Court Opinion

ID: 9000004
Source: CourtListenerOpinion
Date Created: 2022-11-27 12:58:45.671736+00
Date Added: 2024-06-11T17:11:08.731525
License: Public Domain

PARKER, Chief District Judge,
concurring in the result:
Although I agree with ■ substantial portions of the majority opinion and concur in its ultimate conclusion, I believe that the majority reads the pleadings too narrowly in certain regards and that there is a preferable ground for affirmance.
I.
I agree with the majority that in order to prevail plaintiffs must allege “at least two acts of racketeering activity” within a ten year period. Ante at 190, 192. I also agree that plaintiffs properly alleged' a predicate act of extortion in their claim that Anderson threatened economic harm if plaintiffs refused to bring Rothstein into the deal. Ante at 194.
Contrary to the majority view, however, it seems to me that a fair reading of the Complaint and Plaintiffs’ RICO Case Statement leads to the conclusion that the plaintiffs have alleged at least three predicate acts of mail fraud in addition to the extortion.
First, plaintiffs allege that defendants made material misrepresentations as to the terms of the deal in two pre-bid mailings— the January 1986 mailing of the HUD Prospectus and Invitation to Bid, and the March 1986 mailing of the HUD “Bid Kit.” Both .of these mailings are alleged to further a fraudulent scheme to induce plaintiffs to submit a bid on the project. They constitute well-pleaded acts of mail fraud. See 18 U.S.C. § 1341. Although the scheme to induce plaintiffs’ bid through fraud, as the majority points out, is ostensibly in tension with the subsequent scheme *196to cause plaintiffs to relinquish their ownership in the property, both schemes are nevertheless set forth with adequate clarity in the pleadings.1
Furthermore, the fact that the two schemes may have contrary purposes does not mean that predicate acts done in furtherance of each may never be considered concurrently to prove a “pattern of racketeering activity” under RICO. RICO acts of course must be “related” in order to form a pattern, but the relationship may be considerably more tangential than is suggested by the majority. In H.J., Inc. v. Northwestern Bell Tel. Co., 492 U.S. 229, 109 S.Ct. 2893, 106 L.Ed.2d 195 (1989), the Supreme Court adopted as the definition of relatedness for RICO purposes the broad definition given by Congress in Title X of the Organized Crime Control Act of 1970, Pub.L. 91-452, 84 Stat. 922 (of which RICO formed Title IX): Two criminal acts are related if they “ ‘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.’ ” 492 U.S. at 240, 109 S.Ct. at 2901 (quoting 18 U.S.C. § 3575(e)). “We have no reason to suppose that Congress had in mind for RICO’s pattern of racketeering component any more constrained a notion of the relationships between predicates that would suffice.” Id. As a matter of law, therefore, acts with conflicting goals may nonetheless be “related” for RICO purposes if they satisfy other criteria of relatedness.
All of the alleged predicate acts relate to plaintiffs’ efforts to acquire and rehabilitate the HUD project in Hartford in 1986, and both schemes were allegedly perpetrated by the same persons and organizations. In my view, these common features easily satisfy the relatedness requirement as explicated in H.J., Inc., despite an apparent conflict of goals.
Second, I believe that at least one, and probably two, of the post-bid mailings qualify as well-pleaded predicate acts of mail fraud. Specifically, I disagree with the majority in its conclusion that the April 9th letter to McLaughlin and Gall was not deceptive and, therefore, did not constitute an act of mail fraud. Plaintiffs allege that the defendants had a scheme to defraud, the purpose of which was “to cause plaintiffs such severe financial harm that they would be forced to abandon the Project....” (Complaint ¶ 4, Joint Appendix at 37.) The claim is that the alleged scheme was played out through a series of acts, which occurred after plaintiffs had rejected Anderson’s attempt to force a joint venture with Rothstein by the use of extortion. (Plaintiff’s RICO Case Statement at 20, J.A. at 92.) Among those acts was the April 9th letter, in which Anderson claimed that financing would be available only on more onerous and costly terms than had previously been promised. (J.A. at 96).
Given the context in which the mailing occurred, the clear implication of the pleadings is that Anderson was fraudulently demanding onerous terms in order to force plaintiffs off the project. Similarly, the mailing of June 16, 1986 falsely claimed that any work done by plaintiffs by way of an early start could not be considered as eligible for “prior start reimbursement.” I believe that these mailings, read in conjunction with the extortion allegation, constitute well-pleaded predicate RICO acts of mail fraud.2
In my view, the RICO remedy is unavailing in this case, however, because plaintiffs’ allegations fail to satisfy the “continuity” element of a RICO pattern.
II.
The alleged schemes consisted of at most a small number of mail fraud offenses and one act of attempted extortion *197committed over a period of some six months (January to June 1986) by persons otherwise engaged in legitimate businesses. Such are the temporal limits of the well-pleaded allegations of a racketeering pattern.
On appeal, plaintiffs attempt to transcend these limits by insisting that the Complaint alleges fraudulent conduct by Anderson for a fifteen-month period, from January 1986 through March 1987. But general allegations of fraud, even if made with requisite particularity, do not ipso facto constitute allegations of “racketeering activity” under RICO. Racketeering activity includes mail fraud as made unlawful in 18 U.S.C. § 1341 — but not common-law fraud.3
To prove a “pattern of racketeering activity,” a RICO plaintiff must show that the alleged predicate acts are both related in the relevant sense and amount to, or threaten the likelihood of, “continued criminal activity.” H.J., Inc. v. Northwestern Bell Tel. Co., 492 U.S. at 237, 109 S.Ct. at 2899. The continuity element is satisfied by showing either the commission of related predicate offenses during “a closed period of repeated conduct” that lasts a “substantial period of time” or the threat thereof, that is, “past conduct that by its nature projects into the future with a threat of repetition.” Id. at 241-42, 109 S.Ct. at 2901-02. “Predicate acts extending over a few weeks or months and threatening no future criminal conduct do not satisfy this requirement: Congress was concerned in RICO with long-term criminal conduct.” Id. at 242, 109 S.Ct. at 2902. Under this standard, plaintiffs’ allegations fail to demonstrate the requisite continuity.
The facts of H.J., Inc. stand in contrast to those alleged here. In that case the Supreme Court found that a pattern of racketeering activity had been properly pleaded where the complaint alleged
that at different times over the course of at least a 6-year period the [telephone company officers and employees] gave five members of the [Minnesota Public Utilities Commission] numerous bribes, in several different forms, with the objective — in which they were allegedly successful — of causing these commissioners to approve unfair and unreasonable rates for Northwestern Bell.
_[Petitioners claim that the racketeering predicates occurred with some frequency over at least a 6^year period, which may be sufficient to satisfy the continuity requirement. Alternatively, a threat of continuity of racketeering activity might be established at trial by showing that the alleged bribes were a regular way of conducting Northwestern Bell’s ongoing business, or a regular way of conducting or participating in the conduct of the alleged and ongoing RICO enterprise, the MPUC.
Id. at 250, 109 S.Ct. at 2906 (emphasis added).
This Circuit has explored the continuity element of a RICO suit in two recent en banc decisions. In United States v. Indelicato, the court held that a RICO pattern was established where the defendant, who committed three murders almost simultaneously, was a member of an organized crime family. “Where the enterprise is an *198entity whose business is racketeering activity, an act performed in furtherance of that business automatically carries with it the threat of continued racketeering activity.” 865 F.2d 1370, 1383-84 (2d Cir.) (en banc), cert. denied, 493 U.S. 811, 110 S.Ct. 56, 107 L.Ed.2d 24 (1989). And in Beauford v. Helmsley, the court held that a threat of continuity was adequately pleaded where the alleged fraudulent scheme used the mails to sell and convert into condominiums over 8,000 apartments and “there was reason to believe that similarly fraudulent mailings would be made over an additional period of years.” 865 F.2d 1386, 1392 (2d Cir.), vacated and remanded for further consideration in light of H.J., Inc., 492 U.S. 914, 109 S.Ct. 3236, 106 L.Ed.2d 584, original decision adhered to, 893 F.2d 1433 (2d Cir.), cert. denied, 493 U.S. 992, 110 S.Ct. 539, 107 L.Ed.2d 537 (1989). See also Jacobson v. Cooper, 882 F.2d 717, 720 (2d Cir.1989) (continuity adequately alleged where related predicates extended over “a matter of years”). Unlike Indelicato, the enterprise in this case is not one whose business is racketeering activity; as plaintiffs concede, the defendants are all engaged in otherwise legitimate businesses and that, in committing the racketeering activities alleged, they “subverted the legitimate, usual, and daily activities of the Enterprise.” RICO Case Statement, Responses to ¶¶ 7 and 8. Unlike Beauford, no suggestion is made that similar racketeering predicates will occur over an additional period of years — or, for that matter, into the future at all.
The continuity requirement was also addressed at length in Procter & Gamble Co. v. Big Apple Industrial Bldgs., Inc., 879 F.2d 10 (2d Cir.1989), cert. denied, 493 U.S. 1022, 110 S.Ct. 723, 107 L.Ed.2d 743 (1990), where this court found a pattern of racketeering activity adequately pleaded to survive a motion to dismiss. The case involved contracts for the lease, construction and financing of a television and motion picture production facility. The defendants, owners of the building and contractors for the renovation project, allegedly made numerous misrepresentations relating to their experience and expertise, to anticipated costs, and to the site’s potential. The plaintiffs also accused them “of repeated illegal siphoning of project funds.” Id. at 13. The district court had dismissed the complaint, finding “that the necessary element of continuity was lacking principally because the ‘single, finite project’ was not of a continuing nature.” Id. at 18. This court reversed, stating:
A pattern of racketeering activity may be discerned from the facts alleged in plaintiffs’ 77-page complaint. It claims that defendants engaged in at least five separate fraudulent schemes: (1) inducing execution of the ten-year studio lease by fraudulently misstating their experience, expertise, and construction cost estimates; (2) inducing plaintiffs to continue with the project, and inducing P & G to guarantee construction financing by fraudulently misrepresenting and concealing costs; (3) fraudulently diverting construction funds and charging excessive professional and other fees; (4) improperly escrowing construction loan funds to build a “cushion” against discovery of the alleged fraud; and (5) fraudulently scheming to collect “interim rent” for delays primarily caused by defendants.
These violations of the Federal Mail Fraud Act, resulting from written and oral misrepresentations as to defendants’ expertise, as to construction costs, and from sending false and excessive invoices and certifications over a period of nearly two years, are not isolated or sporadic actions. While multiple schemes are not essential for demonstrating continuity or a threat of continuity, here it is alleged that defendants conducted fraudulent business activities on a number of fronts in five separate schemes.
Id. (citations omitted). The third, fourth and fifth of the fraudulent schemes in Big Apple are of the type that would likely continue through the duration of the ten-year lease. The complaint in Big Apple thus alleged a series of mail frauds substantially longer in duration than the schemes alleged in the present pleadings.
*199RICO is a powerful weapon for civil litigants in federal court. But it is not a weapon for all purposes. What defendants are alleged to have done in this case, no matter how fraudulent, is not the type of sustained criminal conduct RICO reaches. Counting all the properly pleaded predicate acts, plaintiffs simply have failed to allege a sufficient factual basis for finding a pattern of racketeering by any of the defendants as required under 18 U.S.C. § 1962(c). That was the conclusion of the district court and I would affirm its dismissal of the action on that basis.

. The pleadings are not a model of clarity. While plaintiffs often refer to a or the scheme, they also refer in the Complaint to “schemes to defraud,” and describe a scheme to fraudulently induce plaintiffs' bid in ¶¶ 15-20 and 38 of the Complaint.

. This analysis is bolstered by the Complaint's general allegations of fraud and extortion (¶¶ 3 and 4), plus the RICO Case Statement's charge that the entire deal was arranged by Anderson and Harrity to direct the project to Rothstein by use of both threats and fraud (J.A. at 89, 90, 92).

. I do not suggest that allegations of ongoing fraud may never be considered in a RICO action. An ongoing fraudulent scheme may be relevant, for example, to show the likelihood of continued acts of mail fraud into the future. See United States v. Kaplan, 886 F.2d 536, 543 (2d Cir.1989); Beauford v. Helmsley, 865 F.2d 1386, 1392 (2d Cir.) (en banc), vacated and remanded, 492 U.S. 914, 109 S.Ct. 3236, 106 L.Ed.2d 584 original decision adhered to, 893 F.2d 1433 (2d Cir.), cert. denied, 493 U.S. 992, 110 S.Ct. 539, 107 L.Ed.2d 537 (1989). But here plaintiffs do not allege that defendants’ racketeering conduct was likely to continue beyond the date the complaint was filed in December 1989. At best plaintiffs speculate about an ongoing conspiracy to steer all HUD housing projects in Hartford to Rothstein, and hint that the specific events alleged in the complaint are part of that broader scheme. Thus, RICO Case Statement ¶ 3: "Rothstein procured from defendants Anderson, CHFC, Imagineers and Harrity, ownership and/or management of virtually all housing financed by HUD and/or the Department of Housing in the greater Hartford area.” Entirely absent are allegations that such "steering” is likely to continue into the future or, even if it were, that it would involve racketeering predicates such as mail fraud or extortion.