claims, but plaintiffs may 

replead on the personal jurisdiction issue under RICO as well. 

“[A] civil RICO action can only be brought in a district court 

where personal jurisdiction based on minimum contacts is 

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