Rajaratnam v. Motley Rice, LLC et al
Filing
66
ORDER granting 53 and 56 Defendants' Motions to Dismiss for Failure to State a Claim. For the reasons stated in the attached Memorandum and Order, defendants' motions to dismiss the Amended Complaint are granted in their entirety and th e Amended Complaint is dismissed with prejudice. Plaintiff's RICO claims asserted in Claims One, Two, Three, and Four of the Amended Complaint are dismissed for failure to plead a "pattern of racketeering activity." Plaintiff's de famation claim under New York law, asserted against defendants Motley Rice, Jay Kanetkar, and "Rudra," is dismissed as untimely. The court denies plaintiff a second opportunity to amend his pleading. The Clerk shall enter judgment in favor of defendants and close the case. Ordered by Judge Kiyo A. Matsumoto on 3/26/2020. (Brasky, Michael)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
----------------------------------X
RAJ RAJARATNAM,
Plaintiff,
MEMORANDUM & ORDER
-againstMOTLEY RICE, LLC, a South Carolina
limited liability company, MICHAEL
E. ELSNER, an individual, JAYAT P.
KANETKAR aka JAY KANETKAR, an
individual, RUDRA, an individual
named pseudonymously, BRIAN P.
MALLON, an individual, and JOHN
“HANK” ALLISON, an individual,
18-cv-3234(KAM)(RML)
Defendants.
----------------------------------X
MATSUMOTO, United States District Judge:
Nearly eleven years ago, plaintiff Raj Rajaratnam
(“plaintiff” or “Rajaratnam”) was named as a defendant in a
civil action in New Jersey federal court alleging he provided
material support to the Liberation Tigers of Tamil Eelam
(“LTTE”), a terrorist group more commonly known as the “Tamil
Tigers.”
In 2011, a Vanity Fair article published statements by
a confidential FBI informant claiming that Rajaratnam had
expressed support for LTTE’s terrorist activities in prepared
remarks delivered at a 2002 fundraiser.
Seven years later, with
his civil action in New Jersey federal court still pending,
Rajaratnam filed a suit in the Eastern District alleging federal
racketeering violations by the law firm representing plaintiff
1
in the New Jersey action, the confidential FBI informant, and
three former federal agents associated with the Joint Terrorism
Task Force.
Plaintiff asserts that the defendants comprise a
racketeering enterprise, the purpose of which is to illegally
obtain confidential investigatory materials from federal law
enforcement officials, which are used to identify wealthy
targets, like Rajaratnam, and then defame and file lawsuits
against them, in order to coerce a lucrative settlement.
Plaintiff’s action against the above-captioned defendants
alleges violations of the federal Racketeer Influenced and
Corrupt Organizations Act (“RICO”) and common law defamation.
(ECF No. 42, Amended Complaint (“Compl.”).)
Before the court are motions to dismiss by two sets
of defendants: (1) the law firm Motley Rice LLC (“Motley Rice”)
and its member, Michael E. Elsner (collectively, “Motley
Defendants”), (ECF No. 53-1, Mem. of Law in Supp. of Mot. by
Defendants Motley Rice and Michael E. Elsner to Dismiss Amended
Complaint (“Motley Mot.”)); and (2) defendants Jayat Kanetkar,
Brian Mallon, and John “Hank” Allison, all former members of the
federal Joint Terrorism Task Force (“JTTF Defendants”), (ECF No.
56-1, Mem. of Law in Supp. of Defendants Allison, Kanetkar and
Mallon’s Mot. to Dismiss Amended Complaint (“JTTF Mot.”)).
Plaintiff served an opposition to both motions, (ECF No. 58,
Consol. Mem. of Law in Opp. to Defendants’ Motions to Dismiss
2
(“Opp.”)), to which both sets of defendants replied.
(ECF No.
61, Motley Reply; ECF No. 60, JTTF Reply.)
For the reasons that follow, the court GRANTS
defendants’ motions, and DISMISSES the Amended Complaint in its
entirety.
BACKGROUND
The following facts are derived from the allegations
in plaintiff’s complaint, which the court assumes are true for
the purposes of defendants’ motions.
I.
Parties
Plaintiff, an ethnic Sri Lankan Tamil, left Sri Lanka
when he was 14 years old and has a permanent residence in New
York, New York, though he was incarcerated in Massachusetts at
the time the Amended Complaint was filed.
(Compl. ¶ 24.)
Defendant Motley Rice was founded in 2003 and is a “well-known”
South Carolina litigation firm representing primarily
plaintiffs.
Motley Rice is registered to practice in New York
and maintains an office in this state.
Elsner is a member of Motley Rice.
(Id. ¶ 18.)1
(Id. ¶ 19.)
Michael
Brian P. Mallon
is a former Special Agent with the United States Immigration and
Naturalization Service (“INS”) assigned to the Joint Terrorism
Task Force (“JTTF”).
(Id. ¶ 20.)
1
John “Hank” Allison is a
Motley Rice’s predecessor-in-interest was the law firm of Ness, Motley,
Loadholt, Richardson & Poole (“Ness Motley”). (Id.)
3
former Special Agent with the Federal Bureau of Investigation
(“FBI”) assigned to the JTTF.
(Id. ¶ 21.)
Jayat P. “Jay”
Kanetkar (together, with Allison and Mallon, “JTTF Defendants”),
is also a former FBI Special Agent.
(Id. ¶ 23.)
The complaint
alleges that Kanetkar was the “handler” for defendant “Rudra,”
the pseudonym used for an FBI “Confidential Human Source.”
(Id.
¶¶ 22-23.)2
II.
Pertinent Allegations
A. Origins of the Enterprise3
Beginning in the 1970’s, Motley Rice’s predecessor,
Ness Motley, engaged in high volume personal injury asbestos
litigation, filing at least tens of thousands of lawsuits in
state and federal courts.
(Compl. ¶ 30.)
Ness Motley entered
into mass settlements to resolve asbestos claims, the merits of
which varied, and in the process, netted hundreds of millions of
dollars in contingency fees.
(Id. ¶ 31.)
In 2001, a lawsuit
alleged that Ness Motley improperly induced medical experts to
submit false testimony in asbestos personal injury suits, and
also thwarted legislative attempts to reform asbestos litigation
2
Plaintiff states that he has been unable to effect service of the
complaint on Rudra, whom he believes resides abroad in Sri Lanka. (See ECF
No. 63.) Rudra has not answered or otherwise moved to dismiss the complaint.
3
The court adopts certain words or phrases in the “Background” section
of this Memorandum and Order solely to describe the complaint’s allegations,
and not to endorse factual or legal assertions made by either party.
4
through the use of threats and intimidation.
(Id. ¶ 33.)4
Ness
Motley’s successor, Motley Rice, also earned substantial fees
through “bulk” settlements in litigation against tobacco
companies.
(Id. ¶ 34.)
B. Use of Government Secrets
After the terrorist attacks on September 11, 2001,
Ness Motley filed a trillion-dollar lawsuit accusing Saudi
banks, charities, and members of the Saudi royal family of
financing al Qaeda (“9/11 Action”).
(Compl. ¶ 36.)
In 2002,
Motley Rice hired Jean-Charles Brisard as its lead investigator.
(Id. ¶ 38.)
Brisard, a French author and analyst, claimed to
have ties with French intelligence.
(Id.)
Motley Rice sent
Brisard to Bosnia in 2003 to obtain a secret document in the
possession of the Central Intelligence Agency (“CIA”).
39.)
(Id. ¶
The Department of Justice (“DOJ”) initially opposed Motley
Rice’s efforts to obtain the document, but acquiesced after the
Bosnian Supreme Court “ask[ed]” the government to share to
document.
(Id. ¶¶ 39-40.)
The document that Motley Rice sent Brisard to retrieve
“supposedly” included a list of donors to Osama bin Laden.
¶ 41.)
(Id.
Brisard changed the spelling of one name on the list
4
Plaintiff asserts Ness Motley’s alleged conduct constituted witness
tampering and obstruction under federal law, see 18 U.S.C. §§ 1512, 1505.
(Id.) The complaint does not state how the 2001 lawsuit was resolved.
5
from “bin Mahfoodh” to “Khalid bin Mahfouz,” the latter being
one of the richest men in Saudi Arabia.
(Id.)
Motley Rice
named Khalid bin Mahfouz as a defendant in the 9/11 Action.
(Id. ¶ 42.)
When Brisard’s alteration of the document came to
light, however, Motley Rice replaced him with Michael Asimos.
(Id.)
Using his access to information about the 9/11 Action,
Asimos shared intelligence with “low-level government
operatives,” including personnel at the Department of Defense
(“DoD”).
(Id. ¶ 43.)5
Though Elsner, along with other Motley
Rice attorneys, knew that Asimos shared information collected
and generated for the 9/11 Action with DoD personnel, he
encouraged Asimos’s information-sharing because Motley Rice
wanted access to sensitive information about ongoing government
investigations.
(Id.)
Plaintiff claims that each government
operative that Asimos offered to share intelligence with was a
“public official.”
(Id. ¶ 44.)6
C. Use of Military Intelligence
After the United States invasion of Iraq in March
5
The complaint refers to the “9/11 cases,” but the only 9/11-related
case mentioned is the 9/11 Action.
6
The complaint also claims that Asimos once travelled to Kabul,
Afghanistan, purportedly on behalf of the U.S. government, and returned with
a document identifying al Qaeda operatives who were authorized to carry
weapons in Afghanistan, but instead of delivering the document straight to
the Pentagon, like he was supposed to, he disclosed it to Motley Rice
attorneys first. (Id. ¶ 47.) The complaint does not allege this constituted
a predicate act under RICO.
6
2003, Asimos sought entry into Iraq to “gather intel for Motley
Rice.”
(Compl. ¶ 50.)
Asimos called Mark Heilbrun, a
congressional staffer who worked with Senator Arlen Specter, and
falsely represented that Paul Wolfowitz, the Deputy Secretary of
Defense at the time, wanted Asimos in Iraq on a covert basis.
(Id.)
To bolster his story, Asimos gave Heilbrun the cell phone
number of a contact at the Office of the Secretary of Defense,
Col. Steven Bucci, who corroborated Asimos’s story to Heilbrun.
(Id. ¶¶ 49, 51.)
Asimos was eventually able to enter Iraq, and
gained “access” to the Iraqi National Congress (“INC”) by posing
as a representative of the Pentagon.
(Id. ¶ 52.)
Asimos’s INC
access begat further access to Iraqi governmental and
intelligence documents.
(Id.)
Eventually, Asimos was forced to
flee Iraq when an Iraqi government official inquired into his
credentials.
(Id. ¶ 53.)
Asimos’s and Bucci’s fabrication had
been perpetrated on Motley Rice’s behalf.
(Id. ¶ 54.)
D. Rosetta
After Asimos returned from Iraq, Motley Rice helped
him form Rosetta Research and Consulting LLC (“Rosetta”).
(Compl. ¶ 55.)
Rosetta’s stated mission was to perform
investigative work to support the 9/11 Action.
(Id. ¶ 56.)
In
reality, Asimos, along with Brian Mallon and other
investigators, used Rosetta to exploit government contacts to
obtain information to build a database of government
7
intelligence on terrorism.
(Id.)
From June 2003 until 2006,
Motley Rice, Asimos, and Mallon used Rosetta to “obtain,
transport, transmit, and/or transfer in interstate or foreign
commerce documents worth more than $5,000 obtained by means of
false or fraudulent pretenses.” (Id. ¶ 57.)
The complaint does
not specify the nature of the documents or how they were falsely
obtained.
E. Use of Bribes to Access FBI Databases
Rosetta offered valuable information to Mike Dick,
Mallon’s friend at the FBI, in exchange for his assistance with
Rosetta’s operations, and even gave Dick a Rosetta email
address.
(Compl. ¶ 61.)
According to plaintiff, Rosetta’s
offers of valuable information were bribes because Dick was a
“public official.”
(Id. ¶ 62.)
Dick’s relationship with
Rosetta drew the scrutiny of the DOJ’s Office of the Inspector
General and, eventually, he was reprimanded.
(Id. ¶ 63.)
In
addition, an “unnamed FBI analyst” who worked for Rosetta and
searched confidential FBI databases on behalf of the “Motley
Rice Enterprise” was also a “public official.”
(Id. ¶¶ 64-65.)
Plaintiff “believes” that discovery will show that “Asimos,
Mallon, and/or another agent of Rosetta and/or the Motley Rice
Enterprise offered things of value” to the analyst in violation
of the federal bribery statute.
(Id. ¶ 65.)
8
F. Witness Manipulation
In 2004, Motley Rice wanted to bring Haji Bashir
Noorzai, an Afghan drug lord, into the United States to serve as
a witness in the 9/11 Action.
(Compl. ¶ 68.)
Rosetta contacted
a DEA employee, who agreed to facilitate Noorzai’s entry into
the country.
(Id.)
Motley Rice reversed course when it learned
that the DEA planned to arrest Noorzai; Mallon and Asimos
delivered Noorzai to the DEA once he arrived in the United
States.
(Id. ¶¶ 69-70.)
Mallon and Asimos’s false promise of
“employment” to Noorzai was transmitted “via international
wire,” purportedly an act of criminal wire fraud.
(Id. ¶ 71.)
G. Access to JTTF Materials and Information
In or before 2009, Mallon “enlisted” Kanetkar and
Allison, former JTTF colleagues, “into the conspiracy.”
¶ 72.)
While working as JTTF agents, Kanetkar and Mallon worked
with Rudra, a Confidential Human Source.
(Id. ¶ 73.)
Kanetkar
and Mallon introduced Rudra to Motley Rice circa 2009.
74.)7
(Compl.
(Id. ¶
Between 2009 and 2018, Mallon, Kanetkar, Allison, and
Rudra transported “via interstate or foreign wire or by
travelling across state lines” documents and materials that
Rudra obtained while working on behalf of the FBI, and which
7
The complaint asserts that Rudra’s identity was a government secret and
that, by disclosing his identity to Motley Rice, Kanetkar and Mallon violated
the Attorney General’s Guidelines Regarding the Use of FBI Confidential Human
Sources. (Id.)
9
were “worth more than $5,000 to Motley Rice.”
(Id. ¶ 75.)
H. Targeting Rajaratnam
The JTTF Defendants previously worked together on a
criminal investigation into the Tamil Tigers, which led to a
series of prosecutions in the Eastern District of New York.
(Compl. ¶ 80.)
Investigators working on the case approached
Rajaratnam about donations he and his father made to the Tamil
Rehabilitation Organization (“TRO”), a Maryland-based 501(c)(3)
entity, between 2002 and 2006.
(Id. ¶ 81.)
In 2007, after
allegations surfaced that TRO was funding the Tamil Tigers, the
United States Department of the Treasury designated the TRO as
an organization supporting a terrorist group.
(Id. ¶ 82.)
As a
result, Rajaratnam promptly ceased donations to TRO and
cooperated with the JTTF investigation of LTTE.
(Id. ¶¶ 82-83.)
He was not prosecuted in connection with the investigation.
(Id. ¶ 83.)
The JTTF Defendants did, however, learn sensitive
information about Rajaratnam’s wealth, and “along with far more
sensitive government materials,” passed this information along
to Motley Rice.
(Id. ¶ 84.)
I. Unlawful Use of Government Assets to Target Rajaratnam
On October 16, 2009, the FBI arrested Rajaratnam for
insider trading.
Six days later, he was named as a defendant in
a civil suit in the District of New Jersey, captioned Krishanthi
10
v. Rajaratnam, 09-cv-5395 (“NJ Action”).
(Compl. ¶ 85.)8
Rice filed the complaint initiating the NJ Action.
No. 1, NJ Complaint (“NJ Compl.”).)
Motley
(See NJ ECF
The NJ Complaint alleges,
inter alia, that:
In November 2002, Raj Rajaratnam was a guest speaker
at an ITSA’s [(Ilanka Tamil Sangam USA, a non-profit
Tamil-related organization)] fundraising event held in
North Brunswick, New Jersey. An LTTE flag and
informational brochures concerning the LTTE were
placed on a table in the conference hall. In his
speech to the organization, Rajaratnam referred to the
struggle in Sri Lanka and asked those in attendance to
support the struggle. As if to clarify, Rajaratnam
described those in attendance who support the struggle
in Sri Lanka as terrorists, noting that he was married
to a terrorist because his wife is an Indian Punjabi.
. . . He further described those supporters in
attendance as not just terrorists but as freedom
fighters.
(NJ Compl. ¶ 113.)
This allegation was false.
Plaintiff’s
speech focused on the importance of philanthropy and support for
the Tamil community; plaintiff did not encourage those present
at the November 2002 event (“November Event”) to support LTTE
and he did not describe them as both “terrorists” and “freedom
fighters.”
(Compl. ¶ 87.)
At the time Motley Rice filed the NJ
Action, the FBI possessed a recording and transcript of the
November 2002 event that belied Motley Rice’s allegations about
Rajaratnam’s remarks at the November 2002 Event. (Id.)
8
The caption “NJ ECF No. _” is used herein to refer to filings on the NJ
Action electronic docket. The court takes judicial notice of the docket in
the NJ Action. See Pani v. Empire Blue Cross Blue Shield, 152 F.3d 67, 75
(2d Cir. 1998) (a court may rely on “matters of public record” in deciding
a motion to dismiss under Rule 12(b)(6)).
11
J. Bribery of a Government Witness
The JTTF Defendants shared Rudra’s identity with the
Motley Defendants, even though Rudra was a confidential source
for the United States government.
(Compl. ¶ 90.)
Between 2009
and 2018, “Motley Rice and/or the [JTTF Defendants]” made
payments to Rudra in excess of $75,000.
(Id. ¶ 91.)
Rudra was
not an expert witness in, and did not prepare an expert report
for, the NJ Action.
(Id.)
Though Rudra was deposed in the NJ
Action in 2018, as of January 18, 2019, he had not appeared as a
witness at trial or at an evidentiary hearing.
(Id.)
“Apparently, the payments [to Rudra] were used to fund living
arrangements, consumer goods, and extraneous travel unrelated to
Rudra’s testimony in the [NJ Action] . . . .”
(Id.)
In addition, on February 5, 2010, Motley Rice filed an
affidavit from Rudra in the NJ Action.
(Id. ¶ 94.)9
Motley Rice
“hid that affidavit” by filing it right before the close of
discovery in the NJ Action.
(Id.)
Rajaratnam’s NJ Action
counsel took Rudra’s deposition for four days in July 2018.
(Id. ¶ 95.)
Plaintiff “is informed and believes that, since at
9
The complaint cites to ECF No. 325 in the NJ Action, but that document
is a December 13, 2016 letter by Rajaratnam’s NJ Action counsel requesting a
conference to address “disclosures by Motley Rice . . . that the
investigators whose identity Motley Rice was ordered to disclose . . . are in
fact three former [JTTF] law enforcement officials who investigated on behalf
of the government the very same subject matter that Motley Rice is now
pursuing in its civil litigation.” (NJ ECF No. 325.) The complaint does not
cite to the Rudra affidavit itself.
12
least 2009, Motley Rice, Elsner, and the [JTTF Defendants] . . .
persuaded, or attempted to persuade, Rudra to cooperate, . . .
with the intent to influence his testimony in the [NJ Action].”
(Id. ¶ 96.)10
The complaint alleges that these acts constituted
witness tampering.
(Id.)
K. The Vanity Fair Article and the 2009 Press Release
On October 23, 2009, Motley Rice issued a press
release stating, inter alia, “[i]n November 2002, Rajaratnam,
speaking at a fundraiser for the Association of Tamils of Sri
Lankan USA (“ITSA”), called those supporting the Tamils’
struggle in Sri Lanka ‘terrorists,’ later adding that they were
not just terrorists but also ‘freedom fighters’” (“2009 Press
Release”).
(Compl. ¶ 97.)
Then, on September 30, 2011, Vanity
Fair published an article by David Rose entitled “Crouching
Tiger, Hidden Raj” (“Vanity Fair Article” or “Article”).
100.)11
(Id. ¶
According to the Vanity Fair Article, Rajaratnam was the
“star speaker” of the November 2002 Event, but “[u]nbeknownst to
Rajaratnam,” the audience that night included an FBI informant,
nicknamed Rudra, who was equipped with a concealed recording
10
The complaint does not indicate what aspect of Rudra’s testimony
defendants influenced or attempted to influence, or otherwise identify the
“false statements” in Rudra’s affidavit or his deposition.
11
The Vanity Fair Article is attached as Exhibit D to the Declaration of
Larry H. Krantz, counsel for the JTTF Defendants, in Support of their Motion
to Dismiss (“Krantz. Decl.”). (ECF No. 56-2, Krantz Decl. at Ex. D, pp. 119123.) The Article, on which the complaint relies and bases certain critical
allegations, is appropriately incorporated by reference.
13
device.
(Id. 1-2.)
Rudra, the article explains, had worked
undercover for eleven years, and his secret recordings had been
used by the DOJ in 20 successful criminal prosecutions.
(Id.
2.)
The Vanity Fair Article related Rudra’s recollection
of the November 2002 Event:
Rudra says his memory of what Rajaratnam said at the
gala is clear, and it is supported by his former
F.B.I. handlers, who heard the recordings when they
were made. “He got up and, flanked by L.T.T.E. flags,
he said, ‘Everyone must support the Tigers’ cause,’”
Rudra recalls.
“He mentioned the fact that his wife
was an Indian Sikh [a minority group from which some
had also mounted a terrorist campaign aimed at
creating a separate state]. Rajaratnam said: ‘They’re
terrorists.
We’re terrorists.
We are all freedom
fighters.’ Everyone laughed. Then he added: ‘They’re
our terrorists, and you all must support this
struggle.’”
(Id. (brackets in original).)
The Vanity Fair Article also
identifies Kanetkar as “Rudra’s main F.B.I. handler from 1999
until he left the bureau in June 2006 . . . .”
101.)
(Id.; Compl. ¶
Though the Article notes that Elsner’s firm filed a claim
against Rajaratnam on behalf of LTTE victims, it did not
“indicate that Kanetkar and Rudra were working for Motley Rice
at the time they gave their interviews to Vanity Fair.”
(Compl.
¶ 101.)
According to plaintiff, a “now-unclassified
transcript” of Rudra’s recording at the November 2002 Event
demonstrates that Rudra’s quotation of Rajaratnam’s remarks was
14
false.
(Id. ¶ 103.)
In addition to Rudra’s false quotation of
plaintiff, the complaint alleges the Vanity Fair Article
published other falsehoods promoted by Rudra and Kanetkar, such
as a claim by Kanetkar that two Tamil Tiger members once went to
Rajaratnam’s house to “arrange” to get money.
(Id. ¶ 104.)
Kanetkar and Rudra were “agents and/or employees of Motley Rice”
at the time they made these statements to Vanity Fair, and the
dissemination of these statements to Vanity Fair was
“coordinated” by Motley Rice, Elsner, Kanetkar, and Rudra.
(Id.
¶¶ 105-06.)
L. Fraudulent Concealment
A series of “red flags” brought Motley Rice’s
“criminal enterprise” to plaintiff’s attention.
First, in
September 2016, two years after the close of discovery, Motley
Rice disclosed that one of its witnesses was a former
Confidential Human Source with the United States government.
(Compl. ¶ 113.)
When Motley Rice finally disclosed Rudra’s
existence, it misspelled his real name in different ways to
prevent Rajaratnam’s counsel from investigating him or
connecting him to documents in which he was referenced.
(Id.)
Second, in November 2016, Motley Rice disclosed that it had
retained three former JTTF law enforcement agents to serve as
“non-testifying experts.”
(Id. ¶ 114.)
Once Rajaratnam learned
the identities of these agents, i.e. the JTTF Defendants, he was
15
able to discover that they had participated in the JTTF
investigation into LTTE terrorism.
(Id.)
Third, in December
2016, Rajaratnam’s counsel in the NJ Action learned that Motley
Rice had, up to that point, paid Rudra approximately $40,000.
(Id. ¶ 115.)
When Rudra retained independent counsel in late 2017,
he began producing documents that “hint[ed] at the extent to
which Motley Rice and the [JTTF Defendants] have been working to
conceal their crimes and thus protect their longstanding and
highly profitable enterprise.”
(Id. ¶ 117.)
In 2018, Motley
Rice and Rudra made additional disclosures in the NJ Action,
including: (1) a 17-page print-out of cell phone text messages
between Rudra and Elsner; (2) over 3,000 pages of documents and
correspondence between Rudra and “Motley Rice and/or the [JTTF
Defendants];” (3) 60 pages of expense records, “which revealed
$35,000 of previously-undisclosed payments to Rudra;” and (4) a
limited production of documents that had been in the JTTF
Defendants’ possession since the NJ Complaint was filed.
¶¶ 118-26.)12
(Id.
Furthermore, a 2009 memorandum produced on August
17, 2018 revealed that the JTTF Defendants mailed Motley Rice
“hard copies of documents and materials received from Rudra,
which Rudra obtained by working on behalf of the FBI.”
12
(Id. ¶
With the exception of the $35,000 payment to Rudra, plaintiff does not
describe the contents of these disclosures.
16
141.)
Motley Rice also opposed Rajaratnam’s efforts to
modify a Discovery Confidentiality Order (“DCO”) governing the
disclosure of documents produced in the NJ Action.
Though
plaintiff alleges the DCO prevents him from viewing or learning
the contents of documents designated as confidential, Jones Day,
his counsel in the NJ Action, informs him that “many of the
documents Defendants have designated directly support the
allegations herein, and evidence additional wrongdoing by
Defendants.”
(Id. 1 n.1.)
Because “Jones Day is currently
constrained by the DCO—to which they object—from sharing
substantively the information in these documents,” plaintiff is
“constrained in [his] ability to fully describe the criminal
enterprise and its acts.”
(Id.)
M. Bribery of Rudra is Revealed
On December 20, 2016, Elsner filed affidavits by the
three JTTF Defendants.
(Compl. ¶ 133; NJ ECF No. 382.)
Allison’s affidavit stated, “I have provided no payments or
promise of payments to [Rudra] on my own behalf or on behalf of
Motley Rice LLC.”
(Compl. ¶ 135.)
Mallon’s affidavit echoed
Allison’s statements, with the caveat that payments were made
for Rudra’s “out-of-pocket expenses and travel expenses related
to his role as a fact witness in this case.”
(Id.)
However, in
2018, Rudra produced documents “that revealed that Allison and
17
Mallon’s statements were false.”
(Id. ¶ 136.)13
Plaintiff
further alleges that Elsner’s filing of Allison’s and Mallon’s
affidavits violated the federal wire fraud statute.
(Id. ¶
137.)
N. Orchestration of the Vanity Fair Article is Revealed
On May 17, 2017, Elsner filed a letter in the NJ
Action which stated that Motley Rice was “not involved in the
creation or ‘orchestration’ of the Vanity Fair article.”
(Compl. ¶ 145.)
But metadata from Motley Rice’s August 17, 2018
production in the NJ Action reveals that the JTTF Defendants
forwarded information about Rudra to the author of the Vanity
Fair Article as early as April 29, 2011, five months before the
Article was published.
(Id. ¶ 146.)
Allison’s and Mallon’s
affidavits were thus false, and the Motley Defendants’ filing of
those false affidavits in the NJ Action constituted wire fraud.
(Id. ¶ 147.)
O. Defendants Concede That They Lied About Rajaratnam
After Rudra’s 2018 disclosures in the NJ Action,
Rajaratnam’s counsel moved for sanctions pursuant to Rule 11 of
the Federal Rules of Civil Procedure.
(Compl. ¶ 149.)
On
October 3, 2018, Motley Rice moved to amend its complaint to
13
The complaint cites NJ ECF Nos.
parenthetical explanations suggesting
Rudra. Though the court attempted to
Action’s electronic docket, access to
382 and 344 (Exs. H, Q, D, U, V), with
the JTTF Defendants “loaned” money to
review these documents on the NJ
the documents was restricted.
18
withdraw the allegation regarding Rajaratnam’s remarks at the
November 2002 Event.
(Id.)
On November 13, 2018, Motley Rice
filed an amended complaint in the NJ Action striking the
allegation regarding Rajaratnam’s speech.
384.)
(Id.; NJ ECF No.
Motley Rice insisted the amendment was “not an
acknowledgement that the withdrawn allegations are incorrect or
false.”
(Compl. ¶ 150; NJ ECF No. 375-2.)
But plaintiff
alleges that Motley Rice knew the allegations concerning the
November 2002 Event were false when it filed the NJ Complaint
because Rudra described the speech to Motley Rice’s
investigators months before the firm initiated the NJ Action,
and the transcript and record of Rajaratnam’s speech made clear
that the allegations regarding the November 2002 Event were not
as Rudra claimed.
(Compl. ¶ 150.)
Motley Rice’s pleadings in
the NJ Action, dated October 22, 2009, June 13, 2014, and March
8, 2016, all contained these falsehoods, and therefore,
plaintiff alleges, were all separate instances of wire fraud.
(Id. ¶ 152.)
III.
Causes of Action
Claims One and Two of the complaint assert claims
under RICO, 18 U.S.C. § 1962(c), against all defendants.
(Compl. ¶¶ 155-75.)
Claim Three asserts a cause of action under
18 U.S.C. § 1962(a) of the RICO statute against the Motley
Defendants for deriving income from a pattern of racketeering
19
activity, and Claim Four asserts a RICO conspiracy under 18
U.S.C. § 1962(d) against the individual defendants.
176-86.)
(Id. ¶¶
The complaint alleges that “Motley Rice had an ongoing
business relationship with one or more of: [Motley Rice
founders] Joe Rice [and] Ron Motley, Michael Elsner, Jay
Kanetkar, Brian Mallon, John Allison, Rosetta, Mike Asimos,
Jean-Charles Brisard, Steven Bucci, Mike Dick, and Rudra, such
that their relationship constituted an ‘association in fact’
enterprise [(“Enterprise”)].”
(Id. ¶ 156.)
This Enterprise
allegedly caused plaintiff damage through an “open-ended”
pattern of racketeering activity that began as early as the
1990’s.
(Id. ¶¶ 159-61.)
Finally, Claim Five of the complaint asserts a
defamation claim relating to the publication of the Vanity Fair
Article in 2011.
(Id. ¶¶ 187-99.)
Plaintiff alleges that
Kanetkar and Rudra, in coordination with Motley Rice, made
“false and defamatory” statements about plaintiff to David Rose
of Vanity Fair.
(Id. ¶ 188-89.)
When Vanity Fair published
these statements, plaintiff suffered “public contempt, disgrace,
personal and professional harm, and ridicule;” his personal
safety was jeopardized; and he can no longer “integrate back
into, and interact with, society in the United States” and
elsewhere.
(Id. ¶¶ 192-95.)
Plaintiff claims he did not learn
of Rudra’s identity “until on or after November 14, 2016,” and
20
did not learn that Kanetkar was acting at the direction of
Motley Rice until the same date.
IV.
(Id. ¶¶ 196-97.)
The Motions
Defendants move to dismiss the complaint in its
entirety.
In the main, they assert that plaintiff’s RICO
allegations are thinly-clothed malicious prosecution and
defamation claims.
Defendants contend that any allegedly
improper litigation activity in the NJ Action, or defamatory
statements to Vanity Fair, do not constitute “predicate acts”
under RICO, (Motley Mot. 9-10), and that the purported crimes
committed before the NJ Action commenced in 2009 are not
sufficiently related to the Enterprise’s alleged racketeering
activity in the NJ Action.
(Id. 6-7, 22; JTTF Mot. 16.)
Defendants assert that these pleading deficiencies are
incompatible with a “pattern of racketeering activity” under 18
U.S.C. § 1961(5), a threshold requirement for RICO, without
which, plaintiff’s RICO claims cannot be sustained.
Mot. 10, 22.)
(Motley
Defendants further attack the RICO claims as
time-barred, and maintain that plaintiff’s alleged injuries are
too attenuated to sustain a RICO claim.
(Id. 14, 24; JTTF Mot.
19.)
Plaintiff counters that each predicate act has been
adequately alleged and, at the very least, raises factual
questions that preclude dismissal at the motion to dismiss
21
stage.
(Opp. 19-26.)
Plaintiff asserts that the complaint
alleges cognizable injuries that resulted in investors
jettisoning business ventures with plaintiff, banks freezing his
funds, and increasing the costs to defend the NJ Action.
39.)
(Id.
In addition, plaintiff acknowledges that RICO claims are
subject to a four-year statute of limitations, but denies that
his RICO claims accrued in 2009, when the NJ Action was filed,
and instead asserts that he only discovered the first “storm
warnings” in 2016, which alerted plaintiff that he was the
victim of “something more than malicious prosecution.”
41.)
(Id. 40-
Plaintiff contends that, at a minimum, because the
defendants’ fraudulent concealment raises questions as to
whether plaintiff’s claims are “clearly” time-barred, dismissing
the RICO claims at this stage is improper.
(Id. 40-43.)
Defendants also urge the court to retain supplemental
jurisdiction over plaintiff’s state law defamation claim, and to
dismiss it with prejudice.
29.)
(Motley Mot. 26-30; JTTF Mot. 26-
New York’s Civil Practice Law and Rules (“CPLR”) § 215(3)
imposes a one-year limitations period for defamation claims,
running from the date of publication of the statements at issue.
Defendants note plaintiff filed suit for defamation well beyond
the one-year limitation period, and deny the applicability of
any recognized tolling doctrine.
Even if New York had a
“discovery rule” for defamation claims, defendants say, Rudra
22
and Kanetkar were both clearly identified in the Vanity Fair
Article in 2011.
(Motley Mot. 28-30.)
Plaintiff, on the other
hand, insists New York’s one-year statute of limitations was
tolled on both equitable and statutory grounds, and that, at the
very least, the application of any tolling doctrine is a
question of fact that cannot be resolved at the pleading stage.
(Id. 44-46.)
LEGAL STANDARD
“To survive a motion to dismiss pursuant to Rule
12(b)(6), a complaint must contain sufficient facts that if
accepted as true ‘state a claim to relief that is plausible on
its face.’”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)
(quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)).
“A well-pleaded complaint must contain ‘a short and plain
statement of the claim showing that the pleader is entitled to
relief, in order to give the defendant fair notice of what the .
. . claim is and the grounds upon which it rests.’”
Carson
Optical Inc. v. eBay Inc., 202 F. Supp. 3d 247, 252 (E.D.N.Y.
2016) (citing Twombly, 550 U.S. at 555).
A complaint providing
only “labels and conclusions” or “a formulaic recitation of the
elements of a cause of action will not do.”
Twombly, 550 U.S.
at 555.
In deciding the motion, “courts must consider the
23
complaint in its entirety, as well as other sources courts
ordinarily examine when ruling on Rule 12(b)(6) motions to
dismiss, in particular, documents incorporated into the
complaint by reference, and matters of which a court may take
judicial notice.”
Tellabs, Inc. v. Makor Issues & Rights, Ltd.,
551 U.S. 308, 322 (2007). The court may also consider documents
that the plaintiff relied on in bringing the action and that are
either in the plaintiff’s possession or that the plaintiff knew
of when bringing suit.
Chambers v. Time Warner, Inc., 282 F.3d
147, 153 (2d Cir. 2002); Brass v. Am. Film Techs., Inc., 987
F.2d 142, 150 (2d Cir. 1993); Cortec Indus., Inc. v. Sum Holding
L.P., 949 F.2d 42, 47–48 (2d Cir. 1991), cert. denied, 503 U.S.
960 (1992); McKevitt v. Mueller, 689 F. Supp. 2d 661, 665
(S.D.N.Y. 2010).
Where the complaint cites or quotes from
excerpts of a document, the court may consider other parts of
the same document submitted by the parties on a motion to
dismiss.
131 Main St. Assocs. v. Manko, 897 F. Supp. 1507, 1532
n. 23 (S.D.N.Y. 1995).
If “the documents contradict the
allegations of a plaintiff's complaint, the documents control
and the [c]ourt need not accept as true the allegations in the
complaint.”
2002 Lawrence R. Buchalter Alaska Tr. v.
Philadelphia Fin. Life Assurance Co., 96 F. Supp. 3d 182, 199
(S.D.N.Y. 2015) (quoting Bill Diodato Photography LLC v. Avon
Prods., Inc., No. 12–CV–847, 2012 WL 4335164, at *3 (S.D.N.Y.
24
Sept. 21, 2012)) (collecting authorities).
DISCUSSION
I.
RICO Claims
Section 1964(c) of RICO provides a private right of
action to any person injured in his business or property by
reason of a violation of RICO’s substantive provisions, codified
in section 1962.
“To establish a RICO claim, a plaintiff must
show: (1) a violation of . . . 18 U.S.C. § [1962]; (2) an injury
to business or property; and (3) that the injury was caused by
the violation of Section 1962.”
Cruz v. FXDirectDealer, LLC,
720 F.3d 115, 120 (2d Cir. 2013) (quoting DeFalco v. Bernas, 244
F.3d 286, 305 (2d Cir. 2001)).
To establish a violation under
18 U.S.C. § 1962, a plaintiff must show “(1) conduct (2) of an
enterprise (3) through a pattern (4) of racketeering activity.”
Kim v. Kimm, 884 F.3d 98, 103 (2d Cir. 2018) (quoting DeFalco,
244 F.3d at 306)).
A “pattern of racketeering activity” is defined by the
statute as “at least two acts of racketeering activity” within a
ten-year period.
18 U.S.C. § 1961(5).
“Racketeering activity”
is defined to include any “act” indictable under various
specified federal statutes, including, as relevant here, the
mail and wire fraud statutes, the bribery statute, and the
witness tampering statute.
See 18 U.S.C. § 1961(1) (defining
25
“racketeering activity” to include offenses indictable under 18
U.S.C. §§ 1341 (mail fraud), 1343 (wire fraud), 201 (bribery),
and 1512 (witness tampering)).
Two predicate acts are necessary
to constitute a pattern, though not always sufficient.
See
Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479,496 n. 14 (1985)
(“The implication is that while two acts are necessary, they may
not be sufficient.”); see also United States v. Indelicato, 865
F.2d 1370, 1382 (2d Cir. 1989) (“The legislative history is . .
. inconsistent with a rule that any two acts of racketeering
activity, without more, suffice to establish a RICO pattern.”).
Courts have cautioned that RICO is as “an unusually
potent weapon—the litigation equivalent of a thermonuclear
device.”
Halvorssen v. Simpson, No. 218CV2683ENVRLM, 2019 WL
4023561, at *3 (E.D.N.Y. Aug. 26, 2019) (quoting Katzman v.
Victoria’s Secret Catalogue, 167 F.R.D. 649, 655 (S.D.N.Y. 1996)
(citation omitted), aff’d, 113 F.3d 1229 (2d Cir. 1997)).
Given
the “powerful incentive for plaintiffs to attempt to fit garden
variety fraud claims within the standard of civil RICO” due to
“the allure of treble damages, attorney’s fees, and federal
jurisdiction,” courts must “scrutinize civil RICO claims early
in the litigation to separate the rare complaint that actually
states a claim for civil RICO from that more obviously alleging
common law fraud.”
Holmes v. Parade Place, LLC, No. 12-CV-6299
(GBD) (DF), 2013 WL 5405541, at *14 (S.D.N.Y. Sept. 26, 2013)
26
(citation omitted); see also Olympicorp Int’l LLC v. Farm Rich
Foods, LLC, No. 13-CV-4094 (ENV), 2013 WL 6194238, at *2
(E.D.N.Y. Nov. 25, 2013) (observing that RICO, when “often
invoked inappropriately,” becomes “a mere saber to be rattled”).
A. Relatedness
1. Legal Standard
The Supreme Court has interpreted the phrase “pattern
of racketeering activity” to require both that the RICO
predicates pose a threat of continuous criminal activity (the
“continuity” requirement) and that they be related to each other
(the “relatedness” requirement).
Reich v. Lopez, 858 F.3d 55,
59 (2d Cir. 2017) (citing H.J. Inc. v. Nw. Bell Tel. Co., 492
U.S. 229, 239 (1989)).
RICO targets conduct that “amount[s] to
or pose[s] a threat of continued criminal activity.”
U.S. at 239.
H.J., 492
Because RICO does not apply to “isolated or
sporadic criminal acts,” it has a relatedness requirement in
addition to the continuity requirement.
1383 (internal quotation marks omitted).
Indelicato, 865 F.2d at
Predicate crimes must
be related both to each other (“horizontal relatedness”) and to
the enterprise as a whole (“vertical relatedness”).
Reich, 858
F.3d at 60-61 (citing United States v. Cain, 671 F.3d 271, 284
(2d Cir. 2012)).
In H.J. Inc. v. Northwestern Bell Telephone Company,
27
the Supreme Court clarified that predicate acts are horizontally
related when 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.
Where the putative
enterprise is primarily a legitimate business, courts must
determine whether there is a relationship between the predicate
crimes themselves; to do so, courts inquire whether the crimes
share “purposes, results, participants, victims, or methods of
commission.”
Id.; see also Indelicato, 865 F.2d at 1382
(looking to “temporal proximity, or common goals, or similarity
of methods, or repetitions”).
“‘[W]here the enterprise in
question is not primarily in the business of racketeering,’
overlapping participants, without more, are insufficient to show
horizontal relatedness.”
Halvorssen, 2019 WL 4023561, at *5
(quoting Reich, 858 F.3d at 62).
The Second Circuit’s 2017 decision in Reich v. Lopez
is instructive.
Plaintiff Otto J. Reich, the principal of a
consulting firm specializing in anti-corruption, alleged that
Derwick Associates (“Derwick”), a Venezuelan energy company,
bribed Venezuelan energy officials to secure energy contracts at
inflated prices without public bidding, then subcontracted out
the work while retaining significant profits.
858 F.3d at 58.
In 2012, Derwick’s principals filed state court defamation suits
28
against a Venezuelan bank that was threatening to expose
Derwick’s criminal activities.
Id.
Derwick hatched a plan to
sever the bank’s relationship with Reich.
Id.
A Derwick agent
called a major shareholder of the bank and falsely stated that
Reich was in cahoots with Derwick.
Id.
The call achieved
Derwick’s goal: the bank cut ties with Reich.
Id. at 58-59.
Around the same time, one of Derwick’s principals peddled the
same falsehood to another client of Reich’s, Eligio Cedeño, and
achieved the same result: Cedeño fired Reich.
Id.
All told,
Derwick’s actions cost Reich thousands of dollars monthly in
consulting fees.
Id.
Reich filed a RICO action against Derwick’s principals
alleging predicate crimes of wire fraud arising from the false
phone calls, and violations of the Travel Act arising from
Derwick’s bribery of Venezuelan officials.
Id.
The district
court dismissed Reich’s RICO claim for failure to plead a
“pattern of racketeering activity,” and the Second Circuit
affirmed.
Applying the H.J. factors to assess relatedness, the
Second Circuit found that even though Derwick’s principals
partook in both the alleged wire fraud and bribery, “little
else” linked the two predicates:
As
to
the
Travel
Act
violations,
they
were
accomplished by the payment of bribes; the result was
that Derwick secured energy contracts; and the victims
were competing energy contractors and the government
29
of Venezuela; whereas the wire fraud was accomplished
by false phone calls, the result was that two clients
terminated Reich, and the victims were Reich himself
and his firm. The methods of commission, victims, and
results of the predicate acts are all dissimilar and
weigh against relatedness.
Id. at 62 (emphasis in original).
The Second Circuit also considered the purpose of the
underlying wire fraud and Travel Act violations.
Though both
predicates were committed for the purpose of helping Derwick,
Judge Jacobs, writing for a unanimous panel, reasoned that
construing purpose at so broad a level of generality “would make
the factor meaningless” because “virtually all crimes committed
on behalf of an enterprise are done to help it.”
omitted).
Id. (citations
Rather, the acts of wire fraud were intended to get
Reich fired; the Travel Act violations were committed to secure
energy contracts.
Id.
The distinct motives underlying the wire
fraud and Travel Act violations weighed against relatedness, as
did the other H.J. factors and, therefore, plaintiff failed to
plead a “pattern of racketeering activity.
H.J. and Reich thus delineate the contours of the
“relatedness” inquiry under RICO.
The court will now apply the
relatedness test, which has been called “a bulwark against the
application of RICO to the perpetrators of ‘isolated’ or
‘sporadic’ criminal acts,” United States v. Daidone, 471 F.3d
371, 376 (2d Cir. 2006) (citation and internal quotation marks
30
omitted), to the instant complaint.
2. Application
Plaintiff alleges that the Enterprise committed acts
of racketeering activity prior to the NJ Action against
Rajaratnam, some dating as far back as the 1970s, before Motley
Rice even existed.
The sprawling nature of the scheme alleged
by plaintiff necessitates a relatedness inquiry to separate the
wheat of the complaint from its chaff.
The complaint avers
that Motley Rice is a legitimate business that is primarily
engaged in the practice of law.
(Compl. ¶ 18 (“Defendant Motley
Rice, LLC is a well-known plaintiff side litigation firm founded
in 2003.”).)
The relatedness analysis thus begins with the
factors identified in H.J.: similar “purposes, results,
participants, victims, [and] methods of commission.”
492 U.S.
at 240.
The participants in the NJ Action-related predicates
were Motley Rice and Michael Elsner, who filed the NJ Complaint,
the JTTF Defendants, with whom Motley Rice coordinated, and
Rudra, who was allegedly bribed by members of the Enterprise.
The participants accomplished their crimes by planting false
information about plaintiff in the Vanity Fair Article,
unlawfully obtaining and exploiting confidential government
information, and concealing evidence of their criminality by,
31
among other things, resisting disclosures in the NJ Action and
lying to the court.
The victim, obviously, was Rajaratnam.
The
purpose of the Motley Rice Enterprise’s predicate crimes was to
pressure Rajaratnam into settling the NJ Action, thus enriching
the Enterprise.
The alleged racketeering acts that preceded the NJ
Action ultimately have no apparent relation to the predicates
committed in the course of the NJ Action.
These unrelated acts
may be grouped as follows:
Asbestos Litigation.
According to the complaint,
Motley Rice’s predecessor, Ness Motley, began “flooding” courts
in the 1970s with voluminous personal injury cases claiming
asbestos-related injuries.
(Compl. ¶ 30.)
Ness Motley’s
founders supposedly used “threats” and “intimidation” to
obstruct a bill related to asbestos claims, in violation of 18
U.S.C. § 1505,14 and improperly induced medical experts to
provide false testimony, in violation of 18 U.S.C. § 1512.
(Id.
¶ 33.)
The actions of Motley Rice’s predecessor are not
related in any conceivable way to the NJ Action or Rajaratnam.
Plaintiff does not claim that Elsner, Rudra, or the JTTF
14
Violations of 18 U.S.C. § 1505 are not predicate acts of racketeering
activity as defined by RICO. See 18 U.S.C. § 1961(1).
32
Defendants were involved in Ness Motley’s asbestos litigation
lawsuits.
The complaint also does not allege that defendants
used threats or intimidation in connection with the NJ Action.
The complaint claims defendants procured Rudra’s testimony
through bribes, but does not allege that Ness Motley bribed the
experts in the asbestos cases.
The result of Ness Motley’s
asbestos suits were “bulk” settlements.
Though plaintiff
insists the overarching goal of the NJ Action is to coerce him
into a quick settlement, settlement is a goal that can be
ascribed to nearly every plaintiff litigating a civil case.
Whatever the purported goal of the NJ Action, the only results,
thus far, have been a protracted, decade-long federal
litigation, attorneys’ fees, and other intangible, alleged harms
to plaintiff.
No particular persons or entities are identified
as the victims of Ness Motley’s asbestos suits and related
conduct, but suffice it to say, the victims did not include
Rajaratnam, who is the lone alleged victim of the NJ Action.
The 9/11 Action.
Plaintiff alleges that, in the years
following the terrorist attacks of September 11, Jean-Charles
Brisard, Motley Rice’s lead investigator, falsified a document
listing donors to Osama bin Laden and, as a result, a wealthy
Saudi man by the name of Khalid bin Mahfouz was wrongly named in
a suit brought by Motley Rice on behalf of 9/11 terror attack
victims.
(Compl. ¶¶ 39-42.)
Brisard was then “replaced” with
33
Michael Asimos, who supposedly shared information about the 9/11
Action with DoD personnel in order to receive a “quid pro quo”—
the receipt of sensitive government information—from those same
DoD officials.
Plaintiff claims Brisard’s and Asimos’s actions
violated the federal mail and wire fraud and bribery statutes.
As a preliminary matter, plaintiff’s fraud and bribery
claims in connection with Brisard, Asimos, and the 9/11 Action
are wholly conclusory and do not pass muster under basic notice
pleading requirements, much less Rule 9(b) of the Federal Rules
of Civil Procedure, applicable to claims sounding in fraud.
That glaring deficiency aside, there is plainly no relation
between the NJ Action and the allegations relating to the 9/11
Action.
Asimos and Brisard are not parties to this proceeding,
and are not alleged to have participated in the NJ Action; the
victim of Brisard’s “falsification” was Khalid bin Mahfouz, not
Rajaratnam, and the complaint does not identify any victim of
Asimos’s conduct; bin Mahfouz was named in the 9/11 Action but
there is no mention of any settlement, the supposed goal of the
NJ Action; and falsifying an intelligence document, the method
whereby the Enterprise targeted bin Mahfouz, is not the same as
planting a story in a national magazine, or leveraging
government secrets for litigation advantage.
Rosetta.
Asimos allegedly lied to a congressional
34
staffer and fabricated a story so that he could insinuate his
way into Iraq after the 2003 invasion by the United States.
(Compl. ¶¶ 49-54.)
Asimos, Mallon, and other investigators also
used an entity called Rosetta, allegedly funded by Motley Rice,
to “secure profitable government contracts” and sell information
gathered in connection with the 9/11 Action.
(Id. ¶ 55.)
Rosetta built “a massive database of government intelligence on
terrorism,” (id. ¶ 56), though plaintiff neglects to explain why
that project was criminal.
Rosetta also offered information to
an FBI agent in the hopes he would return the favor, received
information from a different FBI agent, and took yet another FBI
agent on a “house-hunting trip ‘in anticipation of being hired
by Rosetta.’”
(Id. ¶¶ 61-67.)
Even ignoring the pleading
deficiencies in these allegations, which plaintiff conclusorily
asserts constitute bribery and sale of stolen property across
state lines, see 18 U.S.C. §§ 201, 2314, 2315, Rosetta’s acts
bear no plausible relation to the NJ Action.
Arrest of Afghan Drug Lord. In 2004 and 2005, at the
DEA’s request, Motley Rice allegedly induced a “notorious Afghan
drug lord” to come to the United States under false pretenses,
where he was arrested and sentenced to life in prison, thereby
committing wire fraud against the drug lord, 18 U.S.C. § 1343.
(Compl. ¶¶ 68-71.)
Motley Rice’s allegedly duplicity in luring
an Afghan drug lord to his arrest is clearly unrelated to the NJ
35
Action or any act that allegedly harmed plaintiff.
Plaintiff has not pled any plausible connection
between the NJ Action, on the one hand, and Ness Motley’s
asbestos litigation, the 9/11 Action, Rosetta, or the deception
of an Afghan drug lord, on the other.
Accordingly, these
alleged acts fail to establish a pattern of racketeering
activity.
The court next turns to the remaining predicate acts
alleged in the complaint, which relate to the NJ Action and the
Vanity Fair Article.
B. Predicate Acts
Though defendants have raised a number of issues with
respect to plaintiff’s RICO claims, including whether Rajaratnam
actually suffered an injury, or whether the JTTF Defendants
participated in the management of the enterprise, the court need
proceed no further than considering the sufficiency, or lack
thereof, of the predicate acts alleged in the complaint.
In
order to state a claim for a violation of RICO, plaintiff must
allege a pattern of racketeering activity, which, at a minimum,
requires the commission of “at least two acts of racketeering
activity” within a ten-year period.
18 U.S.C. § 1961(5); see 18
U.S.C. §§ 1962(a)-(d).
1. Mail and Wire Fraud, 18 U.S.C. §§ 1341, 1343
“The essential elements of [mail and wire fraud] are
36
(1) a scheme to defraud[;] (2) money or property as the object
of the scheme[;] and (3) use of the mails or wires to further
the scheme.”
United States v. Weaver, 860 F.3d 90, 94 (2d Cir.
2017) (citing United States v. Binday, 804 F.3d 558, 569 (2d
Cir. 2015)).
“For both wire and mail fraud, the object of the
scheme to defraud must be money or property.”
Westchester Cty.
Indep. Party v. Astorino, 137 F. Supp. 3d 586, 600 (S.D.N.Y.
2015) (citing United States v. Pierce, 224 F.3d 158, 165 (2d
Cir. 2000)) (emphasis in original).
“In the context of mail
fraud and wire fraud, the words ‘to defraud’ commonly refer to
wronging one in his property rights by dishonest methods or
schemes, and usually signify the deprivation of something of
value by trick, deceit, chicane or overreaching.”
F.3d at 165 (internal quotations omitted).
Pierce, 224
“A scheme to
deceive, however dishonest the methods employed, is not a scheme
to defraud in the absence of a property right for the scheme to
interfere with.”
Id. (citing Carpenter v. United States, 484
U.S. 19, 27–28 (1987)).
As fraud-based predicates, wire fraud and mail fraud
“must be pleaded with particularity in accordance with Federal
Rule of Civil Procedure 9(b).”
Jus Punjabi, LLC v. Get Punjabi
US, Inc., 640 Fed. Appx. 56, 58 (2d Cir. 2016) (summary order)
(citing Lundy v. Catholic Health Sys. of Long Island Inc., 711
F.3d 106, 119 (2d Cir. 2013)).
This particularity requirement
37
extends “to each defendant.”
Fuji Photo Film U.S.A., Inc. v.
McNulty, 640 F. Supp. 2d 300, 314 (S.D.N.Y. 2009).
“To satisfy
this requirement, a complaint must specify the time, place,
speaker, and content of the alleged misrepresentations, explain
how the misrepresentations were fraudulent and plead those
events which give rise to a strong inference that the
defendant[] had an intent to defraud, knowledge of the falsity,
or a reckless disregard for the truth.”
Jus Punjabi, 640 Fed.
Appx. at 58 (bracket in original, internal quotation marks
omitted) (quoting Cohen v. S.A.C. Trading Corp., 711 F.3d 353,
359 (2d Cir. 2013)); see also First Capital Asset Mgmt., Inc. v.
Satinwood, Inc., 385 F.3d 159, 178-79 (2d Cir. 2004).
The complaint’s mail and wire fraud allegations break
down into two categories.
The first consists of electronic
court filings on the New Jersey District Court’s docket,
including “false statements” regarding Motley Rice’s acquisition
and use of confidential government information, allegedly
obtained through Rudra and the JTTF Defendants, (Compl. ¶¶ 13844), as well as Allison and Mallon’s affidavits, electronically
filed by Elsner in the NJ Action, which represented that the
JTTF Defendants had not paid Rudra to be a fact witness in the
case.
(Id. ¶¶ 135-37.)
The second false statement category
concerns Motley Rice’s dissemination of the 2009 Press Release
and its “orchestrating and planting ‘fake news’” about
38
Rajaratnam’s remarks and the November 2002 Event in the Vanity
Fair Article, which was thereafter “disseminated via interstate
wires on Vanity Fair’s website.”
(Id. ¶¶ 97-99, 106-07.)
For the reasons discussed below, these allegations
fail to state a claim for mail or wire fraud.
a. False Statements in the NJ Action
Plaintiff’s allegation, that defendants committed mail
and wire fraud by disseminating false statements to the New
Jersey District Court with the intent to coerce plaintiff into
settling, runs headlong into “the overwhelming weight of
authority [that] bars a civil RICO claim based on the use of the
mail or wire to conduct allegedly fraudulent litigation
activities as predicate racketeering acts.”
Carroll v. U.S.
Equities Corp., No. 118CV667TJMCFH, 2019 WL 4643786, at *12
(N.D.N.Y. Sept. 24, 2019); see also Kim, 884 F.3d 98.15
15
See Estate of Izzo v. Vanguard Funding, LLC, No. 15-CV-7084 (ADS/GRB),
2017 WL 1194464, at *11 (E.D.N.Y. Mar. 30, 2017)(“[E]ven assuming that Urban
Financial’s August 29, 2011 mailing satisfies the elements of mail fraud—a
proposition that is questionable on the current record—the RICO claim fails
because the service and filing of litigation documents in the Foreclosure
Action cannot plausibly support a cognizable claim.”); see also Avraham v.
Lakeshore Yacht & Country Club, Inc., No. 5:15-CV-1297, 2016 WL 6585589, at
*12 (N.D.N.Y. Nov. 7, 2016) (“[A] defendant’s ‘use of mail and wire to
conduct allegedly fraudulent ‘litigation activities’ is insufficient to
establish predicate acts of racketeering.’ ”)(citation omitted); Saluzzo v.
Greenbaum, No. 110-CV-649 (GLS\RFT), 2011 WL 13234286, at *3 (N.D.N.Y. Feb.
4, 2011)(“[W]hile mail and wire fraud do constitute predicate acts under
RICO, . . . allegations of mail or wire fraud are nonetheless insufficient to
plead the necessary predicate act where the focus of those allegations is the
defendant’s litigation activities in pending litigation.”)(citation omitted).
Courts outside the Second Circuit are similarly skeptical of mail and wire
fraud predicates based on litigation activities. See Republic of Kazakhstan
v. Stati, 380 F. Supp. 3d 55, 61 (D.D.C. 2019)(“Courts do not allow allegedly
39
In Kim v. Kimm, the Second Circuit reviewed a district
court decision dismissing a RICO action against parties who had
previously brought a trademark infringement action against the
plaintiff.
884 F.3d 98.
The crux of plaintiff’s RICO claim was
“four declarations” that defendants had prepared, signed, and
filed in the trademark action “with full knowledge that they
contained fraudulent representations intended to persuade the
district court to find in favor of [defendants].”
Id. at 103.
The district court determined that these alleged litigation
activities could not provide a basis for predicate acts under
Section 1962(c).
Id.
Affirming on substantially identical
grounds, the panel noted the consensus among its sister circuits
that litigation activities were improper predicates for civil
RICO claims.
Id. at 104 (collecting cases).
The Second Circuit
was particularly concerned that allowing litigation activities
to state a claim under RICO could “spawn a retaliatory action”
fraudulent ‘litigation activities,’ such as filing fraudulent documents or
engaging in baseless litigation to serve as predicate acts for RICO . . .
where such acts constitute ‘the only allegedly fraudulent conduct.’”)
(citation omitted); Quick v. EduCap, Inc., 318 F. Supp. 3d 121, 141–42
(D.D.C. 2018) (“As Plaintiffs’ RICO claim is premised entirely on mailings
done for the purpose of litigation activity, they have failed to state a
claim.”); see also Snow Ingredients, Inc. v. SnoWizard, Inc., 833 F.3d 512,
525 (5th Cir. 2016) (“[P]rosecuting litigation activities as federal crimes
would undermine the policies of access and finality that animate our legal
system. Moreover, allowing such charges would arguably turn many state-law
actions for malicious prosecutions into federal RICO actions.”) (quoting
United States v. Pendergraft, 297 F.3d 1198, 1208 (11th Cir. 2002)); Auburn
Med. Ctr., Inc. v. Andrus, 9 F. Supp.2d 1291, 1298 (M.D. Ala. 1998)
(“Numerous other courts have found that the actions underlying claims for
malicious prosecution, or analogous actions in the litigation context, will
not support a RICO action.”).
40
for every unsuccessful lawsuit, “inundate federal courts with
procedurally complex RICO pleadings,” and undermine the
principles buttressing the res judicata and collateral estoppel
doctrines by raising doubts about the validity of documents
presented in the underlying litigation, and, ipso facto, the
judicial decisions that relied on those documents.
Id.16
Plaintiff asserts that Kim and similar decisions do
not establish an “unqualified ‘safe harbor’ that immunizes
litigation-related activities from RICO liability.”
(Opp. 10.)
Plaintiff relies on four cases in which litigation activities
supposedly comprised the basis for sufficiently pled RICO
claims.
But none of those cases sustains the instant pleading.
United States v. Eisen, (cited at Opp. 11), concerned
the criminal prosecution of seven attorneys, investigators, and
office personnel of a Manhattan law firm (“Eisen Firm”), which
specialized in personal injury suits.
Cir. 1992).
974 F.2d 246, 251 (2d
The evidence at trial in that case showed that the
defendants conducted the affairs of the Eisen Firm through a
“pattern of mail fraud and witness bribery by pursuing
counterfeit claims” by, among other things, “pressuring accident
16
Plaintiff argues that Kim left the door open to RICO claims based, in
part, on litigation activities, where defendants “also engaged in a variety
of other out-of-court actions to further this activity.” Id. at 105. As
discussed throughout this Memorandum and Order, any “other out-of-court
actions” alleged in the complaint are either deficiently pled, or fail to
establish relatedness or continuity, as are necessary to establish a pattern
of racketeering activity.
41
witnesses to testify falsely, paying individuals to testify
falsely . . . , paying unfavorable witnesses not to testify, and
creating false . . . evidence for use before and during trial.”
Id.
Defendants operated this scheme to pursue over a dozen
counterfeit personal injury claims.
convicted by a jury and appealed.
Id.
Defendants were
The appeal was denied.
As an appeal following a criminal jury trial and
verdict, Eisen is of limited utility in determining whether
plaintiff has pleaded mail and wire fraud with particularity in
a civil matter.
Further, as another court observed, “the
predicate acts in Eisen amounted to far more than mere
‘litigation activities,’ and instead involved an extensive and
broader scheme to defraud defendants in the personal injury
lawsuits commenced by the Eisen Firm.”
Curtis & Associates,
P.C. v. Law Offices of David M. Bushman, Esq., 758 F.Supp.2d
153, 176 (E.D.N.Y. 2010).
Thus, in Eisen, the defendant
attorneys “went well beyond their capacities as legal
representatives” in conducting their fraudulent scheme. See
Morrow v. Blessing, No. 04-1161, 2004 WL 2223311, at *5 (E.D.
Pa. Sept. 29, 2004).
In another case cited by plaintiff, Sykes v. Mel
Harris and Assocs., LLC, (cited at Opp. 11), the defendants—Mel
Harris, LLC, a Manhattan law firm primarily engaged in debt
42
collection, and Leucadia, a group of entities that purchased and
collected defaulted debts—entered into agreements to purchase
debt portfolios, pursued high volume debt collection litigation
against the purported debtors, and sought collection of millions
of dollars in fraudulently obtained default judgments.
Supp. 2d 413, 419 (S.D.N.Y. 2010).
757 F.
Leucadia and Mel Harris used
sewer service to effectuate their scheme.
Over 90% of the
consumers named in the actions defaulted because they were not
actually served.
Id.
After a consumer failed to appear in
court, the defendants would move for default judgment by
providing the court with proofs of service and affidavits
attesting to personal knowledge of facts comprising the basis
for their legal claims.
Id.
The Sykes plaintiffs, consumers
who had been sued by defendants in state debt collection
actions, commenced a RICO action in federal court alleging that
defendants engaged in a scheme to defraud consumers of money
through fraudulent statements involving the use of the mail and
wires.
Id. at 425.17
Sykes is readily distinguishable from the allegations
before this court.
The gravamen of Mel Harris’s racketeering
activity was not so much litigation activities, as it was the
17
Judge Chin did not dismiss the RICO claim in Sykes but his decision did
not address whether litigation activities can support allegations of mail and
wire fraud for RICO purposes, see id., perhaps because the argument had not
been raised.
43
use of courts to obtain default judgments en masse against
defendants who had not been served.
The “litigations” in Sykes
were mere perfunctory steps to cash in on a portfolio of
defaulted debts.
Plaintiff cannot reasonably claim that the NJ
Action, a decade-long court battle in which Rajaratnam is one of
only three named defendants, is remotely akin to the industrial
scale state court litigations filed for the exclusive purpose of
obtaining default judgments in Sykes.
Indeed, the concerns
about civil RICO litigation based on litigation activities that
so troubled the Second Circuit in Kim, were altogether
inapplicable in Sykes: there was little chance of “retaliatory
action” by the non-appearing consumers, and the RICO action
brought by those consumers did not risk eroding res judicata and
collateral estoppel doctrines because default judgments
typically are not preclusive.
See Artmatic USA Cosmetics, a
Div. of Arthur Matney Co. v. Maybelline Co., a Div. of Schering
Plough, 906 F. Supp. 850, 856 (E.D.N.Y. 1995) (“The majority
view is that collateral estoppel based on default judgments is
undesirable.”) (collecting cases).
In Guzman v. Hecht, (cited at Opp. 11-12), a New York
law firm misrepresented the nature of the legal services it
would provide to clients seeking immigration relief.
No.
18CV3947(DLC), 2019 WL 1315888, at *1 (S.D.N.Y. Mar. 22, 2019).
Though Judge Cote denied a motion to dismiss plaintiff’s RICO
44
claim, further explication of the facts and holding in Guzman is
unnecessary.
Guzman is inapt because, unlike here, the RICO
claim did not arise from adversarial litigation activities, but
rather, defendants’ misrepresentations to putative clients about
the nature of legal services their law firm would provide.
Lastly, plaintiff relies on Feld Entertainment Inc. v.
American Society for the Prevention of Cruelty to Animals, 873
F. Supp. 2d 288 (D.D.C. 2012).
(Opp. 12.)
Feld Entertainment
was the defendant in an earlier, long-running suit asserting
violations of the Endangered Species Act, based on its use of
Asian elephants in circus productions (“ESA Action”).
Supp. 2d at 299.
873 F.
The plaintiffs in the ESA Action were several
non-profit animal rights organizations and one individual
plaintiff, Thomas Rider.
Id.
Following a bench trial, the
court in the ESA Action concluded that Rider did not have
Article III standing, and further found that he was “not
credible” because he was “essentially a paid plaintiff and fact
witness” whose sole source of income throughout the litigation
was provided by the animal advocacy organizations which had been
his co-plaintiffs in the ESA Action.
Id.
Feld then turned
around and sued the animal rights organizations and their
counsel of record, arguing that the ESA plaintiffs’ payments to
Rider during that litigation violated RICO.
45
Id. at 300.
Judge Emmet Sullivan denied defendants’ motion to
dismiss and permitted discovery on the RICO claim.
Id. at 322.
Judge Sullivan acknowledged “that courts have refused to allow
litigation activities such as filing fraudulent documents or
engaging in baseless litigation to serve as predicate acts for
RICO,” but considered this restriction limited to “circumstances
where such acts constitute the only allegedly fraudulent
conduct.”
Id. at 318 (internal quotations and citations
omitted).
Feld’s lawsuit went beyond those limited
circumstances:
[W]here additional allegations of extortion or some
other pattern of racketeering activity are involved,
courts have found that alleged mail and wire fraud
violations arising out of malicious prosecution or
abuse of process could be RICO predicate acts.
This
case, at least at the pleading stage, falls into the
latter category. Plaintiff’s allegations in the FAC
are not limited to claims that defendants filed false
documents with the Court or otherwise engaged in
frivolous and harassing litigation; they claim the
entire lawsuit was based on bribery of the lead
plaintiff and witness.
Id. at 318-319 (emphasis added, internal citation and quotation
marks omitted).
Though Rajaratnam has alleged that the NJ Action was
facilitated by bribes paid to Rudra, a claim the court deals
with below, the complaint does not allege that the NJ Action was
based entirely on information or testimony provided by Rudra, or
confidential government documents stolen by the JTTF Defendants
46
and transmitted to Motley Rice.
The initial NJ Complaint
alleged Rajaratnam and his father made donations to TRO,
including a $1 million personal contribution from Rajaratnam to
TRO that was allegedly funneled to Sri Lanka; that TRO provided
LTTE with material support; and incorporated written statements
by Rajaratnam’s father in support of LTTE.
96, 102, 110-11.)
(NJ Compl. ¶¶ 12,
Even after Motley Rice retracted the
allegations arising from Rajaratnam’s purported statements at
the November 2002 Event, which Rudra claimed to have recorded,
the bulk of the allegations in the initial NJ Complaint remain
pending, (NJ ECF No. 384, ¶¶ 11, 267-68, 314, 320), and there is
no allegation by Rajaratnam that they are each based on bribery
or other crimes.
The court, therefore, finds that Feld, which
is not controlling in any event, is distinguishable.
Based on the foregoing, plaintiff cannot rely on
defendants’ litigation activities in the NJ Action to plead the
predicate acts of mail or wire fraud for his civil RICO claim.
A civil RICO action in a neighboring federal district is not the
appropriate mechanism to seek redress for false statements made
in court filings by a litigation adversary.
More appropriate
measures may include a motion for Rule 11 sanctions, motions to
preclude or strike testimony, and, if necessary, a motion for
relief under Federal Rule of Civil Procedure 60(b)(3) for fraud
on the court.
47
b. The Vanity Fair Article and 2009 Press
Release
Plaintiff alleges that Motley Rice committed wire
fraud when it issued the 2009 Press Release falsely representing
that Rajaratnam made pro-LTTE remarks at the November 2002
Event.
(Compl. ¶ 97-98.)
Elsner, Kanetkar, and Rudra, in
coordination with Motley Rice, allegedly committed wire fraud
again in 2011 when they parroted the same misrepresentations
about Rajaratnam to Vanity Fair.
(Id. ¶ 103-07.)
Plaintiff
claims these statements were made as part of a scheme to
“wrongfully obtain money” from him by increasing pressure on
plaintiff to settle the NJ Action.
(Id. ¶ 97.)
Just as courts are loath to permit litigation
activities to be shoehorned into civil RICO predicates, courts
express similar reticence towards attempts to recast defamatory
statements as mail and wire fraud violations.
“The mere fact
that a statement is negative or even defamatory . . . does not
make it fraudulent.
In order for a statement to be actionable
under the mail and wire fraud statutes, a plaintiff must allege
the existence of a scheme, conscious and knowing intent to
defraud on the part of the speaker, and the materiality of the
misrepresentation.”
Li Jun An v. Hui Zhang, No. 13 Civ.
5064(PKC), 2013 WL 6503513, at *6 (S.D.N.Y. Dec. 6, 2013); see
also McEvoy Travel Bureau, Inc. v. Heritage Travel, Inc., 904
48
F.2d 786, 791 (1st Cir. 1990) (“[N]ot every use of the mails or
wires in furtherance of an unlawful scheme to deprive another of
property constitutes mail or wire fraud.”).
The Vanity Fair Article and 2009 Press Release are not
suitable foundations for wire fraud.
At the outset, plaintiff
claims the widely-disseminated falsehoods published in the
Vanity Fair Article caused him to suffer “public contempt,
disgrace, personal and professional reputational harm, and
ridicule.”
(Compl. ¶ 192.)
It is well-established, however,
that reputational harm alone, cannot support a claim for mail or
wire fraud.
Kimm v. Lee, No. 04 CIV. 5724 (HB), 2005 WL 89386,
at *4 (S.D.N.Y. Jan. 13, 2005), aff'd sub nom. Kimm v. Chang
Hoon Lee & Champ, Inc., 196 F. App'x 14 (2d Cir. 2006) (“Though
Kimm may well have suffered reputational injury as a result of
the defendants’ alleged acts, no one was induced to part with
anything of value as a result.”) (internal quotation marks and
citation omitted); United States v. Ferrara, 701 F. Supp. 39, 43
(E.D.N.Y. 1988), aff’d, 868 F.2d 1268 (2d Cir. 1988) (“[I]f
one’s reputation-standing alone-could be construed as property,
then any ordinary defamation action could be brought under the
mail fraud statute-a startling proposition.”).
Plaintiff also alleges that the Vanity Fair Article
and 2009 Press Release caused him financial harm.
49
(Compl. ¶
190.)
The complaint does not specify what financial harm
plaintiff actually suffered, a pleading deficiency under Rule
9(b), but avers that Motley Rice intended the publication of the
false statements about Rajaratnam’s speech to increase pressure
on him to settle the NJ Action.
The court declines to credit
this allegation because it rests on the implausible notion that
Rajaratnam somehow would have been deceived or tricked into
settling the NJ Action based on claims that he knew had no basis
in fact.
It defies common sense that plaintiff relied on
statements he knew were false, or that Motley Rice plausibly
expected to induce Rajaratnam’s reliance on falsehoods about his
remarks at the November 2002 Event, when Rajaratnam himself was
the one who made the speech.
Indeed, the complaint neglects to
explain why or how Vanity Fair’s broader publication of
statements that had already been presented to the court in the
NJ Action would, suddenly, prompt plaintiff to settle that case,
especially if plaintiff knew he could disprove the false
statements about his remarks at the November 2002 Event in the
course of discovery.
Construing the allegations liberally, plaintiff
appears to claim that Motley Rice intended to compel a
settlement offer from Rajaratnam by leveraging against him the
reputational stigma that flowed from the 2009 Press Release and
Vanity Fair Article.
Plaintiff’s attempt to “spin an alleged
50
scheme to harm a plaintiff’s [] reputation” into a RICO claim
fails, see Kimm, 2005 WL 89386, at *5, and federal courts
routinely and soundly reject such attempts.
See, e.g., Ctr. for
Immigration Studies v. Cohen, 410 F. Supp. 3d 183, 191 (D.D.C.
2019) (dismissing RICO claim where plaintiff has “clearly tried
to shoehorn a defamation claim into the RICO framework”);
Kimberlin v. Nat'l Bloggers Club, No. GJH-13-3059, 2015 WL
1242763, at *9 (D. Md. Mar. 17, 2015) (dismissing plaintiff's
RICO claim for the additional reason that it “reflect[ed] more
of an attempt to spin an alleged scheme to harm his reputation
than it reflects a viable RICO claim”); Ritchie v. Sempra
Energy, No. 10-cv-1513, 2013 WL 12171757 at *4 (S.D. Ca. Oct.
15, 2013) (finding that allegations of a smear campaign, through
a website and press releases, containing false statements
regarding market analysis, designed to injure the company’s good
will and lower its stock prices, did not state a predicate
offense under RICO); Manax v. McNamara, 660 F. Supp. 657, 660
(W.D. Tex. 1987), aff'd, 842 F.2d 808 (5th Cir. 1988) (where
defendant coordinated false and misleading press articles
harmful to plaintiff, the scheme was not a fraud on tangible or
intangible rights, but rather was an effort to damage his
reputation, and thus, could not be a predicate act under RICO).18
18
Plaintiff’s principal authority to the contrary, Frydman v.
Verschleiser, 172 F. Supp. 3d 653 (S.D.N.Y. 2016), is distinguishable.
51
(Opp.
Accordingly, plaintiff has failed to plead the
predicate acts of mail or wire fraud.
The court now turns to
the other predicate acts alleged in the complaint.
2. Witness Tampering, 18 U.S.C. § 1512
The federal witness tampering statute sanctions
persons who “corruptly persuade[] another person, or attempt[]
to do so . . . with intent to . . . cause or induce any person
to . . . withhold testimony, or withhold a record, document, or
other object, from an official proceeding.”
1512(b)(2)(A).
18 U.S.C. §
The complaint alleges two incidences of witness
tampering, both of which fail for pleading purposes.
First, on
February 5, 2010, Motley Rice procured an affidavit from Rudra
in connection with the NJ Action that contained “demonstrably
false statements.”
(Compl. ¶ 94.)
However, the complaint does
not state what these false statements are, much less how Motley
Rice “corruptly persuad[ed]” Rudra to furnish the purported
falsehoods.
Though plaintiff alleges that Rudra received bribes
for his testimony in the NJ Action, there is no allegation
concerning the payment of money or other means of corrupt
18.) In Frydman, the defendants accessed the plaintiff’s email account to
learn about his impending business transactions and then sent emails to
potential business partners that defamed plaintiff, costing him a $10 million
loan and $1.4 million sublease. Id. at 600. The court distinguished Kimm,
which involved spreading false information in news articles with intent to
injure, but not the intent to defraud, i.e. to induce reliance. Id. at 669
(citing Kimm, 2005 WL 89386, at *4). The same distinction obtains here:
plaintiff fails to plausibly claim that he or anyone else relied on the
alleged falsehoods published in Vanity Fair and the 2009 Press Release.
52
persuasion in return for Rudra’s affidavit.
Second, plaintiff is “informed and believes” that
Motley Rice still has not produced documents in the NJ Action
that Rudra requested from the FBI, then passed on to the JTTF
Defendants, and which the JTTF Defendants, in turn, passed on to
Motley Rice.
(Id. ¶ 130.)
Plaintiff also “believes” that if
given the opportunity for further discovery, he will show that
Motley Rice and Elsner “corruptly persuaded, or attempted to
persuade” the JTTF Defendants and Rudra to withhold key evidence
from plaintiff.
(Id. ¶ 131.)
Though “matters peculiarly within a defendant’s
knowledge” may be pled “on information and belief,” that does
not sanction the pleading of such matters without any detail
whatsoever.
First Capital Asset Mgmt., 385 F.3d at 179.
“Where
a plaintiff is permitted to plead on information and belief, the
‘complaint must adduce specific facts supporting a strong
inference of fraud or it will not satisfy even a relaxed
pleading standard.’”
Fuji Photo Film U.S.A., 640 F. Supp. 2d at
310 (quoting Wood ex rel. U.S. v. Applied Research Assocs.,
Inc., 328 Fed. Appx. 744, 747 n.1 (2d Cir. 2009) (summary
order)); see also DiVittorio v. Equidyne Extractive Indus.,
Inc., 822 F.2d 1242, 1247 (2d Cir. 1987) (“[T]he allegations
must be accompanied by a statement of the facts upon which the
53
belief is based.”).
Plaintiff has adduced no factual basis for his
assertions of witness tampering, and, instead, alleges a
“formulaic recitation of the elements,” which Twombly prohibits.
550 U.S. at 555.
Plaintiff also does not allege how Motley Rice
persuaded or attempted to persuade Rudra or the JTTF Defendants
to withhold documents or provide false statements.
To the
extent plaintiff believes that Motley Rice has not complied with
its discovery obligations in the NJ Action, the appropriate
means of redress is a motion to compel before the New Jersey
District Court.
3. Violations of 18 U.S.C. §§ 1957, 2314, and 2315
The complaint alleges that Motley Rice received and
transported FBI documents that Rudra had “obtained while working
on behalf of the FBI” or had “requested . . . outside the Touhy
process,” and “compensated Rudra” for them.
78, 141.)
(Compl. ¶¶ 75, 77,
The RICO statute defines racketeering activity to
include, inter alia, acts indictable under Sections 1957, 2314,
and 2315 of Title 18 of the United States Code.
1961(1).
See 18 U.S.C. §
Section 1957, a money laundering statute, outlaws
monetary transactions in criminally derived property that is of
a value greater than $10,000 and is derived from specified
unlawful activity.
Id. § 1957.
Section 2314 prohibits, among
54
other things, the interstate or foreign transport of goods
valued at $5,000 or more, that have been stolen, converted, or
taken by fraud.
Id. § 2314.
Section 2315 prohibits the knowing
receipt, sale, concealment, possession, or disposition of stolen
goods that have been transported interstate or abroad after
being stolen, unlawfully converted, or taken.
Id. § 2315.
Plaintiff fails to plausibly allege violations of
sections 1957, 2314, and 2315 for three distinct reasons.
First, under sections 2314 and 2315, FBI documents are not
“goods” because they are not ordinarily bought or sold in
commerce.
“The Second Circuit has held that the phrase ‘goods,
wares, or merchandise’ is ‘a general and comprehensive
designation of such personal property or chattels as are
ordinarily a subject of commerce.’”
United States v. Farraj,
142 F. Supp. 2d 484, 487 (S.D.N.Y. 2001) (quoting In re
Vericker, 446 F.2d 244, 248 (2d Cir. 1971)).
In Vericker, the
Second Circuit explicitly held that FBI documents were not
“goods, wares, or merchandise” within the meanings of 18 U.S.C.
§§ 2314 and 2315 because “the substance contained in the
documents was not ordinarily the subject of commerce.”
at 248.
446 F.2d
Here, plaintiff conspicuously fails to allege the
nature or contents of documents that were the subject of the 18
U.S.C. §§ 2314 and 2315 violations, much less that the
documents’ substance was “ordinarily the subject of commerce.”
55
Second, notwithstanding the Second Circuit’s ruling in
Vericker, plaintiff fails to plausibly allege that the documents
in question were “stolen,” see 18 U.S.C. § 2314, 2315, or
“criminally derived.”
Id. § 1957.
The complaint alleges that
Rudra “obtained” “copies of documents and materials . . . while
working on behalf of the FBI,” “requested [and presumably
received] additional documents from the FBI,” and the JTTF
Defendants then transported those copies across state lines to
Motley Rice.
(Compl. ¶¶ 75, 77.)
Aside from formulaic
recitations of legal elements, the complaint does not allege
that the documents were “stolen, converted or taken by fraud.”
See United States v. Schultz, 333 F.3d 393, 399 (2d Cir. 2003)
(“[18 U.S.C. § 2314] applies to goods that are ‘stolen,
unlawfully converted, or taken.’”) (citation omitted); see also
United States v. Aleynikov, 676 F.3d 71, 78 (2d Cir. 2012)
(“However, there is no violation of the statute [18 U.S.C. §
2314] unless the good is transported with knowledge that ‘the
same’ has been stolen.”).
Plaintiff merely alleges that Rudra
“obtained” the documents but offers no allegations to support
the claim that the documents were taken by theft, conversion, or
fraud.
In fact, plaintiff alleges in one instance that Rudra
requested documents from the FBI, but did not follow proper
protocol,19 and then passed the documents on to the JTTF
19
According to plaintiff, Rudra acted “outside the Touhy process.”
56
The
Defendants.
(Compl. ¶ 77.)
Plaintiff does not claim that
Rudra’s purported breach of protocol constituted a criminal act
or could be reasonably construed as theft, conversion, or taking
by fraud.
Third, the court cannot discern any basis for
plaintiff’s assignment of “value” to the allegedly stolen
documents.
Plaintiff claims the documents were worth at least
$5,000 or $10,000, but, without more, this is clearly just an
attempt to satisfy statutory thresholds.
See 18 U.S.C. §§ 1957
(property must be worth at least $10,000); id. §§ 2314, 2315
(goods must be worth at least $5,000).
Like the other
allegations in the complaint, plaintiff offers a bare recital of
the elements of a cause of action.
Twombly.
That is insufficient under
In a similar vein, the allegations in support of the
stolen property predicates assert that, over a nine-year period,
the JTTF Defendants received from Rudra, and transmitted to
Motley Rice, some unspecified number of documents, with no
detail as to their contents or the means of transmission.
This
falls far short of notice pleading requirements under Rule 8 of
complaint does not elaborate what this means, but the Motley Defendants
reasonably surmise that this refers to the so-called “Touhy regulations” at
28 C.F.R. § 16.22, a Department of Justice regulation prohibiting the
production of DOJ materials in a civil proceeding. (Motley Mot. 21.)
Plaintiff’s opposition does not cite to a single authority stating that 28
C.F.R. § 16.22 imposes criminal penalties or otherwise creates a private
civil cause of action for breaches of the Touhy protocol, or any instance in
which an alleged violation of 18 U.S.C. §§ 1957, 2314, or 2315, was based on
disclosure or receipt of documents in contravention of 28 C.F.R. § 16.22.
57
the Federal Rules of Civil Procedure.
In sum, the complaint fails to adequately plead
violations of 18 U.S.C. §§ 1957, 2314, and 2315.
4. Bribery, 18 U.S.C. § 201
Finally, plaintiff claims that Motley Rice made “over
$75,000” in payments to Rudra in connection with the NJ Action
between 2009 and 2018.
(Compl. ¶¶ 91-92, 115.)
Though Motley
Rice classified the payments as expense reimbursements related
to Rudra’s role as a fact witness in the NJ Action, (see id. ¶
135), plaintiff alleges the payments were actually bribes that
Rudra “used to fund living arrangements, consumer goods, and
extraneous travel unrelated to Rudra’s testimony.”
(Id. ¶ 91).
Plaintiff concludes that the payments to Rudra could not have
been reasonably related to time spent providing testimony, but
were in fact intended to “secure and influence” his testimony in
the NJ Action.
(Id. ¶ 92.)
Rajaratnam further alleges, on
information and belief, that Motley Rice “gave, offered, or
promised [Rudra] additional things of value,” and otherwise
“corruptly persuaded, or attempted to persuade Rudra to
cooperate” as well as to withhold discovery documents from
plaintiff in the NJ Action.
(Id. ¶¶ 93, 96, 131.)
Neither the complaint nor plaintiff’s opposition
clarifies which subparagraph of the federal bribery statute
58
defendants supposedly violated.
Because the complaint alleges
bribery of a witness, the court assumes that plaintiff is
alleging defendants violated 18 U.S.C. § 201(b)(3) and (c)(2),
which prohibit payments or promises of value to a witness for or
because of their testimony.20
Critically, however, subparagraph
(d) of the statute exempts “the payment, by the party upon whose
behalf a witness is called and receipt by a witness, of the
reasonable cost of travel and subsistence incurred and the
reasonable value of time lost in attendance at any such trial,
hearing, or proceeding.”
18 U.S.C. § 201(d).
Plaintiff contends that whether or not the $75,000 in
20
Section 201(b)(3) imposes criminal penalties on a person who:
directly or indirectly, corruptly gives, offers, or promises
anything of value to any person, or offers or promises such
person to give anything of value to any other person or entity,
with intent to influence the testimony under oath or affirmation
of such first-mentioned person as a witness upon a trial,
hearing, or other proceeding, before any court, any committee of
either House or both Houses of Congress, or any agency,
commission, or officer authorized by the laws of the United
States to hear evidence or take testimony, or with intent to
influence such person to absent himself therefrom[.]
18 U.S.C. § 201(b)(3).
person who:
Section 201(c)(2) imposes criminal penalties on a
directly or indirectly, gives, offers, or promises anything of
value to any person, for or because of the testimony under oath
or affirmation given or to be given by such person as a witness
upon a trial, hearing, or other proceeding, before any court, any
committee of either House or both Houses of Congress, or any
agency, commission, or officer authorized by the laws of the
United States to hear evidence or take testimony, or for or
because of such person’s absence therefrom[.]
18 U.S.C.A. § 201(c)(2).
59
payments to Rudra reasonably reflects the cost of his expenses
and time is a question of fact that cannot be decided at this
stage.
(Opp. 21.)
The court disagrees.
The Second Circuit
does not appear to have spoken as to what constitutes
appropriate payments to fact witnesses, but district courts in
this Circuit and elsewhere that have considered the issue hold
that “[a] witness may be compensated for the time spent
preparing to testify or otherwise consulting on a litigation
matter in addition to the time spent providing testimony in a
deposition or at trial.”
Prasad v. MML Inv'rs Servs., Inc., No.
04 CIV. 380 (RWS), 2004 WL 1151735, at *5–6 (S.D.N.Y. May 24,
2004);
New York v. Solvent Chemical Co., 166 F.R.D. 284, 289
(W.D.N.Y. 1996) (“Of course, the court finds nothing improper in
the reimbursement of expenses incurred by [the witness] in
travelling to New York to provide [a party] factual information,
or in the payment of a reasonable hourly fee for [his] time.”)
(internal quotation marks and citations omitted); Centennial
Mgmt. Servs., Inc. v. Axa Re Vie, 193 F.R.D. 671, 679–80 (D.
Kan. 2000) (concluding that a fact witness was properly and
reasonably compensated “for the time he lost in order to give
testimony in the litigation, review documents produced in the
litigation, and otherwise consult with [a party] and its counsel
on matters related to the litigation”); cf. Biovail Labs. Int'l
SRL v. Abrika, LLLP, No. 04-61704-CIV, 2007 WL 788849, at *2
60
(S.D. Fla. Mar. 14, 2007) (“Abrika presents no evidence to
demonstrate that the retention of Mr. Maes was designed to
secure his cooperation at trial.
Indeed, the fact that Mr. Maes
consults for a Biovail Corporation subsidiary, Biovail Ireland,
demonstrates that he is not likely to be a witness hostile to
Biovail.
Thus, Mr. Maes’ previous employment relationship does
not raise any significant concerns.”).
The complaint alleges that Rudra is “believed
currently to be a resident of Sri Lanka.”
(Compl. ¶ 22.)
Plaintiff further portrays Rudra as playing an integral role in
Motley Rice’s continued prosecution of the NJ Action.
For
example, plaintiff alleges that from 2009 to 2018, Rudra was
intricately involved in obtaining and transmitting key documents
to Motley Rice for use in the NJ Action.
101-103, 105-107.)
(Id. ¶¶ 73-77, 94-95,
The complaint also does not allege that
Rudra demanded, asked for, or otherwise required compensation as
a condition to provide evidence or testimony against plaintiff.
To the contrary, the Vanity Fair Article, on which the complaint
relies, notes that Rudra was committed to “bring[ing] [LTTE]
down.”
(Article 2.)21
Plaintiff also notes that, in July of
2018, Rudra was deposed over a period of four days.
21
(Compl. ¶
Plaintiff disputes Vanity Fair’s description of the November 2002 Event
but does not dispute those parts of the Article that detail Rudra’s work to
undermine LTTE, which date as far back as 1999, ten years before the NJ
Action was filed. (Article 2.)
61
95.)
Though plaintiff notes that Rudra received the entire sum
of $75,000 from Motley Rice prior to his deposition, (see Opp.
21), the length of the deposition itself is indicative of
Rudra’s centrality to the NJ Action, and his pivotal role in the
case would warrant frequent travel to the United States from Sri
Lanka, and back, and any related expense reimbursements.
A
total of $75,000 in payments over the course of nine years,
including thousands of miles travelled, equates to less than
$8,500 per year.
This figure hardly strikes the court as an
unreasonable amount of expenses to reimburse, given the
importance of Rudra to Motley Rice’s case.
Finally, Motley Rice
disclosed Rudra’s expense reimbursements to Rajaratnam in the NJ
Action, producing over 160 pages of expense records in 2016 and
2018.
(NJ ECF No. 382, p. 2.)
Motley Rice’s fulsome disclosure
of its expense reimbursements, which exposed in plain sight its
payments to Rudra, is not consonant with the often-covert nature
of bribes.22
And despite having possession of these voluminous
records, plaintiff fails to provide any examples of suspect
reimbursements that would warrant the plausible inference of a
bribe to secure or influence Rudra’s testimony.23
22
Cf. Alexander Avery, Foreign Corrupt Practices Act: Pleading ParentSubsidiary Liability, 35 J. Nat'l Ass'n Admin. L. Judiciary 131, 157 (2015)
(“[E]mployees who knowingly bribe will also attempt to conceal their bribes .
. . .”).
23
Plaintiff avers that he has been hamstrung from providing documents to
support his pleading by the DCO governing the confidentiality of documents
62
Moreover, even if plaintiff had adequately alleged
that the reimbursements of Rudra’s expenses were in fact bribes,
this lone predicate would not constitute a “pattern of
racketeering activity.”
The purported bribes to Rudra involved
a single scheme with a limited goal, namely, to procure or
influence Rudra’s testimony against Rajaratnam in the NJ Action.
Though plaintiff insists that “[e]ach payment Motley Rice and
the [JTTF Defendants] directly or indirectly made to Rudra was a
separate violation of 18 U.S.C. § 201,” the Second Circuit has
admonished district courts to “take care to ensure that the
plaintiff is not artificially fragmenting a singular act into
multiple acts simply to invoke RICO.”24
Schlaifer Nance & Co.
v. Estate of Andy Warhol, 119 F.3d 91 (2d Cir. 1997).
The
Schlaifer principle has been applied with particular force where
a plaintiff alleges “a single scheme promulgated for the limited
produced in the NJ Action. (See, e.g., Opp. 8 (“Mr. Rajaratnam has alleged
that many of the documents Defendants have designated directly support the
allegations herein, and evidence additional wrongdoing by Defendants.
Unfortunately, the terms of the DCO prevent Mr. Rajaratnam from making more
specific allegations—even on ‘information and belief’—concerning that
wrongdoing.”) (citing Compl. 1 n.1).) Plaintiff essentially employs the DCO
as a sword, rather than a shield, by urging the court to overlook his
pleading deficiencies as a by-product of circumstances beyond his control.
This is perplexing, given the representation of plaintiff’s counsel in a
September 2018 conference before this court that he was “in the process” of
seeking a modification from the District Court in New Jersey to permit coextensive usage of NJ Action documents in this case. (Krantz Decl. at Ex. C,
pp. 83-117 (Tr. 6:4-17).) A review of the NJ Action docket shows no
indication that plaintiff has indeed moved for such relief, and plaintiff has
not otherwise claimed that such action has been taken.
24
Despite having possession of defendants’ expense records, plaintiff
does not allege how many payments defendants made to Rudra.
63
purpose of defrauding a single victim.”
F. Supp. 2d 222, 228 (S.D.N.Y. 2001).
Dempsey v. Sanders, 132
Under such circumstances,
courts hold that “continuity cannot be established.”
Id.; see,
e.g., Cote v. Tennant, No. 6:09–CV–1273, 2010 WL 1930572, at *4
(N.D.N.Y. May 10, 2010) (complaint failed to state a plausible
claim for relief under RICO, where it “allege[d] only a single
isolated act with a single victim,” and where allegations of
additional meetings and mailings “simply reflect[ed] plaintiff's
attempt to fragment the single isolated act into a pattern of
separate acts”); Stein v. N.Y. Stair Cushion Co., Inc., No. 04–
CV–4741, 2006 WL 319300, at *8 (E.D.N.Y. Feb. 10, 2006) (finding
that “the racketeering activity alleged here does not constitute
the sort of ‘long-term criminal conduct’ that Congress sought to
target in RICO,” where plaintiffs alleged only “a single scheme
of narrow scope, including one victim and a limited number of
related participants”); FD Prop. Holding, Inc. v. U.S. Traffic
Corp., 206 F. Supp. 2d 362, 372 (E.D.N.Y. 2002) (“Courts in the
Second Circuit have generally held that where the conduct at
issue involves a limited number of perpetrators and victims and
a limited goal, the conduct is lacking in closed-ended
continuity. This is the case even when the scheme’s duration
exceeds one year.”).
Plaintiff alleges that defendants engaged in an “openended pattern of racketeering activity.”
64
(Compl. ¶ 161, 173.)
But plaintiff cannot establish open-ended continuity because the
payments to Rudra, even if construed as bribes, were singlevictim acts carried out by a handful of participants for the
singular purpose of procuring or influencing Rudra’s testimony
in a specific litigation, and therefore, were not the “multifaceted scheme” required to establish continuity.
GICC Capital
Corp. v. Tech. Fin. Grp., Inc., 67 F.3d 463, 467 (2d Cir. 1995)
(“[A] plaintiff must provide some basis for a court to conclude
that defendants' activities were ‘neither isolated nor
sporadic.’”); see also CPF Premium Funding, Inc. v. Ferrarini,
No. 95 Civ. 4621, 1997 WL 158361, at *9 (S.D.N.Y. April 3, 1997)
(finding thirty-five specific acts of misconduct carried out
against the same victim did not constitute continuity as
required under RICO); China Tr. Bank of N.Y. v. Standard
Chartered Bank, PLC, 981 F. Supp. 282, 287–88 (S.D.N.Y. 1997)
(finding that although a number of acts of misconduct were
alleged, they were all carried out by a single defendant against
one victim, pursuant to a single scheme, and thereby failed both
open and close-ended continuity requirement); Dempsey, 132 F.
Supp. 2d at 228 (“There was no open-ended continuity here. The
alleged fraud involved was designed to extract money from the
Plaintiff. Given this limited goal, the scheme was inherently
terminable.”).25
25
Therefore, even if this court were to find
Courts in the Second Circuit have routinely held that a plaintiff fails
65
that plaintiff adequately alleged that defendants had bribed
Rudra for his testimony in the NJ Action, plaintiff cannot
fragment that single bribery scheme into more than one predicate
act.
*
*
*
The complaint fails to plead at least two acts of
racketeering activity, and thus, fails to allege a pattern of
to plead a pattern of racketeering activity where the complaint alleges a
single-victim scheme with a singular end. Morris v. Zimmer, No. 10 CV 4146
VB, 2011 WL 5533339, at *11 (S.D.N.Y. Nov. 10, 2011) (“There is one main
fraudulent act: Zimmer's alleged fraudulent retention of the NASD settlement
proceeds for use in his business. The other acts complained of all flow from
that main fraud against plaintiffs. Zimmer’s continued misrepresentations to
plaintiff and alleged misrepresentations to this Court are all ‘subparts of
the singular act, and not a ‘pattern’ of separate acts with an underlying
purpose.’”); Andrea Doreen Ltd. v. Bldg. Material Local Union 282, 299 F.
Supp. 2d 129, 153 (E.D.N.Y. 2004) (“Here, there is allegedly one act
attempted by the same officials against the same victims on two occasions.
Doreen implicitly admits that these acts are actually only one attempt to
extort money by claiming that after no money was provided to Local 282
Officials in response to the first shakedown, these officials made a
‘[r]evised [d]emand for a bribe [raised to almost $500,000].’ Thus, this
Court holds that Doreen's classification of this ‘shakedown’ as two predicate
acts ‘is an attempt . . . to go beyond Congress's intent and fragment an act
that plainly is unitary into multiple acts.”) (case and record citations
omitted); Shamis v. Ambassador Factors Corp., No. 95 CIV. 9818 (RWS), 1997 WL
473577, at *16–17 (S.D.N.Y. Aug. 18, 1997) (plaintiff failed to plead a
continuous pattern of racketeering where alleged wrongdoing revolved around a
single act, a limited number of perpetrators were involved, there was only
one target of the scheme, and a discreet, limited goal); Polycast Tech. Corp.
v. Uniroyal, Inc., 728 F. Supp. 926, 945 (S.D.N.Y. 1989) (“Although these
statutory violations directly result from two separate actions—the sale of
Plastics’ shares and Polycast’s issuance of debt securities to finance the
purchase—both actions were undertaken in reliance on the same set of
misrepresentations concerning Plastics' earnings. The defendants are alleged
to have committed a single illegal act that, because of the plaintiffs’ own
actions, happened to have produced two statutory violations. Defendants’
single set of fraudulent statements cannot be split into two separate acts of
racketeering activity in this manner.”); cf. Marini v. Adamo, 812 F. Supp. 2d
243, 264–65 (E.D.N.Y. 2011) (plaintiffs did not “artificially fragment a
singular act” to invoke RICO based on evidence of, inter alia, 144 distinct
coin transactions, numerous allegedly fraudulent communications, and
targeting of victims other than plaintiffs) (citations and brackets omitted).
66
racketeering activity.
This dooms each of plaintiff’s RICO
causes of action asserted in Claims One through Four, and those
claims are thus dismissed.
GICC, 67 F.3d at 465 (“Under any
prong of § 1962 a plaintiff in a civil RICO suit must establish
a pattern of racketeering activity.”); Schlesinger v.
Schlesinger, No. 05-CV-5016-ADS-WDW, 2007 WL 9706975, at *15
(E.D.N.Y. Nov. 15, 2007) (“[T]here can be no RICO conspiracy
without a substantive RICO violation.”) (citation omitted);
Knoll v. Schectman, No. 02 cv 692, 2006 WL 839428, at *6
(W.D.N.Y. Sept. 25, 2003) (“Inasmuch as the plaintiff has failed
to state a claim under § 1962(c), the RICO conspiracy claim must
fail as well.”).
Based on the foregoing, the court need not
address defendants’ other contentions in support of dismissing
the RICO claims, and will now address plaintiff’s defamation
claim under New York state law.
II.
DEFAMATION
Defendants urge the court to dismiss plaintiff’s
defamation claim as time-barred.
As an initial matter, the
court must decide whether or not to exercise supplemental
jurisdiction over plaintiff’s state law defamation claim.
A. Supplemental Jurisdiction
A district court “may decline to exercise supplemental
jurisdiction” over a claim arising under state law if the court
67
“has dismissed all claims over which it has original
jurisdiction.”
28 U.S.C. § 1367(c).
The court’s dismissal of
plaintiff’s RICO claims removes 28 U.S.C. § 1331 and 18 U.S.C. §
1964 as bases for jurisdiction, (see Compl. ¶ 25), because there
are no other federal claims pending before the court.26
“The exercise of supplemental jurisdiction is left to
the discretion of the district court . . . .”
Ametex Fabrics,
Inc. v. Just In Materials, Inc., 140 F.3d 101, 105 (2d Cir.
1998) (internal quotation marks omitted).
“[I]f the federal
claims are dismissed before trial, even though not insubstantial
in a jurisdictional sense, the state claims should be dismissed
as well.”
First Capital Asset Mgmt., 385 F.3d at 182–83
(quoting Castellano v. Bd. of Trustees, 937 F.2d 752, 758 (2d
Cir. 1991)) (internal quotation marks omitted, brackets in
original). “Moreover, the discretion implicit in the word ‘may’
in subdivision (c) of [28 U.S.C.] § 1367 permits the district
court to weigh and balance several factors, including
considerations of judicial economy, convenience, and fairness to
litigants.”
Purgess v. Sharrock, 33 F.3d 134, 138 (2d Cir.
1994).
Though the RICO claims have been dismissed at an early
stage of the litigation, the court finds that its discretion is
26
The complaint does not allege that the court has diversity jurisdiction
pursuant to 28 U.S.C. § 1332.
68
properly exercised by adjudicating the remaining state law
defamation claim.
As discussed immediately below, the
defamation claim may be readily disposed of on timeliness
grounds, does not involve the application of novel or complex
state law, and does not raise concerns of unfairness to
plaintiff, given his selection of the instant forum.
B. Timeliness
Plaintiff alleges that Motley Rice, Kanetkar, and
Rudra defamed him by making false and misleading statements to
Vanity Fair about, inter alia, Rajaratnam’s remarks at the
November 2002 Event.
(Compl. ¶¶ 103, 104.)
Vanity Fair
published the Article disseminating these “defamatory
statements”, “Crouching Tiger, Hidden Raj,” on September 30,
2011.
(Id. ¶ 100.)27
An action alleging defamation under New York law must
be commenced within one year.
CPLR § 215(3).
“The limitations
period begins accruing when ‘the libelous material first was
published, that is, displayed to a third party.’”
27
Mirage
A plaintiff asserting defamation under New York law must establish five
elements: (1) a written defamatory statement of and concerning the plaintiff,
(2) publication to a third party, (3) fault, (4) falsity of the defamatory
statement, and (5) special damages or per se actionability. Mestecky v. New
York City Dep’t of Educ., No. 18-3186, 2019 WL 5783302, at *2 (2d Cir. Nov.
6, 2019) (quoting Palin v. New York Times Co., 940 F.3d 804, 809 (2d Cir.
2019)). Plaintiff asserts that defendants’ remarks “charg[ing] Rajaratnam
with a serious crime (to wit, funding terrorists), are of the sort that tend
to injure a plaintiff in his or her business, trade, or profession,” and
therefore constitute defamation per se. (Compl. ¶ 195.)
69
Entm't, Inc. v. FEG Entretenimientos S.A., 326 F. Supp. 3d 26,
35 (S.D.N.Y. 2018) (quoting Tucker v. Wyckoff Heights Med. Ctr.,
52 F.Supp.3d 583, 596–97 (S.D.N.Y. 2014)).
Vanity Fair
published the Article on September 30, 2011.
The statute of
limitations thus expired on September 30, 2012.
Plaintiff did
not file his defamation claim until November 14, 2017, when he
commenced suit in New York Supreme Court.28
Absent tolling,
plaintiff’s defamation claim is plainly time-barred and must be
dismissed.
1. Equitable Tolling
Plaintiff asserts that the applicable limitations
period should be equitably tolled, and should not accrue from
the date of publication of the Article, because Motley Rice
fraudulently concealed the fact that it was coordinating with
Kanetkar and Rudra when the latter two peddled falsehoods to
Vanity Fair.
According to plaintiff, he did not learn that
Rudra and Kanetkar were working on Motley Rice’s behalf until
November 17, 2016.
(Opp. 44.)
Defamation claims are subject to equitable tolling
under certain circumstances.
The Second Circuit has
characterized the doctrine of equitable tolling as applicable
28
Plaintiff agreed to
prejudice, and defendants
14, 2017 until the filing
Motley Mot. 27-28; id. 28
voluntarily dismiss his state court action without
agreed to toll the limitations period from November
of this federal action on June 1, 2018. (See
n.18.)
70
“‘as a matter of fairness’ where a plaintiff has been ‘prevented
in some extraordinary way from exercising his rights . . . .’”
Johnson v. Nyack Hospital, 86 F.3d 8, 12 (2d Cir. 1996)
(citation omitted).
Fraudulent concealment, such that a
defendant prevents a putative claimant from discovering a
defamation claim, is a paradigmatic basis for equitable tolling.
Wellesley v. Debevoise & Plimpton LLP, No. 06 CV 3518 (ARR),
2007 WL 9710545, at *4 (E.D.N.Y. Jan. 11, 2007) (“The doctrine
was developed in large part ‘to address situations in which
fraudulent or other conduct concealed the existence of a
claim.’”) (quoting Bowers v. Transportacion Maritima Mexicana,
S.A., 901 F.2d 258, 264 (2d Cir. 1990)).
In considering claims
for equitable tolling, district courts are to consider “whether
the person seeking application of the equitable tolling doctrine
(1) has acted with reasonable diligence during the time period
she seeks to have tolled, and (2) has proved that the
circumstances are so extraordinary that the doctrine should
apply.”
Zerilli-Edelglass v. New York City Transit Authority,
333 F.3d 74, 80 (2d Cir. 2003).
Plaintiff confuses the fraudulent concealment of
Motley Rice’s relationship with Kanetkar and Rudra, with
concealment of the publication itself.
Here, only the latter
form of concealment would trigger equitable tolling.
Plaintiff
surely knew the statements attributed to him in the Vanity Fair
71
Article were false at the time they were published on September
30, 2011.
The Article disclosed that Rudra was the source of
the purported falsehoods because the author, David Rose, made it
clear that Rudra was reciting Rajaratnam’s remarks at the
November 2002 Event from memory.
(Article 2.)
Vanity Fair also
identified Kanetkar as Rudra’s main FBI handler.
101.)
(Id.; Compl. ¶
Yet, plaintiff nowhere alleges or claims that he made any
efforts to contact Vanity Fair about the Article, or to
ascertain Rudra or Kanetkar’s whereabouts.
Plaintiff justifies
his delay as a by-product of the late discovery that Motley Rice
“was behind” Rudra and Kanetkar’s defamatory statements, (Opp.
45-46), but plaintiff fails to explain why uncovering Motley
Rice’s alleged involvement forestalled his investigation of the
defamatory remarks until well after the limitations period
accrued.
Plaintiff provides no legal basis to toll what he knew
was a claim for defamation against Rudra and Kanetkar at the
time the Article was published.
There is no indication that
plaintiff acted with reasonable diligence to pursue a defamation
claim against Kanetkar and Rudra in the twelve months following
publication of the Article, thus, the equitable tolling doctrine
cannot, and does not, save his claim.
See Chisolm v. City of
New York, No. 17-CV-5327 (MKB), 2018 WL 3336451, at *5 (E.D.N.Y.
July 6, 2018) (holding equitable tolling was not available where
72
“the Complaint alleges no facts” in support of these components)
(quoting Bolarinwa v. Williams, 593 F.3d 226, 231 (2d Cir.
2010)).
Further, even if Motley Rice had coordinated the
dissemination of the purported falsehoods to Vanity Fair,
plaintiff’s failure to file a timely defamation suit against
Kanetkar and Rudra precludes a viable defamation claim against
Motley Rice.
See LeBlanc v. Skinner, 103 A.D.3d 202, 209 (N.Y.
App. Div. 2d Dep’t 2012) (“Under the relation-back doctrine, a
plaintiff may interpose a cause of action against a person or
entity after the statute of limitations has expired, provided
that the plaintiff had timely commenced the action against
another defendant . . . .”) (citing CPLR § 203(b)) (emphasis
added).
Further, plaintiff fails to plausibly allege “that the
defendant[s] took affirmative steps to prevent the plaintiff's
discovery of his claim or injury or that the wrong itself was of
such a nature as to be self-concealing.”
De Sole v. Knoedler
Gallery, LLC, 974 F. Supp. 2d 274, 318–19 (S.D.N.Y. 2013)
(quoting State of New York v. Hendrickson Bros., 840 F.2d 1065,
1083 (2d Cir. 1988)).
Generalized or conclusory allegations of
fraudulent concealment are not sufficient to toll a statute of
limitations.
1983).
See Armstrong v. McAlpin, 699 F.2d 79, 90 (2d Cir.
Plaintiff alleges that he first learned of Motley Rice’s
coordination with Kanetkar and Rudra, “putting the Vanity Fair
73
article in a whole new light,” beginning in 2016, when Motley
Rice made certain disclosures in the NJ Action.
see also id. ¶¶ 112-15.)
(Compl. ¶¶ 116;
But Motley Rice’s purported connection
to Kanetkar and Rudra was not requisite to Rajaratnam’s
discovery of Kanetkar and Rudra’s roles in publishing the
defamatory statement, which, according to the complaint,
Rajaratnam had good cause to believe was false on its face.
Thus, equitable tolling does not save plaintiff’s time-barred
defamation claim.
2. Statutory Tolling
Finally, plaintiff asserts that the defamation claim
against Kanetkar remains timely under an obscure tolling
provision, CPLR § 207, because Kanetkar is a New Jersey resident
who was “not subject to long-arm jurisdiction in New York for
his defamatory statements against Mr. Rajaratnam.”
see also Compl. ¶ 23.)
(Opp. 46;
Section 207 provides, in pertinent part,
that “if, when a cause of action accrues against a person, he is
without the state, the time within which the action must be
commenced shall be computed from the time he comes into or
returns to the state.”
CPLR § 207.
Section 207 does not apply,
however, “while jurisdiction over the person of the defendant
can be obtained without personal delivery of the summons to the
defendant within the state.”
Id. § 207(3).
74
As relevant here,
CPLR § 313 authorizes service outside of New York State where a
person is subject to the jurisdiction of New York courts under
CPLR § 302.
In Yarusso v. Arbotowicz, the New York Court of
Appeals held that CPLR § 207(3) prohibits tolling under section
207 whenever an authorized method of service other than in-state
personal service is available.
41 N.Y.2d 516 (N.Y. 1977).
“Thus, all that § 207(3) requires is ‘merely the availability of
an authorized method of service by which personal jurisdiction
could be obtained.’”
Plitman v. Leibowitz, 990 F. Supp. 336,
339 (S.D.N.Y. 1998) (quoting Yarusso, 41 N.Y.2d at 518).
It
matters not whether the alternative means of service would have
been effective: “[t]he standard looks to what is possible, not
what is practicable.”
Id. (citation omitted).
Plaintiff argues that the Yarusso principle is cabined
with respect to defamation claims against a non-domiciliary.
(Opp. 46-47.)
Plaintiff’s contention relies on the Court of
Appeals’ decision in SPCA of Upstate New York v. American
Working Collie Association.
18 N.Y.3d 400 (N.Y. 2012).
In
SPCA, the Court of Appeals confirmed that CPLR §§ 302(a)(2) and
(3), which typically permit long-arm jurisdiction “premised on
the commission of a tortious act—perpetrated either within the
state or outside the state, causing injury within the state,”
75
are inapplicable bases for long-arm jurisdiction for defamation
claims.
Id. at 403.
Instead, jurisdiction over a non-
domiciliary for defamation must satisfy CPLR § 302(a)(1), which
provides that a court may exercise personal jurisdiction over a
non-domiciliary that “transacts any business within the
state” so long as the cause of action arises from the in-state
activity.
In order to demonstrate that an individual is
transacting business within the state under CPLR § 302(a)(1),
there must be a “substantial relationship” between the
defendant’s purposeful activities within New York State and “the
transaction out of which the cause of action arose.”
(internal quotation marks and citations omitted).
Id. at 404
Critically,
the Court of Appeals in SPCA did not address the tolling
provision at issue here, CPLR § 207, and it does not appear, in
the eight years since it was decided, that any court has cited
SPCA as a basis for tolling under section 207.
The crux of the defamation claim is that Kanetkar and
Rudra were in cahoots with Motley Rice; made false statements
about Rajaratnam to Vanity Fair; and Kanetkar knew these
statements were false because he had learned the extent of
Rajaratnam’s support (or lack thereof) for the Tamil Tigers
during a criminal investigation into LTTE in the Eastern
District of New York.
(Compl. ¶¶ 100-08.)
According to
Kanetkar’s counsel, the allegations that Kanetkar “handled”
76
Rudra and “procured much of the information misused by Motley
Rice against Mr. Rajaratnam in connection with investigations
(and prosecutions brought) in the Eastern District of New York,”
establish a substantial relationship between Kanetkar’s
purposeful New York State activities and the Vanity Fair
Article.
(JTTF Mot. 28-29.)
Plaintiff counters that these
allegations do not establish that Kanetkar actually handled
Rudra, or procured the information used against plaintiff,
within New York.
(Opp. 47.)
He concludes that while discovery
may yield evidence that establishes long-arm jurisdiction over
Kanetkar, “for now the record places him in New Jersey, working
for a South Carolina law firm, beyond the jurisdiction of New
York.”
(Id. 47-48.)
Plaintiff’s argument is flawed because it wrongly
presumes the burden lies with defendants to rebut the
application of CPLR § 207 by demonstrating that Kanetkar was
subject to jurisdiction in New York State.
(See Opp. 47 (“In
short, none of the allegations on which the JTTF Defendants rely
establishes any connection between Kanetkar’s activities and New
York—let alone the substantial relationship necessary to
establish long-arm jurisdiction.”).)
Here, because plaintiff’s
“claims are time-barred on the face of [his] own complaint,
[plaintiff] has the burden of pleading facts sufficient to
establish that the statute[] of limitations should be tolled.”
77
Voiceone Commc'ns, LLC v. Google Inc., No. 12 Civ. 9433 (PGG),
2014 WL 10936546, at *7 (S.D.N.Y. Mar. 31, 2014) (quoting OBG
Technical Servs., Inc. v. Northrop Grumman Space & Mission Sys.
Corp., 503 F. Supp. 2d 490, 504 (D. Conn. 2007)).
Thus,
plaintiff bears the burden of pleading facts supporting the
tolling of the statute of limitations under Section 207.
See
Plitman, 990 F. Supp. at 338; Weimer v. Lake, 268 A.D.2d 741,
741–42 (N.Y. App. Div. 3d Dep’t 2000) (“The burden is on the
plaintiff to demonstrate that the Statute of Limitations is
tolled by the defendant’s absence from the State.”).
Further,
courts rarely grant tolling relief pursuant to Section 207
because CPLR § 308(5) “nearly always allows a plaintiff to
obtain jurisdiction over a defendant by obtaining a court order
proscribing [sic] the means of service where other attempts at
service have been unsuccessful.”
See Plitman, 990 F. Supp. at
338 (“under governing New York case law, the tolling provision
in § 207 is almost never available to a plaintiff, even to a
plaintiff who can show that he unsuccessfully attempted to serve
a hard-to-locate defendant out of state”).
Here, neither the
complaint nor opposition remotely suggest that plaintiff made
any effort whatsoever to effect service on Kanetkar since the
publication of the Vanity Fair Article, including by seeking a
court order pursuant to CPLR § 308(5).
At bottom, plaintiff seeks to benefit from his failure
78
to adequately plead that Kanetkar was subject to the long-arm
jurisdiction of New York State.
It is plaintiff’s burden,
however, to demonstrate that the statute of limitations is
tolled, and this he does not do.
Therefore, the court grants
defendants’ motion to dismiss plaintiff’s defamation claim.29
CONCLUSION
For the foregoing reasons, defendants’ motions to
dismiss the Amended Complaint are granted in their entirety.
Plaintiff’s RICO claims asserted in Claims One, Two, Three, and
Four of the Amended Complaint are dismissed for failure to plead
a “pattern of racketeering activity.”
Plaintiff’s defamation
claim under New York law, asserted against defendants Motley
Rice, Jay Kanetkar, and “Rudra,” is dismissed as untimely.
The court also denies plaintiff a second opportunity
to amend his pleading.
Although plaintiff has not requested
leave to replead, “[w]hen a motion to dismiss is granted, the
usual practice is to grant leave to amend the complaint.”
Hayden v. Cty. of Nassau, 180 F.3d 42, 53 (2d Cir. 1999),
overruled on other grounds by Gonzaga v. Doe, 536 U.S. 273
(2002).
“However, a district court has the discretion to deny
leave to amend where there is no indication from a liberal
reading of the complaint that a valid claim might be stated.”
29
Plaintiff’s opposition does not assert that the same tolling provision
applies to Rudra.
79
Perri v. Bloomberg, No. 11–CV–2646, 2012 WL 3307013, at *4
(E.D.N.Y. Aug. 13, 2012) (citing Chavis v. Chappius, 618 F.3d
162, 170 (2d Cir. 2010)).
Here, the court finds that any
further pleading amendments would be futile.
See Lucente v.
Int'l Bus. Machs. Corp., 310 F.3d 243, 258 (2d Cir. 2003)
(“Where it appears that granting leave to amend is unlikely to
be productive, . . . it is not an abuse of discretion to deny
leave to amend”); see also Cuoco v. Moritsugu, 222 F.3d 99, 112
(2d Cir. 2000) (holding that leave to amend the pleadings is not
required where “the problem with [the litigant’s] causes of
action is substantive” such that “better pleading will not cure
it”).
Plaintiff’s RICO claims rest on the flawed theory that
defendants’ litigation activities and alleged defamatory
statements, combined with scattershot allegations of unrelated
conduct spanning decades and bearing no relation to plaintiff,
can be spun into a coherent pattern of racketeering activity.
The court does not envision any factual supplementation that can
cure this deficiency in a subsequent pleading.
Likewise,
plaintiff’s defamation claim is facially time-barred and his
equitable tolling argument rests of a meritless theory of
fraudulent concealment.
With respect tolling under CPLR § 207,
plaintiff was well aware, or should have been, that he was
required to plead or offer additional facts in support of
tolling, and his counsel acknowledged as much to the court four
80
months before he filed the Amended Complaint.
(See ECF No. 39,
Tr. 15:6-13 (“One of arguments that was advanced in favor of
tolling the statute with respect to the agents is that the
agents are non-domiciliaries of the United States -- in New
York, and as a result of that, while they're outside of the
jurisdiction, the statute doesn't run. And so it may become
necessary for me to put in supplemental papers in connection
with the fact that the agents are outside of New York . . .
.”).)
Plaintiff presented no such facts in either the Amended
Complaint or his opposition.
Therefore, additional leave to
amend is denied.
The Clerk shall enter judgment in favor of defendants
and close the case.
SO ORDERED.
Dated: Brooklyn, New York
March 26, 2020
/s/
KIYO A. MATSUMOTO
United States District Judge
Eastern District of New York
81
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