Source: http://openjurist.org/235/f3d/629
Timestamp: 2014-07-29 23:37:35
Document Index: 768022872

Matched Legal Cases: ['§ 1961', '§ 1341', '§ 1962', '§ 1962', '§ 1962', '§ 1961']

235 F3d 629 Western Associates Limited Partnership v. Market Square Associates, et al. | OpenJurist
235 F. 3d 629 - Western Associates Limited Partnership v. Market Square Associates, et al.	Home235 f3d 629 western associates limited partnership v. market square associates, et al.
235 F3d 629 Western Associates Limited Partnership v. Market Square Associates, et al. 235 F.3d 629 (D.C. Cir. 2001)
Western Associates Limited Partnership, individually and on behalf of Avenue Associates Limited Partnership, Appellantv.Market Square Associates, et al., Appellees
Argued November 28, 2000Decided January 5, 2001
In this appeal the court again addresses the continuity prong of the "pattern of racketeering activity" requirement of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961, et seq. Western Associates Limited Partnership ("Western") sued various individuals and investors associated with Market Square Associates (collectively, "Market"), its partner in the development of a real estate project known as Market Square. Western alleged violations under RICO and District of Columbia law based on an accounting dispute in the partnership. The district court, applying the multi-factor analysis of Edmondson & Gallagher v. Alban Towers Tenants Association, 48 F.3d 1260 (D.C. Cir. 1995), dismissed the complaint pursuant to Fed. R. Civ. P. 12(b)(6) because Western failed to allege the requisite pattern of racketeering activity.1 Western contends that in finding the "continuity" element lacking, the district court erred by failing to focus on the length of the time period during which Market's predicate acts occurred, and misread Edmondson. We disagree, and accordingly we affirm.
Subsequently, Western filed an amended complaint, increasing the number of schemes and victims alleged. The Amended complaint alleges that Market conspired to commit and engaged in four separate but related schemes to defraud Avenue Associates, Western, and the general and limited partners that make up Western. The four schemes consist of: (1) the Revised Budget-Approval Scheme; (2) the Cost Shifting Scheme; (3) the Income Projection Scheme; and (4) the Going-Concern Scheme.
The four alleged schemes are briefly summarized as follows. (1) The Revised Budget-Approval Scheme was a plot to conceal cost overruns. According to the complaint, Market knew as early as April 1988 that the total cost of the project would exceed the original budget, and improperly approved and conspired to conceal cost increases. In August 1989, after 18 months, Market sent a revised budget to Western, knowing that the cost projections in this budget were also inaccurate. Western relied on the false representations in the revised budget and approved it in December 1989. (2) The Cost-Shifting Scheme addresses the priority of allocations and the continuing cost increases. The partnership's budgets called for costs to be divided into "guaranteed" and "non-guaranteed" categories, and prohibited guaranteed cost overruns from being repaid from partnership cash flow. According to the complaint, Market circumvented these accounting restrictions by shifting guaranteed cost items into the non-guaranteed category, used improperly authorized optional loans to cover these cost increases, and repaid these loans out of partnership distributions. This fraudulent scheme was concealed by annual financial statements mailed to Western each year between 1990 and 1996. (3) The Income Projection Scheme arises from Market's attempt to conceal the impact of the budget overruns. According to the complaint, in 1992, in a series of financial documents, Market falsely represented the expected revenues from Market Square over the next 15 years, overstated the value the cost increases had added to the project, and deceived Western regarding the partnership's debt. Due to these misrepresentations, Western refrained from suing appellees or pursuing other remedies. (4) The Going-Concern Scheme relates to a failure to provide honest annual accounting statements. The complaint alleges that from 1994 to 1996, Market sent Western financial statements that omitted a "going-concern clause," in an effort to conceal Avenue Associates' burdensome debt.
According to the amended complaint, Western did not become aware that the Market Square Project's financial health was in jeopardy until early 1997, when it received a financial statement indicating that the partnership was having difficulty meeting its financial obligations. This statement also acknowledged that Market Square would not meet Market's 1992 income projections. The amended complaint alleged that the four schemes included numerous violations of the mail and wire fraud statutes, 18 U.S.C. §§ 1341 and 1343, and that these allegedly fraudulent acts violated § 1962(c) of the RICO Act. Western also alleged a violation of § 1962(d) of the RICO Act, which prohibits conspiracy to violate § 1962(c). Finally, Western alleged common law claims of fraud, civil conspiracy to defraud, breach of fiduciary duty, aiding and abetting a fiduciary, and breach of contract, and requested various types of injunctive relief, including access to the records of Avenue Associates.
The district court granted Market's motion to dismiss under Fed. R. Civ. P. 12(b)(6), based on Western's failure to allege a "pattern of racketeering activity," as required by § 1961(5) of the RICO Act. Relying on similarities to Edmondson,