1998 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

8-31-1998

Rolo v. City Investing Co

Precedential or Non-Precedential:

Docket 95-5768

Follow this and additional works at: http://digitalcommons.law.villanova.edu/thirdcircuit_1998

This decision is brought to you for free and open access by the Opinions of the United States Court of Appeals for the Third Circuit at Villanova

University School of Law Digital Repository. It has been accepted for inclusion in 1998 Decisions by an authorized administrator of Villanova

University School of Law Digital Repository. For more information, please contact Benjamin.Carlson@law.villanova.edu.

Recommended Citation

"Rolo v. City Investing Co" (1998). 1998 Decisions. Paper 210.

http://digitalcommons.law.villanova.edu/thirdcircuit_1998/210
Filed 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) 

 2 
 Herbert 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 

 3 
 Nicholas 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 

 4 
 Joseph 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 

 5 
 Joseph 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. 

 6 
 Steven 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 

 7 
 Steven 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 

 8 
 Edward 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 

 9 
 J. 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 realty in 

Florida. Plaintiffs, Jose and Rosa Rolo and Dr. William and 

 10 
Rosanne Tenerelli, purchased lots and homes from General 

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 prices. This 

case and its related proceedings have a long and convoluted 

history. The present appeal is the third time this Court has 

considered this case. 

Plaintiffs originally filed suit in 1989 in the United States 

District Court for the District of New Jersey alleging claims 

under the Racketeer Influenced and Corrupt Organizations 

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 law fraud 

against thirty-five named defendants. They also sought to 

represent a putative class consisting of all persons 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 ("NPA"). 

The district court dismissed plaintiffs' claims in their 

entirety. Rolo v. City Investing Co. Liquidating Trust, 845 F. 

Supp. 182 (D.N.J. 1993). The court held that plaintiffs' 

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 for pleading 

aider and abettor liability under RICO. Although the court 

found that plaintiffs' complaint stated claims under 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 dismissed 

plaintiffs' Securities Act claims on the grounds that the 

sales contracts and mortgage notes were not securities 

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 plaintiffs' 

common law fraud claims. Finally, the district court denied 

plaintiffs' Motion to file a Second Amended Complaint that 

would have restructured and reformulated their action. 

Following a remand for reconsideration of plaintiffs' claims 

in light of our decision in Jaguar Cars, Inc. v. Royal Oaks 

Motor Car Co., 46 F.3d 258 (3d Cir. 1995), the district court 

 11 
reaffirmed its dismissal of each of plaintiffs' claims and its 

denial of further leave to amend the complaint. Rolo v. City 

Investing Co. Liquidating Trust, 897 F. Supp. 826 (D.N.J. 

1995). 

The present appeal is from the district court's decision on 

remand. Plaintiffs assert that the district court erred in 

dismissing their RICO claims and abused its discretion by 

denying them leave to amend their complaint. We conclude 

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 land that it 

owned in Florida and that it had no intention of developing 

the land further. Prospective purchasers were told,

however, that the entire tract would be developed. 

According to plaintiffs, GDC targeted unsophisticated 

purchasers, particularly those who spoke English only as a 

second language. Prospective purchasers were invited to 

attend lavish "investment seminars" at which GDC 

represented that the value of the real estate continually 

appreciated, that there was a good resale market for the 

lots and houses, and that the real estate was an excellent 

investment. The Complaint further alleges that much

information was concealed from prospective purchasers, 

including the very low resale value of the lots, the artificial 

nature of the original sale prices of the lots, and the fact 

that most purchasers defaulted within two years, allowing 

GDC to cancel their contracts and resell the same lots over 

and over again. According to plaintiffs, similar tactics were 

also used to sell homes to those who already owned lots. 

 12 
B. The Defendants 

The Amended Complaint names thirty-five defendants 

and classifies them according to the nature of their 

participation in the allegedly fraudulent scheme, placing 

some defendants in more than one category. The district 

court adopted this classification and divided the defendants 

into six categories:1 City Defendants, Inside Director 

Defendants, Director Defendants, Financing Defendants, 

Mortgagee Defendants and Lot Contract Defendants. The 

Complaint did not specifically include the lawfirm Cravath, 

Swaine & Moore ("Cravath") or David Ormsby, a Cravath 

partner, in any of these categories. The Complaint alleges 

that in rendering legal services to GDC and GDV, Cravath 

and Ormsby assisted the defendants in concealing their 

fraudulent scheme. Ormsby also acted as GDC's secretary 

from 1985-1988. 

The City Defendants include City Investing Company,

later City Trust, ("City"), its subsidiaries and several 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 disassociate 

itself from GDC by transferring itself into a liquidating 

trust, City Trust. The City Defendants and Cravath 

arranged for City to sell 62% of GDC stock to the public 

and retain 38% in City Trust for later distribution. GDC 

also borrowed in excess of $100 million,3 which was 

remitted to City as a dividend. 

The Inside Director Defendants include Edwin Hatch,

Marshall Manley, Eben Pyne and George Scharffenberger, 

_________________________________________________________________ 

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, Inc., 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. 

 13 
individuals who served as directors of GDC and City Trust 

for various periods from September 1985 onwards. The 

Director Defendants, Reubin O'D. Askew, Howard L. Clark, 

Jr., Charles J. Simons, and Peter R. Brinkerhoff, are 

persons who served as "outside directors" of GDC for 

various periods dating from September 1985. Also included 

in this category are David F. Brown and Robert F. Ehrling, 

who served as both officers and directors of GDC during 

this period. Both Brown and Ehrling were convicted of 

criminal charges in connection with their involvement in 

the fraudulent scheme. Their convictions were 

subsequently reversed on appeal. See infra. The Complaint 

alleges that the Inside Director Defendants along with the 

Director Defendants controlled the City Defendants and 

used them in furtherance of the fraudulent scheme. 

The Financing Defendants include banks and financial 

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 public 

offering. Others loaned GDC money and extended credit to 

the company. Another "warehoused" new GDV mortgages

until they could be pooled and sold, while also lending GDV 

money using these mortgages as collateral. The Complaint 

alleges that these defendants knew or should have known 

of GDC's sales fraud. 

The mortgagee defendants, including the Federal National 

Mortgage Association ("Fannie Mae") and the Federal Home 

Loan Mortgage Corporation ("Freddie Mac") and a number 

of private institutions,5 purchased pools of mortgages on 

_________________________________________________________________ 

4. The First Amended Complaint lists seven entities under the heading 

"Financing Conspirators." These entities are: Southeast Bank, N.A., 

PaineWebber Inc., Merrill Lynch, Pierce, Fenner & Smith, Inc., The 

Prudential Insurance Company of America, Citicorp Real 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 institutions: 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 Louisiana, The Home 

Insurance Co., Carteret Bancorp, Inc., Carteret Savings 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. 

 14 
GDC houses. The Complaint alleges that these defendants 

knew or recklessly disregarded information that the GDC 

mortgages were overvalued. The Complaint also alleges that 

Fannie Mae and Freddie Mac stopped purchasing GDV 

mortgages in 1985 because GDV's practices did not meet 

their standards, but that these defendants permitted GDV 

to repurchase the mortgages through a confidential 

agreement. In addition, they did not strip GDV of its 

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 residential 

property in Florida. Some of these defendants authorized 

GDC to service their contracts, including collection from 

and negotiations with the lot owners. Others collected their 

payments from owners directly. Under GDC's agreements 

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 value of the 

property. The Complaint alleges that these defendants had 

conducted extensive financial review of GDC and knew or 

should have known of GDC's fraudulent scheme, but chose 

to remain silent in order to protect their own interests. 

The defendants must also be divided into two additional 

categories, the primary and secondary defendants. The 

primary defendants are those defendants who, plaintiffs 

allege, participated in the operation and management of the 

affairs of GDC through a pattern of racketeering activity. 

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 following entities: Oxford 

First Corp. and the Oxford Finance Companies, Inc., Greyhound 

Financial Corporation, StanChart Business Credit, Inc., Lloyds Bank, 

PLC, Harbor Federal Savings and Loan Association, Merrill Lynch, Pierce, 

Fenner & Smith, Inc., National Bank of Canada, Citicorp Real Estate, 

Inc. and First National Bank of Boston. 

 15 
defendants, who, it is alleged, aided and abetted the 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 RICO. 

C. Procedural History 

Plaintiffs filed their original complaint on August 8, 1989, 

in the United States District Court for the District of New 

Jersey against GDC and its subsidiary, GDV, asserting 

claims under RICO, S 10(b) of the Securities Exchange 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 complaint, 

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 plaintiffs had 

failed to plead fraud with the particularity required 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 action. As 

in their earlier action, plaintiffs allege that the defendants 

participated in a fraudulent marketing scheme in violation 

of several federal criminal and civil statutes. 7 Although 

plaintiffs listed GDC and GDV as defendants in this action, 

they did not serve either company with a copy of the 

summons or the complaint. Rolo v. General Development 

Corp., 949 F.2d 695, 698 (3d Cir. 1991). Plaintiffs asserted 

before the district court their intention "to delete all 

references to GDC and GDV as defendants." Rolo v. General 

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 Racketeer Influenced and 

Corrupt Organizations Act, 18 U.S.C. S 1964, and the 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 over 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. 

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

this Court, in its 1991 decision, treated GDC or GDV as 

defendants in this case. Rolo, 949 F.2d at 698. 

About two weeks after the filing of this case, plaintiffs 

filed a proof of claim with the bankruptcy court, on behalf 

of all members of the NPA, a group of more than 5,000 

individual who had purchased property from GDC and its 

agents. Id. In support of their claim, plaintiffs reiterated the 

allegations detailed in their complaint, which was attached 

to their proof of claim. Id. During the bankruptcy 

proceedings, the bankruptcy judge denied class treatment 

of plaintiffs' claims and approved settlements in which over 

60,000 homesite and house purchasers participated. See In 

re GDC, No. 90-12231-BKC-AJC, slip op. at 1, 6 (Bankr. 

S.D. Fla. Aug. 16, 1991). 

Proceedings in this case were stayed by the district court 

from December 1990 until March 1993, pending disposition 

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 directed 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 district 

court also stayed plaintiffs' request for a preliminary 

_________________________________________________________________ 

8. Prior to the filing of this case GDC, its Chairman David Brown, and 

President Robert Ehrling, were indicted for their involvement 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 Cir. 1996). A civil 

action has also been brought by the United States against GDC. No. 90- 

0879-Civ. Nesbitt (S.D. Fla.). For their participation 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 count 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 calculated to deceive 

persons of ordinary prudence and comprehension was devised." Id. at 

1553. Both Brown and Ehrling are named as defendants in the action 

presently before this Court. 

 17 
injunction to bar Ambase and City Investment from 

liquidating and distributing their assets. Id. These stay 

orders were the subject of the first appeal before this Court.9 

On May 13, 1991, plaintiffs filed their First Amended 

Complaint, which no longer named either GDC or GDV as 

a defendant, but added a number of additional defendants. 

This complaint also dropped plaintiffs' claim for breach of 

contract. Later the same month, the defendants moved to 

dismiss the First Amended Complaint pursuant to Rule 

12(b)(2) and 12(b)(6). In June, plaintiffs voluntarily 

withdrew their claims for breach of an implied covenant of 

good faith, negligence and negligent misrepresentation. 

In their response to the defendants' Motion to Dismiss, 

plaintiffs first raised their challenge to the 

enterprise/person distinction under RICO. Although this 

argument raised allegations not contained in the amended 

complaint, the plaintiffs did not formally request further 

leave to amend the complaint. In considering the plaintiffs' 

response, the district court treated these amended RICO 

allegations as a Second Amended Complaint. In a lengthy 

Opinion and Order dated December 27, 1993, the district 

court granted defendant's motions to dismiss under Rule 

12(b)(6), and granted the motions to dismiss pursuant to 

Rule 12(b)(2) for lack of personal jurisdiction of 

Scharffenberger, Manley, Hatch, Pyne, Askew, Brinkerhoff, 

Clark and Simons. The dismissal of all of plaintiffs' claims 

rendered the Motion for Class Certification moot. The court 

dismissed the plaintiffs' complaint without granting leave to 

file a further amended complaint. Plaintiffs appealed 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 order staying this action 

pending final resolution of the related bankruptcy and criminal 

proceedings was not an appealable order under the collateral-order 

doctrine. Rolo, 949 F.2d at 700. Moreover, we concluded that plaintiffs 

could not demonstrate exceptional circumstances sufficient to warrant 

the grant of mandamus relief. Id. at 702. In contrast, however, the order 

staying consideration of the request for preliminary injunction could be 

appealed interlocutorily, and the district court erred in deferring 

consideration of the merits of the requested injunction. Id. at 703-04. 

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

opinion. Rolo v. City Investing Co. Liquidating Trust, 66 F. 

3d 312 (3d Cir. 1994). 

On November 18, 1994, plaintiffs filed a Petition for 

Rehearing and Suggestion for Rehearing In Banc. Their 

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 liability cannot 

be the same entity as the `enterprise' "). While plaintiffs' 

Petition was pending, another panel of this Court decided 

Jaguar Cars, Inc. v. Royal Oaks Motor Car Co., 46 F.3d 258 

(3d Cir. 1995), holding that under RICO, officers or 

employees "may properly be held liable as persons 

managing the affairs of their corporation as an enterprise." 

46 F.3d at 261. This holding endorsed the position taken by 

plaintiffs in their Petition for Rehearing. By Order dated 

April 4, 1995, we granted plaintiffs' Petition, vacated our 

earlier Judgment Order, vacated the order of dismissal 

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 Cars was 

necessary as there were other, independent grounds to 

support dismissal of all of plaintiffs' claims. Plaintiffs also 

advised the district court that they intended to seek leave 

to file a further amended complaint, to add and drop 

parties, and to restate their claims in light of Jaguar 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 requested by 

the district court, the parties filed their initial briefs on 

June 1, 1995. The following day, plaintiffs also served 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 Dismiss as a Second Amended 

 19 
letter dated June 8, 1995, the district court adjourned the 

Motion for leave to serve an amended complaint until 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 other grounds 

for dismissing plaintiffs' claims were unaffected by Jaguar 

Cars. Rolo, 897 F. Supp. at 833. The district court also 

dismissed plaintiffs' Motion to file a Second Amended 

Complaint and to add and drop parties. Id. Within ten days 

after the court's final order, plaintiffs moved for relief 

pursuant to Rule 60(b) of the Federal Rules of Civil 

Procedure, seeking leave to serve their proposed Second 

Amended Complaint and to add and/or intervene additional 

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 district court's 

decisions dismissing the complaint and denying postjudgment relief pursuant to Rule 60(b). Specifically, 

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 28 

U.S.C. S 1291, as the appeal arises from afinal decision 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' federal 

claims pursuant to 28 U.S.C. S 1331 and exercised pendent 

jurisdiction over their state claims.11 

_________________________________________________________________ 

Complaint, the proposed Amended Complaint would have been the 

Second Amended Complaint, and we will refer to it as such in this 

Opinion. 

11. This case was filed prior to the enactment of the supplemental 

jurisdiction statute, 28 U.S.C. S 1367 in 1990, which 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). 

 20 
Defendants contend, however, that we may not hear this 

appeal because plaintiffs did not file a timely notice of 

appeal. Rule 4 of the Federal Rules of Appellate Procedure 

provides that a notice of appeal must be filed within 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 order 

disposing of the motion. In this case, the district court 

dismissed plaintiffs' claims on August 24, 1995. Plaintiffs 

moved for relief pursuant to Rule 60(b) within the 10 day 

time limit provided by Rule 4(a)(4)(F) of the Federal Rules of 

Appellate Procedure. The district court denied their Rule 

60(b) Motion on October 23, 1995, and plaintiffsfiled 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 properly 

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 persuade 

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) cannot 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 characterization of 

their motion is not dispositive, instead the court must look 

to the "purpose the motion seeks to achieve"). In response, 

plaintiffs contend that they filed a Rule 60(b) Motion rather 

than an immediate appeal because they believed that the 

district court had construed this Court's mandate as 

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 our 

mandate to constitute "exceptional circumstances" meriting 

review pursuant to Rule 60(b)(6). 

Although plaintiffs' Rule 60(b) Motion was ultimately 

unsuccessful, it was not so deficient that it was not 

cognizable pursuant to Rule 60. Plaintiffs could reasonably 

 21 
believe that the district court had dismissed plaintiffs' 

Request for Leave to file an amended complaint because the 

district judge believed that our mandate had limited review 

to the issues created by the decision in Jaguar Cars and 

that a Rule 60 motion might offer broader relief. Plaintiffs' 

position is buttressed by the fact that within a relatively 

short time frame, controlling precedent was reversed after 

the prior dismissal had been affirmed by judgment order, 

but before completion of their appeal, which concluded 

when the prior dismissal was vacated on rehearing. 

Accordingly, plaintiffs' notice of appeal was timelyfiled 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 court's 

dismissal of their motion for leave to amend the complaint 

and denial of their motion for post-judgment relief under 

Rule 60(b) for abuse of discretion only. In re Burlington 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 reconsideration 

in light of the decision in Jaguar Cars because, they 

contend, it refused to consider their motion for leave to 

serve a Second Amended Complaint. Plaintiffs also argue 

that the district court abused its discretion when it denied 

their Rule 60(b) Motion seeking leave to amend. Wefind 

that the district court neither misunderstood our mandate 

nor abused its discretion by denying plaintiffs further leave 

to amend the complaint. 

Our mandate was designed to offer the district court 

broad flexibility to reconsider its earlier ruling in light of 

our decision in Jaguar Cars. Our April 4, 1995, Order 

provided in pertinent part: 

 22 
 The petition for rehearing is granted, the orders of the 

 district court from which the appeal were taken 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 Cir. 1995). 

 We do not retain jurisdiction. 

Rolo, No. 94-5057, 94-5058, slip op. at 2. The district court 

was free to reconsider its original ruling, dismissing the 

request for leave to amend, and also to consider the 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 their 

Motion for Leave to Amend. The district court's August 24, 

1995, Opinion states that plaintiffs' Motion for Leave to 

Amend is "dismissed." Rolo, 897 F. Supp. at 833. The court 

wrote, "the remand order did not contemplate that plaintiffs 

be allowed to reconstitute and restructure their action 

through the vehicle of an amended complaint and the

addition and deletion of parties" and that "the motion to 

serve a second amended and supplemental complaint and 

to add and drop parties should not be considered." Id. at 

827-28. On the other hand, the district court discussed 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 mandate as 

requiring consideration of the Proposed Complaint or any 

other proposed amended complaint." Id. at 832. Similarly, 

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 motion 

for leave to file a further amended and supplemental 

complaint and to substitute new plaintiffs." Rolo v. City 

Investing Co. Liquidating Trust, No. 90-4420 slip op. at *24 

(D.N.J. Oct. 23, 1995) (transcript of hearing denying 

plaintiffs' Rule 60(b) motion). 

Under these circumstances, we conclude that the actions 

of the district court are consistent with this Court's 

 23 
mandate. The court considered the impact of Jaguar Cars 

and determined that, in light of the procedural posture of 

the case, our mandate did not require that leave to amend 

be granted when there were other adequate grounds for 

upholding the decision to dismiss the complaint. 

In addition, the district court did not abuse its discretion 

by denying plaintiffs leave to amend pursuant to Rule 15(a) 

or Rule 60(b)(6). Rule 15(a) of the Federal Rules of Civil 

Procedure provides that a party may seek leave of the court 

to amend a pleading and that such leave "shall be freely 

given when justice so requires." The decision whether 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 part of the 

movant, repeated failure to cure deficiencies by amendment 

previously allowed, undue prejudice to the opposing party 

by virtue of allowance of the amendment, etc. -- the leave 

sought should, as the rules require, be `freely given.' " 

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 extraordinary 

and requires a "showing of exceptional circumstances." 

Marshall v. Board of Education, 575 F.2d 417, 425-26 (3d 

Cir. 1978). 

In this case, the plaintiffs' proposed Second Amended 

Complaint primarily seeks to replead facts and arguments 

that could have been pled much earlier in the proceedings. 

In Gasoline Sales, Inc. v. Aero Oil Company, 39 F.3d 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 placed in a 

 complaint before it is filed." [Plaintiff] is not seeking to 

 add claims it inadvertently omitted from its prior 

 complaints or which it did not know about earlier. 

 Rather [plaintiff] is modifying the allegations in hopes 

 24 
 of remedying factual deficiencies in its prior pleadings, 

 even to the point of contradicting its prior pleadings. 

Id. at 74. This description is equally applicable to the 

procedural posture of this case. Plaintiffs have not only had 

the opportunity to file an amended complaint, but the 

district court also accepted certain allegations contained in 

their response to defendants' motion to dismiss as a Second 

Amended Complaint. Plaintiffs have already had ample 

opportunity to plead their allegations properly and

completely. 

The duration of this case, and the substantial effort 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 factors 

could constitute undue delay, bad faith or prejudice to the 

defendants. See Adams v. Gould, 739 F.2d 858, 863-64 (3d 

Cir. 1984). Finally, in our Judgment Order of November 8, 

1994, which was later vacated, we ruled that the district 

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). Because 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 dismissing 

plaintiffs' renewed Motion for Leave to Amend. 

B. Statute of Limitations 

In its original opinion dismissing this case, the district 

court concluded that plaintiffs' RICO claims against the 

primary defendants could not survive because plaintiffs had 

"failed to plead that the RICO `persons' (GDC's officers, 

directors and controlling shareholders) were separate and 

distinct from the `enterprise' (GDC)." Rolo, 897 F. Supp. at 

832. In the alternative, the district court found that these 

claims could also be dismissed on the grounds that they 

were time barred. Id. Plaintiffs' aiding and abetting 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 anything 

more than general and conclusory allegations of knowledge 

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

Following our decision in Jaguar Cars, the 

enterprise/person distinction no longer constituted a 

grounds for dismissing their RICO claims against the 

primary defendants. The district court found that other, 

independent reasons supported dismissal of all plaintiffs' 

RICO claims. The court concluded that plaintiffs' RICO 

claims could be dismissed as to all defendants on the 

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 Jaguar Cars. 

Id. 

Although RICO does not contain an express statute of 

limitations for civil actions, the Supreme Court has held 

that RICO claims are subject to the four year statute 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 have 

accrued no earlier than November 8, 1986, for the claims 

contained in the original complaint and May 13, 1987, for 

those claims contained in the First Amended Complaint. 

At the time plaintiffs filed both their original complaint 

and their First Amended Complaint, this Court recognized 

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 the plaintiff 

 knew or should have known that the elements of a civil 

 RICO action existed. However, if further predicate acts 

 occur that are part of the same pattern of racketeering, 

 regardless of whether they injure the plaintiff or if the 

 plaintiff suffers further injury from a predicate act that 

 is part of the same pattern of racketeering, even if that 

 predicate act occurred outside the limitations period, 

 the statute of limitations begins to run from 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. 1993) 

(citation omitted). Relying in part upon this accrual 

 26 
method, plaintiffs contend that the district court erred in 

concluding that their RICO claims were not timely filed. 

During the pendency of this appeal, the Supreme Court 

held that the last predicate act accrual method was not a 

proper interpretation of the RICO statute of limitations. 

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 the 

longest period of time in which to file their claims is the 

"injury and pattern discovery" method, which has also been 

applied in this Circuit. See Keystone Ins. Co. v. Houghton, 

863 F.2d 1125, 1130 (3d Cir. 1988). Under this method, 

plaintiffs have four years in which to file suit from the time 

that they discover or should have discovered either their 

injury or the defendants' pattern of racketeering activity. 

Given that plaintiffs purchased their properties in the 

1970s, it seems likely that they should have discovered the 

defendants' allegedly fraudulent activities prior to 1986 or 

1987, when their complaints were filed.12 We will not, 

however, address this issue directly as other adequate 

grounds exist for dismissing the plaintiffs' RICO claims. 

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 plaintiffs. 

The district court dismissed the complaint as to these 

defendants, because the plaintiffs had failed to plead that 

the alleged aiders and abettors had "participated in 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 defendants is 

unavailing. In Klehr, the Court clarified that in order to use fraudulent 

concealment to toll the statute of limitations, plaintiffs must have been 

reasonably diligent in protecting their interests. 117 S. Ct. at 1993. 

Whether or not plaintiffs should have discovered their claims prior to 

1986, there is no evidence that plaintiffs were reasonably diligent in 

supervising the defendants' actions with regard to their property. 

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

829. The district court also found that had the allegations 

of the Amended Complaint satisfied the Reves requirement, 

these allegations would be insufficient because they 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 affirm the 

district court's dismissal of the plaintiffs' RICO aiding and 

abetting claims without reaching either of the district 

court's grounds for dismissing these allegations because we 

are convinced that a private cause of action for aiding and 

abetting a RICO violation cannot survive the Supreme 

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 statute. "It 

is inconsistent with the settled methodology inS 10(b) cases 

to extend liability beyond the scope of conduct prohibited 

by the statutory text." Id. at 177. Reasoning that the text of 

S 10(b) does not reach aiding and abetting a violation of 

S 10(b), the Court concluded that "the statute itself resolves 

the case." Id. at 177-78. The Court rejected the argument 

that Congress had intended to permit private actions for 

aiding and abetting, stating "Congress knew how to impose 

aiding and abetting liability when it chose to do so." Id. at 

176. The Court explained, 

 Congress has not enacted a general civil aiding and 

 abetting statute . . .. [W]hen Congress enacts a statute 

 under which a person may sue and recover damages 

 from a private defendant for violation of some statutory 

 norm, there is no general presumption that the plaintiff 

 may also sue aiders and abettors. 

Id. at 181. The Court refused to entertain arguments based 

upon reference to general tort principles or the policy 

considerations supporting inference of a Rule 10b-5 aiding 

and abetting cause of action. Id. at 181, 188. 

 28 
The Court also rejected the argument that a private

cause of action for aiding and abetting in violation 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 action must 

 also exist. We have been quite reluctant to infer a 

 private right of action from a criminal prohibition alone 

 . . .. 

Id. at 190. Thus, the Court concluded that because the text 

of S 10(b) itself does not prohibit aiding and abetting, a 

private plaintiff may not maintain a suit for aiding 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 reason of a 

violation of section 1962." Like S 10(b), the text of S 1962 

itself contains no indication that Congress intended 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 aiding and 

abetting statute, 18 U.S.C. S 2. This provision has no 

application to private causes of action. See Central 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 to aiders 

and abettors of RICO violations, under Central Bank of 

Denver, we must "interpret and apply the law as Congress 

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. 1461, 

1475 (N.D. Ill. 1996). Because the text of the RICO statute 

does not encompass a private cause of action for aiding and 

abetting a RICO violation, "in accordance with the policies 

articulated in Central Bank of Denver", we have no 

 29 
authority to imply one. Hayden v. Paul, Weiss, Rifkind, 

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 RICO claims 

against all of the secondary defendants. 

We reach this result despite our discussion of aiding and 

abetting liability in Jaguar Cars, a case decided after 

Central Bank of Denver. See 46 F.3d at 270. In Jaguar 

Cars, the opinion did not address the impact of Central 

Bank of Denver on earlier cases that had recognized a 

private cause of action for aiding and abetting under RICO. 

The decision in Jaguar Cars focused on whether there had 

been sufficient evidence to find the defendant liable for 

aiding and abetting a RICO violation. See 46 F.3d at 270. 

The parties did not challenge the existence of a cause of 

action for aiding and abetting, and we did not raise the 

issue sua sponte. Although, under this Court's Internal 

Operating Procedures, we are bound by, and lack the

authority to overrule, a published decision by a prior panel, 

see I.O.P. 9.1, we conclude that the discussion of a private 

cause of action for aiding and abetting a RICO violation in 

Jaguar Cars does not control our analysis in this case. The 

decision in Central Bank of Denver was not called to the 

attention of the panel in Jaguar Cars, and the panel's 

opinion neither explicitly nor implicitly decided the impact 

of Central Bank of Denver on the continued availability of a 

private cause of action for aiding and abetting a RICO 

violation. 

D. Failure to Plead Fraud with the Requisite Particularity 

The Amended Complaint alleges that the primary 

defendants, those defendants who actually participated in 

the operation and management of the fraudulent scheme, 

committed mail and wire fraud as predicate racketeering 

acts. Because the Complaint alleges that these defendants 

participated in the operation or management of the 

racketeering enterprise, the allegations against the primary 

defendants conform with the requirements for liability 

under RICO established by Reves v. Ernst & Young. 

Originally, the district court dismissed these claims for 

 30 
failure to plead that the RICO "persons" were separate and 

distinct from the RICO "enterprise." Rolo, 897 F. Supp. at 

829. Following the decision in Jaguar Cars, the district 

court reaffirmed its dismissal of these claims against the 

primary defendants, finding that they were time barred. Id. 

at 833. We will affirm the dismissal of these claims without 

reaching the statute of limitations question because 

plaintiffs' allegations fail to satisfy the pleading 

requirements established by Fed. R. Civ. P. 9(b). 

Rule 9(b) states, "In all averments of fraud or mistake, 

the circumstances constituting fraud or mistake shall be 

stated with particularity. Malice, intent, knowledge, and 

other condition of mind of a person may be averred 

generally." Thus, under Fed. R. Civ. P. 9(b), plaintiffs must 

plead with particularity the "circumstances" of the alleged 

fraud. They need not, however, plead the "date, place or 

time" of the fraud, so long as they use an "alternative 

means of injecting precision and some measure of 

substantiation into their allegations of fraud." Seville 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 charges. 

Id. Courts should, however, apply the rule with some 

flexibility and should not require plaintiffs to plead 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 misrepresentation was 

adequately plead. 742 F.2d at 791. We found that, 

 Seville adequately satisfied the requirements of Rule 

 9(b) by incorporating into the complaint a list 

 identifying with great specificity the pieces of 

 machinery that were the subject of the alleged fraud 

 . . .. The Complaint sets forth the nature of the alleged 

 misrepresentations, and while it does not describe the 

 precise words used, each allegation of fraud adequately 

 describes the nature and subject of the alleged 

 misrepresentation. 

 31 
Id. In contrast, in Saporito v. Combustion Engineering, 843 

F.2d 666 (3d Cir. 1988), cert. granted and judgment vacated 

on other grounds, 489 U.S. 1049 (1989), the plaintiffs failed 

to satisfy this standard. The plaintiffs' complaint alleged 

that ". . . defendants and/or persons under their direction 

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 Voluntary 

Separation Incentive Plan]." Id. at 673. This Court held that 

their Complaint was deficient because it did not adequately 

allege who made the statements ("defendants and/or 

persons under their direction or control") or who received 

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 described 

in some detail. For example, the Complaint alleges that 

"[d]uring standard sales presentations, the moderators 

acting for GDC would misrepresent the supply, demand 

and value of the lots" by stating that the prices for the lots 

would increase the following day and that the number of 

lots for sale had decreased due to prior purchases.

Amended Complaint at P 84. The moderators also allegedly 

misrepresented GDC's intentions and abilities with regard 

to development of the communities. Amended Complaint 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." Amended 

Complaint at P 123. 

While many of the allegations relating to the allegedly 

fraudulent scheme are quite detailed, the Complaint lacks 

any specific allegations about the presentations made 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 mailings is 

described in reasonably specific terms, but when, by whom, 

and to whom a mailing was sent, and the precise content 

 32 
of each particular mailing are not detailed. The Complaint 

also includes some general allegations such as,"[a]t the 

time plaintiffs purchased their Lots, when they purchased 

houses from GDC, and thereafter, the material facts alleged 

in paragraphs 87 and 138 herein were unknown to them 

and were actively concealed from them by the defendants." 

Amended Complaint at P 143. It remains unclear, however, 

who misrepresented and concealed the information, when 

and how. For example, plaintiffs allege that GDC concealed 

its fraud through a Customer Service Office. It is unclear 

from the Complaint, however, whether the Rolos or 

Tenerellis ever contacted this office. The Complaint only 

alleges what happened to "most purchasers," "the vast 

majority of complaints" and what happened "typically." 

Amended Complaint at P 145. 

Under Rule 9(b), failure to plead fraud with particularity 

with respect to what happened to a specific plaintiff 

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, this 

includes specific allegations as to which fraudulent 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 First 

Amended Complaint links the Rolos and Tenerellis to the 

scheme in a general way, as purchasers of GDC properties, 

the manner in which the fraudulent scheme allegedly

caused them injury has not been adequately pled. Plaintiffs 

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 what 

actually happened to either the Rolos or the Tenerellis, 

_________________________________________________________________ 

13. For example, in one of the paragraphs alleging mail fraud, many 

individuals are listed as plaintiffs, including "Paul and Agnes Duncan." 

Amended Complaint at P 396. Paul and Agnes Duncan are not parties to 

this case. 

 33 
plaintiffs 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 affirmed 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 plaintiffs' RICO 

claims. The claims against the secondary defendants, 

alleging liability for aiding and abetting a RICO conspiracy, 

cannot survive the Supreme Court's decision in Central 

Bank of Denver. Plaintiffs' claims against the primary 

defendants also fail because their allegations are not pled 

with the particularity required by Rule 9(b). Accordingly, 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 opportunity to plead their 

allegations fully and in the proper form, we will not 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