Source: cases/18usc1962/f-supp-2d-118-392-goldfine-v-sichenzia.case
Case source: https://www.neochart.com/catalog/cases/f-supp-2d/volume_118/0392_01/index.html
Because the Plaintiffs have not exhausted the bargained-for remedies, which they admit are available to them, they have not satisfied RICO’s requirement of alleging damages that are clear and definite.
As Plaintiffs cannot allege “clear and definite” damages to their business or property, they lack standing under RICO, and their RICO causes of action must be dismissed.
Because injury by reason of investment of racketeering income in an enterprise is the very foundation of a § 1962(a) claim, Plaintiffs’ allegations are insufficient as a matter of law.
This sweepingly general allegation that the defendants either “retained” or “disposed of’ any income they received plainly fails to allege the required: (I) investment, (2) of any income, (3) in an enterprise.
they fail to state a cause of action under 18 USC § 1962(a). Thus, Plaintiffs’ RICO claims must be dismissed.
Further, in a fraud-based RICO claim, if the sole purpose of the alleged enterprise is to perpetrate the alleged fraud, there can be no enterprise for RICO purposes.
The test is whether the predicate acts differed from the usual and daily activities of the enterprise itself.
Plaintiff identifies no purpose of the enterprise except to engage in the racketeering activity, no group (as opposed to individual) activity other than the racketeering activity, and no on-going structure except the conduct of racketeering.
As the Plaintiffs failed to allege the existence of an enterprise that has any existence separate and apart from the purported predicate acts, they fail to state a claim under 18 U.S.C. § 1962(c), and their Claim 119, brought under that provision must be dismissed as a matter of law.
Liability under § 1962(c) requires a showing that each defendant employed by or associated with the enterprise “conduct or participate, directly or indirectly, in the conduct of [the] enterprise’s affairs”.
Reading the allegations of the complaint most generously to the Plaintiffs, there are allegations sufficient to charge Michael and Lisa Sichenzia and Patrick Cottrell with leading, running, managing or directing any of the alleged enterprise.
But there is no allegation that the other Defendants were leaders or managers of the enterprise.
In addition, the mere fact that a defendant may have aided in the alleged scheme to defraud, even if that aid was intentional, does not give rise to liability under § 1962(c).
None of those pages and pages of contentions remotely suggests how this transformed the non-Sichenzia Defendants into leaders, managers or directors of the enterprise of which they are not even alleged to be members
The business entities named by the Plaintiffs in their § 1962(c) claim, as opposed to the individual defendants, cannot possibly “lead, run, manage or direct” the affairs of the alleged enterprise, or, for that matter, act “intentionally” at all, since corporations can act only through their individual officers, directors or agents (who are not explicitly identified).
It is fundamental that a Plaintiff who contends that the counterparty to a contract never intended to perform the terms of that contract may only prevail in an action for fraud under limited circumstances:
Plaintiffs fail to identify any legal duty owed to the Plaintiffs by any of the Sichen-zia Defendants that is separate from the duty to perform under the mortgages and notes as required by Cougar.
Without making any legally sufficient allegation of fraud, Plaintiffs cannot allege mail fraud.
The allegations concerning the letters can be quickly dismissed, as the contents thereof are not set forth with specificity, nor are any misrepresentations identified with the specificity required by Fed.R.Civ.P. 9(b).
Plaintiff does not explain how the act of transmission was incidental to an essential part of the alleged fraudulent scheme to withhold and fail to file instruments so as to defeat Plaintiffs’ priority liens
Courts in this District have long held that there is no private right of action for aiding and abetting a RICO violation.
As this Court does not recognize a private right of action for aiding and abetting a RICO violation, Plaintiffs’ causes of action against the all defendants, insofar as they are based on either “aiding and abetting” or 18 U.S.C. § 2, must be dismissed.
Plaintiffs’ substantive claims under 18 U.S.C.1962(a) and (c) fail to state a cause of action, and have been dismissed. As a result, Plaintiffs’ claim under section 1962(d) sounding in conspiracy to violate sections 1962(a) and (c) must also be dismissed.
Therefore, the purported Section 1962(d) claim (Claim 120) also must fail as a matter of law.
In addition, the Section 1962(d) claim fails as against every defendant because the complaint does not allege that each defendant agreed to commit two or more predicate acts.
Here, Plaintiffs’ Amended Complaint and Civil RICO Statement are devoid of any factual allegation whatsoever to indicate that any of the moving defendants were aware of the alleged scope of the purported enterprise, or that they specifically agreed to further the alleged scheme through the commission or facilitation of any racketeering activity.
casedsl 1
case /f-supp-2d/118/0392-01
name Goldfine v. Sichenzia
cite 118 F. Supp. 2d 392 (2000)
court United States District Court for the Southern District of New York
date 2000-09-14
url catalog/cases/f-supp-2d/volume_118/0392_01/index.html
source ir/caselaw/f_supp_2d_118.jsonl sha1=d1fe0d1ebdf284e6546710c1b55580c2e64aebab chars=49589
law 18usc1962 (a),(c),(d)
role applied
posture civil; lenders sue borrowers, title agent, title insurer and attorney; defendants' 12(b)(6) motions to dismiss the two RICO counts (119, 120) granted with prejudice; 118 state-law claims dismissed without prejudice
result claimant-lost
element injury : not-satisfied [pleaded]
variant not-ripe/secured-lender-has-not-exhausted-collateral-remedies
fact @10627..10838 [cuts-against] | Plaintiffs admit in their Amended Complaint, as well as their Civil RICO Statement, that each and every loan was secured by a mortgage and note, most of which bind the individual Sichenzia defendants personally.
fact @10839..11041 [cuts-against] | They also admit that each mortgage was insured through defendants Old Republic and/or Artesian Abstract. However, Plaintiffs have made no effort to enforce those rights prior to instituting this action.
fact @14868..15072 [cuts-against absent] | However, nowhere do Plaintiffs allege that they made any effort whatsoever to recover their alleged losses, or even any part of such losses, by seeking to enforce any of their admitted contractual rights.
rule @11255..11456 | Because the Plaintiffs have not exhausted the bargained-for remedies, which they admit are available to them, they have not satisfied RICO’s requirement of alleging damages that are clear and definite.
held @16721..16890 | As Plaintiffs cannot allege “clear and definite” damages to their business or property, they lack standing under RICO, and their RICO causes of action must be dismissed.
gloss Fraudulently-induced-loan injury is unripe until foreclosure/guaranty/title-insurance remedies are tried and leave a deficiency (First Nationwide v. Gelt Funding).
element investment : not-satisfied [pleaded]
count § 1962(a) claim
variant investment-injury/no-allegation-of-any-investment
fact @17367..17648 [cuts-against absent] | Plaintiffs admit, at Section 8(b) of their Amended Civil RICO Statement, that they have no idea whether any alleged income was ever invested by any defendant at all, let alone that it was invested in the alleged enterprise and that they were injured as a result of that investment.
fact @20368..20679 [cuts-against absent] | In the instant case, neither Plaintiffs’ Amended Complaint nor their Civil RICO Statement sets forth a single allegation relating to any investment whatsoever made by any Defendant, in the alleged enterprise or anywhere else, much less that the Plaintiffs were damaged or injured as a result of such investment.
rule @18192..18376 | Because injury by reason of investment of racketeering income in an enterprise is the very foundation of a § 1962(a) claim, Plaintiffs’ allegations are insufficient as a matter of law.
held @21176..21385 | This sweepingly general allegation that the defendants either “retained” or “disposed of’ any income they received plainly fails to allege the required: (I) investment, (2) of any income, (3) in an enterprise.
element causation : not-satisfied [pleaded]
count § 1962(a) claim
variant investment-injury-rule/injury-flows-from-predicate-acts-not-investment
fact @17649..17920 [cuts-against] | Elsewhere, they make it quite clear that the injury they have allegedly suffered — the supposed non-collectability of their various mortgages and loans — resulted, not from the investment of any money in a RICO enterprise, but rather because of the various predicate acts
held @21640..21749 | they fail to state a cause of action under 18 USC § 1962(a). Thus, Plaintiffs’ RICO claims must be dismissed.
gloss Under (a) the "by reason of" injury must come from the use/investment of racketeering income, not from the predicate acts themselves (Ouaknine, 2d Cir.).
element enterprise : not-satisfied [pleaded]
party alleged enterprise of the three borrowers (later adding the title-agent defendants)
count § 1962(c) claim (Claim 119)
variant association-in-fact/no-existence-apart-from-fraud-scheme
fact @6795..6928 [supports] | Plaintiffs originally alleged that Michael Sichenzia, Lisa Sichenzia and Patrick Cott-rell were the only “members” of the enterprise.
fact @24799..25017 [cuts-against] | In the case at bar, the Plaintiffs unequivocally stated, at section 5(b)(B) of their original Civil RICO Statement, that “[t]he purpose of the enterprise was to obtain monies from the Plaintiffs under false pretenses.”
fact @25039..25218 [cuts-against absent] | There is no allegation in the Amended Complaint or the Civil RICO Statement of what activity, if any, the alleged enterprise ever engaged-in other than the alleged predicate acts.
fact @25432..25677 [cuts-against absent] | Additionally, Plaintiffs fail to allege any chain of command of the enterprise, or how, if at all the alleged “members” functioned as an integrated group or directed the affairs of the alleged enterprise apart from the predicate acts themselves.
rule @24274..24439 | Further, in a fraud-based RICO claim, if the sole purpose of the alleged enterprise is to perpetrate the alleged fraud, there can be no enterprise for RICO purposes.
rule @26136..26245 | The test is whether the predicate acts differed from the usual and daily activities of the enterprise itself.
held @28099..28340 | Plaintiff identifies no purpose of the enterprise except to engage in the racketeering activity, no group (as opposed to individual) activity other than the racketeering activity, and no on-going structure except the conduct of racketeering.
held @28846..29130 | As the Plaintiffs failed to allege the existence of an enterprise that has any existence separate and apart from the purported predicate acts, they fail to state a claim under 18 U.S.C. § 1962(c), and their Claim 119, brought under that provision must be dismissed as a matter of law.
gloss "Would the enterprise still exist with the predicate acts removed?" test. Members' separate individual businesses do not count; the group as a whole needs a common link beyond the fraud. Pre-Boyle strictness.
element conduct : satisfied [pleaded]
party Michael Sichenzia, Lisa Sichenzia, Patrick Cottrell (the borrowers)
variant operation-or-management/principals-of-scheme
rule @29389..29595 | Liability under § 1962(c) requires a showing that each defendant employed by or associated with the enterprise “conduct or participate, directly or indirectly, in the conduct of [the] enterprise’s affairs”.
held @32388..32630 | Reading the allegations of the complaint most generously to the Plaintiffs, there are allegations sufficient to charge Michael and Lisa Sichenzia and Patrick Cottrell with leading, running, managing or directing any of the alleged enterprise.
gloss Satisfied only on this element; the (c) claim against them still fails on enterprise, injury and predicate acts. The court states no supporting facts beyond the general narrative.
element conduct : not-satisfied [pleaded]
party Betty Grahn and Denise Grahn (relatives of a borrower)
variant operation-or-management/peripheral-relatives-notary-and-later-purchaser
fact @33056..33277 [cuts-against absent] | The only allegations against Betty and Denise Grahn are that Betty Grahn purchased two of the parcels several months after the Plaintiffs made the loans, and that Denise Grahn notarized the signatures of other defendants.
held @32631..32727 | But there is no allegation that the other Defendants were leaders or managers of the enterprise.
element conduct : not-satisfied [pleaded]
party title agent (Artesian defendants), title insurer (Old Republic), attorney (DeEsso)
variant operation-or-management/outside-service-providers
fact @34115..34433 [supports] | The specific allegations of the complaint identify what they did as, in essence, failing to record mortgages and other instruments affecting the loans made by Plaintiffs, wrongfully issuing priority of title insurance, offering false documents for filing, and engaging in various acts of negligence and breach of duty.
fact @5809..6009 [cuts-against] | He represented various of the Sichenzia defendants and/or Artesian (it is not clear which, or whether the client differed in different deals) in connection with some of the loan transactions at issue.
rule @31621..31796 | In addition, the mere fact that a defendant may have aided in the alleged scheme to defraud, even if that aid was intentional, does not give rise to liability under § 1962(c).
held @34434..34649 | None of those pages and pages of contentions remotely suggests how this transformed the non-Sichenzia Defendants into leaders, managers or directors of the enterprise of which they are not even alleged to be members
gloss Reves: providing services that help the scheme (title work, recording, legal opinions) is not directing the enterprise's affairs.
element conduct : not-satisfied [pleaded]
party the corporate/LLC defendants owned by the borrowers
variant operation-or-management/shell-entities-of-principals
fact @4095..4182 [cuts-against] | all of which are entities that were or are owned by the Sichenzias and/or Mr. Cottrell.
held @33448..33818 | The business entities named by the Plaintiffs in their § 1962(c) claim, as opposed to the individual defendants, cannot possibly “lead, run, manage or direct” the affairs of the alleged enterprise, or, for that matter, act “intentionally” at all, since corporations can act only through their individual officers, directors or agents (who are not explicitly identified).
element racketeering.mail-fraud : not-satisfied [pleaded]
party the borrower (Sichenzia) defendants
count mail and wire fraud predicates
variant scheme-to-defraud/breach-of-contract-dressed-as-fraud
fact @36249..36429 [supports] | As against the Sichenzia Defendants, Plaintiffs assert that they were defrauded into entering into contracts (mortgages, loans, etc.) that the counterparty never intended to honor.
fact @38081..38268 [supports] | The Plaintiffs claim that the mortgages are “false and invalid” because “the Sichenzias and Cottrell closed on the mortgage loans prior to the date they obtained title to the properties”.
rule @35413..35618 | It is fundamental that a Plaintiff who contends that the counterparty to a contract never intended to perform the terms of that contract may only prevail in an action for fraud under limited circumstances:
held @37370..37566 | Plaintiffs fail to identify any legal duty owed to the Plaintiffs by any of the Sichen-zia Defendants that is separate from the duty to perform under the mortgages and notes as required by Cougar.
held @38473..38568 | Without making any legally sufficient allegation of fraud, Plaintiffs cannot allege mail fraud.
gloss State-law rule (NY: no fraud claim for a promise never intended to be kept absent separate duty / collateral misrepresentation / special damages) imported to defeat the federal mail-fraud predicate.
element racketeering.mail-fraud : not-satisfied [pleaded]
party the title-agent (Artesian) defendants
variant use-of-mails/mailing-not-incident-to-essential-part-of-scheme
fact @39079..39320 [supports] | Plaintiffs allege, in their complaint and RICO Statement, that Artesian “accomplished” the fraudulent scheme by mailing or faxing copies of one defective mortgage, as well as certain letters and satisfactions of mortgages, to the Plaintiffs.
held @39381..39599 | The allegations concerning the letters can be quickly dismissed, as the contents thereof are not set forth with specificity, nor are any misrepresentations identified with the specificity required by Fed.R.Civ.P. 9(b).
held @39765..39972 | Plaintiff does not explain how the act of transmission was incidental to an essential part of the alleged fraudulent scheme to withhold and fail to file instruments so as to defeat Plaintiffs’ priority liens
gloss Two failures: Rule 9(b) particularity for the letters; Schmuck "incident to an essential part of the scheme" for transmitted policies (many sent by courier, not mail/wire).
element x-aiding-abetting : not-satisfied [law]
party relatives, shell entities, title insurer, attorney, and part of the claims against the title agent
theory aiding and abetting a RICO violation / 18 U.S.C. § 2
variant secondary-liability/no-private-action-for-aiding-and-abetting-rico
fact @41566..41826 [supports] | it would appear that the only allegations against (1) the Sichenzia defendants other than Lisa and Michael Sichenzia and Cottrell, (2) Old Republic, (3) DeEsso, and (4) certain allegations against the Artesian defendants are allegations of aiding and abetting.
rule @41827..41948 | Courts in this District have long held that there is no private right of action for aiding and abetting a RICO violation.
held @43656..43908 | As this Court does not recognize a private right of action for aiding and abetting a RICO violation, Plaintiffs’ causes of action against the all defendants, insofar as they are based on either “aiding and abetting” or 18 U.S.C. § 2, must be dismissed.
element conspiracy : not-satisfied [pleaded]
count § 1962(d) claim (Claim 120)
theory derivative of the dismissed (a) and (c) claims
variant derivative-of-substantive-claim/substantive-counts-deficient
rule @44002..44257 | Plaintiffs’ substantive claims under 18 U.S.C.1962(a) and (c) fail to state a cause of action, and have been dismissed. As a result, Plaintiffs’ claim under section 1962(d) sounding in conspiracy to violate sections 1962(a) and (c) must also be dismissed.
held @44779..44872 | Therefore, the purported Section 1962(d) claim (Claim 120) also must fail as a matter of law.
element conspiracy : not-satisfied [pleaded]
scope alternative
count § 1962(d) claim (Claim 120)
theory each defendant's own agreement to commit two predicate acts
variant agreement/conclusory-no-facts-of-knowing-agreement
rule @44873..45047 | In addition, the Section 1962(d) claim fails as against every defendant because the complaint does not allege that each defendant agreed to commit two or more predicate acts.
held @47289..47636 | Here, Plaintiffs’ Amended Complaint and Civil RICO Statement are devoid of any factual allegation whatsoever to indicate that any of the moving defendants were aware of the alleged scope of the purported enterprise, or that they specifically agreed to further the alleged scheme through the commission or facilitation of any racketeering activity.
gloss Applies the pre-Salinas Second Circuit rule that each conspirator must personally agree to commit two predicates.
element pattern : not-reached
element person : not-reached
element association : not-reached
misfit Independently sufficient grounds: six separate reasons each dismiss the claim. Only the second conspiracy ground ("In addition, ...") is marked `scope alternative`; the others are stated cumulatively with no "even if", so v1 scope cannot rank them, nor say that the standing/ripeness ground (injury) alone disposed of both RICO counts.
misfit `injury` holding is really ripeness/standing (claim premature, could be refiled after foreclosure) -- a temporal "not yet" holding that not-satisfied flattens; yet the dismissal was with prejudice.
misfit § 1962(a) "investment injury" rule is a relation between `investment` and `causation` (injury must flow from the investment, not the predicates); split over two blocks. `causation` held line is the nearest deciding sentence and is not specific to causation.
misfit `x-aiding-abetting` (now declared on the .law side as an element) is really a rule about WHO can be liable -- a secondary-liability theory -- not an element of the claim; "not-satisfied [law]" means the theory does not exist, not that an element failed on these allegations.
misfit `conduct : satisfied` for the three principals has no supporting fact quote in the opinion (court says only that the allegations suffice); block carries rule+held only.
misfit Predicate fails by importing a state common-law doctrine (contract vs. fraud) into the mail-fraud predicate; cross-law dependency (RICO -> 18 USC 1341 -> NY fraud law) not expressible. Rule 9(b) particularity is a pleading-standard failure, not an element failure.
misfit Rule lines sit mostly in block quotations from other district opinions (Schmidt v. Fleet Bank), which the brief says not to quote as fact; the court's own restatements were used, so the richest statement of the Reves and separate-enterprise tests is not captured.