Farag et al v. XYZ Two Way Radio Service Inc. et al
MEMORANDUM & ORDER: Defendants' motion to dismiss 15 is GRANTED. Plaintiffs' complaint is dismissed with prejudice. The Clerk of Court is respectfully directed to enter judgment and close the case. ORDER ATTACHED. Ordered by Judge Eric R. Komitee on 8/1/2022. (Guy, Alicia)
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UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
AHMED FARAG, MOHAMED ABDELHAMID,
PIERRE MANKIT CHAN, SI CHAN CHEN, YAU
CHEUNG, YUK CHOR LUI, et al.,
MEMORANDUM & ORDER
-againstXYZ TWO WAY RADIO SERVICE, INC.,
MOHAMED MOWAD, SANDY CHECK, JERRY
CHING HOR, AHMED MOHARREM, et al.,
ERIC KOMITEE, United States District Judge:
Plaintiffs are a group of former shareholders of
defendant XYZ Two Way Radio Service, Inc., which provides
Plaintiffs allege that XYZ
wrongfully terminated them and forced them to sell their shares
at below-market prices.
They sued XYZ and eight members of its
board of directors (including Mohamed Mowad, who is XYZ’s
president, in addition to serving on the board). 1
Plaintiffs assert claims under the Racketeer
Influenced and Corrupt Organizations Act (“RICO”) and various
Defendants move to dismiss the complaint pursuant
to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6).
The eight directors named in the complaint as individual defendants
are Mohamed Mowad, Sandy Check, Jerry Ching Hor, Ahmed Moharrem, Chi Yuen Lo,
Shengwe Zhang, Mohamed Salem, and Dindyal Rampersaud.
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the following reasons, I grant the motion to dismiss for failure
to state a claim under Rule 12(b)(6).
The following factual allegations are drawn from the
Defendant XYZ coordinates “black car” ground
First Amended Compl. (“FAC”) ¶ 26, ECF
Each share of XYZ entitles a shareholder to drive, or
rent to a third party, one car.
Plaintiffs allege that in
February 2019, they discovered that XYZ’s President, defendant
Mowad, “had committed various wrongdoings, unethical behavior,
breaches of fiduciary duty and theft, self-dealing” to benefit
himself and the Board at Plaintiffs’ expense.
Id. ¶ 52.
The complaint is short on specifics, but Plaintiffs
allege (among other things) that Defendants engaged in
“oppressive conduct that destroy[ed] or substantially
diminish[ed] the value” of their shares, id. ¶ 42; threatened
them “on a daily basis . . . with arbitrary and unwarranted
fines” and the “expulsion and forced sale of their shares,” id.
¶ 45; “confiscate[d]” the shares, and “through self-dealing,
convert[ed] these shares to their own use and benefit.”
Plaintiffs contend that the forced redemption of their
shares, and their concomitant expulsion from the firm, were done
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in retaliation for the plaintiffs having demanded an
investigation into Mowad’s earlier wrongful acts.
Id. ¶ 54.
They say that Defendants filed a series of baseless grievances —
what the parties call “10-5 violations” — against Plaintiffs. 2
Id. ¶ 58.
Defendants then “terminated, expelled and fined all
of the Plaintiffs individually herein in excess of $20,000.00
without any cause, reason, or justification.”
Id. ¶ 58.
Upon termination, Defendants forced Plaintiffs to sell
their shares of XYZ at “an extremely diluted value below the
fair market value of such shares.”
Id. ¶ 54.
Each share sold
for $5,000, which Plaintiffs claim was a “gross undervaluation.”
Id. ¶ 83.
These actions, Plaintiffs allege, were all part of a
long-term “scheme,” beginning in 2010, to enable members of the
Board to obtain additional shares at artificially low prices.
Id. ¶¶ 77, 119.
This lawsuit is the latest in a series of actions —
heretofore all unsuccessful — by Plaintiffs and other former XYZ
In September 2011, a group of former XYZ
Both parties use the term “10-5 violations” to describe the notices
XYZ sent Plaintiffs to inform them of disciplinary charges, so I refer to
them as such. The parties do not, however, explain why these notices are
called “10-5.” XYZ’s by-laws state that the Security Chairman is responsible
for issuing “10-5’s,” but the by-laws also do not define them. Copies of
these “10-5” notices, submitted by Plaintiffs, say “Security Charge/Hearing
Notice” at the top. See, e.g., Part 1 of Exs. to Pls.’ Opp. 12-13, ECF No.
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shareholders, including one current plaintiff (Abdelhamid), sued
XYZ and certain directors in New York State Supreme Court on
behalf of themselves and “all other Shareholders of XYZ.”
Ex. 3 to Declaration of Deana Davidian (“Davidian Decl.”), ECF
They challenged (1) their terminations and fines,
(2) the sale of their shares for “less than market value,”
(3) embezzlement of funds, and (4) Mowad’s acquisition of
certain XYZ shares.
The court dismissed the majority of
these claims in April 2013, see Ex. 4 to Davidian Decl., ECF No.
17-4, and the remainder in January 2014.
See Ex. 5 to Davidian
Decl., ECF No. 17-5. 3
In April 2019, several of the plaintiffs here sued
Defendants — again in New York State Supreme Court — alleging,
among other things, that (1) XYZ’s disciplinary charges against
them were “false,” (2) XYZ had imposed “unwarranted” fines in
“retaliation” for their having accused Mowad of misconduct, and
(3) their shares were sold for less than fair market value. 4
Ex. 6 to Davidian Decl. 5-6, ECF No. 17-6.
The court dismissed
The Supreme Court’s order dismissing this 2011 case mentions three
previous lawsuits involving similar subject matter. Ex. 4 to Davidian Decl.
12, ECF No. 17-4.
The plaintiffs in the April 2019 action included all of the plaintiffs
in this action except Tian, Hui, and Zou. See Ex. 6 to Davidian Decl. 2, ECF
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this action in July 2019.
See Ex. 11 to Davidian Decl. 7, ECF
No. 17-11. 5
In December 2019, plaintiffs Abdelhamid, Abdelnaby,
Chan, Elbaridi, and Farag filed yet another lawsuit against XYZ
and Mowad, again in New York State Supreme Court.
challenged their terminations, alleging violations of New York
Labor Law (“NYLL”), including that they were terminated “in
retaliation for the complaints [they] lodged” at the February
2019 annual XYZ shareholder meeting.
10, 13, 16, 19, ECF No. 17-12.
Ex. 12 to Davidian Decl.
In March 2020, those plaintiffs
stipulated to the dismissal of their NYLL claims with prejudice.
Ex. 14 to Davidian Decl. 2, ECF No. 17-14.
Defendants advise that, in addition to these
unfavorable terminations in prior cases, several plaintiffs have
waived claims against XYZ, either in the course of prior actions
or during their separation from the company. 6
Defendants seek to
In dismissing the April 2019 complaint, the court held (1) that
plaintiffs’ terminations, the fines imposed against them, and the sale of
their radios were lawful, proper, and required or permitted by XYZ’s by-laws;
(2) that “there is no evidence” that the defendants breached any fiduciary
duty owed to plaintiffs; and (3) that plaintiffs’ other allegations,
including that Mowad abused his power, obtained a life insurance policy paid
for by XYZ, and diverted funds that XYZ recovered from a settlement, were
“conclusory and unsubstantiated.” See Ex. 11 to Davidian Decl. 7, ECF No.
17-11 (state court order dated July 25, 2019).
For example, Defendants point to (i) a release-of-claims form executed
and signed by plaintiff Tian, see Ex. 2 to Declaration of Yuk Man Lee (“Lee
Decl.”), ECF No. 18-2 (document entitled “RELEASE” in bold, capital letters,
stating that Tian “releases and discharges” XYZ, its directors, and officers
from all actions or claims relating to “any matter[,] cause or thing
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dismiss certain claims based on those releases.
Defs.’ Mem. in
Supp. of Mot. to Dismiss, ECF No. 16 (“Defs. Br.”), at 6, 21.
do not consider the releases at this stage, however, because
these documents are outside the pleadings, and not all of the
relevant documents were made part of the court record in the
prior actions (such that I could take judicial notice of them
Plaintiffs filed the instant action on September 9,
ECF No. 1.
They amended their complaint as of right one
ECF No. 2.
The amended complaint alleges eight
claims: one civil RICO claim, under 18 U.S.C. § 1962(c) and (d)
(Count Eight), and state-law claims for wrongful termination and
retaliation, breach of fiduciary duty, unjust enrichment,
conversion or embezzlement, and self-dealing (Counts One through
At a pre-motion conference in December 2021,
Plaintiffs heard Defendants’ articulated bases for dismissal and
then declined the Court’s invitation to amend the complaint
whatsoever from the beginning of the world to the day of the date of this
RELEASE . . . .”); (ii) legends appearing on checks made out to and deposited
by plaintiffs Bouhmaza, Xiao Hua Chen, and Zou, which state that by “cashing
this check, you are releasing all claims against XYZ and its directors [and]
officers,” see Exs. 4-9 to Lee Decl., ECF Nos. 18-4 to 18-9; and (iii) the
2020 stipulation pursuant to which plaintiffs Abdelhamid, Abdelnaby, Chan,
Elbaridi, and Farag, agreed to dismiss with prejudice their state-court
retaliation claims. Ex. 14 to Davidian Decl., ECF No. 17-14 (plaintiffs’
claim “for alleged violations of Section 215 of the NYLL . . . is dismissed
with prejudice”). Because these alleged releases are not part of the record
before me, I do not consider them in connection with this motion.
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See Pre-Motion Conference Tr., ECF No. 32; see also
Defs.’ Ltr. Requesting a Pre-Motion Conference, ECF No. 12.
Defendants then moved to dismiss for lack of jurisdiction —
arguing Plaintiffs lack standing — and failure to state a claim.
As discussed below and in the margin, Defendants’ RICO
standing argument presents no jurisdictional impediment and is
properly reviewed under Rule 12(b)(6), not 12(b)(1). 7
12(b)(6) analysis, I reach the merits on only the RICO claim, as
that is the sole basis for federal jurisdiction.
To overcome a Rule 12(b)(6) motion, a plaintiff must
plead factual allegations sufficient “to state a claim to relief
that is plausible on its face.”
550 U.S. 544, 570 (2007). 8
Bell Atlantic Corp. v. Twombly,
A claim is plausible “when the
7 The Second Circuit has explained that RICO standing should be
addressed under Rule 12(b)(6): “lack of RICO standing does not divest the
district court of jurisdiction over the action, because RICO standing, unlike
other standing doctrines, is sufficiently intertwined with the merits of the
RICO claim that such a rule would turn the underlying merits questions into
jurisdictional issues.” Lerner v. Fleet Bank, N.A., 318 F.3d 113, 116–17 (2d
Cir. 2003), as amended (Apr. 16, 2003), abrogation on other grounds
recognized by Am. Psych. Ass’n v. Anthem Health Plans, Inc., 821 F.3d 352,
359 (2d Cir. 2016); see also Am. Psych., 821 F.3d at 359 (“The Supreme Court
has recently clarified . . . that what has been called ‘statutory standing’
in fact is not a standing issue, but simply a question of whether the
particular plaintiff has a cause of action under the statute.” (citing
Lexmark Int’l, Inc. v. Static Control Components, Inc., 134 S.Ct. 1377, 1387
Unless otherwise noted, when quoting judicial decisions this order
accepts all alterations and omits all citations, and internal quotation
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plaintiff pleads factual content that allows the court to draw
the reasonable inference that the defendant is liable for the
Ashcroft v. Iqbal, 556 U.S. 662, 678
The Court must accept all factual allegations in the
complaint as true and draw all reasonable inferences in the
See Lundy v. Catholic Health Sys. of Long
Island Inc., 711 F.3d 106, 113 (2d Cir. 2013).
Plaintiffs level their civil RICO claim against all
For the reasons set forth below, this claim is
Plaintiffs’ state-law claims are dismissed as
abandoned because Plaintiffs’ opposition brief does not address
Defendants’ arguments that Plaintiffs fail to state claims for
each such claim. See Pls.’ Mem. in Opp. to Mot. to Dismiss, ECF
No. 20 (“Pls. Opp.”).
Plaintiffs allege that Defendants violated RICO by
conspiring to deprive them of the value of their XYZ stock.
To establish a civil RICO claim, a plaintiff must allege
“(1) conduct, (2) of an enterprise, (3) through a pattern (4) of
racketeering activity,” as well as “injury to business or
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property as a result of the RICO violation.”
Lundy, 711 F.3d at
Defendants argue, as a threshold matter, that
Plaintiffs lack standing to bring a RICO claim because they are
alleging harms against XYZ and not against them personally.
This argument is not jurisdictional, for the reasons set out in
note 7 supra.
It is also not correct, at least as applied to
the instant factual allegations.
“To satisfy RICO’s standing requirements, a plaintiff
must demonstrate (1) a violation of section 1962; (2) injury to
business or property; and (3) causation of the injury by the
Motorola Credit Corp. v. Uzan, 322 F.3d 130, 135
(2d Cir. 2003).
“The requirement that the injury be to the
plaintiff’s business or property means that the plaintiff must
show a proprietary type of damage.”
Gotlin v. Lederman, 367 F.
Supp. 2d 349, 356 (E.D.N.Y. 2005).
It is generally settled that shareholders lack
standing to bring a claim in their individual capacities for
injuries to the corporation – i.e., claims that are derivative
of the corporation’s injury.
See, e.g., Lakonia Mgmt. Ltd. v.
Meriwether, 106 F. Supp. 2d 540, 551 (S.D.N.Y. 2000) (“A
decrease in value of a holder’s shares which merely reflects the
decrease in value of the firm as a result of the alleged illegal
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conduct is derivation rather than direct in nature and cannot
confer individual standing under RICO.”).
New York courts have applied Delaware’s framework to
determine whether a claim is direct or derivative:
[A] court should look to the nature of the wrong and
to whom the relief should go. The stockholder’s
claimed direct injury must be independent of any
alleged injury to the corporation. The stockholder
must demonstrate that the duty breached was owed to
the stockholder and that he or she can prevail without
showing an injury to the corporation.
Yudell v. Gilbert, 949 N.Y.S.2d 380, 384 (App. Div. 2012)
(adopting test framed by Delaware Supreme Court in Tooley v.
Donaldson, Lufkin & Jenrette, Inc., 845 A.2d 1031, 1039 (Del.
“Thus, under Tooley, a court should consider (1) who
suffered the alleged harm (the corporation or the stockholders);
and (2) who would receive the benefit of any recovery or other
remedy (the corporation or the stockholders individually).”
Yudell, 949 N.Y.S.2d at 384.
Plaintiffs satisfy this requirement because they
allege injuries that are distinct from injuries to the
corporation itself, and Plaintiffs themselves — not XYZ — would
receive the benefit of any recovery.
They claim that Defendants
“confiscate[d]” and “convert[ed],” or improperly redeemed, the
shares they held, FAC ¶ 40, rather than simply diminishing the
value of those shares by looting the corporation.
id. ¶¶ 45, 74-75, 119, 123.
Indeed, the complaint is devoid of
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any real suggestion that Defendants’ conduct diminished XYZ’s
Accordingly, they have statutory standing to
bring the RICO claim.
Pattern of Racketeering Activity
Despite having standing, Plaintiffs fail to state a
RICO claim because they do not allege a pattern of racketeering
A pattern of racketeering activity must consist of
two or more predicate acts.
18 U.S.C. § 1961(5).
allege that Defendants committed — as predicate acts — mail
fraud, 18 U.S.C. § 1341, and money laundering, 18 U.S.C. § 1957.
But Plaintiffs fail to plead a valid claim of mail fraud. 9
Mail fraud requires “the existence of a fraudulent
scheme and a mailing in furtherance of the scheme.”
F.3d at 119.
The “gravamen” of mail fraud is the “scheme to
Bridge v. Phoenix Bond & Indem. Co., 553 U.S. 639,
“Allegations of mail fraud . . . must be made with
the particularity required by Rule 9(b), which requires that the
complaint allege content, date, place, or intent of any alleged
Entretelas Americanas S.A. v. Soler, 840 F.
App’x 601, 603 (2d Cir. 2020), as amended (Jan. 7, 2021); see
also Fed. R. Civ. P. 9(b) (“[A] party must state with
Because Plaintiffs fail to make out a claim for mail fraud, I do not
reach the question of whether they have adequately alleged money laundering.
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particularity the circumstances constituting fraud or
“Pursuant to this higher pleading standard, the
complaint must adequately specify the statements it claims were
false or misleading, give particulars as to the respect in which
plaintiffs contend the statements were fraudulent, state when
and where the statements were made, and identify those
responsible for the statements.”
App’x at 603-04.
Entretelas Americanas, 840 F.
Where “multiple defendants are asked to
respond to allegations of fraud, the complaint should inform
each defendant of the nature of his alleged participation in the
DiVittorio v. Equidyne Extractive Indus., Inc., 822
F.2d 1242, 1247 (2d Cir. 1987).
The complaint falls well short
of meeting these standards.
First, the allegations of fraud are not particularized
as to any individual defendant other than Mowad.
required to “plead facts that describe each defendant’s
involvement in the fraud,” see LLM Bar Exam, LLC v. Barbri,
Inc., 271 F. Supp. 3d 547, 587 (S.D.N.Y. 2017), aff’d, 922 F.3d
136 (2d Cir. 2019), but the complaint describes only the
involvement of defendant Mowad.
See generally FAC.
Plaintiffs simply refer generically to the conduct of
E.g., id. ¶¶ 40-42, 55, 58-60, 65-66, 80, 119,
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Even as to Mowad, the allegations are insufficient for
the reason that follows.
Second, Plaintiffs identify no fraudulent
communications and provide no detailed description of any
The complaint speaks to the motive for the
alleged fraud, describing a “scheme” to “sell shares of stocks
[sic] . . . to members of the Board of Directors at an extremely
diluted and depressed value,” id. ¶ 74; to “criminally deprive
the value of [Plaintiffs’] stocks . . . for the ultimate illegal
financial gains of the [board] members,” id. ¶ 123; and to
“wrongfully terminate employment agreement [sic] of the
Plaintiffs with XYZ and purchase the capital stocks of the
Plaintiffs at a diluted price.”
Id. ¶ 82.
But the complaint
says next to nothing specific about the modus operandi of the
The only misrepresentations that Plaintiffs point to
are the allegedly false statements about Plaintiffs’ conduct —
the allegations underpinning the “10-5” violations.
¶ 50 (alleging “erroneous or false 10-5 violations against
Plaintiffs to fine or to terminate their employment”); see also
¶ 58 (Defendants issued “false, unwarranted and baseless
violations (10-5) against all Plaintiffs” and then “terminated,
expelled and fined all of the Plaintiffs individually herein in
excess of $20,000.00 without any cause, reason, or
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Plaintiffs do not explain what these “10-5
violations” were, where and when they were issued, or how they
Cf. Sky Med. Supply Inc. v. SCS Support Claims
Servs., Inc., 17 F. Supp. 3d 207, 228 (E.D.N.Y. 2014) (mail
fraud claim contained sufficient particularity where it
identified specific reports containing fraudulent statements,
and specific false statements within those reports; date of
mailing and recipient; and “the manner in which those statements
were false by alleging specific facts that, if true, would
support the existence of a fraudulent scheme”).
Moreover, it is
not clear how these statements could be calculated to deceive
Plaintiffs, given that they would have been aware (by
definition) of their own conduct.
Likewise, Plaintiffs provide no “detailed description”
of the underlying scheme.
Curtis & Assocs., P.C. v. L. Offs. Of
David M. Bushman, Esq., 758 F. Supp. 2d 153, 176-77 (E.D.N.Y.
2010), aff’d sub nom. Curtis v. L. Offs. of David M. Bushman,
Esq., 443 F. App'x 582 (2d Cir. 2011); see also, e.g., A. Terzi
Productions, Inc. v. Theatrical Protective Union, 2 F. Supp. 2d
485, 500 (S.D.N.Y. 1998) (allegations of threats and abusive
conduct do not constitute scheme to defraud).
For example, the
complaint provides no basis at all — let alone a plausible basis
— to support the allegation that the redemption price paid was
below fair market value.
The complaint states, again in
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conclusory fashion, that Plaintiffs’ shares were redeemed at
$5,000 per share, “a fraction of the[ir] true value.”
alleges nothing about the “true value” of the shares or why this
was a “gross undervaluation.”
Id. ¶ 82-83. 10
complaint does not allege which board members participated, or
Again, Plaintiffs fall back on conclusions.
¶ 94 (“Defendants have improperly deprived the shareholders of
their money and their property through the use of trickery,
deceit and fraudulent practices.”).
These allegations are not
sufficiently particularized to meet Rule 9(b)’s higher pleading
Without plausibly alleging mail fraud, Plaintiffs
cannot establish two or more predicate acts to show a “pattern
In opposing the motion to dismiss, Plaintiffs filed a series of
declarations providing supplemental information regarding the value of their
shares and details about Defendants’ alleged wrongdoing. See Exs. 1-2 to
Pls. Opp., ECF Nos. 20-1 to 20-2. These declarations were prepared
subsequent to the filing of Defendants’ motion to dismiss. “Because a Rule
12(b)(6) motion challenges the complaint as presented by the plaintiff,
taking no account of its basis in evidence, a court adjudicating such a
motion may review only a narrow universe of materials,” Goel v. Bunge, Ltd.,
820 F.3d 554, 559 (2d Cir. 2016), comprised of “the facts alleged in the
complaint, documents attached to the complaint as exhibits, and documents
incorporated by reference in the complaint.” United States ex rel. Foreman
v. AECOM, 19 F.4th 85, 106 (2d Cir. 2021). “A district court therefore errs
when it considers affidavits and exhibits submitted by defendants, or relies
on factual allegations contained in legal briefs or memoranda in ruling on a
12(b)(6) motion to dismiss.” Id. at 107. Because Plaintiffs’ additional
materials are outside the pleadings and not “integral” to the complaint, I
have not considered them in deciding this motion. See e.g., Toretto v.
Donnelley Fin. Sols., Inc., No. 20-CV-2667, 2022 WL 348412, at *5 (S.D.N.Y.
Feb. 4, 2022) (declining to consider a document that was not integral to the
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of racketeering activity” under Section 1961(5). 11
claim thus fails as a matter of law and is dismissed with
Dismissing the RICO claim with prejudice is
appropriate because Plaintiffs were given notice of Defendants’
specific objections and offered the opportunity to amend, but
declined multiple times.
See City of Pontiac Policemen's &
Firemen's Retirement Sys. v. UBS AG, 752 F.3d 173, 188 (2d Cir.
2014) (district court’s denial of leave to amend and dismissal
with prejudice were appropriate where plaintiffs had an
opportunity to amend their complaint after notice of pleading
At the pre-motion conference, after Defendants
set forth the various bases for dismissal, I asked Plaintiffs
whether they wished to amend; they said no. 12
Based on that
demurrer, I set a briefing schedule for this motion.
Defendants do not argue that Plaintiffs fail to allege money
laundering. The Court need not reach this question, however, because a
pattern of racketeering requires two or more predicate acts.
12 At the beginning of the conference, I explained that the purpose of
pre-motion conference is “to circumvent the situation where a motion to
dismiss is filed, is fully briefed, is orally argued, and only then does the
plaintiff identify certain proposed amendments . . . to the pleadings,
thereby necessitating that we start the entire cycle over again,” Pre-Motion
Conference Tr. 3:2-7, ECF No. 32. I clarified that the pre-motion conference
was not a venue to argue the merits of the motion to dismiss; rather, “the
ultimate question” for Plaintiffs would be whether “they want to proceed to
briefing and arguing the motion based on complaint as is . . . or, having
heard a preview of the defense’s arguments, [whether they] want to avail
[themselves] of right to amend at this stage?” Id. at 3:23-4:7; see also id.
at 17:6-8 (reminding counsel that the “purpose of the premotion conference .
. . is to decide whether you want to amend the complaint now or not”). After
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It was a surprise, then, when Plaintiffs’ opposition
brief requested leave to amend as an “alternative” to granting
Defendants’ motion, see Pls. Opp. 25, but Plaintiffs provided no
This violates not only Rule III.A.1 of
this Court’s Individual Rules (requiring a proposed complaint
and redline), but also established procedure.
See Fed. R. Civ.
Pro. 7(b) (“A request for a court order must be made by motion.
The motion must . . . state with particularity the grounds for
seeking the order.”); see also Credit Chequers Info. Servs.,
Inc. v. CBA, Inc., 205 F.3d 1322, 1322 (2d Cir. 2000)
(“[A]ppellant has given no indication of what amendment is
proposed that would state a valid claim for relief.”).
Plaintiffs again received notice, and an opportunity
to request leave to amend, at oral argument on this motion.
asked Plaintiffs’ counsel to confirm whether Plaintiffs were
seeking to amend the complaint: “[L]et me just make sure the
record is clear here. . . . [I]n response to my question, are
you seeking leave to amend now?
You’re saying in response, no,
we are not seeking leave to amend now; is that correct?”
going through each element of a RICO claim, the heightened pleading standard
under Rule 9(b), and specifically asking Plaintiffs’ counsel whether he
wanted to amend the RICO claim, counsel replied that “we believe, at the
pleading stage, we have sufficiently alleged” it. Id. at 18:6-7. At the end
of the conference, I presented the issue to counsel again: “[T]hat is your
choice and if you want to say, we rest on the complaint as currently drafted,
then we’re happy to set a briefing schedule right now . . . .” Id. at 26:1013. Counsel stated: “We think we have pleaded enough. Whether or not we can
ultimately win, that’s a different story. We think we have met . . . the
very beginning hurdle to allege a civil RICO claim.” Id. at 27:11-13.
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Argument Tr. 17:18-22, ECF No. 33.
Counsel replied, “Yes . . .
because we think we have already alleged sufficiently . . . at
least for me sustain a . . . motion to dismiss.”
Id. at 17:23-
Plaintiffs maintained their position that they sufficiently
alleged a RICO violation, but said they wished to amend, after a
decision, if the Court granted Defendants’ motion.
Id. at 18:1-
That kind of optionality, however, is not and should not be
available at this late stage.
For the reasons set out above, Plaintiffs’ RICO claim
is dismissed with prejudice. 14
Plaintiffs’ counsel stated: “[A]fter you render a decision, and you
think there’s . . . a deficiency there, . . . we would like to be given an
opportunity to amend the complaint to address those deficiencies.” See also
id. at 27:4-5 (Q: “So are you asking for leave to amend right now? A: “I’m
not asking for leave to amend on the elements that the plaintiff has [sic].”
Q: “[Y]ou are, or you are not?” A: “[A]fter you make a decision, and if you
think we . . . have not alleged sufficient acts to sustain mail fraud, then
we’ll be asking for the opportunity to amend. But currently we are confident
that we have already . . . stated sufficient facts . . . to sustain our
allegations, at least to sustain against a motion to dismiss.”).
14 I note that, in response to the Court’s directive to submit briefing
on the question of dismissal with or without prejudice, Oral Argument Tr. 2324, ECF No. 33. Plaintiffs’ letter addressed the different question of
whether leave to amend would be appropriate. Pls’. Ltr. dated March 2, 2022,
ECF No. 29. However, during oral argument Plaintiffs’ counsel expressly
confirmed that he was requesting that dismissal be without prejudice – not
for leave to amend. Id. at 18:5-10 (Q: “I think you’re really saying that
any dismissal of the complaint should be without prejudice.” A: “Correct.” Q:
“Alright, so we don’t . . . have a live request for leave to amend.”). To
the extent Plaintiffs’ letter is a belated request to amend the complaint,
that request is denied due to Plaintiffs’ undue delay, multiple opportunities
to amend, and prejudice to Defendants. E.g., Ruotolo v. City of New York,
514 F.3d 184, 191 (2d Cir. 2008) (affirming district court’s denial of leave
to amend, based on plaintiff’s “delay in seeking leave to amend was
inexcusable given the previous opportunities to amend, and the defendants’
burden and prejudice”).
Case 1:20-cv-04191-EK-LB Document 34 Filed 08/01/22 Page 19 of 20 PageID #: 857
Plaintiffs’ state-law claims are dismissed because
Plaintiffs have abandoned them.
“District courts in this
circuit have found that a plaintiff’s failure to respond to
contentions raised in a motion to dismiss claims constitute an
abandonment of those claims.”
Laface v. E. Suffolk Boces, 349
F. Supp. 3d 126, 161 (E.D.N.Y. 2018); see also, e.g., Burchette
v. Abercrombie & Fitch Stores, Inc., 8-CV-8786, 2009 WL 856682,
at *9 (S.D.N.Y. Mar. 30, 2009) (dismissing, as abandoned, claim
that plaintiff failed to address in her opposition to
defendant’s motion to dismiss); Hanig v. Yorktown Cent. Sch.
Dist., 384 F. Supp. 2d 710, 722–23 (S.D.N.Y. 2005) (“Because
Plaintiff did not address Defendant’s motion to dismiss with
regard to this claim, it is deemed abandoned.”); Lipton v. Cty.
of Orange, 315 F. Supp. 2d 434, 446 (S.D.N.Y. 2004) (“This Court
may, and generally will, deem a claim abandoned when a plaintiff
fails to respond to a defendant’s arguments that the claim
should be dismissed.”).
Here, Defendants moved to dismiss each of Plaintiffs’
state-law claims – Counts One through Seven – for failure to
state a claim.
See Defs. Br. 21-29.
Yet Plaintiffs’ opposition
brief did not address any of Defendants’ specific arguments,
instead stating simply that “Plaintiffs have stated a claim for
each and every cause of action listed in the Complaint.”
Case 1:20-cv-04191-EK-LB Document 34 Filed 08/01/22 Page 20 of 20 PageID #: 858
Opp. 26. 15
Plaintiffs also stated that they “are not seeking
damages for any claims beyond the RICO cause of action.”
The Court thus deems these claims abandoned, and they are
dismissed with prejudice.
See e.g., Laface, 349 F. Supp. 3d at
161-62 (dismissing abandoned claim with prejudice); Rae v.
County of Suffolk, 693 F. Supp. 2d 217, 230 (E.D.N.Y. 2010)
For these reasons, Defendants’ motion to dismiss is
Plaintiffs’ complaint is dismissed with prejudice.
The Clerk of Court is respectfully directed to enter judgment
and close the case.
/s/ Eric Komitee
United States District Judge
August 1, 2022
Brooklyn, New York
15 At oral argument, Plaintiffs acknowledged that they did not address
these arguments. Plaintiffs’ counsel said Plaintiffs “didn’t respond [to the
arguments] because we don’t think they deserve a response.” Oral Argument
Tr. 14:3-4, ECF No. 33; see also id. 16:3-7 (“Even if we do not respond, it
doesn’t mean we abandon the claims. We just simply not worth [sic] . . . any
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