Crab House of Douglaston Inc. et al v. Tribune Company et al
Filing
175
ORDER granting in part and denying in part Motions to Dismiss 141 , 143 , 150 and, 151 , and granting Motion to Dismiss 149 . See attached. Ordered by Senior Judge Denis R. Hurley on 7/13/2011. (Malley, Sean)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
--------------------------------------------------------X
CRABHOUSE OF DOUGLASTON INC. d/b/a
DOUGLASTON MANOR, et al.,
MEMORANDUM & ORDER
04 CV 558 (DRH)(WDW)
Plaintiffs,
- against -
NEWSDAY INC., et al.,
Defendants.
--------------------------------------------------------X
Appearances:
Joseph O. Giaimo
Attorney for Plaintiffs
80-02 Kew Gardens Road
Kew Gardens, New York 11415
Harwood Feffer LLP
Attorneys for Plaintiffs
488 Madison Avenue, Suite 801
New York, New York 10019
By: Samuel K. Rosen
Joel C. Feffer
Robert I. Harwood
Sidley Austin LLP
Attorneys for Defendants Newsday, Hoy, Distribution Systems of America, Harold Foley, and
Thomas Langer
787 Seventh Avenue
New York, New York 10019
By: Robert W. Hirth
Daniel A. McLaughlin
DeFeis O’Connell & Rose, P.C.
Attorneys for Defendant Keith Potthoff
500 Fifth Avenue, 26th Floor
New York, New York 10110
By: Philip C. Patterson
Gregory J. O’Connell
1
Clifford Chance US LLP
Attorneys for Defendant Robert Halfmann
31 West 52nd Street
New York, New York 10019
By: David Meister
Mark A. Weissman
Dechert LLP
Attorneys for Defendant Robert Brennan
30 Rockefeller Plaza
New York, New York 10112
By: Edward A. McDonald
Matthew J. Lang
HURLEY, District Judge:
Before the Court are five motions to dismiss plaintiffs’ fourth amended complaint. (See
docket nos. 141, 143, 149, 150, 151.) The Court previously granted defendants’ motions to
dismiss the second amended complaint (“SAC”), 1 dismissing all claims under the Lanham Act
with prejudice, dismissing all claims under the Racketeer Influenced and Corrupt Organizations
Act (“RICO”), 18 U.S.C. § 1961 et seq., without prejudice and with leave to amend, and
temporarily declining jurisdiction on plaintiffs’ state law claims. Plaintiffs have since amended
their complaint and defendants now move again to dismiss pursuant to Fed R. Civ. P. 12(b)(6).
For the reasons that follow, defendants’ motions are granted in part, and denied in part.
BACKGROUND
The allegations set forth in plaintiffs’ fourth amended complaint (“FAC”) are
substantially similar to the prior pleadings in this case, 2 the underlying facts of which have been
articulated in more detail in the Court’s previous Memorandum & Order. See Crab House of
1
Plaintiffs label their most recent pleading as the fourth amended complaint (docket nos. 111-14), even though no
third amended complaint was ever filed. Plaintiffs attribute this mislabeling to a “scrivenor’s error.” (Pls.’ Memo in
Opp., n. 1.)
2
To the extent that there are material differences, those differences are discussed in the text infra.
2
Douglaston, Inc. v. Newsday, Inc. (“Crab House I”), 418 F. Supp. 2d 193 (E.D.N.Y. 2006).
Some familiarity with the underlying facts of this case is therefore assumed. In a nutshell,
plaintiffs’ claims arise from an alleged scheme by defendant news publications Newsday, Inc.
(“Newsday”), Hoy, LLC (“Hoy”), and their distributors, as well as various employees to inflate
the reported circulation numbers for their publications and “advertising flyers” by as much as 50
percent. (FAC ¶¶ 1-6, 25.) It is alleged that by padding these numbers, defendants fraudulently
drove up the rates they could charge advertisers.
Central to the implementation of the purported scheme was the Audit Bureau of
Circulation (“ABC”), an independent, non-profit entity responsible for auditing the reported
circulation numbers of Newsday, Hoy, and a host of other news publications. ABC publishes
biannual audited circulation reports upon which advertisers, including plaintiffs, rely in
estimating both the effectiveness of their advertising in a particular publication and the market
rate for placing such advertisements. The alleged fraud is said to have involved defendants
submitting false circulation reports to ABC, taking various measures to create the appearance
that those circulation reports were valid when later audited by ABC, and using the final audited
reports published by ABC to substantiate the bogus circulation claims made to potential
advertisers.
The named plaintiffs bring this action on behalf of themselves and a class consisting of
other businesses that placed advertisements in the publications beginning in 1995 and continuing
through the date plaintiffs filed their FAC. (Id. ¶ 15.) They allege eight causes of action, with the
first five charging substantive RICO violations under 18 U.S.C. § 1962(c) 3 [Counts I and III] and
3
18 U.S.C. § 1962(c) states that “[i]t shall be unlawful for any person employed by or associated with any
enterprise engaged in, or the activities of which affect, interstate or foreign commerce, to conduct or participate,
directly or indirectly, in the conduct of such enterprise's affairs through a pattern of racketeering activity or
collection of unlawful debt.”
3
RICO conspiracy violations under 18 U.S.C. § 1962(d) 4 [Counts II, IV, and V], with the
remaining three being causes of action under state law, to wit, unjust enrichment, fraud, and New
York General Business Law § 349.
The “Company defendants,” as they are referred to in the FAC, include the two
publication companies Newsday and Hoy, and their distributor, Distribution Systems of
America, Inc. (“DSA”). 5 The FAC also brings claims against a number of named and unnamed
individuals. The named individuals (the “Individual defendants”) 6 include:
1) Louis Sito (“Sito”), President and Publisher of Hoy, Executive Vice President for
Circulation for Newsday, and National Director Of Hispanic Publications for The
Tribune Company, the parent company for the three Company Defendants; 7
2) Robert Brennan (“Brennan”), Vice President of Circulation for Newsday, and “overall
director” for circulation and sales of Newsday, Hoy, and DSA;
3) Robert Garcia (“Garcia”), Circulation Director for Hoy;
4) Robert Halfmann (“Halfmann”), 8 “employee, agent, and sales representative” of the
Company Defendants;
5) Fred Herb (“Herb”), also an “employee, agent, and sales representative” of the Company
Defendants;
6) Keith Potthoff (“Potthoff”), an “employee and agent of Company Defendants,” as well as
General Manager of DSA.
7) Harold Foley (“Foley”), a computer programmer and independent contractor to the
Company Defendants;
4
18 U.S.C. § 1962(d) provides that “[i]t shall be unlawful for any person to conspire to violate any of the provisions
of subsection (a), (b), or (c) of this section.”
5
DSA distributed the Newsday and Hoy newspapers to readers, as well as advertising flyers to residences.
6
Because defendant Sito has settled his claims (see following footnote), and because defendants Garcia and
Langer have not responded to the FAC or any other pleading in this case (see section VII infra) the term “Individual
defendants” as it is used in this decision shall refer exclusively to defendants Brennan, Halfmann, Potthoff, Foley,
and Langer.
7
Since this pleading was filed, defendant Sito settled all claims asserted against him in the FAC without prejudice.
(FAC ¶ 135.)
8
Defendant Robert Halfmann’s last name is misspelled “Haufman” in the FAC.
4
8) Thomas Langer (“Langer”), and independent contractor and financial systems consultant
to the distribution companies that preceded DSA.
According to the FAC, defendants Sito, Brennan, and Garcia were all terminated from the
Tribune Company in 2004, and pled guilty in 2006 for conspiracy to commit mail fraud in
connection with the scheme alleged here. (FAC ¶¶ 107, 113, 115, 119, 120, 124.) The FAC
defines “one or more” of the John/Jane Doe defendants as “a high-level officer, director,
employee, representative and agent of one or more of the Company Defendants,” and a
“managing member of the Circulation Enterprise.” (FAC ¶ 143.)
DISCUSSION
I.
STANDARD OF REVIEW
Rule 8(a) provides that a pleading shall contain “a short and plain statement of the claim
showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). The Supreme Court has
recently clarified the pleading standard applicable in evaluating a motion to dismiss under Rule
12(b)(6). To survive a motion to dismiss [under 12(b)(6)], a plaintiff must allege “only enough
facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S.
544, 570 (2007). 9
While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not
need detailed factual allegations, a plaintiff’s obligation to provide the
grounds of his entitlement to relief requires more than labels and
conclusions, and a formulaic recitation of the elements of a cause of action
will not do. Factual allegations must be enough to raise a right to relief
above the speculative level, on the assumption that all the allegations in
the complaint are true (even if doubtful in fact).
9
Although the FAC was filed before the Supreme Court decided Twombly and Iqbal, the Court nevertheless applies
the heightened pleading standards articulated in those cases here. See, e.g., Iqbal v. Hasty, 490 F.3d 143 (2d Cir.
2007)(applying Twombly retroactively to a case heard before, but decided after, Twombly was rendered).
5
Id. at 555-56 (citations and internal quotation marks omitted).
First, in assessing a party’s complaint the Court should “begin by identifying pleadings
that, because they are no more than conclusions, are not entitled to the assumption of truth.”
Ashcroft v. Iqbal, 566 U.S. ---,129 S. Ct. 1937, 1950 (2009). “While legal conclusions can
provide the framework of a complaint, they must be supported by factual allegations.” Id. Thus,
“[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory
statements, do not suffice.” Id. at 1949 (citing Twombly, 550 U.S. at 555).
Second, “[w]hen there are well-pleaded factual allegations a court should assume their
veracity and then determine whether they plausibly give rise to an entitlement to relief.” Id.
“Determining whether a complaint states a plausible claim for relief [is] . . . a context-specific
task that requires the reviewing court to draw on its judicial experience and common sense.” Id.
at 1950. The Court defined plausibility as follows:
A claim has facial plausibility when the plaintiff pleads factual content
that allows the court to draw the reasonable inference that the defendant is
liable for the misconduct alleged. The plausibility standard is not akin to a
“probability requirement,” but it asks for more than a sheer possibility that
a defendant has acted unlawfully. Where a complaint pleads facts that are
“merely consistent with” a defendant’s liability, it “stops short of the line
between possibility and plausibility of ‘entitlement to relief.’”
Id. at 1949 (quoting and citing Twombly, 550 U.S. at 556-57).
II.
RICO GENERALLY
RICO is a broadly worded statute that “has as its purpose the elimination of the
infiltration of organized crime and racketeering into legitimate organizations operating in
interstate commerce.” S. Rep. No. 91-617, at 76 (1969); see Statement of Findings and Purpose,
Organized Crime Control Act of 1970, Pub. L. 91-452, 84 Stat. 922, 922-23 (1970); see also
6
Attorney Gen. of Can. v. R.J. Reynolds Tobacco Holdings, Inc., 268 F.3d 103, 107 (2d Cir.
2001). “RICO provides that ‘[a]ny person injured in his business or property by reason of’ a
RICO violation may bring a civil action to recover treble damages.” Canada, 268 F.3d at 107
(quoting Metromedia Co. v. Fugazy, 983 F.2d 350, 368 (2d Cir.1992) (quoting 18 U.S.C. §
1964(c))).
To plead a violation of § 1962(c), the sole substantive RICO claim alleged in the FAC,
plaintiffs must allege injuries arising from “(1) the conduct (2) of an enterprise (3) through a
pattern (4) of racketeering activity.” Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 496 (1985);
DeFalco v. Bernas, 244 F.3d 286, 306 (2d Cir. 2001); Cofacredit, S.A. v. Windsor Plumbing
Supply Co. Inc., 187 F.3d 229, 242 (2d Cir. 1999); Azrielli v. Cohen Law Offices, 21 F.3d 512,
520 (2d Cir. 1994). The first two elements, as they pertain to the instant case, are examined in
the section to follow; the latter two are discussed in section IV below.
III.
CONDUCT OF THE RICO ENTERPRISES
“Any principled analysis of a RICO claim [ ] must begin from an understanding of what
enterprise is alleged.” Spira v. Nick, 876 F. Supp. 553, 561 (S.D.N.Y. 1995). One violates RICO
where “a defendant, through the commission of two or more acts constituting a pattern of
racketeering activity, directly or indirectly participate[s] in an enterprise . . . .” DeFalco, 244
F.3d at 306; see Riverwoods Chappaqua Corp. v. Marine Midland Bank, N.A., 30 F.3d 339, 344
(2d Cir. 1994)(“Under [§1962(c)], the RICO ‘person’ must conduct the affairs of the RICO
‘enterprise’ through a pattern of racketeering activity.”). The term “‘enterprise’ includes any
individual, partnership, corporation, association, or other legal entity, and any union or group of
individuals associated in fact although not a legal entity.” § 1961(4).
7
Plaintiffs here allege the existence of four racketeering enterprises within the meaning of
§ 1961(4).
The first three are standalone corporate enterprises, namely: the “Newsday
Enterprise,” consisting of defendant Newsday; the “Hoy Enterprise,” consisting of defendant
Hoy; and the “ABC Enterprise,” consisting of ABC. Plaintiffs also allege the existence of an
“association-in-fact” enterprise, which they label as the “Circulation Enterprise.” The Court
begins its analysis with an examination of the ABC enterprise.
a. The ABC Enterprise
Defendants argue that plaintiffs’ claims as to the ABC enterprise should be dismissed
because they failed to allege that defendants actually “conduct[ed] or participat[ed], directly or
indirectly, in the conduct of such enterprise’s affairs.” See 18 USC § 1962(c). The “conduct”
element requires that “one [ ] participate in the operation or management of the enterprise itself.”
Reves v. Ernst & Young, 507 U.S. 170, 185 (1993).
Of course, the word “participate” makes clear that RICO liability is
not limited to those with primary responsibility for the enterprise's
affairs, just as the phrase ‘directly or indirectly’ makes clear that
RICO liability is not limited to those with a formal position in the
enterprise; but some part in directing the enterprise’s affairs is
required.
First Capital Asset Mgmt. Inc. v. Satinwood. Inc., 385 F.3d 159, 176 (2d Cir.
2004)(quoting Reves, 507 U.S. at 185); see also Redtail Leasing, Inc. v. Bellezza, No. 95 Civ.
5191, 2001 U.S. Dist. LEXIS 10814, at *11 (S.D.N.Y. July 31, 2001)(“There is a ‘substantial
difference’ between actual control over an enterprise and association with an enterprise in ways
that do not involve control; only the former is sufficient under Reves.”).
Although the Reves “operation or management” test sets forth a “low hurdle to clear at
the pleading stage,” City of New York v. Smokes-Spirits.com, Inc., 541 F.3d 425, 449 (2d Cir.
8
2008), overruled on other grounds by Hemi Group, LLC v. City of New York, --- U.S. ---, 130 S.
Ct. 983, 994 (2010), plaintiffs have not cleared that hurdle vis-à-vis their allegations pertaining
to the ABC Enterprise.
Plaintiffs claim that defendants primarily controlled the affairs of ABC by mailing
fraudulent circulation numbers to ABC.
ABC, in turn, relied on those false numbers and
incorporated them into the audit circulation reports that it later published. Although the false
circulation reports submitted to ABC likely affected the content of the final audit reports that
ABC published, to suggest that this effect is tantamount to participating in or conducting the
operation or management of the entity is a bridge too far. ABC stood at arm’s length to
defendants in its relationship as auditor, and defendants’ submission of false information alone
would not have changed the tenor of that relationship, or altered the internal processes by which
ABC authenticates the information that it receives. In this context, without affecting such
internal processes and affairs of ABC, defendants cannot be said to have met the “conduct”
requirements set forth in Reves.
Other courts have come to similar conclusions in analogous scenarios. For example, in In
re Smithkline Beecham Clinical Lab., 108 F. Supp. 2d 84 (D. Conn. 1999), it was alleged that the
defendant, a medical laboratory company, conducted the affairs of the hospitals and doctors’
offices to which the defendants sent fraudulent billing invoices. The court concluded that
“although [the] alleged fraudulent billing practices may have victimized the physicians’ offices,
hospitals, and laboratories, that does not suffice to establish that [defendant] ‘operated or
managed’ the affairs of each of these alleged enterprises.” Id. at 100. Similarly, in Allstate
Insurance Co. v. Seigel, 312 F. Supp. 2d 260, 275 (D. Conn. 2004), plaintiff insurance company
brought RICO claims against a physician and his medical services company for submitting false
9
invoices for medical services that were never actually performed. There, the Court noted that
“any time a company is defrauded by the conduct of a defendant, one could say that the
defendant ‘controlled’ the company’s operations, since absent the fraud, the company would not
have done what it did or acted in the manner in which it did. Such a free-wheeling interpretation
of the operation and management test would appear to be inconsistent with Reves.” Id.; see also
Reves, 507 U.S. at 185 (“[RICO] cannot be interpreted to reach complete ‘outsiders’ because
liability depends on showing that the defendants conducted or participated in the conduct of the
‘enterprise’s affairs,’ not just their own affairs.”).
Plaintiffs allege that defendants conducted the affairs of the ABC Enterprise in two other
ways.
First, they allege that David Laventhal (not a defendant), the former president of
Newsday, sat on the board of ABC during the 1990s and “participated in the formulation of the
policies and practices of ABC,” the details of which “await discovery.” (FAC ¶ 174.) However,
Laventhal’s alleged participation on the board of ABC is not tantamount to participating in the
operation or management of an enterprise as defined by the relevant case law.
As stated above, in order to participate in the operation or management of ABC in this
case, the process by which ABC verifies submitted audit reports would have to have been
affected. According to the FAC, ABC’s board is composed of “persons employed as executives
of nationally known advertisers, advertising agencies, business and farm publications,
magazines, daily newspapers and weekly newspapers.” (FAC ¶ 174.) Any attempt to enact
policies or practices that would weaken or, in plaintiffs’ words, “subvert” the organization’s
ability to audit claimed circulation numbers would be in direct conflict with the interests of other
members of the board who represent advertisers.
It is also arguably in conflict with the
representatives of the other news publications who wish to preserve the integrity and level
10
playing field of a fully functioning audit agency. Plaintiffs’ allegation that Laventhal could have
effected such unilaterally favorable policies vis-à-vis Newsday in the environment described
above is simply not plausible. See Seigel, 312 F. Supp. 2d at 275-76 (“[A] defendant will not be
found to participate in the management or operation of the enterprise simply because he enjoys
substantial persuasive power to induce the alleged enterprise to take certain actions.”)(citing
Vickers Stock Research Corp. v. Quotron Sys., Inc., No. 96 Civ. 2269, 1997 U.S. Dist. LEXIS
10837 (S.D.N.Y. July 25, 1997)).
Second, plaintiffs allege that defendants affected the internal operations of ABC through
its liaisons to ABC. Two individuals acted in this capacity: defendant Brennan, who served as a
representative of the Newspaper Association of America to a committee at ABC and who also
allegedly “participated in the formulation of the policies and practices of ABC,” (FAC ¶ 174),
and a non-defendant identified in the FAC as Ed Smith, who “entertained ABC auditors and
became friendly with the auditors who compromised the thoroughness of ABC’s auditing
activities.” (FAC ¶ 205.)
The allegations that Brennan conducted the affairs of ABC by influencing the policies
and practices of ABC fail for precisely the same reasons that the allegations pertaining to nondefendant Laventhal failed. As to the allegations pertaining to Smith, according to the FAC, he
would notify Newsday in advance of the actual date of an internal audit by ABC, and would
allegedly know the specific delivery routes that would be inspected.
This foreknowledge,
plaintiffs claim, allowed defendants to prepare falsified circulation data for the particular route
under investigation. Though this allegation identifies one of the many ways in which defendants
perpetrated their fraud, it does not explain how Smith, or any other individual, actually
participated in or conducted the affairs of ABC.
11
The FAC therefore fails to provide sufficient allegations that any defendant conducted or
participated in the conduct of the ABC enterprise, and the allegations pertaining to that
enterprise, as against all defendants, are therefore dismissed.
b. The Circulation Enterprise
Plaintiffs’ only substantive RICO claims against the Company defendants are brought
under Count III of the FAC, which alleges that they conducted the affairs of the ABC Enterprise
(discussed above), as well as the affairs of the Circulation Enterprise. The Circulation Enterprise
is pled as an association-in-fact enterprise consisting of the following members:
1) The Company defendants (Newsday, Hoy, DSA) (FAC ¶ 285(3));
2) ABC (id.);
3) The Individual defendants (id.);
4) The John/Jane Doe defendants (id.);
5) The non-defendant distributors 10 that preceded DSA (Volmar Distributors Inc., American
Media Distributors Inc., and United Media Distributors LLC) 11 (FAC ¶ 209(a)-(c));
6) Various unspecified non-defendant “executive, managerial or supervisory personnel,”
employees, agents, and independent contractors working within or for the marketing,
promotional, circulation, sales and legal divisions of the Company defendants, ABC, and
the non-defendant distributors (FAC ¶ 209(a)-(e));
7) Various non-defendant officers and employees of the Company defendants (see FAC ¶
292 for a list of these individuals);
10
As the distribution companies changed throughout the years the alleged scheme took place, the Court will use
the term “the Distributor” to refer to the particular distribution company (or variation thereof) that defendants
Newsday and Hoy happened to have retained at a given time.
11
While United Media Distributors LLC (“United”) was named as a defendant in the SAC, United’s status as a
defendant is unclear in the FAC. The FAC caption, for example, includes United as a defendant and the pleading
refers to the entity on more than occasion as a defendant. (See e.g., FAC ¶¶, 285(3), 292.) The FAC elsewhere,
however, appears not to name United as a defendant (see e.g., FAC ¶¶ 100-02, 157), including the section of the
FAC, which sets forth the causes of action, (see FAC ¶¶ 324-69 (Counts I-VIII)). Furthermore, counsel for United is
under the impression that plaintiffs no longer intend to bring claims against the entity. (See Company Ds’ Memo at
2, n.2.) As United is not listed as a defendant in the eight counts enumerated in the latter portion of the FAC, the
Court construes the FAC as not having named United as a defendant.
12
8) Unidentified “third-party distributors, sub-distributors, marketers, [and] transporters” of
Newsday, Hoy, and “advertising flyers,” (FAC ¶ 290(f)); and
9) All “parents, subsidiaries, affiliates, and representatives” of the Company defendants and
of United, (FAC ¶ 292).
“[T]he very concept of an association in fact is expansive,” Boyle v. United States, --U.S. ---, 129 S. Ct. 2237, 2243 (2009) (“The statute does not specifically define the outer
boundaries of the ‘enterprise’ concept.”).
The definition of “enterprise” encompasses “an
ongoing organization, formal or informal . . . legitimate or admittedly criminal,” which
“function[s] as a continuing unit . . . associated together for a common purpose of engaging in a
course of conduct,” United States v. Turkette, 452 U.S. 576, 583 (1981). “[T]he existence of an
enterprise is an element distinct from the pattern of racketeering activity and ‘proof of one does
not necessarily establish the other’ . . . [though they] may in particular cases coalesce” Boyle,
129 S. Ct. at 2245 (citing Turkette, 452 U.S. at 583). “[F]or an association of individuals to
constitute an enterprise, the individuals must share a common purpose to engage in a particular
fraudulent course of conduct and work together to achieve such purposes.” Satinwood, 385 F.3d
at 174.
An association-in-fact enterprise must also have some discernable elements of
“structure,” namely: “[1] a purpose, [2] relationships among those associated with the enterprise,
and [3] longevity sufficient to permit these associates to pursue the enterprise’s purpose.” Boyle,
129 S. Ct. at 2244. Further, the purpose or purposes of the enterprise must be common to all its
members. See Satinwood, Inc., 385 F.3d at 173 (“[E]xistence [of a common purpose] is proven
by evidence . . . that the various associates function as a continuing unit.”) (citing Turkette, 452
U.S. at 583).
13
Further, an enterprise must function separate and distinct from the person who allegedly
conducts the racketeering activity of that enterprise. DeFalco, 244 F.3d at 307. Under this
“distinctness” requirement, “a corporate entity may not be both the RICO person and the RICO
enterprise under section 1962(c).” Riverwoods, 30 F.3d at 344. However, “[t]his does not
foreclose the possibility of a corporate entity being held liable as a defendant under section
1962(c) where it associates with others to form an enterprise that is sufficiently distinct from
itself.” Id.; Cullen v. Margiotta, 811 F.2d 698, 729-730 (2d Cir. 1987)(“[W]e see no reason why
a single entity could not be both the RICO ‘person’ and one of a number of members of the
RICO ‘enterprise.’”). Nevertheless, the distinctness requirement cannot be circumvented,
by alleging a RICO enterprise that consists merely of a corporate
defendant associated with its own employees or agents carrying on
the regular affairs of the defendant . . . . Because a corporation can
only function through its employees and agents, any act of the
corporation can be viewed as an act of such an enterprise, and the
enterprise is in reality no more than the defendant itself. Thus,
where employees of a corporation associate together to commit a
pattern of predicate acts in the course of their employment and on
behalf of the corporation, the employees in association with the
corporation do not form an enterprise distinct from the corporation.
Cedric Kushner Promotions Ltd. v. King, 219 F.3d 115, 116 (2d Cir. 2000), rev’d on
other grounds by 533 U.S. 158 (2001), (quoting Riverwoods, 30 F.3d at 344).
Presumably to address this distinctiveness rule vis-à-vis their allegations against the
Company defendants, plaintiffs include ABC as a member of the Circulation Enterprise. This
addition is crucial because without the presence of ABC, the enterprise merely consists of the
three Company defendants and their respective agents and employees. Though the prospect of
an enterprise consisting solely of the Company defendants and their agents may appear to
comport with the distinctiveness requirement (i.e. there are ostensibly three separate companies
14
and three distinct sets of employees/agents), this is not actually the case. The three Company
defendants are each wholly owned subsidiaries of the Tribune Company. (FAC ¶ 100-02.) As
explained in this Court’s prior decision, wholly owned subsidiaries are not distinct from their
parent company for the purposes of alleging a RICO enterprise. Crab House I, 418 F.Supp.2d at
205. Where different “defendants [act] within the scope of a single corporate structure, guided
by a single corporate consciousness[,] [i]t would be inconsistent for a RICO person, acting
within the scope of its authority, to be subject to liability simply because it is separately
incorporated.” Discon, Inc. v. NYNEX Corp., 93 F.3d 1055, 1064 (2d Cir. 1996); see Physicians
Mut. Ins. Co. v. Greystone Servicing Corp., Inc., No. 07 Civ. 10490, 2009 U.S. Dist. LEXIS
32616 (S.D.N.Y. March 25, 2009)(holding that where a corporate RICO “person” and a
corporate RICO “enterprise” shared inter alia a common ownership, they did not meet the
distinctiveness requirement). The FAC sets forth facts that the Company defendants all shared a
common owner as wholly owned subsidiaries of the Tribune Company, but does not set forth
facts suggesting that they otherwise operated separately, or that they could be considered distinct
entities. Accord Crab House I, 418 F.Supp.2d at 205.
The allegations against the Company defendants, therefore, necessarily hinge on
successfully alleging an association-in-fact enterprise of which ABC is also a member, in other
words an association-in-fact enterprise in which the membership is broader than the Company
defendants and their employees or agents, and therefore sufficiently “distinct” from the
Company defendants themselves.
The Court’s prior Order dismissing the second amended
complaint found that the pleading failed to allege that ABC was a member of the Circulation
Enterprise because it did not proffer facts that ABC shared a common purpose, lawful or
unlawful, with the other members of that enterprise. Crab House I, 418 F. Supp. 2d at 203-06.
15
As will be discussed in more depth below, the same conclusion holds true for the current
pleading.
i. The Members of the Circulation Enterprise Do Not Share a Common
Lawful Purpose
The SAC defined the lawful purpose of the Circulation Enterprise as “the legitimate
business of planning, developing, marketing, selling, distributing, and managing the circulation
of Newsday and Hoy and the delivery of flyers . . . .” (SAC ¶ 182.) As stated in Crab House I,
ABC could not have shared in that lawful purpose because plaintiffs specifically described ABC
elsewhere in the pleading as “an independent auditing company and self-regulatory auditing
organization engaged by and responsible to advertisers, advertising agencies and the media they
employ, and various newspapers and magazine publishers throughout the United States, for the
independent verification and dissemination of its members’ circulation [statistics].” (Id. ¶ 95.)
The independence and objectivity of ABC therefore ran counter to plaintiffs’ conclusory
assertion that ABC shared in the same endeavor as the “media outlets that it was supposed to
oversee.” Crab House I, 418 F. Supp. 2d at 205.
In an attempt to cure this defect in the SAC, plaintiffs now add a single word to their
description of the Circulation Enterprise’s purported lawful purpose in their most recent
pleading. In addition to planning, developing, marketing, selling, distributing, and managing the
newspapers’ circulation, the Circulation Enterprise, according to the FAC, was also engaged in
“auditing.” (FAC ¶ 286.) This facile alteration of the stated purpose, however, does not create an
association-in-fact enterprise. Indeed, ABC does engage in “auditing,” but the other members of
the Enterprise, according to the facts pled in the FAC, do not; ABC is “independent” in that
respect. Likewise, the other members do in fact develop, market, and distribute the subject
newspapers, but ABC takes to part in those tasks. The respective purposes of these two groups
16
remain as mutually exclusive as they were in the prior pleading. Lumping these disparate
functions together in the same descriptive sentence does not change this, nor does it allege a
common purpose. Cf. Frangipani v. HBO, No. 08 Civ. 5675, 2010 U.S. Dist. LEXIS 27614, at
*21 (S.D.N.Y. 2010)(A plaintiff cannot “satisfy [the] pleading requirement by stringing together
independent acts by different entities and claim it was a joint undertaking for an illegitimate
purpose.”); Nasik Breeding & Research Farm Ltd. v. Merck & Co., 165 F. Supp. 2d 514, 539
(S.D.N.Y. 2001)(“[C]onclusory naming of a string of entities does not adequately allege an
enterprise.”).
ii. The Members of the Circulation Enterprise Do Not Share a Common
Unlawful Purpose
In Crab House I, this Court held that the SAC also did not articulate a common unlawful
purpose for members of the Circulation Enterprise. That unlawful purpose—viz. the artificial
inflation of circulation numbers (SAC ¶¶ 182-83)—as a matter of law, could not have been
shared by ABC because the prior pleading also defined ABC as a “victim” of that same unlawful
undertaking. Crab House I, 418 F. Supp. 2d at 205. In their renewed pleading, plaintiffs again
describe ABC as an “unlawfully victimized . . . innocent instrument of the Circulation
Enterprise.” (FAC ¶ 285(3)).
Plaintiffs argue in their opposition, however, that this characterization is not fatal to the
existence of the Circulation Enterprise. In support, plaintiffs cite to DeFalco, 244 F.3d 286, for
the proposition that an enterprise is “often a passive instrument or victim.” Id. at 306-09.
However, DeFalco is not instructive for present purposes. The plaintiffs in DeFalco brought an
action under 28 U.S.C. 1962(c) charging “a conspiracy, plan and scheme among the defendants –
and an assortment of public officials, private individuals and corporations – to use the Town of
Delaware as a racketeering enterprise to extort money, real property and personal property
17
through the misuse of public officers.” 244 F.3d at 293. In that case, the RICO persons were the
public officials, and the alleged RICO enterprise was the Town of Delaware. The relevant
questions then before the Circuit were (1) whether the individual RICO persons were distinct
from the enterprise, and (2) whether the Town of Delaware, a public entity, could be considered
a single-entity RICO enterprise. The Circuit answered both questions in the affirmative. Id. at
307-09.
We consider a very different question here. The present question is not, for example,
whether a public entity can be a single RICO enterprise, nor is the question whether any of the
individual entities involved in the scheme now alleged can be considered an enterprise by
themselves. There is no dispute that Newsday, Hoy, or ABC (all distinct corporate entities) are
each RICO enterprises – clearly, they are. Rather, the relevant question now under consideration
is whether these entities together, and in combination with numerous other individuals
(enumerated supra), may also combine to form a separate association-in-fact enterprise. See 18
U.S.C. § 1961(4) (defining an “enterprise” to include “any individual, partnership, corporation,
association, or other legal entity, and any union or group of individuals associated in fact
although not a legal entity”)(emphasis added).
For plaintiffs to plead an association-in-fact
enterprise, the members of such enterprise must have a common purpose. Though DeFalco
supports the proposition that a single RICO enterprise may also be a victim of the purported
criminal activity, it does not support the proposition that a victim of said activity may share in
the unlawful purpose of conducting that activity with fellow members of an association-in-fact
enterprise.
Plaintiffs also cite to a case where the Second Circuit held that an association-in-fact
enterprise existed where its members included a victim of the very fraud perpetrated by the other
18
members of the enterprise. (Pls.’ Opp. at 15)(citing Jacobson v. Cooper, 882 F.2d 717-20 (2d.
Cir. 1989). There, however, the members of the association-in-fact enterprise all shared in a
common lawful purpose: the business of real estate. And, as noted in Turkette, 452 U.S. at 583,
“the term ‘enterprise’ as used in RICO encompasses both legitimate and illegitimate enterprises.”
As discussed above, however, the members of the Circulation Enterprise here do not share a
common lawful purpose.
To show that an unlawful goal may be shared between a victim and its perpetrators
within the same association-in-fact enterprise, plaintiffs ventured outside the Circuit by citing
United States v. Cianci, 378 F.3d 71 (1st Cir. 2004), a case that involved a similar factual
scenario to DeFalco (i.e. the manipulation of a public entity by private individuals and public
officials), but which, as explained infra, involved a different type of enterprise. In Cianci, the
defendants—the Mayor of Providence, Rhode Island, the City's Director of Administration, and a
member of the City Towing Association, a private organization—were alleged to have conducted
the affairs of an association-in-fact enterprise comprised of the defendants, the City of
Providence, and numerous City offices and departments through a pattern of extortion, mail
fraud, bribery, money laundering, and witness tampering. Id. at 82-84. In that case, the First
Circuit held that “[a] RICO enterprise animated by an illicit common purpose can be comprised
of an association-in-fact of municipal entities and human members when the latter exploits the
former to carry out that purpose.” Id. at 83. In such a scenario, the entities (in that case, the City
and its departments) are said to be part of an “unlawful enterprise association-in-fact enterprise”
without those entities actually forming an unlawful intent themselves. Id.; see id. at 83-84 (“[A]
corporate or municipal entity does not have a mind of its own for purposes of RICO.”).
19
Setting aside whether such a theory may be applied in this Circuit, its success necessarily
hinges on whether certain members of the enterprise exerted enough control or manipulation on
the corporate or municipal entity such that their interests can be said to have aligned. See id.
(“The common purpose was dictated by individuals who controlled the [ ] entities’ activities and
manipulated them to the desired illicit ends . . . .”).
In Cianci, there was evidence that the
defendants “wielded influence, exerted pressure, and effectively controlled the City’s various
components.” Id. at 83. Specifically, the City’s government was clearly under the control of at
least one other member of the enterprise, Vincent A. Cianci, the Mayor. Here however, as
discussed above, defendants did not actually exert any control over the ABC enterprise.
Therefore, even under the plaintiffs’ proposed theory, the FAC still fails to demonstrate a
common illicit purpose among all members of the Circulation Enterprise.
Furthermore, the allegations fail to set forth sufficient facts that that the members of the
enterprise acted as a “continuing unit.” Turkette, 452 U.S. at 583. Indeed, the complaint alleges
in detail the autonomous role of ABC as an auditor for various news publications, including
Newsday and Hoy. This alleged independent role, by its very nature, belies any notion that ABC
acted with Newsday and Hoy, in a common undertaking. Although, the Supreme Court has
expressly rejected the notion that a hierarchy must exist within the structure of an enterprise,
there must be an “interpersonal” association among its members and a “common interest.” Boyle,
129 S. Ct. 2237 at 2244. The relationship between ABC and the purported members of the
Circulation Enterprise that it audits is fairly described as adversarial.
ABC therefore does not share a common purpose, lawful or unlawful, with the other
members of the Circulation Enterprise.
Without ABC as a member of this enterprise, as
discussed above, the Company defendants, the RICO persons in this scenario, are not sufficiently
20
distinct from the Circulation Enterprise to confer RICO liability. Count III, the sole substantive
RICO claim against the Company defendants is therefore dismissed as to those defendants.
iii. The Viability of Claims Pertaining to the Circulation Enterprise as
Against the Individual Defendants
Counts I and III allege that the Individual defendants also conducted the affairs of the
Circulation Enterprise. A separate analysis from that applied to the Company defendants and
their conduct of the Circulation Enterprise is required where the Individual defendants are
involved. Whereas a corporation cannot be considered the RICO “person” distinct from a RICO
“enterprise” consisting of that corporation and its employees acting in the normal course of
business, the same is not true in the situation where the “corporate employee is the ‘person’ and
the corporation is the ‘enterprise.’” Cedric Kushner Promotions, Ltd. v. King, 533 U.S. 158, 163
(2001). 12 In such a scenario, the person and the enterprise are considered “distinct.” Id. at 164
(distinguishing from the circumstances in Riverwoods where the “corporation was the ‘person’
and the corporation, together with all its employees and agents, were the ‘enterprise’”).
A consideration of the Circulation Enterprise without ABC therefore carries a different
significance for the Individual defendants because they are sufficiently distinct from the
enterprise while the Company defendants were not. However, as discussed above, ABC may not
be considered a member of the Circulation Enterprise.
Plaintiffs have not pled any other
formation of the Circulation Enterprise, i.e. one without ABC, and it would be inappropriate for
12
The Kushner decision further states:
Linguistically speaking, an employee who conducts the affairs of a corporation through
illegal acts comes within the terms of a statute that forbids any ‘person’ unlawfully to
conduct an ‘enterprise,’ particularly when the statute explicitly defines ‘person’ to
include ‘any individual . . . capable of holding a legal or beneficial interest in property,’
and defines ‘enterprise’ to include a ‘corporation.’ 18 U.S.C. §§ 1961(3), (4). And,
linguistically speaking, the employee and the corporation are different ‘persons’ . . . .
Kushner, 533 U.S. at 163.
21
the Court sua sponte to reconfigure plaintiffs’ pleading.
All allegations pertaining to the
Circulation Enterprise are therefore dismissed.
c. The Newsday and Hoy Enterprises
The FAC alleges that the Individual defendants also conducted the affairs of the Newsday
and Hoy Enterprises. (See FAC Count I.) The alleged conduct of each Individual defendant
pertaining to these remaining enterprises is analyzed below.
As an initial matter, there is a single allegation that is repeated verbatim against each of
the Individual defendants.
The allegation states that “as an employee . . . [the particular
defendant] participated in the . . . preparation, presentation, and distribution of Newsday and Hoy
circulation and promotional materials for presentation by Individual Defendants [and other
employees] to the Representative Plaintiffs and Class Members.” (FAC ¶¶ 129, 134.) This vague
allegation of “participation” in the scheme is merely conclusory and devoid of detail – a form of
pleading that cannot state a claim for relief. See Iqbal, 129 S. Ct. at 1949 (“A pleading that
offers labels and conclusions or a formulaic recitation of the elements of a cause of action will
not do.”)
A second allegation asserted against defendants Halfmann, Langer, Herb, and Potthoff
claims that these individuals provided “overall leadership, management and supervision of the
circulation departments . . . for purposes other than the lawful sale of advertising space.” (FAC ¶
293.) This same allegation was made in the SAC, and was dismissed because it made no attempt
to distinguish one individual defendant from the other, and attributed no specific conduct to any
of the defendants. Crab House I, 418 F. Supp. 2d at 209. Precisely for that reason, this same
allegation also fails to state a claim in the FAC.
22
i. Defendant Foley
Defendant Foley is identified in the current pleading as a “computer programmer and
independent contractor” for the distributor. (FAC ¶ 128.) In this capacity, Foley allegedly
created two computer programs known as “Short” and “Fudge ABC,” which were used to alter
the distributor’s weekly circulation reports and affidavits. (FAC ¶¶ 201, 218.)
The prior decision in this case dismissed a more anemic variation of this same allegation
which claimed that Foley was a computer programmer “who created the Distributor’s computer
programs which were used for and during the distribution of Newsday and Hoy.” 418 F. Supp.
2d at 209 (citing SAC ¶ 70). That allegation, the Court explained, did nothing more than allege
that Foley created a computer program, and therefore did not state a RICO claim. Id.
In the revised pleading, plaintiffs now allege that Foley was an employee of Newsday,
Hoy, and DSA (FAC ¶ 129), and that while under the “direction and control” of defendants Sito,
Garcia and Brennan, he “manipulate[d] the [Distributor’s] computers so as to conceal from ABC
the actual paid circulation volume . . . .” (FAC ¶ 128.)
Under the “operation-management” test set forth in Reves, in order to conduct the affairs
of an enterprise, the defendant need “not act[] in a managerial role.” United States v. Diaz, 176
F.3d 52, 92 (2d Cir. 1999). One “can still be liable for directing the enterprise’s affairs if he
exercised broad discretion in carrying out the instructions of his principal.” Id. However, “the
simple taking of directions and performance of tasks that are necessary or helpful to the
enterprise, without more, is insufficient to bring a defendant within the scope of § 1962(c).” Id.
(citing United States v. Viola, 35 F.3d 37, 41 (2d Cir. 1994)); see also United States v. Allen, 155
F.3d 35, 42 (2d Cir. 1998)(“In most of the cases in which we have held lower level employees to
23
be RICO participants, the defendant was shown to have played some management role in the
enterprise.”)(collecting cases).
As the FAC makes clear, Foley acted in his capacity as an employee under the “direction
and control” of three superiors, in “carr[ying] out their directions” to manipulate the Distributor’s
computer reporting system. (FAC ¶ 128.) The alleged facts do not suggest that Foley exercised
any discretion in carrying out this task. Rather, upon the direction of other defendants, he wrote
a computer program that would conceal the actual paid circulation numbers by deleting records
of unsold newspapers from the Distributor’s computers. The allegation suggests that the idea to
use the computers to cover up the alleged scheme was entirely the artifice of defendants Sito,
Garcia, and/or Brennan, not of Foley. He merely created the program following the directive of
these defendants and therefore did not conduct the affairs of either the Newsday or Hoy
enterprises.
ii. Defendant Langer
Langer, however, appears to take a more active role in the conduct of these enterprises.
For example, as Chief Financial Officer of the Distributor and an employee/agent of Newsday
and Hoy, Langer and others would meet on a regular basis to instruct two individuals “as to the
best method for Newsday to fraudulently adjust the Distributor’s [ ] sales affidavits.” (FAC ¶
238.) Langer also allegedly intimated to Michael Pouchie, Executive Vice President of the
Distributor, that it would be “better” for him to cooperate with Newsday and Hoy in helping to
falsely inflate the circulation numbers. (FAC ¶ 247.) These allegations paint a picture of an
individual who actively directed the operation of the scheme, and therefore provides sufficient
factual support to allege Langer’s participation in the management and operation of these two
enterprises.
24
iii. Defendant Potthoff
The FAC asserts the same allegation against Potthoff as it did against Langer: that he
instructed individuals on the best methods for altering the Distributor’s sales affidavits. (FAC ¶
238.) The crucial difference between these two defendants, however, is that Pothoff apparently
acted at the behest of defendants Brennan and Sito. Potthoff, unlike Langer, therefore was
merely carrying out the orders of higher-ups and was not, as a matter of law, directing the affairs
of the enterprises in this regard.
Nevertheless, elsewhere in the pleading it is alleged that Potthoff told an employee for
the Distributor to “dump” unsold Newsday papers instead of reporting them, thus creating the
appearance of a higher sales volume. (FAC ¶ 222.) There is no indication that this particular
directive came from Potthoff’s superiors, however, and the act does encompass the type of
conduct that can be interpreted as directing the affairs of the two enterprises.
iv. Defendant Halfmann
Curiously, two allegations pertaining to defendant Halfmann which were previously
dismissed from the SAC found their way back into the most recent pleading. (See FAC ¶¶ 220,
252.) The Court’s prior decision dismissed plaintiffs’ claim that “Green [a distribution manager]
was systematically directed every few weeks by [Halfmann], to falsely inflate Newsday figures”
because “this general allegation of supervision is directly undercut by the more specific assertion
that Halfmann was a trainee [of Green].” Crab House I, 418 F. Supp. 2d at 209 (citing SAC ¶¶
144, 107). Not only does the FAC fail to remedy this contradiction, it remains unaddressed by
plaintiffs’ opposition brief. This inconsistency is fatal to plaintiffs’ claim in the FAC, just as it
was in the prior pleading. See Jones v. Nat'l Commun. & Surveillance Networks, 409 F. Supp.
25
2d 456, 471 (S.D.N.Y. 2006) (“[T]he Complaint is not saved by conclusory allegations that are
inconsistent with the facts pled, or a common sense understanding of those facts.”)
The remaining allegation pertaining to defendant Halfmann’s conduct of the enterprises
is found in paragraph 200 of the FAC. There, plaintiffs allege that “Green changed the affidavit
[of weekly distribution numbers] with his trainees, Defendants Herb and [Halfmann].” (FAC ¶
200.) The paragraph, however, continues on to explain that it was defendants Garcia and Sito
who would actually “change” the numbers in the affidavit “so as to increase the sales figures,”
and that Garcia’s secretary would “make the physical changes and she delivered the altered
affidavit to Company defendant Newsday.” (Id.) Read together, it is unclear that Halfmann had
any role in this component of the overall scheme, as defendants Garcia and Sito appear to have
taken the primary directive role, and Garcia’s secretary appears to have executed their
instructions. Furthermore, as the allegation states, any involvement by Halfmann herein was in
his capacity as Green’s trainee. For these reasons, the FAC does not allege sufficient facts that
Halfmann conducted the affairs of either the Newsday or Hoy enterprises. The allegations
brought against him in Count I of the FAC are therefore dismissed.
v. Defendant Brennan
In his opposition brief, defendant Brennan contends that the allegations in the FAC
regarding his purported conduct of the two enterprises are fundamentally flawed because they
still fail to attribute conduct directly to him. (Memo of Law in Support of Brennan’s Motion to
Dismiss (“Brennan Memo”), 5-6.) However, the current allegations against Brennan largely
rectify the infirmities that were present in the SAC.
As the Court previously held,
the
allegations in the SAC failed to allege direct wrongdoing against Brennan because (1) they were
26
stated in the disjunctive and thus did not attach factual allegations to a particular defendant, see
Crab House I, 418 F. Supp. 2d at 208 (quoting SAC ¶ 119)(“Green was systematically directed
every few weeks by Defendant Garcia or Defendants Langer, [Halfmann], Herb, and Brennan . .
. .”), and (2) the allegations did not “distinguish Brennan in his legitimate capacity as a
supervisor within Newsday, and Brennan in his illegitimate capacity as a director or manager of
the enterprise,” 418 F. Supp. 2d at 208 (quoting SAC ¶ 155)(“Neshat worked under the direct
supervision of Defendant Brennan”).
The current pleading, however, is on much better footing. Paragraph 114 of the FAC, for
example, states that “Brennan acted jointly with Sito and directed and supervised the other
Individual Defendants . . . to make fraudulent circulation reports to ABC, and to prepare false
and fraudulent circulation and promotional material” to send to plaintiffs. (FAC ¶ 114.) Brennan
argues that this claim fails again to attribute direct conduct. (Brennan Memo at 6.) The Court
disagrees. The allegation makes a straightforward claim that Brennan and Sito both engaged in
actionable conduct, viz. directing employees to produce false audit reports and fraudulent
mailings. This newer version is also not hobbled by the same disjunctive construction found in
the prior pleading. Elsewhere, the FAC also sufficiently alleges that Brennan conducted the
affairs of the enterprises by (1) directing his “subordinates at Newsday to overstate paid
circulation numbers and to submit the resulting false information by mail and private commercial
interstate carrier to ABC . . . .” (FAC ¶ 117), (2) staging “a ‘recreation’ in which [Brennan] and
others dispatched Newsday employees [under] the guise of customers to buy Newsday
newspapers from sellers who had been stationed at locations throughout Long Island” (id.), (3)
directing Foley to “manipulate” the distributor’s computers to reflect a higher-than-actual
27
volume of circulation (FAC ¶ 128), 13 and (4) creating the false audit reports with others (FAC ¶
143). These allegations, together and standing alone, sufficiently allege Brennan’s participation
in the operation and management of the enterprises.
IV.
PATTERN OF RACKETEERING: MAIL FRAUD
The Court now turns to the third and fourth elements of the plaintiffs’ substantive RICO
claims: “the commission of two or more acts constituting a pattern of racketeering activity.” The
pattern of racketeering alleged by plaintiffs in their RICO claim is mail fraud. To bring such a
claim, plaintiffs must allege “(1) the existence of a scheme to defraud, (2) defendant's knowing
or intentional participation in the scheme, and (3) the use of interstate mails or transmission
facilities in furtherance of the scheme.” S.Q.K.F.C., Inc. v. Bell Atl. TriCon Leasing Corp., 84
F.3d 629, 633 (2d Cir. 1996). Because such an allegation involves claims of fraud, it must also
meet the “particularity” requirement of Rule 9(b), Fed. R. Civ. P. Specifically, the pleading
must: “(1) specify the statements that the plaintiff contends were fraudulent; (2) identify the
speaker; (3) state where and when the statements were made; and (4) explain why the statements
were fraudulent.” Lerner v. Fleet Bank, N.A., 459 F.3d 273, 290 (2d Cir. 2006)(quoting Mills v.
Polar Molecular Corp., 12 F.3d 1170, 1175 (2d Cir. 1993)).
“To constitute a [mail or wire fraud] violation . . . it is not necessary to show that
[defendants] actually mailed . . . anything themselves; it is sufficient if they caused it to be
done.” Smokes-Spirits.com, 541 F.3d at 446 (citing Pereira v. United States, 347 U.S. 1, 8
13
Brennan argues that this allegation fails to distinguish between his legitimate and illegitimate roles within the
enterprise. His assertion, however, misunderstands the finding of this Court in the prior decision. There, plaintiffs
alleged only that a subordinate performed fraudulent acts during the time that Brennan supervised him. Though
that allegation created a strong inference of misconduct, it did not actually allege wrongdoing by Brennan and was
dismissed accordingly. Crab House I, 418 F. Supp. 2d at 208. The current allegation by contrast states that Brennan
directed one of his workers to commit fraud, which, taken in the present context, adequately pleads Brennan’s
conduct of the enterprises.
28
(1954)). “It is sufficient for the mailing to be incident to an essential part of the scheme, or a
step in the plot.” Schmuck v. United States, 489 U.S. 705, 710-11 (1989) (internal quotation
marks omitted). A defendant need not mail a fraudulent letter so long as he was “acting with
knowledge that the use of the mails will follow in the ordinary course of business, and that the
use of mail could have been reasonably foreseen.” Baisch v. Gallina, 346 F.3d 366, 374 (2d Cir.
2003)(internal quotes and citations omitted).
Plaintiffs allege that defendants used the mail in furtherance of their scheme in a number
of ways, including: (1) by mailing promotional and marketing materials to certain plaintiffs, (2)
by mailing plaintiffs invoices which contained the inflated advertising figures, and (3) by causing
plaintiffs to mail checks in payment of those invoices back to defendants. (FAC ¶¶ 18-99.)
An essential component of the overall scheme of fraud alleged by plaintiffs was the use
of the falsely inflated circulation numbers published by ABC to induce the advertising plaintiffs
to pay a higher rate for advertising space. Part of inducing potential customers to pay this higher
rate was the mailing of promotional and marketing materials to plaintiffs which contained ABC’s
false audit numbers. (See e.g., FAC Exs. D & E; see also FAC ¶ 106 (“Representative Plaintiffs
and Class Members . . . justifiably relied upon such promotional materials and marketing reports
and ABC audit certifications.”); FAC ¶ 104 (“Advertisers depended on ABC-audited paid
circulation data to negotiate advertising rates with publishers, including Newsday and Hoy.”)).
The FAC details this aspect of the scheme from the perspective of each of the named
plaintiffs. Each allegation states that defendants “used the U.S. mail to deliver promotional
material” to the plaintiff which “boasted of Newsday’s and Hoy’s fraudulently inflated paid
circulation volume,” upon which each plaintiff relied in paying the fraudulent advertising rates.
(FAC ¶¶ 23, 34, 43, 52, 61, 69, 78, 86.) Attached to the FAC are examples of the promotional
29
materials mailed to plaintiffs. (FAC Exs. D & E). 14 These materials make a number of
misrepresentations regarding the circulation numbers for both Newsday and Hoy, all of which
are purported to be certified by ABC, and all, plaintiffs allege, overstate the actual circulation
volume of these publications by as much as 50 percent. (FAC ¶ 25.)
Although the allegations do not provide the exact dates that the materials were mailed to
plaintiffs, they do provide date ranges. The duration of these date ranges varies greatly from
plaintiff to plaintiff. Crab House, for example, who advertised with Newsday “from, or about,
1991 until January 2000 and in Hoy from December 1998 to June 1999” received the allegedly
fraudulent promotional materials in the mail “from time to time and year to year from 1991
through 2000.” (FAC ¶ 22.) At the other end of the spectrum, plaintiff Greenberg & Stein LLP
received similar allegedly fraudulent materials “from December 2002 through August 2003.”
(FAC ¶ 85.) The parties are at odds as to whether these stated ranges satisfy the pleading
requirements of Rule 9(b). Defendants argue that providing date ranges, as opposed to the actual
dates of the mailings, falls short of plaintiffs’ obligations under 9(b). Plaintiffs on the other hand
contend that this level of particularity is sufficient, citing In re Sumitomo Copper Litigation., 95
F. Supp. 451 (S.D.N.Y. 1998), for the proposition that “Rule 9(b) does not require that the
temporal or geographic particulars of each mailing or wire transmission made in furtherance of
the fraudulent be stated with particularity” so long as defendants allege “the specific
circumstances constituting the overall fraudulent scheme.” Id. at 456.
In my prior decision, I required that “any further pleadings must provide the level of
detail and organization illustrated in Moore,” Crab House I, 418 F. Supp. 2d at 212 (citing
Moore v. PaineWebber, Inc., 189 F.3d 165 (2d Cir. 1999), in which the plaintiffs provided a
14
See DiFolco v. MSNBC Cable L.L.C., 622 F.3d 104, 111 (2d Cir. 2010) (“In considering a motion to dismiss [under]
Rule 12(b)(6), a district court may consider the facts alleged in the complaint, documents attached to the
complaint as exhibits, and documents incorporated by reference in the complaint.”).
30
chart of twelve different mailings identifying those defendants responsible and the dates of the
mailings with cross references to the appropriate paragraphs in the complaint. See 189 F.3d at
173. Though plaintiffs here do not provide that level of specificity, I am nevertheless inclined,
upon further reflection, to conclude that the detail provided in the FAC passes muster for
purposes of pleading.
In applying Rule 9(b) to allegations of mail fraud, district courts in this Circuit delineate
between mailings that make specific “averments of fraud” and mailings that are simply made “in
furtherance of the scheme,” and those which are “themselves false or misleading.” Spira, 876 F.
Supp. at 559; see also Allstate Ins. Co. v. Etienne, No. 09-CV-3582, 2010 U.S. Dist. LEXIS
113995 (E.D.N.Y. Oct. 22, 2010); AMA v. United Healthcare Corp., 588 F. Supp. 2d 432, 44243 (S.D.N.Y. 2008)(“Allegations said to be in furtherance of fraud are held to a different
pleading standard entirely.”); Republic of Colom. v. Diageo N. Am. Inc., 531 F. Supp. 2d 365,
443 (E.D.N.Y. 2007); Sumitomo, 995 F. Supp. at 456. In the case of the former, “Rule 9(b) does
not to require that the ‘temporal or geographic particulars of each mailing made in furtherance of
the fraudulent scheme be stated with particularity,’ but only that the ‘plaintiff delineate, with
adequate particularity in the body of the complaint, the specific circumstances constituting the
overall fraudulent scheme.’” AIU Ins. Co. v. Olmecs Med. Supply, Inc., No. CV-04-2934, 2005
U.S. Dist. LEXIS 29666, at *34 (E.D.N.Y. Feb. 22, 2005)(quoting Sumitomo, 995 F. Supp. at
456).
The rationale for this approach is twofold: one, mailings made only in furtherance of a
scheme are not technically allegations of fraud within the meaning of Rule 9(b); and two, the
very purpose of applying Rule 9(b) to mailings in furtherance of the scheme is obviated where a
plaintiff alleges the wider scheme with the requisite particularity. Spira, 876 F. Supp. at 559.
As the court in Spira stated:
31
[I]t is difficult to see any useful purpose in requiring that a RICO
complaint specifically allege each mailing in furtherance of a complex
commercial scheme, at least where, as here, the complaint alleges that
numerous mailings of particular kinds were made in furtherance of the
scheme. Once the plaintiff alleges with particularity the circumstances
constituting the fraudulent scheme, neither the reputational interests nor
the notice function served by Rule 9(b) would be advanced in any material
way by insisting that a complaint contain a list of letters or telephone calls.
Id.; see also DiVittorio v. Equidyne Extractive Indus., Inc., 822 F.2d 1242, 1247 (2d Cir.
1987)(“Rule 9(b) is designed to further three goals: (1) providing a defendant fair notice of
plaintiff's claim, to enable preparation of defense; (2) protecting a defendant from harm to his
reputation or goodwill; and (3) reducing the number of strike suits.”).
As the Court stated in its prior decision, “[t]here is little question that Plaintiffs have pled
a general scheme to defraud.” Crab House I, 418 F. Supp. 2d at 211. Such allegations, as pled in
the FAC, provide a detailed account of a plan executed by numerous individuals to give the
appearance of inflated circulation numbers by manipulating computer systems and circulation
logs, directly reporting overstated figures to the circulation auditor, staging “re-creations” when
the auditors later investigate, and finally, openly misrepresenting the volume of circulation
communications to potential advertisers.
Plaintiffs allegedly relied to their detriment on
statements made by defendants and their agents both orally and in writing, and on certifications
of circulation numbers published by ABC. (See, e.g., FAC ¶¶ 20, 27, 28, 104, 106.) The
promotional materials at issue here were merely sent in furtherance of this larger scheme – a
scheme which plaintiffs have already pled with the requisite particularity. Therefore, given the
particularity in which plaintiffs have alleged the overarching scheme, the lack of precise dates
for these mailings is not fatal to plaintiffs’ allegations of mail fraud. 15
15
The Court is cognizant of the difference between the promotional materials, which contain purportedly
fraudulent statements, and the invoices, which do not. Both, however, were mailed in furtherance of a well-pled
scheme, and defendants have been provided with more than enough particularity regarding that scheme. The
32
Finally, a fair inference can be drawn that the Individual defendants against whom
plaintiffs sufficiently allege RICO liability acted with the knowledge that mailing false
representations of circulation numbers to potential advertisers would likely follow in the ordinary
course of business. Thus, plaintiffs have adequately pled that the remaining defendants “caused”
the mailings to occur. See Baisch, 346 F.3d at 374.
Accordingly, plaintiffs RICO claims alleged in Count I against defendants Brennan,
Potthoff, and Langer survive. The same claims in Count I against Foley and Halfmann are
hereby dismissed with prejudice.
V.
CONSPIRACY CLAIMS UNDER §1962(d)
Plaintiffs allege three separate conspiracy claims in Counts II, IV, and V pursuant to 18
U.S.C. §1962(d).
Section 1962(d) prohibits any person from conspiring to violate any of the
substantive provisions of subsections §1962(a)-(c).
a. Count II
Plaintiffs’ conspiracy claims in Count II allege that each of the individual defendants
conspired to violate §1962(c) as to all four enterprises. A RICO conspiracy claim requires an
allegation that the defendant agreed to participate “‘in a charged enterprise’s affairs’ through a
pattern of racketeering, ‘not a conspiracy to commit predicate acts.’” United States v. Pizzonia,
577 F.3d 455, 463 (2d Cir. 2009) (quoting United States v. Persico, 832 F.2d 705, 713 (2d Cir.
1987)). 16 The Reves “operation or management” test, however, does not apply to RICO
Court, therefore, need not impose an elevated pleading standard on the promotional mailings merely because
they also happen to contain fraudulent statements. See United Healthcare Corp., 588 F. Supp. 2d at 443 (requiring
that the plaintiffs plead only the overall fraud scheme with particularity, even where the subject mailings in
furtherance of the scheme also contained “various omissions and misrepresentations”).
16
Defendants’ arguments on this point, by comparison, assert that the pleading does “not plead any facts showing
that Brennan agreed that RICO predicate acts would be committed.” (Memo of Law in Support of Defendant
33
conspiracy. 577 F.3d at 462 n.4. “Assuming that a RICO enterprise exists, [one] must prove
only that the defendants . . . know the general nature of the conspiracy and that the conspiracy
extends beyond [their] individual roles.” United States v. Zichettello, 208 F.3d 72, 99 (2d Cir.
2000)(quotes and citations omitted); see also Salinas v. United States, 522 U.S. 52, 64 (1997)
(“A person . . . may be liable for [RICO] conspiracy even though he was incapable of
committing the substantive offense.”); see id. at 63 (“[D]efendant need only know of, and agree
to, the general criminal objective of a jointly undertaken scheme.”).
i. Plaintiffs’ Conspiracy Claims Against the Individual Defendants Related
to the Conduct of the ABC and Circulation Enterprises
Analysis of these claims begins with the premise that any claim for conspiracy under
§1962(d) necessarily fails where the underlying substantive claim is insufficiently pled. See,
e.g., Satinwood, 385 F.3d at 182; Cofacredit, 187 F.3d at 244-45 (“A conspirator must intend to
further an endeavor which, if completed, would satisfy all of the elements of a substantive
criminal offense . . . .”)(quoting Salinas v. United States, 522 U.S. 52,65 (1998)).
Count II includes allegations of a conspiracy by the individual defendants to conduct the
affairs of the Circulation and ABC Enterprises through a pattern of racketeering. As the FAC
fails to adequately allege (1) the existence of the Circulation Enterprise, and (2) that any of the
defendants conducted the affairs of the ABC Enterprise, the conspiracy claims related to those
substantive RICO claims must be dismissed.
Brennan’s Motion to Dismiss at 10; see also Memo of Law in Support of Defendant Halfmann’s Motion to Dismiss
at 8 (“Plaintiffs do not plead any facts showing that Halfmann knowingly agreed to participate in a conspiracy to
commit predicate acts, as the statute requires.”).)
34
ii. Plaintiffs’ Conspiracy Claims Against the Individual Defendants Related
to the Conduct of the Newsday and Hoy Enterprises
Additionally, Count II alleges that the Individual defendants conspired to conduct the
affairs of the Newsday and Hoy Enterprises. Of the substantive claims against five of the
individuals related to those enterprises analyzed above, two of these claims were dismissed
because the FAC failed to allege sufficient facts that defendants Halfmann and Foley participated
in the operation or management of the Newsday and Hoy Enterprises. This finding, however,
does not preclude allegations of conspiracy against these two individuals. In fact, the general
allegations against nearly all of these individual defendants plead enough facts to survive
defendants’ motion to dismiss the conspiracy claims. The FAC sets forth facts that each one of
these individual defendants agreed to participate in a scheme whose ultimate objective must have
been known to its participants, or so a jury could reasonably conclude. Even defendant Foley,
who operated soley at the behest of his superiors, would have known that the purpose behind his
task of manipulating the computer system to reflect a higher sales volume was to inflate
artificially the reported circulation numbers. (See FAC ¶201 (“The Short program . . . was
developed by Foley to record Newsday’s sales and returns and render reports to Newsday for
eventual use by ABC.”)
As to the other Individual defendants, Brennan acted “jointly” with defendant Sito;
Potthoff contributed to the dumping of unsold newspapers; and Langer would meet with others
regularly to plot the best means of manipulating the circulation numbers. According to these
alleged facts, these individuals did not act alone in furthering the goals of the overall scheme.
Their motions to dismiss as to the Count II conspiracy claims are therefore denied.
The allegations against Halfmann discussed above (see section III (c)(iv) supra),
however, are so murky and inconsistent, and his role in the scheme is so unclear, that the FAC
35
does not state ample facts to allege a conspiracy against him.
Accordingly, the Count II
conspiracy claim against him is dismissed.
b. Count IV
Count IV alleges a conspiracy by all defendants, including the Company defendants, to
conduct the affairs of the Circulation and ABC Enterprises through a pattern of racketeering. For
precisely the same reasons discussed in section (V)(a)(i) above, the conspiracy claims in Count
IV related to the Circulation and ABC Enterprises are hereby dismissed.
c. Count V
Count V alleges conspiracy by all defendants to violate §1962(a) of the RICO statute. 17
The Court notes that plaintiffs did not bring a claim for violating subsection (a), nor have they
pled facts that would permit the conclusion that had the alleged conspiracy’s goal been realized,
all of the elements of subsection (a) would have been met. In other words, plaintiffs have not
alleged an injury separate and apart from the purported injury arising from the alleged mail
fraud. See Ouaknine v. MacFarlane, 897 F.2d 75, 83 (2d Cir. 1990)(“[A] violation is not
established by mere participation in predicate acts of racketeering. . . . [T]o state a claim for civil
damages under § 1962(a), a plaintiff must allege injury from the defendants’ investment of
racketeering income in an enterprise.”). Furthermore, the allegation claims that defendants used
and invested income derived from the alleged scheme in the Circulation, ABC, Newsday and
Hoy enterprises. However, a claim under §1962(a) is actionable only if the defendants “invested
that income in the acquisition of a stake in, or establishment of, an enterprise distinct from the
17
Section 1962(a) prohibits the “use or invest[ment], directly or indirectly” of any “income derived . . . from a
pattern of racketeering activity” in an “enterprise which is engaged in, or the activities of which affect, interstate
or foreign commerce.” 18 U.S.C. § 1962(a).
36
one from which the income was derived.” Leung v. Law, 387 F. Supp. 2d 105, 120 (E.D.N.Y.
2005); Falise v. Am. Tobacco Co., 94 F. Supp. 2d 316, 349 (E.D.N.Y. 2000) (“Where
reinvestment of racketeering proceeds back into the same RICO enterprise is alleged, the injuries
stem proximately not from the investment, but from the predicate acts that make up the
racketeering activity.”). Therefore, for the reasons indicated, plaintiffs’ conspiracy claims under
Count V are dismissed.
VI.
STATE LAW CLAIMS
a. New York General Business Law
Count VIII of the FAC asserts claims for deceptive and unlawful practices under New
York’s General Business Law § 349 (“§349”) against the Company defendants, 18 who have
moved to dismiss those claims. To state such a claim, plaintiffs must allege: “(1) the act or
practice was consumer-oriented; (2) the act or practice was misleading in a material respect; and
(3) the plaintiff was injured as a result.” Spagnola v. Chubb Corp., 574 F.3d 64, 74 (2d Cir.
2009). An alleged act is “consumer-oriented” if it has “a broader impact on consumers at large.”
Gaidon v. Guardian Life Ins. Co., 94 N.Y.2d 330, 344, 725 N.E.2d 598, 604 (N.Y. 1999)
(quoting Oswego Laborers’ Local 214 Pension Fund v. Marine Midland Bank, 85 N.Y.2d 20,
647 N.E.2d 741, 744 (N.Y. 1995)); see also Allstate Ins. Co. v. Bogoraz, No. 10-CV-5286, 2011
U.S. Dist. LEXIS 63721 (E.D.N.Y. June 10, 2011). “Corporate competitors [ ] have standing to
bring a claim under this [statute] . . . so long as some harm to the public at large is at issue . . . .”
Gucci America, Inc. v. Duty Free Apparel, Ltd., 277 F. Supp. 2d 269, 273 (S.D.N.Y. 2003)
18
Although plaintiffs include the individual defendants in the header introducing this cause of action in the FAC,
the specific allegation states that the “fraudulent acts committed by the Company Defendants Newsday, Hoy, and
DSA as aforesaid, constituted a deceptive and unlawful practice. . . under the provisions of [§349].” (FAC ¶ 368.)
The Court therefore construes plaintiffs’ §349 claims to be alleged solely against the Company defendants.
37
(quoting Securitron Magnalock Corp. v. Schnabolk, 65 F.3d 256, 264 (2d Cir. 1995)) “[T]he
gravamen of the complaint must be consumer injury or harm to the public interest.” Securitron,
65 F.3d at 264.
Although plaintiffs bring their §349 claim on behalf of themselves and other purported
class members as consumers of the Company defendants’ advertising and distribution services,
each plaintiff is a business, not an individual consumer. As the Company defendants correctly
point out, these forms of private transactions between businesses do not fall within the broad
consumer protections and public harm considerations contemplated by the subject statute. See,
e.g., Spin Master Ltd. v. Bureau Veritas Consumer Prods. Servs., No. 08-CV-923, 2011 U.S.
Dist. LEXIS 43757 (W.D.N.Y. Mar. 4, 2011)(plaintiff’s claims as a consumer of testing services
and on behalf of other companies that may require product testing services did not allege
“consumer-oriented” conduct by defendants); Federated Retail Holdings, Inc. v. Sanidown, Inc.,
2009 U.S. Dist. LEXIS 118700 (S.D.N.Y. 2009)(dispute between sales agent and manufacturer
had “little to do with the ‘consumer injury or harm to the public interest’ that is required in order
to give a non-consumer standing to bring such a claim”); Blue Cross & Blue Shield, 3 N.Y.3d
200, 818 N.E.2d 1140, (N.Y. 2004)(plaintiff third-party payer of health care costs could not
recover damages in the form of higher costs to its subscribers because the statute does not cover
such “derivative” claims); but see Allstate Ins. Co. v. Rozenberg, 590 F. Supp. 2d 384, 395
(E.D.N.Y. 2008) (allowing a §349 claim by an insurance company to proceed because “the
alleged scheme would almost certainly result in higher premiums for insurance consumers.”).
Plaintiffs do not allege that the purported acts of the defendants were “consumer-oriented
within the meaning of the statute, or that the acts had a “broader impact on consumers at large.”
38
(See Ps’ Memo at 49-50.) Defendants’ motions to dismiss plaintiffs’ claims pursuant to §349 are
therefore granted.
b. Unjust Enrichment
Plaintiff brings claims for unjust enrichment against the Company defendants. Although
these defendants indirectly move to dismiss this claim by arguing that the Court should decline
to exercise supplemental jurisdiction on all state law claims in the event that the federal claims
are dismissed, they do not make any specific arguments that plaintiffs’ unjust enrichment claims
should not proceed. The Court nevertheless evaluates the validity of those claims infra.
Under New York law, to make out a claim for unjust enrichment, a plaintiff must
establish “(1) that the defendant was enriched; (2) that the enrichment was at the plaintiff's
expense; and (3) that the circumstances are such that in equity and good conscience the
defendant should return the money or property to the plaintiff.” State Farm Mutual Auto. Ins.
Co., 375 F. Supp. 2d at 154. Here, plaintiffs have adequately pled that the Company defendants
were unjustly enriched “by the difference between the money [plaintiffs] paid for advertising
space and the delivery of advertising flyers and what they would have paid if the circulation
volume and flyer circulation volume had not been fraudulently inflated . . . .” (FAC Count VI.)
c. Common Law Fraud
Finally, plaintiffs allege common law fraud against all defendants. “To successfully
plead a common law fraud claim, plaintiff must allege a material, false representation, an intent
to defraud thereby, and reasonable reliance on the representation, causing damage to the
39
plaintiff.” S.Q.K.F.C., Inc. v. Bell Atl. Tricon Leasing Corp., 84 F.3d 629, 633 (2d Cir. 1996).
Again, the heightened pleading requirements of Rule 9(b) apply to such fraud claims.
As discussed above, with the exception of defendant Halfmann, 19 the FAC sets forth facts
with requisite particularity detailing the alleged fraudulent scheme and each of the defendants’
role in that scheme. Furthermore, the allegations “give rise to a strong inference of fraudulent
intent” by the defendants. See Satinwood, 385 F.3d at 179. Defendants’ motions to dismiss these
claims are therefore denied.
VII.
DEFENDANTS GARCIA AND HERB
Defendants Garcia and Herb have not answered or moved against either complaint filed
in this case. In fact, these defendants have not taken any action since their attorney, Robert
Hirth, requested to withdraw as their counsel, citing a conflict of interest. (See docket no. 61.)
Defendants Garcia and Herb therefore appear to be in default, but plaintiffs have not taken any
action against them. Therefore, by August 10, 2011, plaintiffs shall show good cause in writing
why the Court should not dismiss the claims against these two defendants for plaintiffs’ lack of
prosecution.
19
For primarily the same reasons discussed above in concluding that the allegations against Halfmann pertaining
to the RICO claims fail to state a claim for relief, the fraud allegations against him also fail. Defendant Halfmann’s
motion to dismiss as to all claims asserted against him is therefore granted.
40
CONCLUSION
For the reasons stated above, defendants’ motions to dismiss are granted in part, and
denied in part, as follows:
Count I (Substantive RICO claims against the Individual defendants only)
- Dismissed as to defendants Halfmann and Foley, but survives as to defendants
Brennan, Langer, and Potthoff.
Count II (RICO conspiracy claims pertaining to Count I against the Individual
defendants only)
- Dismissed as to defendant Halfmann, but survives as to as to defendants
Foley, Brennan, Langer, and Potthoff.
Count III (Substantive RICO claims against all defendants)
- Dismissed as to all defendants
Count IV (RICO conspiracy claims pertaining to Count III against all defendants)
- Dismissed as to all defendants
Count V (Conspiracy to violate 19 U.S.C. §1962(a) against all defendants)
- Dismissed as to all defendants
Count VI (Unjust enrichment claims against Company defendants)
- Survives as to those defendants.
Count VII (Common law fraud claims against all defendants)
- Dismissed as to defendant Halfmann, but survives as to all other defendants
Count VIII (Claims pursuant to N.Y. Gen. Bus. L. §349 against Company defendants)
- Dismissed as to all defendants
This matter is respectfully referred back to Magistrate Judge Wall for settlement talks,
and if no settlement is reached, for supervision of discovery and other pretrial matters.
SO ORDERED.
Dated: Central Islip, New York
July 13, 2011
/s
Denis R. Hurley
Unites States District Judge
41
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