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. e du/thir dc ir c uit_1998/210Filed August 31, 1998

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

Nos. 95-5768 & 96-5128

JOSE and ROSA ROLO; and DR. WILLIAM and

ROSEANNE TENERELLI

v.

CITY INVESTING COMPANY LIQUIDATING TRUST; AmBASE CORPORATION; CARTERET BANCORP, INC.; FEDERAL DEPOSIT INSURANCE CORPORATION, as Successor to RESOLUTION TRUST CORPORATION, in its capacity as RECEIVER OF CARTERET SAVINGS BANK,
FA; THE HOME INSURANCE COMPANY; GEORGE T. SCHARFFENBERGER; MARSHALL MANLEY; EDWIN I. HATCH; EBEN W. PYNE; REUBIN O'D. ASKEW;
HOWARD L. CLARK, JR.; CHARLES J. SIMONS; PETER R. BRINKERHOFF; DAVID F. BROWN; ROBERT F. EHRLING; CRAVATH, SWAINE & MOORE; DAVID G. ORMSBY; FEDERAL DEPOSIT INSURANCE CORPORATION, in its capacity as RECEIVER OF
SOUTHEAST BANK, NA; PAINEWEBBER INCORPORATED; MERRILL LYNCH, PIERCE, FENNER & SMITH, INC.; THE PRUDENTIAL INSURANCE COMPANY OF AMERICA; NATIONAL BANK OF CANADA; CITICORP REAL ESTATE, INC.; FIRST NATIONAL BANK OF BOSTON; FEDERAL NATIONAL MORTGAGE ASSOCIATION; FEDERAL HOME LOAN MORTGAGE CORPORATION; CHASE FEDERAL BANK, FSB; CITIZENS AND SOUTHERN TRUST COMPANY (FLORIDA), NA; REGIONS BANK OF
LOUISIANA, as Successor to SECOR BANK, FSB; OXFORD FIRST CORP.; THE OXFORD FINANCE COMPANIES, INC.; LASALLE BUSINESS CREDIT, INC.; as Successor to STANCHART BUSINESS CREDIT, INC.;HARBOR FEDERAL SAVINGS AND LOAN ASSOCIATION;

GREYHOUND FINANCIAL CORPORATION; LLOYDS BANK PLC; and JOHN DOES 1-10

Jose Rolo, Rosa Rolo, Dr. William Tenerelli, and Roseanne Tenerelli, and proposed intervenor plaintiffs Dominick J. Capezza, Estrelita Capezza, Jacques Cormier, Anite Cormier, Steven Kalinowski, Bernard Kalinowski, Charles R. Panellino, and Clarisse Panellino,

Appellants in 95-5768

proposed intervenor plaintiffs Dominick J. Capezza, Estrelita Capezza, Jacques Cromier, Anite Cormier, Steven Kalinowski, Bernard Kalinowski, Charles R. Panellino, and Clarisse Panellino,

Appellants in 96-5128

(Caption amended per Clerk's 11/27/95, 1/3/96 & 2/29/96 orders)

On Appeal from the United States District Court for the District of New Jersey (D.C. Civil Action No. 90-cv-04420)

Argued September 16, 1996

Before: BECKER, NYGAARD and ROTH, Circuit Judges

(Opinion Filed August 31, 1998)

2Herbert I. Deutsch, Esq.

Roy A. Heimlich, Esq. (Argued) Deutsch & Frey
18 East 41st Street
6th Floor New York, NY 10017

William J. O'Brien, Esq. Delany & O'Brien
306 West Somerdale Road Voorhees, NJ 08043

Attorneys for Appellants Jose Rolo; Rosa Rolo; William Tenerelli; Roseanne Tenerelli; Dominick J. Capezza; Estrelita Capezza; Jacques Cormier; Anite Cormier; Steven Kalinowski; Bernard Kalinowski; Charles R.
Panellino and Clarisse Panellino

Douglas S. Eakeley, Esq. (Argued) Lowenstein, Sandler, Kohl, Fisher & Boylan 65 Livingston Avenue Roseland, NJ 07068

Paul M. Dodyk, Esq. Cravath, Swaine & Moore
Worldwide Plaza 825 Eighth Avenue New York, NY 10019

Attorneys for Appellees AmBase; City Investing Company Liquidating Trust; Carteret Bancorp Inc.; George T. Scharffenberger; Marshall Manley; Edwin I. Hatch; and Eben W. Pyne

3Nicholas deB. Katzenbach, Esq.

(Argued)
906 Great Road Princeton, NJ 08540

Peter N. Perretti, Jr., Esq. Riker, Danzig, Scherer, Hyland &
Perretti One Speedwell Avenue Headquarters Plaza Morristown, NJ 07962-1981

Attorneys for Appellees Cravath, Swaine & Moore and David G. Ormsby

Alan J. Kluger, Esq. (Argued) Steve I. Silverman, Esq. Kluger, Peretz, Kaplan & Berlin 201 South Biscayne Boulevard
Suite 1970 Miami, FL 33131

Joseph A. Boyle, Esq. Kelley, Drye & Warren 5 Sylvan Way Parsippany, NJ 07054

Attorneys for Appellee Greyhound Financial Corporation

John W. Little, III, Esq. Gerry S. Gibson, Esq. (Argued) Steel, Hector & Davis 777 South Flagler Drive 1900 Phillips Point West West Palm Beach, FL 33401

4Joseph J. Schiavone, Esq.

Budd, Larner, Gross, Rosenbaum, Greenberg & Sade 150 John F. Kennedy Parkway
CN 1000 Short Hills, NJ 07078-0999

Attorneys for Appellee Federal National Mortgage
Association

Steven M. Edwards, Esq. Davis, Scott, Weber & Edwards
100 Park Avenue
32nd Floor New York, NY 10017

Attorneys for Appellees
David F. Brown and Robert F. Ehrling

Elizabeth J. Sher, Esq. Pitney, Hardin, Kipp & Szuch
P.O. Box 1945 Morristown, NJ 07962-1945

Attorney for Appellee

Home Insurance Co.

Peter W. Homer, Esq.

Homer & Bonner
100 Southeast 2nd Street
3400 International Place Miami, FL 33131

Attorney for Appellee
Citizens and Southern Trust Company
National Association

5Joseph L. Buckley, Esq.

Mark E. Duckstein, Esq. Sills, Cummis, Zuckerman, Radin, Tischman, Epstein & Gross
One Riverfront Plaza Newark, NJ 07102

Robert T. Wright, Jr., Esq.

Shutts & Bowen 201 South Biscayne Boulevard
1500 Miami Center Miami, FL 33131

Attorneys for Appellees Reubin O'D. Askew; Howard L. Clark, Jr.; Charles J. Simons; and
Peter R. Brinkerhoff

James J. Hagan, Esq. Bruce D. Angiolillo, Esq. Simpson, Thacher & Bartlett 425 Lexington Avenue New York, NY 10017

James M. Altieri, Esq. Shanley & Fisher
131 Madison Avenue Morristown, NJ 07962-1979

Attorneys for Appellee Painewebber, Inc.

Warren H. Colodner, Esq. Kirkpatrick & Lockhart
1251 Avenue of the Americas

45th Floor New York, NY 10020-2195

Attorneys for Appellee Merrill, Lynch, Pierce, Fenner & Smith, Inc.

6Steven H. Reisberg, Esq.

Willkie, Farr & Gallagher
153 East 53rd Street One Citicorp Center New York, NY 10022

Robert E. Bartkus, Esq. Pinto, Rodgers and Kopf 107 Washington Street Morristown, NJ 07960

Attorneys for Appellee Prudential Insurance Company of
America

L. Louis Mrachek, Esq. Roy E. Fitzgerald, Esq. Gunster, Yoakley, Valdes-Fauli &

Stewart 777 South Flagler Drive
Suite 500 East West Palm Beach, FL 33401

Attorney for Appellee
National Bank of Canada

George J. Wade, Esq. Shearman & Sterling
153 East 53rd Street New York, NY 10022

Steven M. Richman, Esq. Herrick, Feinstein 104 Carnegie Center
Suite 200 Princeton, NJ 08540

Attorneys for Appellee Citicorp Real Estate

7Steven I. Adler, Esq.

Cole, Schotz, Meisel, Forman &

Leonard
25 Main Street P.O. Box 800, Court Plaza North Hackensack, NJ 07602

Attorney for Appellee
The First National Bank of Boston

Gerald J. Houlihan, Esq.
Houlihan & Partners Douglas Centre 2600 Douglas Road
Suite 600 Miami, FL 33134

Attorneys for Appellee

Chase Federal Bank

Robert L. Young, Esq. Carlton, Fields, Ward, Emmanuel,
Smith & Cutler

P.O. Box 1171 Orlando, FL 32802

Attorney for Appellee Harbor Federal Savings and Loan
Association

David T. Eames, Esq.
Bodian & Eames 450 Lexington Avenue
Suite 3810 New York, NY 10017

Attorney for Appellee Lloyds Bank, PLC

8Edward B. Deutsch, Esq.

McElroy, Deutsch & Mulvaney
1300 Mount Kemble Avenue
P.O. Box 2075 Morristown, NJ 07962-2075

Attorney for Appellee Regions Bank LA, as Successor to SECOR Bank, FSB

Kevin M. Hart, Esq. Stark, & Stark 993 Lenox Drive, Princeton Pike Corporate Center
CN 5315 Princeton, NJ 08543-5315

Attorney for Federal Deposit Insurance Corporation, in its capacity as Receiver of Southeast Bank, NA and Federal Deposit Insurance Corporation, as Successor to Resolution Trust, in its capacity as Receiver of Carteret Savings Bank, FA

John H. Denton, Esq. Connell, Foley & Geiser 85 Livingston Avenue Roseland, NJ 07068

Attorneys for Appellee Federal Deposit Insurance Corporation, as Successor to Resolution Trust, in its capacity as Receiver of Carteret Savings Bank, FA

9J. Marbury Rainer, Esq.

Parker, Hudson, Rainer & Dobbs
285 Peach Center Avenue 1500 Marquis Two Tower Atlanta, GA 30303

Attorney for Appellee LaSalle Business Credit, as
Successor to Stanchart Business Credit, Inc.

George Kielman, Esq. Mailstop 202 Federal Home Loan Mortgage Corporation Legal Department
8200 Jones Branch Drive McLean, VA 22102

George T. Ford, Esq. Landman, Corsi, Ballaine & Ford One Gateway Center
Suite 500 Newark, NJ 07102

Attorneys for Appellee Federal Home Loan Mortgage Corporation

Alan I. Moldoff, Esq. Adelman, Lavine, Gold & Levin
1900 Two Penn Center Philadelphia, PA 19102

Attorney for Appellees Oxford Fin Co., And Oxford First Corp.

OPINION OF THE COURT

ROTH, Circuit Judge:

This case arises from the sale of residential realt y in Florida. Plaintiffs, Jose and Rosa Rolo and Dr. Wil liam and

10Rosanne Tenerelli, purchased lots and homes from Ge neral

Development Corporation ("GDC") and its subsidiary GDV Financial, Inc. ("GDV"). They claim that they were deceived by a fraudulent marketing scheme which induced them to purchase residential lots and homes at inflated pri ces. This case and its related proceedings have a long and co nvoluted history. The present appeal is the third time this Court has
considered this case.

Plaintiffs originally filed suit in 1989 in the Uni ted States District Court for the District of New Jersey alleg ing claims under the Racketeer Influenced and Corrupt Organiza tions Act, 18 U.S.C. S 1961 et seq (RICO), the Interstate Land Sales Full Disclosure Act, 15 U.S.C. S 1701 et seq ("Land Sales Act"), federal securities laws, and common la w fraud against thirty-five named defendants. They also sou ght to represent a putative class consisting of all person s who purchased houses or homesites from GDC or GDV over the period from 1957 to 1990 and who are members of the North Port Out-of-State Lot Owners Association ("NP A").

The district court dismissed plaintiffs' claims in their entirety. Rolo v. City Investing Co. Liquidating Tr ust, 845 F. Supp. 182 (D.N.J. 1993). The court held that plaint iffs' RICO claims were time-barred; plaintiffs had failed to plead adequately the existence of a RICO conspiracy; and they had failed to satisfy the essential requirements fo r pleading aider and abettor liability under RICO. Although th e court found that plaintiffs' complaint stated claims unde r the Land Sales Act for aiding and abetting against some defendants, but not others, all of their Land Sales Act
Claims were time barred. The district court dismiss ed plaintiffs' Securities Act claims on the grounds th at the sales contracts and mortgage notes were not securit ies within the meaning of S 10 of the 1934 Act or Rule 10b-5. Having dismissed all of plaintiffs' federal claims, the court declined to exercise pendent jurisdiction over plai ntiffs' common law fraud claims. Finally, the district cour t denied plaintiffs' Motion to file a Second Amended Complai nt that
would have restructured and reformulated their acti on. Following a remand for reconsideration of plaintiff s' claims in light of our decision in Jaguar Cars, Inc. v. Ro yal Oaks Motor Car Co., 46 F.3d 258 (3d Cir. 1995), the dist rict court

11reaffirmed its dismissal of each of plaintiffs' cla ims and its

denial of further leave to amend the complaint. Rol o v. City Investing Co. Liquidating Trust, 897 F. Supp. 826 ( D.N.J. 1995).

The present appeal is from the district court's dec ision on
remand. Plaintiffs assert that the district court e rred in dismissing their RICO claims and abused its discret ion by denying them leave to amend their complaint. We con clude that there were adequate grounds to dismiss each of plaintiffs' RICO claims and that the district court did not abuse its discretion by denying plaintiffs further leave to amend their complaint. Accordingly, we will affirm the district court's decision on remand in its entirety

.

I. BACKGROUND

A. The Fraudulent Scheme

Plaintiffs allege that GDC and GDV engaged in a fraudulent marketing scheme to sell real estate in violation
of several federal criminal and civil statutes. The First Amended Complaint alleges that GDC improved only a small portion of the 1,000 square mile tract of lan d that it
owned in Florida and that it had no intention of de veloping the land further. Prospective purchasers were told, however, that the entire tract would be developed. According to plaintiffs, GDC targeted unsophisticat ed purchasers, particularly those who spoke English on ly as a second language. Prospective purchasers were invite d to
attend lavish "investment seminars" at which GDC represented that the value of the real estate conti nually appreciated, that there was a good resale market fo r the lots and houses, and that the real estate was an ex cellent investment. The Complaint further alleges that much information was concealed from prospective purchase rs, including the very low resale value of the lots, th e artificial nature of the original sale prices of the lots, and the fact that most purchasers defaulted within two years, al lowing
GDC to cancel their contracts and resell the same l ots over and over again. According to plaintiffs, similar ta ctics were also used to sell homes to those who already owned lots.

12B. The Defendants

The Amended Complaint names thirty-five defendants and classifies them according to the nature of thei r participation in the allegedly fraudulent scheme, p lacing some defendants in more than one category. The dist rict court adopted this classification and divided the d efendants into six categories:1 City Defendants, Inside Direc tor Defendants, Director Defendants, Financing Defendan ts, Mortgagee Defendants and Lot Contract Defendants. T he Complaint did not specifically include the lawfirm Cravath, Swaine & Moore ("Cravath") or David Ormsby, a Crava th partner, in any of these categories. The Complaint alleges that in rendering legal services to GDC and GDV, Cr avath and Ormsby assisted the defendants in concealing th eir fraudulent scheme. Ormsby also acted as GDC's secre tary
from 1985-1988.

The City Defendants include City Investing Company, later City Trust, ("City"), its subsidiaries and se veral of its directors.2 The Complaint alleges that City had an ownership interest in and controlled GDC. After the sales fraud was initially discovered, the City Defendants attempted to distance themselves from GDC. With the assistance of Cravath, City Investing sought to dis associate itself from GDC by transferring itself into a liqui dating trust, City Trust. The City Defendants and Cravath arranged for City to sell 62% of GDC stock to the p ublic and retain 38% in City Trust for later distribution . GDC also borrowed in excess of $100 million,3 which wa s remitted to City as a dividend.

The Inside Director Defendants include Edwin Hatch, Marshall Manley, Eben Pyne and George Scharffenberg er,

___________________________________________________ ______________

1. The Complaint also includes a seventh group, the "John Doe" Defendants, those individuals who were involved in the alleged conspiracy but who were not known to the appellants

.

2. Specifically, the City Defendants include: City Trust, George Scharffenberger, Marshall Manley, Edwin Hatch, Eben Pyne, Ambase Corp., The Home Insurance Co., Carteret Bancorp, In c., and Carteret Savings Bank, FA.

3. It is unclear from the district court's opinion who lent this money to GDC. See Rolo, 845 F. Supp. at 204.

13individuals who served as directors of GDC and City Trust

for various periods from September 1985 onwards. Th e Director Defendants, Reubin O'D. Askew, Howard L. C lark, Jr., Charles J. Simons, and Peter R. Brinkerhoff, a re persons who served as "outside directors" of GDC fo r various periods dating from September 1985. Also in cluded in this category are David F. Brown and Robert F. E hrling,
who served as both officers and directors of GDC du ring this period. Both Brown and Ehrling were convicted of criminal charges in connection with their involveme nt in
the fraudulent scheme. Their convictions were subsequently reversed on appeal. See infra. The Com plaint alleges that the Inside Director Defendants along w ith the Director Defendants controlled the City Defendants and
used them in furtherance of the fraudulent scheme.

The Financing Defendants include banks and financia l institutions,4 who provided a variety of financial services to the other defendants. Some, for example, underwrote the $125,000,000 in notes issued by GDC in its 1988 pub lic offering. Others loaned GDC money and extended cred it to the company. Another "warehoused" new GDV mortgages until they could be pooled and sold, while also len ding GDV money using these mortgages as collateral. The Comp laint alleges that these defendants knew or should have k nown of GDC's sales fraud.

The mortgagee defendants, including the Federal Nat ional Mortgage Association ("Fannie Mae") and the Federal Home Loan Mortgage Corporation ("Freddie Mac") and a num ber of private institutions,5 purchased pools of mortga ges on

___________________________________________________ ______________

4. The First Amended Complaint lists seven entities under the heading "Financing Conspirators." These entities are: South east Bank, N.A., PaineWebber Inc., Merrill Lynch, Pierce, Fenner & S mith, Inc., The Prudential Insurance Company of America, Citicorp R eal Estate, Inc.,
National Bank of Canada and First National Bank of Boston.

5. The First Amended Complaint lists nine entities under the heading of "Mortgagee Conspirators." In addition to Fannie Mae and Freddie Mac, allegations were made against the following institu tions: Chase Federal Bank, FSB, Citizens and Southern Trust Co., N.A. n/ k/a NationsBank Trust Co., Secor Bank, FSB n/k/a Regions Bank of Lo uisiana, The Home Insurance Co., Carteret Bancorp, Inc., Carteret Sav ings Bank, FA and Prudential. The FDIC also appeared as successor to the Resolution Trust Corporation in its capacity as receiver of Carteret Savings Bank, FA.

14GDC houses. The Complaint alleges that these defend ants

knew or recklessly disregarded information that the GDC mortgages were overvalued. The Complaint also alleg es that Fannie Mae and Freddie Mac stopped purchasing GDV mortgages in 1985 because GDV's practices did not m eet their standards, but that these defendants permitte d GDV to repurchase the mortgages through a confidential agreement. In addition, they did not strip GDV of i ts privileges to sell mortgages under the Federal Home Mortgage Act.

The Lot Contract Defendants,6 purchased pools of monthly payments due to GDC from the sale of reside ntial property in Florida. Some of these defendants autho rized GDC to service their contracts, including collectio n from and negotiations with the lot owners. Others collec ted their payments from owners directly. Under GDC's agreemen ts with these defendants, substitution pools were used as a security. When a contract or note went into default , GDC would replace it with a performing contract. Thus, these
defendants incurred no losses from defaults and had no incentive to ensure that loans reflected the true v alue of the property. The Complaint alleges that these defendan ts had
conducted extensive financial review of GDC and kne w or should have known of GDC's fraudulent scheme, but c hose to remain silent in order to protect their own inte rests.

The defendants must also be divided into two additi onal categories, the primary and secondary defendants. T he primary defendants are those defendants who, plaint iffs allege, participated in the operation and managemen t of the affairs of GDC through a pattern of racketeering ac tivity. The primary defendants are City Trust, George Scharffenberger, Marshall Manley, Edwin Hatch, Eben Pyne, David F. Brown, and Robert F. Ehrling. All of the remaining defendants are categorized as secondary

___________________________________________________ ______________

6. The Lot Contract Defendants include the followin g entities: Oxford First Corp. and the Oxford Finance Companies, Inc., Greyhound Financial Corporation, StanChart Business Credit, I nc., Lloyds Bank, PLC, Harbor Federal Savings and Loan Association, M errill Lynch, Pierce, Fenner & Smith, Inc., National Bank of Canada, Citi corp Real Estate,
Inc. and First National Bank of Boston.

15defendants, who, it is alleged, aided and abetted t he pattern

of racketeering activity devised and controlled by the primary defendants. The plaintiffs allege that the actions of the secondary defendants are also in violation of R ICO.

C. Procedural History

Plaintiffs filed their original complaint on August 8, 1989,
in the United States District Court for the Distric t of New Jersey against GDC and its subsidiary, GDV, asserti ng claims under RICO, S 10(b) of the Securities Exchan ge Act of 1934 and Rule 10b-5, the Land Sales Act, various state RICO statutes, and breach of fiduciary obligations. On September 7, 1989, plaintiffs filed an amended comp laint, adding claims for breach of contract and fraud.

Defendants moved to dismiss the First Amended Complaint, and in January 1990 the district court dismissed the case in its entirety finding that pla intiffs had failed to plead fraud with the particularity requir ed by Fed. R. Civ. P. 9(b). Plaintiffs were given 120 days in which to file a second amended complaint. Before plaintiffs filed their amended complaint, on April 16, 1990, the case was administratively terminated because GDC had filed a petition for bankruptcy under Chapter 11.

In November 1990, plaintiffs filed the present acti on. As in their earlier action, plaintiffs allege that the defendants participated in a fraudulent marketing scheme in vi olation
of several federal criminal and civil statutes. 7 A lthough plaintiffs listed GDC and GDV as defendants in this action, they did not serve either company with a copy of th e summons or the complaint. Rolo v. General Developme nt Corp., 949 F.2d 695, 698 (3d Cir. 1991). Plaintiffs asserted
before the district court their intention "to delet e all

references to GDC and GDV as defendants." Rolo v. G eneral Dev. Corp., Civ. Action No. 90-4420, slip op. at 15 (D.N.J.

___________________________________________________ ______________

7. Specifically, plaintiffs assert claims underS 10 (b) of the Securities

and Exchange Act of 1934, 15 U.S.C. S 78j, the Racketee r Influenced and Corrupt Organizations Act, 18 U.S.C. S 1964, and th e Interstate Land Sales Full Disclosure Act, 15 U.S.C. S 1703(a), as well as common law fraud claims. The district court had jurisdiction o ver the statutory
claims pursuant to 15 U.S.C. S 78aa, 18 U.S.C. S 1964, and 15 U.S.C. S 1719, and exercised pendent jurisdiction over the common law claims.

16April 26, 1990). Accordingly, neither the district court nor

this Court, in its 1991 decision, treated GDC or GD V as defendants in this case. Rolo, 949 F.2d at 698.

About two weeks after the filing of this case, plai ntiffs filed a proof of claim with the bankruptcy court, o n behalf of all members of the NPA, a group of more than 5,0 00 individual who had purchased property from GDC and its agents. Id. In support of their claim, plaintiffs r eiterated the allegations detailed in their complaint, which was attached to their proof of claim. Id. During the bankruptcy proceedings, the bankruptcy judge denied class trea tment of plaintiffs' claims and approved settlements in w hich over 60,000 homesite and house purchasers participated. See In re GDC, No. 90-12231-BKC-AJC, slip op. at 1, 6 (Ban kr. S.D. Fla. Aug. 16, 1991).

Proceedings in this case were stayed by the distric t court from December 1990 until March 1993, pending dispos ition of GDC and GDV's bankruptcy proceedings. Rolo , 949 F.2d at 699. In April 1991 the district court denied reconsideration of its stay order and "further dire cted that the action be stayed on the terms set forth in the December Order pending the resolution of the criminal cases against Brown and Ehrling."8 Id. The following month, the d istrict court also stayed plaintiffs' request for a prelimi nary

___________________________________________________ ______________

8. Prior to the filing of this case GDC, its Chairm an David Brown, and President Robert Ehrling, were indicted for their i nvolvement in this scheme. GDC pled guilty to fraud and established a $169 million fund to pay its customers. It also filed for bankruptcy under Chapter 11. United States v. Brown, 79 F.3d 1550, 1555 (11th Ci r. 1996). A civil action has also been brought by the United States a gainst GDC. No. 90- 0879-Civ. Nesbitt (S.D. Fla.). For their participat ion in the scheme, Brown and Ehrling were charged with 73 total counts of mail fraud, interstate transportation of persons in furtherance of a fraud, and conspiracy. Brown was convicted on one conspiracy c ount and Ehrling was convicted on 39 counts. Id. Both received jail sentences for their participation in the conspiracy. On appeal, however , the Eleventh Circuit Court of Appeals reversed their convictions finding that "insufficient evidence was presented that a scheme reasonably cal culated to deceive persons of ordinary prudence and comprehension was devised." Id. at 1553. Both Brown and Ehrling are named as defendant s in the action presently before this Court.

17injunction to bar Ambase and City Investment from

liquidating and distributing their assets. Id. Thes e stay orders were the subject of the first appeal before this Court.9

On May 13, 1991, plaintiffs filed their First Amend ed Complaint, which no longer named either GDC or GDV as a defendant, but added a number of additional defen dants. This complaint also dropped plaintiffs' claim for b reach of contract. Later the same month, the defendants move d to dismiss the First Amended Complaint pursuant to Rul e 12(b)(2) and 12(b)(6). In June, plaintiffs voluntar ily withdrew their claims for breach of an implied cove nant of good faith, negligence and negligent misrepresentat ion.

In their response to the defendants' Motion to Dism iss, plaintiffs first raised their challenge to the enterprise/person distinction under RICO. Although this argument raised allegations not contained in the am ended complaint, the plaintiffs did not formally request further leave to amend the complaint. In considering the pl aintiffs' response, the district court treated these amended RICO allegations as a Second Amended Complaint. In a len gthy Opinion and Order dated December 27, 1993, the dist rict court granted defendant's motions to dismiss under Rule 12(b)(6), and granted the motions to dismiss pursua nt to Rule 12(b)(2) for lack of personal jurisdiction of Scharffenberger, Manley, Hatch, Pyne, Askew, Brinke rhoff, Clark and Simons. The dismissal of all of plaintiff s' claims
rendered the Motion for Class Certification moot. T he court dismissed the plaintiffs' complaint without grantin g leave to file a further amended complaint. Plaintiffs appeal ed the dismissal of their claims to this Court. Following oral argument, on November 8, 1994, we issued a Judgment Order affirming the decision of the district court for

___________________________________________________ ______________

9. On appeal, we held that the district court's ord er staying this action pending final resolution of the related bankruptcy and criminal proceedings was not an appealable order under the c ollateral-order doctrine. Rolo, 949 F.2d at 700. Moreover, we concl uded that plaintiffs could not demonstrate exceptional circumstances suf ficient to warrant the grant of mandamus relief. Id. at 702. In contra st, however, the order staying consideration of the request for preliminar y injunction could be appealed interlocutorily, and the district court er red in deferring consideration of the merits of the requested injunc tion. Id. at 703-04.

18"substantially the reasons" set out in the district court

opinion. Rolo v. City Investing Co. Liquidating Tru st, 66 F. 3d 312 (3d Cir. 1994).

On November 18, 1994, plaintiffs filed a Petition f or Rehearing and Suggestion for Rehearing In Banc. The ir Petition requested this Court to reconsider its jurisprudence on the person/enterprise distinction, which was applied to claims brought under RICO. See , e.g ., Hirsch v. Enright Refining Co., 751 F.2d 628, 633 (3d Cir. 1984) (concluding that defendant corporation could not be liable under S 1962 in that "the `person' subject to liabi lity cannot be the same entity as the `enterprise' "). While pl aintiffs' Petition was pending, another panel of this Court d ecided Jaguar Cars, Inc. v. Royal Oaks Motor Car Co., 46 F .3d 258 (3d Cir. 1995), holding that under RICO, officers o r employees "may properly be held liable as persons managing the affairs of their corporation as an ent erprise." 46 F.3d at 261. This holding endorsed the position taken by plaintiffs in their Petition for Rehearing. By Orde r dated April 4, 1995, we granted plaintiffs' Petition, vac ated our earlier Judgment Order, vacated the order of dismis sal issued by the district court, and remanded the case to the district court for reconsideration in light of the decision in Jaguar Cars. Rolo v. City Investing Co. Liquidating Trust, No. 94-5057, 94-5058, slip op. at 2 (3d Cir. Apr. 4 , 1995). We did not retain jurisdiction over the case.

Following the remand, the parties disputed whether reconsideration in light of the holding in Jaguar C ars was necessary as there were other, independent grounds to support dismissal of all of plaintiffs' claims. Pla intiffs also advised the district court that they intended to se ek leave to file a further amended complaint, to add and dro p parties, and to restate their claims in light of Ja guar Cars. By letter dated April 12, 1995, the district court requested briefing from the parties regarding the appropriate actions for the court to take on reconsideration. As reques ted by the district court, the parties filed their initial briefs on June 1, 1995. The following day, plaintiffs also se rved their formal motion for leave to serve a proposed Second Amended Complaint10 and to add and drop parties. By

___________________________________________________ ______________

10. Although the district court had treated certain allegations contained in the plaintiffs' response to the Motion to Dismis s as a Second Amended

19letter dated June 8, 1995, the district court adjou rned the

Motion for leave to serve an amended complaint unti l the court had completed the reconsideration mandated by this

Court.

On August 24, 1995, the district court once again dismissed this case in its entirety, holding all ot her grounds for dismissing plaintiffs' claims were unaffected b y Jaguar Cars. Rolo, 897 F. Supp. at 833. The district court also dismissed plaintiffs' Motion to file a Second Amend ed Complaint and to add and drop parties. Id. Within t en days after the court's final order, plaintiffs moved for relief pursuant to Rule 60(b) of the Federal Rules of Civi l Procedure, seeking leave to serve their proposed Se cond Amended Complaint and to add and/or intervene addit ional parties. Following oral argument on the motion, on October 23, 1995, the district court ruled from the bench, denying relief pursuant to Rule 60(b). On November 1, 1995, plaintiffs filed their notice of appeal from the di strict court's decisions dismissing the complaint and denying post judgment relief pursuant to Rule 60(b). Specificall y, plaintiffs appeal from the dismissal of their RICO claims and from the denial of leave to amend the complaint

.

II. JURISDICTION AND STANDARDS OF REVIEW

We have jurisdiction over this appeal pursuant to 2 8 U.S.C. S 1291, as the appeal arises from afinal dec ision of the district court dismissing all of the remaining claims of the First Amended Complaint, dismissing plaintiffs' motion for leave to serve a Second Amended Complaint, and denying plaintiffs' motion, pursuant to Rule 60(b), for leave to serve a further amended complaint. The district court had subject matter jurisdiction over plaintiffs' fe deral claims pursuant to 28 U.S.C. S 1331 and exercised p endent jurisdiction over their state claims.11

___________________________________________________ ______________

Complaint, the proposed Amended Complaint would hav e been the Second Amended Complaint, and we will refer to it a s such in this Opinion.

11. This case was filed prior to the enactment of t he supplemental jurisdiction statute, 28 U.S.C. S 1367 in 1990, whi ch combined the concepts of pendent and ancillary jurisdiction. See In re: Prudential Ins. Co. America Sales Practice Litigation Agent Actions , ___ F.3d ___, ___, 1998 WL 409156 at *11 (3d Cir. July 23, 1998).

20Defendants contend, however, that we may not hear t his

appeal because plaintiffs did not file a timely not ice of appeal. Rule 4 of the Federal Rules of Appellate Pr ocedure provides that a notice of appeal must be filed with in 30 days after the date of entry of the order appealed, but that if a party files a "timely motion" for relief under Rule 60(b), the time for appeals runs from the entry of the ord er disposing of the motion. In this case, the district court dismissed plaintiffs' claims on August 24, 1995. Pl aintiffs moved for relief pursuant to Rule 60(b) within the 10 day time limit provided by Rule 4(a)(4)(F) of the Feder al Rules of Appellate Procedure. The district court denied thei r Rule 60(b) Motion on October 23, 1995, and plaintiffsfil ed their notice of appeal on November 1, 1995, within the 30 day time limit provided by the rule.

Defendants assert that plaintiffs' motion was not p roperly cognizable pursuant to Rule 60(b) and therefore the motion did not toll the time for filing a notice of appeal . Defendants argue that the Rule 60(b) Motion sought only to per suade
the district court to reconsider issues that it had already fully considered and rejected. Defendants correctly state that a request for relief pursuant to Rule 60(b) ca nnot be used as a substitute for an appeal. Martinez-McBean v. Government of the V.I., 562 F.2d 908, 911 (3d Cir. 1977). See also Union Switch & Signal v. United Electrical , Radio & Machine Workers of America, Local 610, 900 F.2d 608 , 615 (3d Cir. 1990) (finding that a party's characteriza tion of their motion is not dispositive, instead the court must look to the "purpose the motion seeks to achieve"). In r esponse, plaintiffs contend that they filed a Rule 60(b) Mot ion rather than an immediate appeal because they believed that the
district court had construed this Court's mandate a s precluding consideration of their Motion to file a Second Amended Complaint. Plaintiffs considered the change in the law following the original dismissal of their case coupled
with the district court's narrow construction of ou r mandate to constitute "exceptional circumstances" m eriting review pursuant to Rule 60(b)(6).

Although plaintiffs' Rule 60(b) Motion was ultimate ly unsuccessful, it was not so deficient that it was n ot cognizable pursuant to Rule 60. Plaintiffs could re asonably

21believe that the district court had dismissed plain tiffs'

Request for Leave to file an amended complaint beca use the district judge believed that our mandate had limite d review to the issues created by the decision in Jaguar Car s and that a Rule 60 motion might offer broader relief. P laintiffs' position is buttressed by the fact that within a re latively short time frame, controlling precedent was reverse d after the prior dismissal had been affirmed by judgment o rder, but before completion of their appeal, which conclu ded when the prior dismissal was vacated on rehearing. Accordingly, plaintiffs' notice of appeal was timel yfiled and their present appeal is properly before us.

We have plenary review over plaintiffs' appeal from the dismissal of their action. Lorenz v. CSX Corp., 1 F .3d 1406, 1411 (3d Cir. 1993). We may review the district cou rt's
dismissal of their motion for leave to amend the co mplaint and denial of their motion for post-judgment relief under Rule 60(b) for abuse of discretion only. In re Burl ington Coat Factory Securities Litigation, 114 F.3d 1410, 1434 (3d Cir. 1997); Resolution Trust Corp. v. Forest Grove, Inc. , 33 F.3d 284, 288 (3d Cir. 1994).

III. DISCUSSION

A. Denial of Leave to Amend

Plaintiffs argue that the district court must have misconstrued this Court's April 4, 1995, mandate remanding the case to the district court for recons ideration in light of the decision in Jaguar Cars because, th ey contend, it refused to consider their motion for le ave to serve a Second Amended Complaint. Plaintiffs also a rgue that the district court abused its discretion when it denied their Rule 60(b) Motion seeking leave to amend. Wef ind
that the district court neither misunderstood our m andate nor abused its discretion by denying plaintiffs fur ther leave to amend the complaint.

Our mandate was designed to offer the district cour t broad flexibility to reconsider its earlier ruling in light of our decision in Jaguar Cars. Our April 4, 1995, Ord er provided in pertinent part:

22The petition for rehearing is granted, the o rders of the

district court from which the appeal were ta ken are vacated, and the matters are remanded to the district court for reconsideration in light of Jaguar Cars, Inc. v. Royal Oaks Motor Car Co., 46 F.3d 258 (3d Ci r. 1995). We do not retain jurisdiction.

Rolo, No. 94-5057, 94-5058, slip op. at 2. The dist rict court was free to reconsider its original ruling, dismiss ing the request for leave to amend, and also to consider th e new motion for leave to amend, in light of the decision in Jaguar

Cars.

Plaintiffs contend that the district court thought that under this Court's mandate, it could not consider t heir Motion for Leave to Amend. The district court's Aug ust 24, 1995, Opinion states that plaintiffs' Motion for Le ave to Amend is "dismissed." Rolo, 897 F. Supp. at 833. Th e court wrote, "the remand order did not contemplate that p laintiffs
be allowed to reconstitute and restructure their ac tion through the vehicle of an amended complaint and the addition and deletion of parties" and that "the mot ion to serve a second amended and supplemental complaint a nd to add and drop parties should not be considered." Id. at 827-28. On the other hand, the district court discu ssed the proposed amended complaint, noting that it would fundamentally alter the nature of the claims and concluding that it did "not believe that the Third Circuit
intended the reconsideration to be on the basis of an amendment to an already much amended complaint." Id . at 831. The district judge did not "consider the manda te as requiring consideration of the Proposed Complaint o r any other proposed amended complaint." Id. at 832. Simi larly, at oral argument on plaintiffs' Rule 60(b) Motion, the Judge stated, "I concluded that the remand order did not require and the circumstances did not warrant hearing a mot ion for leave to file a further amended and supplementa l complaint and to substitute new plaintiffs." Rolo v . City Investing Co. Liquidating Trust, No. 90-4420 slip o p. at *24 (D.N.J. Oct. 23, 1995) (transcript of hearing denyi ng plaintiffs' Rule 60(b) motion).

Under these circumstances, we conclude that the act ions
of the district court are consistent with this Cour t's

23mandate. The court considered the impact of Jaguar Cars

and determined that, in light of the procedural pos ture of the case, our mandate did not require that leave to amend be granted when there were other adequate grounds f or upholding the decision to dismiss the complaint.

In addition, the district court did not abuse its d iscretion by denying plaintiffs leave to amend pursuant to Ru le 15(a) or Rule 60(b)(6). Rule 15(a) of the Federal Rules o f Civil Procedure provides that a party may seek leave of t he court to amend a pleading and that such leave "shall be f reely given when justice so requires." The decision wheth er to grant or to deny a motion for leave to amend rests within
the sound discretion of the district court. Howze v . Jones & Laughlin Steel Corp., 750 F.2d 1208, 1212 (3d Cir. 1984). The Supreme Court has stated, however, that, "[i]n the absence of any apparent or declared reason -- such as undue delay, bad faith or dilatory motive on the pa rt of the movant, repeated failure to cure deficiencies by am endment previously allowed, undue prejudice to the opposing party by virtue of allowance of the amendment, etc. -- th e leave sought should, as the rules require, be `freely giv en.' " Foman v. Davis, 371 U.S. 178, 182 (1962). The same standard applies when considering a request to add or drop parties. In contrast, relief under Rule 60(b) is ex traordinary and requires a "showing of exceptional circumstance s." Marshall v. Board of Education, 575 F.2d 417, 425-2 6 (3d Cir. 1978).

In this case, the plaintiffs' proposed Second Amend ed Complaint primarily seeks to replead facts and argu ments that could have been pled much earlier in the proce edings. In Gasoline Sales, Inc. v. Aero Oil Company, 39 F.3 d 70 (3d Cir. 1994), affirming the district court's refusal to grant leave to amend, we reasoned:

. . . . as the district court stated, "three attempts at a proper pleading is enough" and a "plaintiff has to carefully consider the allegations to be pla ced in a complaint before it is filed." [Plaintiff] i s not seeking to add claims it inadvertently omitted from its prior complaints or which it did not know about ea rlier. Rather [plaintiff] is modifying the allegati ons in hopes

24of remedying factual deficiencies in its pri or pleadings,

even to the point of contradicting its prior pleadings.

Id. at 74. This description is equally applicable t o the procedural posture of this case. Plaintiffs have no t only had the opportunity to file an amended complaint, but t he district court also accepted certain allegations co ntained in their response to defendants' motion to dismiss as a Second Amended Complaint. Plaintiffs have already had ampl e opportunity to plead their allegations properly and completely.

The duration of this case, and the substantial effo rt and expense of resolving defendants' Motion to Dismiss the First Amended Complaint also support the district court's denial of leave to amend. Although the district court did not make specific factual findings on this question, these f actors could constitute undue delay, bad faith or prejudic e to the defendants. See Adams v. Gould, 739 F.2d 858, 863-6 4 (3d Cir. 1984). Finally, in our Judgment Order of Novem ber 8, 1994, which was later vacated, we ruled that the di strict court had not erred in denying plaintiffs leave to amend. Rolo v. City Investing Co. Liquidating Trust, Nos. 94-5057, 94-5058, slip op. at 2 (3d Cir. Nov. 8, 1994). Beca use the new legal analysis established in Jaguar Cars does not form the basis for plaintiffs' requested amendments, the district court did not abuse its discretion by summarily dis missing plaintiffs' renewed Motion for Leave to Amend.

B. Statute of Limitations

In its original opinion dismissing this case, the d istrict court concluded that plaintiffs' RICO claims agains t the primary defendants could not survive because plaint iffs had "failed to plead that the RICO `persons' (GDC's off icers, directors and controlling shareholders) were separa te and distinct from the `enterprise' (GDC)." Rolo, 897 F. Supp. at 832. In the alternative, the district court found t hat these claims could also be dismissed on the grounds that they were time barred. Id. Plaintiffs' aiding and abetti ng claims under RICO were dismissed because they did not meet the "operation or management" test of Reves v. Ernst & Young, 507 U.S. 170 (1993), and for "failure to plead anyt hing more than general and conclusory allegations of kno wledge

25or participation in a scheme." Rolo, 897 F. Supp. a t 833.

Following our decision in Jaguar Cars, the enterprise/person distinction no longer constituted a grounds for dismissing their RICO claims against th e primary defendants. The district court found that o ther, independent reasons supported dismissal of all plai ntiffs' RICO claims. The court concluded that plaintiffs' R ICO
claims could be dismissed as to all defendants on t he grounds that they were not timely filed. Rolo, 897 F. Supp. at 833. In addition, the grounds for the dismissal of the aiding and abetting claims against the secondary defendants were unaffected by the decision in Jagua r Cars.
Id.

Although RICO does not contain an express statute o f limitations for civil actions, the Supreme Court ha s held that RICO claims are subject to the four year statu te of limitations applicable to civil enforcement actions under the Clayton Act, 15 U.S.C. S 15b. Agency Holding Corp. v. Malley-Duff & Assocs., Inc., 483 U.S. 143, 152-56 ( 1987). Accordingly, to be timely, plaintiffs' claims can h ave accrued no earlier than November 8, 1986, for the c laims contained in the original complaint and May 13, 198 7, for those claims contained in the First Amended Complai nt.

At the time plaintiffs filed both their original co mplaint and their First Amended Complaint, this Court recog nized the "last predicate act" method for calculating the accrual of civil RICO claims. Under the "last predicate act " method

of accrual:

Civil RICO claims accrue at the time when th e plaintiff

knew or should have known that the elements of a civil RICO action existed. However, if further pre dicate acts occur that are part of the same pattern of r acketeering, regardless of whether they injure the plaint iff or if the plaintiff suffers further injury from a pred icate act that is part of the same pattern of racketeering, even if that predicate act occurred outside the limitatio ns period, the statute of limitations begins to run fro m the date that the plaintiff knew or should have known of the last such act or the last such injury.

Davis v. Grusemeyer, 996 F.2d 617, 623 (3d Cir. 199 3) (citation omitted). Relying in part upon this accru al

26method, plaintiffs contend that the district court erred in

concluding that their RICO claims were not timely f iled.

During the pendency of this appeal, the Supreme Cou rt held that the last predicate act accrual method was not a proper interpretation of the RICO statute of limita tions. Klehr v. A.O. Smith Corp., 117 S. Ct. 1984 (1997). The Court declined, however, to determine which of the remaining accrual methods is the appropriate one.

The accrual method that provides plaintiffs with th e longest period of time in which to file their claim s is the "injury and pattern discovery" method, which has al so been applied in this Circuit. See Keystone Ins. Co. v. H oughton, 863 F.2d 1125, 1130 (3d Cir. 1988). Under this meth od, plaintiffs have four years in which to file suit fr om the time that they discover or should have discovered either their injury or the defendants' pattern of racketeering a ctivity.

Given that plaintiffs purchased their properties in the 1970s, it seems likely that they should have discov ered the defendants' allegedly fraudulent activities prior t o 1986 or 1987, when their complaints were filed.12 We will n ot, however, address this issue directly as other adequ ate grounds exist for dismissing the plaintiffs' RICO c laims.

C. Aiding and Abetting Liability

The claims against the vast majority of defendants are secondary claims, contentions that these defendants assisted the primary defendants in defrauding the p laintiffs. The district court dismissed the complaint as to th ese defendants, because the plaintiffs had failed to pl ead that the alleged aiders and abettors had "participated i n the operation or management" of the alleged enterprise, as required by the Supreme Court's decision in Reves v . Ernst

___________________________________________________ ______________

12. In addition, plaintiffs' claim that they could not have discovered
their
claims due to the fraudulent concealment of the def endants is unavailing. In Klehr, the Court clarified that in o rder to use fraudulent concealment to toll the statute of limitations, pla intiffs must have been reasonably diligent in protecting their interests. 117 S. Ct. at 1993. Whether or not plaintiffs should have discovered th eir claims prior to 1986, there is no evidence that plaintiffs were rea sonably diligent in supervising the defendants' actions with regard to their property.

27& Young, 507 U.S. 170, 183 (1993). Rolo, 897 F. Sup p. at

829. The district court also found that had the all egations of the Amended Complaint satisfied the Reves requir ement, these allegations would be insufficient because the y fail to meet the essential pleading requirements for aiding and abetting claims and are barred by RICO's four year statute of limitations. Id. (citing Walck v. American Stock Exchange, Inc., 687 F.2d 778, 791 (3d Cir. 1982)). We will af firm the district court's dismissal of the plaintiffs' RICO aiding and abetting claims without reaching either of the dist rict court's grounds for dismissing these allegations be cause we are convinced that a private cause of action for ai ding and abetting a RICO violation cannot survive the Suprem e Court's decision in Central Bank of Denver, N.A. v. First Interstate Bank of Denver, N.A., 511 U.S. 164 (1994 ).

In Central Bank, the Supreme Court addressed the question of whether a private plaintiff may bring a cause of action for aiding and abetting under the Securities Exchange Act of 1934, S 10(b). The Court's analysis began and ended with a review of the language of the stat ute. "It is inconsistent with the settled methodology inS 10 (b) cases to extend liability beyond the scope of conduct pro hibited by the statutory text." Id. at 177. Reasoning that the text of S 10(b) does not reach aiding and abetting a violat ion of S 10(b), the Court concluded that "the statute itse lf resolves the case." Id. at 177-78. The Court rejected the ar gument that Congress had intended to permit private action s for aiding and abetting, stating "Congress knew how to impose aiding and abetting liability when it chose to do s o." Id. at 176. The Court explained,

Congress has not enacted a general civil aid ing and abetting statute . . .. [W]hen Congress enac ts a statute under which a person may sue and recover dam ages from a private defendant for violation of so me statutory norm, there is no general presumption that t he plaintiff may also sue aiders and abettors.

Id. at 181. The Court refused to entertain argument s based upon reference to general tort principles or the po licy considerations supporting inference of a Rule 10b-5 aiding and abetting cause of action. Id. at 181, 188.

28The Court also rejected the argument that a private

cause of action for aiding and abetting in violatio n of S 10(b) could be implied by reference to 18 U.S.C. S 2, the criminal aiding and abetting statute. The Court wrote,

[W]hile it is true that an aider and abettor of a criminal violation of any provision of the 1934 Act, including S 10(b), violates 18 U.S.C. S 2, it does not follow that a private civil aiding and abetting cause of a ction must also exist. We have been quite reluctant to infer a private right of action from a criminal proh ibition alone

. . ..

Id. at 190. Thus, the Court concluded that because the text of S 10(b) itself does not prohibit aiding and abet ting, a private plaintiff may not maintain a suit for aidin g and abetting in violation of S 10(b).

We conclude that the same analysis controls our construction of the civil RICO provision, 18 U.S.C. S 1964. Section 1964(c) establishes a civil remedy in favor of "[a]ny person injured in his business or property by reaso n of a violation of section 1962." Like S 10(b), the text of S 1962 itself contains no indication that Congress intende d to impose private civil aiding and abetting liability under RICO. Criminal liability for aiding and abetting a violation of S 1962 is imposed by reference to the general ai ding and abetting statute, 18 U.S.C. S 2. This provision has no application to private causes of action. See Centra l Bank of Denver, 511 U.S. at 181-82. Thus, reference to 18 U .S.C. S 2 cannot provide the basis for the imposition of civil liability for aiding and abetting a RICO violation.

Similarly, despite the existence of cogent policy arguments in support of extending civil liability t o aiders and abettors of RICO violations, under Central Bank of Denver, we must "interpret and apply the law as Con gress has written it, and not [ ] imply private causes of action merely to effectuate the purported purposes of the statute." In re Lake States Commodities, Inc. 936 F. Supp. 14 61, 1475 (N.D. Ill. 1996). Because the text of the RICO statute does not encompass a private cause of action for ai ding and abetting a RICO violation, "in accordance with the policies articulated in Central Bank of Denver", we have no

29authority to imply one. Hayden v. Paul, Weiss, Rifk ind,

Wharton & Garrison, 955 F. Supp. 248, 255-56 (S.D.N .Y. 1997); see also In re Lake States, 936 F. Supp. at 1475-76; Department of Economic Dev. v. Arthur Anderson & Co ., 924 F. Supp. 449, 475-77 (S.D.N.Y. 1996). On this basis , we will affirm the district court's dismissal of the R ICO claims against all of the secondary defendants.

We reach this result despite our discussion of aidi ng and abetting liability in Jaguar Cars, a case decided a fter Central Bank of Denver. See 46 F.3d at 270. In Jagu ar Cars, the opinion did not address the impact of Cen tral Bank of Denver on earlier cases that had recognized a private cause of action for aiding and abetting und er RICO. The decision in Jaguar Cars focused on whether ther e had
been sufficient evidence to find the defendant liab le for aiding and abetting a RICO violation. See 46 F.3d a t 270. The parties did not challenge the existence of a ca use of action for aiding and abetting, and we did not rais e the issue sua sponte. Although, under this Court's Inte rnal Operating Procedures, we are bound by, and lack the authority to overrule, a published decision by a pr ior panel, see I.O.P. 9.1, we conclude that the discussion of a private cause of action for aiding and abetting a RICO viol ation in Jaguar Cars does not control our analysis in this c ase. The
decision in Central Bank of Denver was not called t o the attention of the panel in Jaguar Cars, and the pane l's opinion neither explicitly nor implicitly decided t he impact
of Central Bank of Denver on the continued availabi lity of a private cause of action for aiding and abetting a R ICO
violation.

D. Failure to Plead Fraud with the Requisite Partic ularity

The Amended Complaint alleges that the primary defendants, those defendants who actually participa ted in the operation and management of the fraudulent sche me, committed mail and wire fraud as predicate racketee ring acts. Because the Complaint alleges that these defe ndants participated in the operation or management of the racketeering enterprise, the allegations against th e primary defendants conform with the requirements for liabil ity under RICO established by Reves v. Ernst & Young. Originally, the district court dismissed these clai ms for

30failure to plead that the RICO "persons" were separ ate and

distinct from the RICO "enterprise." Rolo, 897 F. S upp. at 829. Following the decision in Jaguar Cars, the dis trict court reaffirmed its dismissal of these claims agai nst the primary defendants, finding that they were time bar red. Id.
at 833. We will affirm the dismissal of these claim s without reaching the statute of limitations question becaus e plaintiffs' allegations fail to satisfy the pleadin g requirements established by Fed. R. Civ. P. 9(b).

Rule 9(b) states, "In all averments of fraud or mis take, the circumstances constituting fraud or mistake sha ll be stated with particularity. Malice, intent, knowledg e, and other condition of mind of a person may be averred generally." Thus, under Fed. R. Civ. P. 9(b), plain tiffs must plead with particularity the "circumstances" of the alleged fraud. They need not, however, plead the "date, pla ce or time" of the fraud, so long as they use an "alterna tive means of injecting precision and some measure of substantiation into their allegations of fraud." Se ville Indus. Machinery v. Southmost Machinery, 742 F.2d 786, 791 (3d Cir. 1984). The purpose of Rule 9(b) is to provide notice of the "precise misconduct" with which defendants are charged and to prevent false or unsubstantiated cha rges. Id. Courts should, however, apply the rule with som e flexibility and should not require plaintiffs to pl ead issues that may have been concealed by the defendants. See Christidis v. First Pennsylvania Mortg. Trust, 717 F.2d 96, 99 (3d Cir. 1983).

In Seville, the plaintiff met this standard because the subject and nature of each alleged misrepresentatio n was adequately plead. 742 F.2d at 791. We found that,

Seville adequately satisfied the requirement s of Rule 9(b) by incorporating into the complaint a l ist identifying with great specificity the piece s of machinery that were the subject of the alleg ed fraud . . .. The Complaint sets forth the nature o f the alleged misrepresentations, and while it does not de scribe the precise words used, each allegation of fraud adequately describes the nature and subject of the alle ged misrepresentation.

31Id. In contrast, in Saporito v. Combustion Engineer ing, 843

F.2d 666 (3d Cir. 1988), cert. granted and judgment vacated on other grounds, 489 U.S. 1049 (1989), the plainti ffs failed to satisfy this standard. The plaintiffs' complaint alleged that ". . . defendants and/or persons under their d irection or control provided notice to certain C-E employees other than plaintiffs during the [options period], that C -E was in the process of planning and promulgating [a Volunta ry Separation Incentive Plan]." Id. at 673. This Court held that their Complaint was deficient because it did not ad equately allege who made the statements ("defendants and/or persons under their direction or control") or who r eceived the allegedly fraudulent information ("certain C-E employees other than the plaintiffs"). Id. at 675.

In this case, plaintiffs have alleged numerous misrepresentations, and the fraudulent scheme is de scribed in some detail. For example, the Complaint alleges that "[d]uring standard sales presentations, the moderat ors acting for GDC would misrepresent the supply, deman d and value of the lots" by stating that the prices f or the lots would increase the following day and that the numbe r of lots for sale had decreased due to prior purchases. Amended Complaint at P 84. The moderators also alle gedly misrepresented GDC's intentions and abilities with regard to development of the communities. Amended Complain t at PP 82-115. Similarly, the Complaint alleges that in the trips sponsored by GDC to the communities, GDC "arranged with hotel staff to screen incoming telephone calls " and to "turn away calls from independent Realtors." Amende d Complaint at P 123.

While many of the allegations relating to the alleg edly fraudulent scheme are quite detailed, the Complaint lacks any specific allegations about the presentations ma de to any of the named plaintiffs. The Complaint includes no information about the actual presentations made to either the Rolos or the Tenerellis, including who made the presentation, when it took place, or with reference to what property it was made. The same is true with regard to the allegedly fraudulent mailings. The content of the m ailings is described in reasonably specific terms, but when, b y whom, and to whom a mailing was sent, and the precise con tent

32of each particular mailing are not detailed. The Co mplaint

also includes some general allegations such as,"[a] t the time plaintiffs purchased their Lots, when they pur chased houses from GDC, and thereafter, the material facts alleged in paragraphs 87 and 138 herein were unknown to the m and were actively concealed from them by the defend ants." Amended Complaint at P 143. It remains unclear, how ever, who misrepresented and concealed the information, w hen and how. For example, plaintiffs allege that GDC co ncealed its fraud through a Customer Service Office. It is unclear from the Complaint, however, whether the Rolos or Tenerellis ever contacted this office. The Complain t only alleges what happened to "most purchasers," "the va st majority of complaints" and what happened "typicall y." Amended Complaint at P 145.

Under Rule 9(b), failure to plead fraud with partic ularity with respect to what happened to a specific plainti ff prevents the defendants from being able to prepare a defense as to this particular allegation of fraud. To link their own injuries to the alleged RICO enterprise, plaintiffs must allege what happened to them. At the least, th is includes specific allegations as to which fraudulen t tactics were used against them and should include some allegations of what was said to them to induce them to purchase their properties from GDC. Although the Fi rst Amended Complaint links the Rolos and Tenerellis to the scheme in a general way, as purchasers of GDC prope rties, the manner in which the fraudulent scheme allegedly caused them injury has not been adequately pled. Pl aintiffs appear to have confused this complaint with a class action complaint.13 The class must, however, be certified before it may become a class action. Until the putative class is certified, the action is one between the Rolos, the Tenerellis and the defendants. Accordingly, the First Amended Complaint must be evaluated as to these particular plaintiffs. Because the Complaint fails to allege w hat actually happened to either the Rolos or the Tenere llis,

___________________________________________________ ______________

13. For example, in one of the paragraphs alleging mail fraud, many individuals are listed as plaintiffs, including "Pa ul and Agnes Duncan." Amended Complaint at P 396. Paul and Agnes Duncan a re not parties to
this case.

33plaintiffs have not pled fraud with the specificity required

by Rule 9(b), and the district court's dismissal of their complaint as to the primary defendants will be affi rmed on
this basis.14

CONCLUSION

The district court did not abuse its discretion by denying plaintiffs leave to amend their complaint when they had already had ample opportunity to plead their claims fully. Nor did the district court err in dismissing plaint iffs' RICO claims. The claims against the secondary defendants
, alleging liability for aiding and abetting a RICO c onspiracy, cannot survive the Supreme Court's decision in Cent ral Bank of Denver. Plaintiffs' claims against the prim ary defendants also fail because their allegations are not pled with the particularity required by Rule 9(b). Accor dingly, we
will affirm the district court's dismissal of this case in its entirety.

A True Copy:

Teste:

Clerk of the United States Court of Appeals
for the Third Circuit

___________________________________________________ ______________

14. Because plaintiffs have already had ample oppor tunity to plead their allegations fully and in the proper form, we will n ot remand this case to the district court in order to provide them with a further opportunity to amend their defective complaint. Cf. Saporito, 843 F.2d at 675-76 (remanding in order to provide plaintiffs with the opportunity to amend their complaint to provide greater specificity).

34