Goldfine v. Sichenzia

118 F. Supp. 2d 392 (2000) United States District Court for the Southern District of New York 2000-09-14

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)

Facts

  1. 2 Enterprise (§ 1961(4)): legal entity or association-in-fact not pleaded
    Plaintiffs originally alleged that Michael Sichenzia, Lisa Sichenzia and Patrick Cott-rell were the only “members” of the enterprise.
  2. 2 Enterprise (§ 1961(4)): legal entity or association-in-fact not pleaded
    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.
  3. 2 Enterprise (§ 1961(4)): legal entity or association-in-fact not pleaded
    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.”
  4. 2 Enterprise (§ 1961(4)): legal entity or association-in-fact not pleaded
    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.
  5. 2 Enterprise (§ 1961(4)): legal entity or association-in-fact not pleaded
    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.
  6. 2 Enterprise (§ 1961(4)): legal entity or association-in-fact not pleaded
    The test is whether the predicate acts differed from the usual and daily activities of the enterprise itself.
  7. 2 Enterprise (§ 1961(4)): legal entity or association-in-fact not pleaded
    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.
  8. 2 Enterprise (§ 1961(4)): legal entity or association-in-fact not pleaded
    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.
  9. 5 Conduct or participate in the conduct of enterprise affairs (§ 1962(c) operation or management test) not pleaded
    all of which are entities that were or are owned by the Sichenzias and/or Mr. Cottrell.
  10. 5 Conduct or participate in the conduct of enterprise affairs (§ 1962(c) operation or management test) not pleaded
    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.
  11. 5 Conduct or participate in the conduct of enterprise affairs (§ 1962(c) operation or management test) satisfied pleaded
    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”.
  12. 5 Conduct or participate in the conduct of enterprise affairs (§ 1962(c) operation or management test) not pleaded
    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).
  13. 5 Conduct or participate in the conduct of enterprise affairs (§ 1962(c) operation or management test) satisfied pleaded
    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.
  14. 5 Conduct or participate in the conduct of enterprise affairs (§ 1962(c) operation or management test) not pleaded
    But there is no allegation that the other Defendants were leaders or managers of the enterprise.
  15. 5 Conduct or participate in the conduct of enterprise affairs (§ 1962(c) operation or management test) not pleaded
    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.
  16. 5 Conduct or participate in the conduct of enterprise affairs (§ 1962(c) operation or management test) not pleaded
    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).
  17. 5 Conduct or participate in the conduct of enterprise affairs (§ 1962(c) operation or management test) not pleaded
    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.
  18. 5 Conduct or participate in the conduct of enterprise affairs (§ 1962(c) operation or management test) not pleaded
    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
  19. 9 Use or investment of racketeering income in an enterprise (§ 1962(a)) not pleaded
    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.
  20. 9 Use or investment of racketeering income in an enterprise (§ 1962(a)) not pleaded
    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.
  21. 9 Use or investment of racketeering income in an enterprise (§ 1962(a)) not pleaded
    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.
  22. 9 Use or investment of racketeering income in an enterprise (§ 1962(a)) not pleaded
    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.
  23. 11 Conspiracy to violate § 1962(a), (b), or (c) (§ 1962(d)) not pleaded
    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.
  24. 11 Conspiracy to violate § 1962(a), (b), or (c) (§ 1962(d)) not pleaded
    Therefore, the purported Section 1962(d) claim (Claim 120) also must fail as a matter of law.
  25. 12 Civil RICO injury to business or property (18 U.S.C. § 1964(c)) not pleaded
    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.
  26. 12 Civil RICO injury to business or property (18 U.S.C. § 1964(c)) not pleaded
    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.
  27. 12 Civil RICO injury to business or property (18 U.S.C. § 1964(c)) not pleaded
    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.
  28. 12 Civil RICO injury to business or property (18 U.S.C. § 1964(c)) not pleaded
    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.
  29. 12 Civil RICO injury to business or property (18 U.S.C. § 1964(c)) not pleaded
    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.
  30. 13 But-for and proximate causation ("by reason of", 18 U.S.C. § 1964(c)) not pleaded
    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
  31. 13 But-for and proximate causation ("by reason of", 18 U.S.C. § 1964(c)) not pleaded
    they fail to state a cause of action under 18 USC § 1962(a). Thus, Plaintiffs’ RICO claims must be dismissed.
  32. 14 Civil aiding and abetting a RICO violation (rejected as a private cause of action) not law
    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.
  33. 14 Civil aiding and abetting a RICO violation (rejected as a private cause of action) not law
    Courts in this District have long held that there is no private right of action for aiding and abetting a RICO violation.
  34. 14 Civil aiding and abetting a RICO violation (rejected as a private cause of action) not law
    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.