Opinion ID: 566797
Heading Depth: 2
Heading Rank: 2

Heading: Was There A Pattern?

Text: 39 Even if the complaint contained more specificity as to the time, place and contents of the allegedly fraudulent communications, we would still affirm the order of dismissal on the ground that it failed adequately to limn a pattern of racketeering activity. A pattern requires more than just the existence of multiple racketeering predicates. See H.J., 492 U.S. at 238, 109 S.Ct. at 2900 (RICO's legislative history leaves no doubt that there is something to a RICO pattern beyond simply the number of predicate acts involved); see also Sedima, 473 U.S. at 496 n. 14, 105 S.Ct. at 3285 n. 14. Thus, the allegation of two or more predicate acts of mail fraud is necessary but not sufficient to establish a pattern of racketeering activity. Sion, 893 F.2d at 444; see also Roeder v. Alpha Industries, Inc., 814 F.2d 22, 30 (1st Cir.1987) (Racketeering acts ... do not constitute a pattern simply because they number two or more.). For there to be a pattern, a plaintiff must demonstrate not only the existence of two or more predicate acts, but also that they are related and pose at least a threat of continued criminal activity. See H.J., 492 U.S. at 238-39; Sion, 893 F.2d at 444. Even apart from the overly scanty description of the predicates, the abstract scenario painted by the plaintiffs in the instant complaint did not meet the requirements of relatedness and continuity. 40 1. Relatedness. The relatedness test is not a cumbersome one for a RICO plaintiff. A showing that predicate acts have the same or similar purposes, results, participants, victims, or methods of commission, or otherwise are interrelated by distinguishing characteristics and are not isolated events is essentially all that is needed. H.J., 492 U.S. at 240, 109 S.Ct. at 2901; Sion, 893 F.2d at 445. A fact-specific allegation of a single common scheme can be used to satisfy the relatedness requirement. See Sion, 893 F.2d at 445; Phelps v. Wichita Eagle-Beacon, 886 F.2d 1262, 1273 (10th Cir.1989). Here, the complaint described two sets of transactions stemming from the formation of the joint ventures: (1) the 1986 property acquisitions in upstate New York and (2) the 1988 property swap whereby the Texas properties were conveyed. 41 We recognize that, as pleaded, the 1986 and 1988 episodes each featured serial transactions that had some common reference points, most notably the victims' identities and the Gleason/Foster axis. Moreover, the purposes of the underlying transactions were at least similar. But notwithstanding these facts, plaintiffs' RICO claim founders on the bald assertion that these two episodes, nearly two years apart in time, hundreds of miles apart in space, and involving two largely distinct groups of participants, were somehow pieces of a unitary scheme. We fully agree with the court below that the facts as alleged, while arguably sufficient to show relatedness with regard to the actions of common participants such as Gleason and Foster, did not implicate any of the other defendants in the same way. No allegations appeared suggesting that, say, Humes or Commonwealth Federal were involved in the 1986 episode, or that Evans, the Swartz Firm, Sweet, or Carthage Federal were involved in the 1988 episode. In the absence of any demonstrable imbrication, the plaintiffs' claim that these episodes were successive segments in a single scheme implicating the defendants' collective actions is nothing more than a conclusory assertion which need not be honored under Rule 12(b)(6). See Correa-Martinez, 903 F.2d at 52; Dartmouth Review, 889 F.2d at 16. We rule, therefore that the district court correctly wrote off the plaintiffs' allegations as insufficient to stake a claim that the 1986 and 1988 episodes were part of a common scheme for which the appellees, collectively, could be held liable. 11 42 2. Continuity. The fact that the 1986 and 1988 episodes lack the requisite relatedness inter sese does not end our inquiry. The appellees do not argue, nor could they successfully argue, that the serial transactions within each of the two episodes lacked relatedness to each other. Hence, we must examine each episode separately to deduce whether there has been a sufficient showing of continued criminal activity. 43 Under recent High Court precedent, two methods are available to determine if a set of predicate acts has achieved the continuity necessary to underbrace a RICO claim. See, e.g., H.J., 492 U.S. at 238, 109 S.Ct. at 2900. For there to be continuity, the plaintiff must show that the related predicates amounted to, or posed a threat of, continued criminal activity. Sion, 893 F.2d at 445-46 (discussing H.J.). Under the amount[ing] to approach, [a] party alleging a RICO violation may demonstrate continuity over a closed period by proving a series of related predicates extending over a substantial period of time. H.J., 492 U.S. at 242, 109 S.Ct. at 2902. Because RICO was intended by Congress to apply only to enduring criminal conduct, [p]redicate acts extending over a few weeks or months ... do not satisfy this requirement. Id. Under the threat approach, however, even where the predicate acts occur in a narrow time frame and suit is brought before the pattern has taken definitive shape, the requirement can still be satisfied by demonstrating a realistic prospect of continuity over an open-ended period yet to come. This approach necessitates a showing that the racketeering acts themselves include a specific threat of repetition extending indefinitely into the future [or] ... are part of an ongoing entity's regular way of doing business. Id. 44 Viewed against this backdrop, the allegations anent the 1986 episode fail to satisfy the continuity requirement. The conduct complained of, insofar as it involved the appellees, spanned no more than three to four months. The only factual allegations regarding Evans and the Swartz Firm concerned their representation of the plaintiffs at some twenty-five real estate closings between March and June of 1986. On the facts that appear of record, this is too short a period to support a claim that the appellees were engaged in the long-term criminal conduct at which RICO is aimed. See, e.g., Kehr Packages, Inc. v. Fidelcor, Inc., 926 F.2d 1406, 1418 (3d Cir.) (eight-month period of fraudulent activity did not constitute a pattern, absent threat of future criminal acts), cert. denied, --- U.S. ----, 111 S.Ct. 2839, 115 L.Ed.2d 1007 (1991); Parcoil Corp. v. Nowsco Well Service, Ltd., 887 F.2d 502, 503-05 (4th Cir.1989) (seventeen falsified reports sent over a period of four months did not establish continuity); Sutherland v. O'Malley, 882 F.2d 1196, 1204-05 (7th Cir.1989) (three acts of mail fraud within five months did not satisfy continuity plus relatedness requirement); see generally H.J., 492 U.S. at 242-43, 109 S.Ct. at 2902-03; Sion, 893 F.2d at 447. 45 The allegations against Sweet and Carthage Federal are even weaker than those against Evans and the Swartz Firm. The full extent of the pleaded conduct attributed to these defendants consists of the appraisal of twenty properties and the subsequent issuance of three mortgages, all between early March of 1986 (when the appellants' loan applications were submitted) and May of that year (when Carthage Federal granted the mortgages). 12 This is precisely the sort of sporadic activity, H.J., 492 U.S. at 239, 109 S.Ct. at 2900, that Congress did not intend to be the target of RICO actions. See Id. at 241-42, 109 S.Ct. at 2901-02; Sedima, 473 U.S. at 496 n. 14, 105 S.Ct. at 3285 n. 14. 46 We regard as mere buzznacking the plaintiffs' efforts to suggest a lengthened period of involvement with respect to Carthage Federal's role by reliance on billing notices from, as well as checks to, the lender, dating from 1989 and 1990. There is no assertion that these communications were in any way irregular, comprised a means by which the fraudulent scheme was perpetrated, or served to perpetuate or conceal the fraud. Hence, they cannot be considered separate fraudulent actions for the sake of establishing a pattern. See Fidelcor, 926 F.2d at 1414-15; Management Computer Services, Inc. v. Hawkins, Ash, Baptie & Co., 883 F.2d 48, 51 (7th Cir.1989) (subsequent and varied uses of stolen software did not comprise additional predicate acts relevant to establishment of RICO pattern); cf. Sion, 893 F.2d at 443 (ninety-five checks were the actual means by which defendants fraudulently conveyed assets of companies). We hold that, in assessing the longevity of a RICO scheme involving allegations of mail fraud, the scheme's duration must be measured by reference to the particular defendant's fraudulent activity, rather than by otherwise innocuous or routine mailings that may continue for a long period of time thereafter. Accord Fidelcor, 926 F.2d at 1418. 47 Shakier still is the claim alleged against defendant Humes in regard to the 1988 episode. The only actions implicating Humes relate to his appraisals of some twenty-three of the plaintiffs' Watertown properties between the time when Gleason and Foster proposed trading these properties (June 1988) and the time, less than two months later, when Commonwealth Federal made a loan secured by these properties. We fail to see how, by any stretch of the imagination, such isolated incidents might be construed to be long-term criminal conduct, or somehow woven together to establish continuity and, thus, the jurisdictionally necessary pattern of racketeering activity. 48 Commonwealth Federal, of course, stands on the outermost periphery of the action. Its only alleged wrongdoing consisted of the issuance of a single mortgage on August 4, 1988. It is little short of chimerical to posit, from so fragile a link, that the charges against Commonwealth Federal somehow met the continuity requirement. RTC, as Commonwealth Federal's conservator, was therefore entitled to dismissal. 49 Lastly, contrary to the appellants' hopeful rumination, the complaint did not catch these defendants on the alternative prong of constitut[ing] a threat of ... continuing racketeering activity. H.J., 492 U.S. at 240, 109 S.Ct. at 2901. There is no valid basis for suspecting that the appellees' supposed misconduct constituted a threat of continuing racketeering activity at the time it is alleged to have occurred. The plaintiffs do not assert, or even suggest, that the behavior will likely be repeated or that the actions complained of constituted the regular way in which Evans, the Swartz Firm, Sweet, Humes, and/or the two lenders conducted their ongoing businesses.