Marini et al v. Adamo et al

Filing 124

ORDER granting in part and denying in part 102 Motion for Partial Summary Judgment. For the reasons set forth in the attached Memorandum and Order, defendants' motion for summary judgment is denied with respect to plaintiffs' securities fraud, RICO, and state-law fraud and breach of contract claims. Defendants' motion is granted, however, with respect to plaintiffs' General Business Law claim. Ordered by Judge Joseph F. Bianco on 9/26/2011. (Graves, Kelly)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
_____________________
No 08-CV-3995 (JFB) (ETB)
_____________________

ROCCO MARINI, JOSEPHINE MARINI, AND T&R KNITTING MILL, INC.,
Plaintiffs,
VERSUS

HAROLD ADAMO, JR., LISA ADAMO, THE BOLTON GROUP, INC., AND H. EDWARD
RARE COINS & COLLECTIBLES, INC.,
Defendants.
___________________
MEMORANDUM AND ORDER
September 26, 2011
___________________

plaintiffs’ state-law fraud, breach of
contract, and New York General Business
Law § 349 claims. For the reasons set forth
herein, defendants’ motion is denied with
respect to the securities fraud, RICO, and
state-law fraud and breach of contract
claims. Defendants’ motion is granted,
however, with respect to plaintiffs’ General
Business Law claim.

Joseph F. Bianco, District Judge:
Plaintiffs Rocco Marini (“Marini”),
Josephine Marini (“Mrs. Marini” or
“Josephine”), and T&R Knitting Mill, Inc.
(“T&R” or “T&R Knitting”) (collectively,
“plaintiffs”) brought this action against
defendants Harold Adamo, Jr. (“Adamo”),
Lisa Adamo (“Mrs. Adamo” or “Lisa”), The
Bolton Group, Inc. (“Bolton” or “The
Bolton Group”), and H. Edward Rare Coins
& Collectibles, Inc. (“H. Edward”)
(collectively, “defendants”), alleging, inter
alia, that Adamo violated the Racketeer
Influenced and Corrupt Organizations Act,
18 U.S.C. §§ 1961 et seq. (“RICO”), and
asserting claims for securities fraud pursuant
to Section 10(b) of the Securities Exchange
Act of 1934, 15 U.S.C. § 78j(b), and Rule
10b-5 promulgated thereunder, 17 C.F.R. §
240.10b-5. Defendants have moved for
partial summary judgment on plaintiffs’
securities fraud and RICO claims, and on

I. Background
A. Facts
The following facts are taken from the
parties’ depositions, declarations, exhibits
and respective Local 56.1 statements of
facts.1 Upon consideration of a motion for
1

Where only one party’s 56.1 statement is cited,
the cited fact is not contested by the other party
or the other party has offered no evidence to
controvert that fact.

1

made numerous representations to Marini
that rare coins were an excellent investment
opportunity. (Defs. 56.1 ¶ 7.) Specifically,
in order to induce Marini to purchase coins
from Adamo, Adamo represented to Marini
that “the kind of coins that he was going to
get us into were the top 1 percent of 1
percent, very rare, and those weren’t the
kind of coins that he has ever seen go down
[in value].” (Marini 12/31/09 Depo. at
17:22-18:2; see also Defs.’ 56.1 ¶ 7.)
Adamo also told Marini that Marini could
expect twenty to forty percent returns and
that, if demanded by Marini, Adamo could
repurchase coins from Marini at their
present value within twenty-four to fortyeight hours of such demand. (Defs.’ 56.1 ¶
7.) In addition, Adamo insisted that Marini
buy and sell coins only through Adamo.
(Marini 12/31/09 Depo. at 5:18-6:6.)
However, Adamo’s coins were not subject
to such a restrictive agreement, and Adamo
was free to buy and sell his own coins
without notifying Marini. (Defs.’ 56.1 ¶ 9.)
Further, although Adamo also told Marini
that “it wasn’t wise to publicize” his coin
dealings with Adamo, Adamo did not direct
Marini not to tell anyone else about the
dealings. (Marini Depo. at 52:7-13.) Marini
testified that his close relationship with
Adamo,
combined
with
Adamo’s
reassurances that Marini could “cash out in
24 to 48 hours,” that the coins were rare and
“couldn’t go down in value,” and that
Marini was “getting in at what [Adamo]
called the dirt bottom,” made it “compelling
for [Marini] to start investing with
[Adamo].” (T&R 12/23/09 Depo. at 264:2265:19.)

summary judgment, the Court construes the
facts in the light most favorable to the nonmoving party. See Capobianco v. City of
New York, 422 F.3d 47, 50 n.1 (2d Cir.
2005). Defendants have also noted that their
motion is “largely” based on plaintiffs’
version of the facts, which defendants have
accepted for purposes of this motion only.
(Defs.’ Mem. of Law at 7.)
Plaintiffs’ claims in this case stem from
their purchase of rare coins from defendants
at what plaintiffs claim were fraudulently
inflated prices. Specifically, plaintiffs claim
that defendants engaged in a multi-year
scheme to defraud plaintiffs in connection
with numerous rare coin transactions that
ultimately resulted in an alleged loss to
plaintiffs of approximately $14.5 million.
(Pls.’ Opp. at 9-10.)
By way of background, Marini and his
wife, Josephine, became close friends with
Adamo and his wife, Lisa, after the couples
met each other in 1992. (Defs.’ 56.1 ¶ 4.)
The Marinis and Adamos are godparents to
certain of the others’ children, and they
frequently socialized and went on family
vacations together. (Id. ¶¶ 5-6.) Prior to
engaging in the coin dealings that are the
subject of the current action, Marini and
Adamo apparently did not conduct any
business together. Instead, Marini earned
his living as a garment manufacturer through
his company, T&R Knitting (Marini
12/31/09 Depo. at 199:8-203:25), and
Adamo worked as a coin dealer, first as a
salesperson for a company known as United
Numismatics (Adamo 6/23/09 Depo. at
89:24-92:13) and later as a coin dealer
through two companies (H. Edward and The
Bolton Group) that he co-owns with his
wife. (Id. at 24:15-26:5, 30:2-31:15; Defs.
56.1 ¶¶ 65-66.)

Consequently, Marini made his first coin
purchase from Adamo in September 2002.
(Defs.’ 56.1 ¶ 18.) Over the course of
approximately the next five years, until in or

In August 2002, Marini and Adamo had
an in-person meeting during which Adamo

2

about May 2007,2 plaintiffs made at least
sixty-nine3 payments to defendants (either to
Adamo, The Bolton Group, or H. Edward)
for the purchase of 144 coins. (Id. ¶ 19;
Harris Decl. Ex. O; Parrella Decl. Ex. A at
5-30; Weinberg Decl. Ex. A.)
From
September 2002 through March 15, 2005,
certain of these payments were made not by
Marini himself, but instead were made by
T&R Knitting on Marini’s behalf in
repayment for certain shareholder loans that
Marini had made to T&R. (Defs.’ 56.1 ¶ 1.)
It is undisputed, however, that T&R does
not own any of the coins that are the subject
of this lawsuit, and that no defendant caused
T&R to make any of these payments. (Id. ¶¶
1, 3.) At least one payment also was made
by Josephine Marini. (Harris Decl. Ex. O,
Line 27.) In terms of methods of payment,
plaintiffs paid defendants either by cash,
check, or by wire transfer. (Id.) Moreover,
regarding receipt of the coins, plaintiffs
acknowledge that Marini received all of the
coins at issue in person and never received
any of these coins through the mail. (Id. ¶
24.)

about the coins. (Defs.’ 56.1 ¶ 11; Pls.’
Response to Defs.’ 56.1 ¶ 11.) Josephine,
Marini’s wife, was not involved in the
decision-making process with respect to
buying or trading coins, and she testified
that once she and Marini “decided to buy
coins,” she “left it up to [Marini] to follow
the advice of [Adamo] for which coins to
buy.” (J. Marini 12/28/09 Depo. at 49:2150:16; see also Defs.’ 56.1 ¶ 15.) Further,
Marini did not contact Adamo about
purchasing coins, but instead waited for
Adamo to contact him regarding the coins
that Adamo had obtained for Marini.
(Defs.’ 56.1 ¶ 12.) Lisa Adamo, however,
neither made representations about rare
coins to plaintiffs nor caused plaintiffs to
purchase any coins. (Id. ¶ 72.) However,
Lisa was present when certain cash
payments were made by Marini to Adamo,
and Marini testified that she “was just as
engaging as [Marini] and Mr. Adamo.”
(Marini 6/25/10 Depo. at 73:6-24.)
Regarding the scheme to defraud,
plaintiffs claim that Adamo “bilk[ed] Marini
out of nearly 15 million dollars” by
fraudulently misrepresenting “the value of
the coins [Adamo] sold Marini and the
propriety of coin investments,” and by
“continu[ing]
to
refuse
to
honor
commitments to buy back Marini’s coin
purchases.” (Second Amended Complaint
(“SAC”) Intro.)
By way of example,
plaintiffs allege that each time Marini made
a coin purchase, Adamo reiterated the same
purportedly false assurances he had given to
Marini during their initial conversation in
August 2002, namely, that Adamo was
offering Marini extremely rare and valuable
coins that were “a great value” and were
“important . . . to add to our portfolio.”
(Defs.’ 56.1 ¶ 13; Marini 12/31/09 Depo. at
8:19-24.) Moreover, with each transaction,
Adamo not only purportedly told Marini that
the proposed coins were “great for our
portfolios” but also “led [Marini] to believe

As to the nature of Marini and Adamo’s
business relationship, it is undisputed that
Marini did not know anything about rare
coins and that, until Marini became
suspicious of Adamo in June 2008, Marini
“believe[d] everything” Adamo told him
2

Although plaintiffs allege that the scheme to
defraud extended into 2008, Marini testified that
he stopped purchasing coins from defendants in
or around May 2007. (Marini 6/25/07 Depo. at
70:10-17; Marini 12/31/09 Depo. at 112:18113:25.)

3

In their response to defendants’ 56.1 statement,
plaintiffs referred the Court to Exhibit A to
plaintiffs’ Amended RICO Statement, which
sets forth eighty-three payments allegedly made
to defendants. In any event, this distinction is
not dispositive for purposes of the Court’s
present analysis.

3

that he was purchasing one [coin] for him
and one for [Marini].” (Marini 12/31/09
Depo. at 8:3-18.) According to Marini,
Adamo “constantly reminded [Marini] of the
security of the investment,” told Marini that
he could “liquidate within 24 to 48 hours,”
and stated that he “would never put [Marini]
into coins that [Adamo] wouldn’t put
himself into.” (Marini 12/31/09 Depo. at
195:25-196:8.) On other occasions, Adamo
“stressed [that the coins] were priced at dirt
bottom, at the highest rarity,” and that
Adamo was “putting a collection together
that would yield us a very good return at the
end of our investment period.” (Marini
12/31/09 Depo. at 184:18-24.) Marini also
testified that Adamo told him during at least
one conversation that Marini would be “a
happy man” once he realized “what [Adamo
was] doing for [him] and the investments”
Marini was making. (Marini 6/25/10 Depo.
at 16:9-17.) As a result of these assurances,
Marini explained that he relied upon Adamo
and “felt like we were partners, building
portfolios together.”
(Marini 12/31/09
Depo. at 196:8-9.)

In February 2006, Marini had a meeting
with Adamo where the two discussed the
topic of published price guides for coins.
(Marini 12/31/09 Depo. at 54:15-22.) Prior
to that meeting, Marini had purchased a
copy of the “Red Book,” which contains
“coin descriptions, populations,” and prices,
and he was “having trouble” matching up
the coins on his yearly statements with the
coins that were listed in the book, although
he “might have found one coin” for which
his purchase price was “close to the price”
listed in the Red Book. (Id. at 54:23-55:14,
57:14:18.) When Marini asked Adamo
about the Red Book, however, Adamo
“dismissed it immediately,” and explained
that “a lot of the information that was in that
book wasn’t from current information” and
was not specific to Adamo’s or Marini’s
portfolio because “you wouldn’t necessarily
see that kind of quality rarity [sic] listed
publicly in that book.” (Id. at 59:6-21.)
Marini accepted Adamo’s explanation and
“continued our conversation.” (Id. at 59:1921.)

Furthermore, throughout the course of
their dealings, Adamo periodically would
send Marini statements that reflected the
purchase prices and current values of the
coins in Marini’s portfolio.
(Marini
12/31/09 Depo. at 40:16-21; 67:9-11.) Most
of these statements showed “no loss” on a
single coin, although there were some coins
that apparently showed a loss in value. (Id.
at 40:22-41:11.) Marini testified, however,
that he did not know whether those losses
were “due to a loss or due to a typo or
mistake.” (Id. at 41:9-11.) Certain of these
coin statements were given to Marini inperson (id. at 165:8-11), while others were
sent via e-mail. (Marini Decl. Ex. A at
PL003855-57, PL003868-70, PL003881-83,
PL003904-08.)

In May 2007, Marini stopped purchasing
coins from Adamo because Marini did not
have additional, available funds at that time.
(Marini 6/25/07 Depo. at 70:10-17; Marini
12/31/09
Depo.
at
112:18-113:25.)
Accordingly, Marini informed Adamo that
he “needed to cash out of roughly a million
dollars worth of coins from the coin
portfolio.”
(Marini 12/31/09 Depo. at
113:20-25.) Although it is not entirely clear
from the record, it appears that Adamo paid
Marini one million dollars in exchange for
three coins in early June 2007. (Id. at
113:20-115:4; Marini Decl. Ex. A,
PL003718.) Marini reported that Adamo
had valued these coins at double what
Marini had paid for them. (Marini 12/31/09
Depo. at 116:15-19.) Shortly thereafter,
Marini informed Adamo that he needed to
cash out of more coins, and Adamo
responded that he had a buyer for two coins
4

converted my nest egg into this coin
investment” and that he was not able to see
any kind of correlation between his coins
and the information in the Gray Book. (Id.
at 62:3-15.) In response, Adamo reiterated
his previous assurances, noting that the
coins he and Marini had were “the top 1
percent” and that “customers that [Adamo]
ha[d] known for over 20 years haven’t been
able to accomplish what [Adamo and Marini
had] accomplished in the past six years.”
(Id. at 62:19-24.)

and would be able to pay Marini “in 60-90
days.” (Marini 12/31/09 Depo. at 115:6-9;
Marini Decl. Ex. A, PL003718.) Adamo’s
response surprised Marini, because Marini
felt that Adamo was contradicting his earlier
promises that Marini could liquidate his
coins in twenty-four to forty-eight hours.
(Marini 12/31/09 Depo. at 115:6-16.)
Ultimately, Adamo bought coins back from
Marini for a total of $2.54 million. (Marini
Decl. ¶ 9; H. Edward 12/22/09 Depo. at
232:15-20.) For other coins that Marini
wished to sell, Adamo apparently proposed
trades instead. (Marini 12/31/09 Depo. at
157:16-18; see, e.g., Marini Decl Ex. A,
PL003807 (“I HAVE YOUR 120K CHECK
AND THE TRADE COIN READY WHEN
YOU IS [sic].”).)

Thereafter, in or around May 2008,
Marini gave Adamo one of his “Stella”
coins to be sent out for “upgrading,”
meaning that Adamo would try to obtain a
higher grade or a star for the coin from a
coin grading service.
(Adamo 6/23/09
Depo. at 287:12-288:15; see also Marini
Decl. Ex A, PL003796, PL003798.) In the
subsequent months, Marini sent several
follow-up emails to Adamo asking when the
Stella would be returned. (Marini Decl. Ex.
A., PL003834, PL003840, PL003852.)
Adamo initially responded to Marini’s
emails that the coin would be shipped back
within a week, but by September 5, 2008,
Adamo reported that the Stella was “there
being reholder [sic].” (Marini Decl. Ex. A,
PL003837,
PL003841,
PL003842,
PL003855.)
The following week, on
September 12, 2008, Adamo emailed Marini
that the Stella would be “back in 7/8 days.”
(PL003879.) Plaintiffs claim, however, that
Adamo did not, in fact, send the coin out for
upgrading and instead sold it without
Marini’s permission. (Pls.’ Opp. at 17.) In
support of this claim, plaintiffs point to a
receipt of purchase that purportedly
indicates Adamo sold a Stella coin of the
same type, year and grade as Marini’s, and
with the same unique serial number, in May
2008.
(Id. (citing SAC Ex. Y.).)
Nevertheless, in contrast to plaintiffs’
claims, Adamo has apparently returned a
coin to Marini that Adamo claims is

Several months later, in November 2007,
Marini again asked Adamo about the prices
listed for Marini’s coins in the Gray Book,
another published price guide. (Marini
12/31/09 Depo. at 60:2-16.) Specifically,
Marini testified:
[Adamo] was cashing me out of, I
believe, an 1879 Stella and I had, I
believe, two copies [of the Gray
Book] with me. . . . After we finished
the dealing of the Stella, Mr. Adamo,
I believe, was jotting down some
other coins for a future deal and then
I said, I have to ask you, I got this
publication and I said I’m still
having a hard time, I just don’t see—
first, I was having a hard time trying
to even identify if it was the exact
coins because some coins on my
slabs would have an extra number
and I just didn’t understand the
process, if it made an significant
difference . . . .
(Id. at 61:13-62:3.) After Adamo asked
Marini whether they were “going there
again,” Marini explained that he had “just

5

Marini’s Stella coin. (Id.; see also SAC Ex.
YY.)4
Plaintiffs’ expert, however, has
submitted a report that the coin returned to
Marini “is not the same $4 Gold Coin that
was consigned” by Marini to Adamo in
2008. (Parella Decl. Ex. B. at 1.)

former customer who had purchased
between twenty-five and fifty coins from H.
Edward; and David Albanese, whom Adamo
refused to pay for a coin until Adamo was
threatened with police action. In particular,
plaintiffs claim that Brancato was targeted in
a similar fashion to Marini, in that Brancato
purchased coins from Adamo after Adamo
gave repeated assurances about the
profitability of coin investments. (Pls.’ Opp.
at 18-20; Brancato 12/29/09 Depo. at 44:1820, 47:2-48:21.) Unlike Marini, however,
Brancato ultimately was able to sell his
coins back to Adamo for a profit. (Pls.’
Opp. at 20 (citing Harris Decl. Ex. Q at
FRANK000833, 836).) As to Travis Bain,
plaintiffs assert that Bain was injured when
Adamo sold him coins that plaintiffs allege
were fraudulently overgraded, a fact that
Bain learned only when he sold his coins
through a major auction house at prices
lower than Bain thought he would realize.5
(Pls.’ Opp. at 20-21; Bain 8/30/09 Depo. at
12:18-13:25.) Finally, Albanese is alleged
to be a victim of Adamo’s because, in 2003,
after Albanese had sold a coin to Adamo,
Adamo refused to render payment until after
Albanese contacted the police for assistance
in procuring payment.6 (Pls.’ Opp. at 22;

In any event, in May 2008, around the
time that Marini gave the Stella coin to
Adamo for upgrading, Marini began to
suspect that he was being defrauded by
Marini. (Defs.’ 56.1 ¶ 21.) In particular,
Marini testified that:
Prior to these deals [in May 2008], I
was very clear if it was going to be a
trade or a straight cash out deal,
everything was going smoothly, any
trade deals that I agreed to, I was
honored that he was taking the time
to maintain the equity and the vitality
of the coin portfolio, but, now, it
seemed like he was doing whatever
he wanted to do.
(Marini 12/31/09 Depo. at 156:16-23.)
Consequently, in late May, Marini took
some of his coins to another dealer for
evaluation. (Id. at 156:4-7; 166:4-8.) In
addition, in June 2008, Marini began to
surreptitiously tape record his conversations
with Adamo. (Defs.’ 56.1 ¶ 21.) Finally, in
July 2008, Marini retained his attorney in
this action. (Id.)

5

The Court notes, however, that Bain testified
that he did not think that Adamo defrauded him.
(Bain 8/30/09 Depo. at 19:6-12.)

6

Plaintiffs have also alleged that Adamo
defrauded an unidentified individual whom
Adamo referred to as a “sucker” for purchasing
a coin at a value that Adamo thought was too
high. (Pls.’ Opp. at 21.) However, no additional
details regarding this alleged victim are
contained in the record. Further, although
plaintiffs proffered another additional victim,
Dominick Grosso, no declarations or other
admissible evidence regarding Grosso’s
interactions with Adamo was provided. Rather,
plaintiffs have relied upon inadmissible hearsay.
(See Pls.’ Opp. at 22-23, notes 207-13.)
Therefore, the Court has not relied upon
plaintiffs’ allegations regarding Grosso.

Plaintiffs also allege that defendants
defrauded other victims in a similar manner.
Specifically, plaintiffs point to three other
purported
identified
victims:
Frank
Brancato, another close family friend of the
Marinis and the Adamos; Travis Bain, a
4

Adamo had originally proffered one coin to
Marini that he stated was the Stella, but he later
provided a different coin, noting, through his
attorney, that the first coin returned to Marini
was not the original. (See SAC Ex. YY.)

6

than simply show that there is some
metaphysical doubt as to the material facts. .
. . The nonmoving party must come forward
with specific facts showing that there is a
genuine issue for trial.’” Caldarola v.
Calabrese, 298 F.3d 156, 160 (2d Cir. 2002)
(emphasis in original) (quoting Matsushita
Elec. Indus. Co. v. Zenith Radio Corp., 475
U.S. 574, 586-87 (1986)). As the Supreme
Court stated in Anderson, “[i]f the evidence
is merely colorable, or is not significantly
probative, summary judgment may be
granted.” Anderson, 477 U.S. at 249-50
(internal citations omitted). Indeed, “the
mere existence of some alleged factual
dispute between the parties” alone “will not
defeat an otherwise properly supported
motion for summary judgment.” Id. at 24748 (emphasis in original).
Thus, the
nonmoving party may not rest upon mere
conclusory allegations or denials but must
set forth “‘concrete particulars’ showing that
a trial is needed.” R.G. Grp., Inc. v. Horn &
Hardart Co., 751 F.2d 69, 77 (2d Cir. 1984)
(quoting SEC v. Research Automation
Corp., 585 F.2d 31, 33 (2d Cir. 1978)).
Accordingly, it is insufficient for a party
opposing summary judgment “‘merely to
assert a conclusion without supplying
supporting arguments or facts.’” BellSouth
Telecomms., Inc. v. W.R. Grace & Co., 77
F.3d 603, 615 (2d Cir. 1996) (quoting
Research Automation Corp., 585 F.2d at
33).

Albanese 12/7/09 Depo. at 6:19-8:18, 74:1677:18.)
II. Standard of Review
The standards for summary judgment are
well settled. Pursuant to Federal Rule of
Civil Procedure 56(a), a court may only
grant a motion for summary judgment “if
the movant shows that there is no genuine
dispute as to any material fact and the
movant is entitled to judgment as a matter of
law.” Fed. R. Civ. P. 56(a). The moving
party bears the burden of showing that he or
she is entitled to summary judgment. See
Huminski v. Corsones, 396 F.3d 53, 69 (2d
Cir. 2005). “A party asserting that a fact
cannot be or is genuinely disputed must
support the assertion by: (A) citing to
particular parts of materials in the record,
including
depositions,
documents,
electronically stored information, affidavits
or declarations, stipulations (including those
made for purposes of the motion only),
admissions, interrogatory answers, or other
materials; or (B) showing that the materials
cited do not establish the absence or
presence of a genuine dispute, or that an
adverse party cannot produce admissible
evidence to support the fact.” Fed. R. Civ.
P. 56(c)(1). The court “is not to weigh the
evidence but is instead required to view the
evidence in the light most favorable to the
party opposing summary judgment, to draw
all reasonable inferences in favor of that
party,
and
to
eschew
credibility
assessments.” Amnesty Am. v. Town of W.
Hartford, 361 F.3d 113, 122 (2d Cir. 2004)
(internal quotation marks omitted); see
Anderson v. Liberty Lobby, Inc., 477 U.S.
242, 248 (1986) (summary judgment is
unwarranted “if the evidence is such that a
reasonable jury could return a verdict for the
nonmoving party”).

III. Discussion
Defendants have moved for partial
summary judgment on plaintiffs’ securities
fraud and RICO claims, and on plaintiffs’
state-law fraud, breach of contract, and New
York General Business Law § 349 claims.
For the reasons set forth herein, defendants’
motion is denied with respect to the
securities fraud, RICO, and state-law fraud
and breach of contract claims. Defendants’

Once the moving party has met its
burden, the opposing party “‘must do more

7

motion is granted, however, with respect to
plaintiffs’ General Business Law claim.7

must involve a “security,” as defined in
Section 2(1) of the Securities Act of 1933,
15 U.S.C. § 77b(a)(1). Although Section
77b(1) sets forth numerous different
instruments that may be considered
securities, the parties agree that the only
category that applies here is that of
“investment contract.”

A. Securities Fraud8
1. Legal Standard
Section 10(b) of the Securities Exchange
Act of 1934 (“the Exchange Act”) makes it
unlawful “[t]o use or employ, in connection
with the purchase or sale of any security . . .
any manipulative or deceptive device or
contrivance in contravention of such rules
and regulations as the [Securities Exchange]
Commission may prescribe as necessary or
appropriate in the public interest or for the
protection of investors.” 15 U.S.C. § 78j(b).
In order to state a claim for securities fraud
under this Section, the transaction at issue
7

In SEC v. Howey, 328 U.S. 293 (1946),
the Supreme Court defined “investment
contract” to mean “a contract, transaction or
scheme whereby a person [1] invests his
money [2] in a common enterprise and [3] is
led to expect profits [4] solely from the
efforts of a promoter or third party . . . .” Id.
at 298-99; accord United States v. Leonard,
529 F.3d 83, 88 (2d Cir. 2008); Revak v.
SEC Realty Corp., 18 F.3d 81, 87 (2d Cir.
1994). The Supreme Court also added a
fifth requirement in Marine Bank v. Weaver,
455 U.S. 551 (1982), namely, that “for an
instrument to be a security the investor must
risk loss.” Gary Plastic Packaging Corp. v.
Merill Lynch, Pierce, Fenner & Smith, Inc.,
756 F.2d 230, 239 (2d Cir. 1985).
Defendants do not dispute, for purposes of
their motion, that plaintiff can satisfy the
first, third, fourth, and fifth prongs of the
Howey test. Instead, defendants focus solely
on the second prong and contend that
plaintiffs cannot establish the existence of a
“common enterprise” in this case.

8

Courts have applied several different
tests to determine whether a common
enterprise exists, namely: the horizontal
commonality test, the broad vertical
commonality test, and the narrow or strict
vertical commonality test. Revak, 18 F.3d at
87-88. Horizontal commonality involves
“the tying of each individual investor’s
fortunes to the fortunes of the other
investors by the pooling of assets, usually
combined with the pro-rata distribution of
profits.” Id. at 87. Vertical commonality, in
contrast, “focuses on the relationship

Defendants have argued that T&R Knitting is
not a proper plaintiff and must be dismissed
from this action. Specifically, defendants argue
that Marini caused T&R to make all payments to
defendants and that T&R does not own any of
the coins at issue in this case. (Defs.’ Mem. of
Law at 14-15.) Plaintiffs acknowledge that
Marini testified that “he purchased some coins
with payments from T&R, at times when T&R
owed Marini money on loans Marini made to
T&R.” (Pls.’ Opp. at 87.) However, plaintiffs
also note that defendants have contested
Marini’s explanation by questioning the
existence of these loans and, consequently,
questioning whether the coins paid for by T&R
do, in fact, belong to Marini. (Pls.’ Opp. at 87.)
Thus, given the disputed issues of fact regarding
payments made by T&R allegedly on Marini’s
behalf, defendants’ motion for summary
judgment to dismiss T&R as a plaintiff is
denied.
Defendants argue that plaintiffs’ securities
fraud claim is limited to transactions that
occurred after September 30, 2003 because of
the applicable statute of limitations. (See Defs.’
Mem. of Law at 49.) Plaintiffs concede this
point. (See Pls.’ Opp. at 24.) Therefore, this
argument need not be addressed by the Court.

8

between the promoter and the body of
investors,” rather than on the sharing or
pooling of funds among investors. Id.
Under the broad vertical commonality test,
“the fortunes of the investors need be linked
only to the efforts of the promoter,” while
“[s]trict vertical commonality requires that
the fortunes of investors be tied to the
fortunes of the promoter.”
Id. at 88
(emphasis in original) (internal quotation
marks and citations omitted).
It is
undisputed that horizontal commonality
does not exist in this case. In addition, the
Second Circuit has held that a showing of
broad vertical commonality does not satisfy
the second prong of the Howey test. Id. (“If
a common enterprise can be established by
the mere showing that the fortunes of
investors are tied to the efforts of the
promoter, two separate questions posed by
Howey—whether a common enterprise
exists and whether the investors’ profits are
to be derived solely from the efforts of
others—are effectively merged into a single
inquiry: ‘whether the fortuity of the
investments collectively is essentially
dependent upon promoter expertise.’”
(quoting SEC v. Continental Commodities
Corp., 497 F.2d 516, 522 (5th Cir. 1974))
(additional citations omitted)). Accordingly,
this Court need only focus on whether strict
vertical commonality exists in this case.9

To support a finding of strict vertical
commonality, a plaintiff must establish that
“‘the fortunes of plaintiff and defendants are
linked so that they rise and fall together.’”
Jordan (Bermuda) Inv. Co., Ltd. v. Hunter
Green Invs. Ltd., 205 F. Supp. 2d 243, 249
(S.D.N.Y. 2002) (quoting Dooner v. NMI
Ltd., 725 F. Supp. 153, 159 (S.D.N.Y.
1989)); accord In re J.P. Jeanneret Assocs.,
Inc., 769 F. Supp. 2d 340, 360 (S.D.N.Y.
2011) (where investment manager was to be
paid, in part, through a performance fee
equal to 20% of the profits in the investment
account, defendant’s compensation was
“dependent on the successful performance
of the investment account” and strict vertical
commonality accordingly existed because
“[i]f profits were not generated in a calendar
year, or if the profits did not exceed the
preferred return, then [defendant] did not
receive a performance fee” and therefore
“financial compensation was linked to the
fortunes of the investors”); Walther v.
Maricopa Intern. Inv. Corp., No. 97-cv4816, 1998 WL 186736, at *7 (S.D.N.Y.
Apr. 17, 1998) (finding that “success of
[plaintiff’s] investments were directly tied to
the fortunes of the defendants” and strict
vertical commonality therefore existed
where defendants “were to be paid only if
[plaintiff’s] funds made substantial gains,”
and “[c]onsequently, if [plaintiff’s] funds
appreciated in value, the defendants were
financially compensated,” whereas “if

9

The Court notes that, in Revak, the Second
Circuit declined to reach the issue of whether the
existence of strict vertical commonality alone
“gives rise to a common enterprise.” 18 F.3d at
88. However, a number of district courts in this
Circuit, as well as the Ninth Circuit Court of
Appeals, have found a showing of strict vertical
commonality to be sufficient to establish a
common enterprise. See In re J.P. Jeanneret
Assocs., Inc., 769 F. Supp. 2d 340, 360
(S.D.N.Y. 2011) (collecting cases); accord
Brodt v. Bache & Co., 595 F.2d 459, 461 (9th
Cir. 1978). Defendants concede that this is the
proper legal analysis. In any event, the Court

agrees with the above-cited courts that have
reached the issue and concludes, for purposes of
the pending motion, that a showing of strict
vertical commonality would satisfy the common
enterprise prong of the Howey test. However, as
set forth herein, the Court finds that a material
factual dispute exists as to whether plaintiffs’
and defendants’ fortunes were interwoven so as
to support a finding of strict vertical
commonality. Accordingly, the Court denies
defendants’ motion for summary judgment on
this claim for the reasons set forth infra.

9

contract” for purposes of the federal
securities laws. Specifically, defendants
contend that plaintiffs cannot satisfy the
strict vertical commonality element of the
Howey test. In opposition, plaintiffs argue
that they can establish the requisite level of
commonality in one of two ways: first,
plaintiffs contend that their purchase of the
same coins as defendants would make their
fortunes rise and fall together from owning
identical property, and, second, plaintiffs
assert that because Adamo earned a
percentage commission on plaintiffs’
eventual sale of coins, Adamo’s fortunes
necessarily would rise and fall with the
value of plaintiffs’ coin portfolio. (Pls.’
Opp. at 25.) For the reasons set forth herein,
the Court finds that there are disputed issues
of material fact that preclude the Court from
granting summary judgment on this issue,
and, accordingly, defendants’ motion for
summary judgment on the securities fraud
claim is denied.

[plaintiff’s] investment did not perform well,
the defendants were not paid” (internal
quotation marks omitted)).
Stated
otherwise, strict vertical commonality exists
where there is a “one-to-one relationship
between the investor and investment
manager” such that there is “an
interdependence of both profits and losses of
the investment.” Kaplan v. Shapiro, 655 F.
Supp. 336, 341 (S.D.N.Y. 1987) (emphasis
in original); see also Lowenbraun v. L.F.
Rothschild, Unterberg, Towbin, 685 F.
Supp. 336, 341 (S.D.N.Y. 1988) (noting that
“[v]ertical commonality is present when
there is interdependence between broker and
client for both profits and losses of the
investment” and holding that plaintiff had
not established vertical commonality
because “profits and losses were not
interdependent since the broker allegedly
profited from the commissions while
plaintiffs suffered losses”); Savino v. E.F.
Hutton & Co., Inc., 507 F. Supp. 1225, 1238
(S.D.N.Y. 1981) (“It is plain enough that a
vertical relationship, that is, a one-to-one
relationship between the investor and the
investment manager, is capable of being
structured so that the profits and losses of
the two parties are somehow interdependent.
In the Court’s opinion, such a structure is all
that vertical commonality means under [SEC
v. Glenn W. Turner Enterprises, Inc., 474
F.2d 476 (9th Cir. 1973)] and Brodt [v.
Bache & Co., 595 F.2d 459, 461 (9th Cir.
1978)], and is all that Howey requires.
Accordingly, the Court concludes that a
common enterprise should be found where
there is vertical commonality such as is
described above.”).

As an initial matter, the Court disagrees
with plaintiffs that Adamo and Marini’s
ownership of the same types of coins
necessarily links their fortunes together for
purposes of the strict vertical commonality
analysis. First, although Adamo and Marini
may have owned similar sets of coins, and
their portfolios might therefore have been
valued similarly, it is clear from the record
that Adamo and Marini maintained separate
portfolios. Indeed, Marini acknowledged at
his deposition that he understood that
Adamo was purchasing two of each
proposed coin: one for Marini’s portfolio
and one for Adamo’s. (Marini 12/31/09
Depo. at 8:12-18 (“[W]hen Mr. Adamo
called me and told me that he had coins that
he procured for us, he said these are great
for our portfolios, so every time he used it in
the context of us and our and all that he led
me to believe that he was purchasing one for
him and one for me.” (emphasis added)).)
Moreover, in a recorded conversation,

2. Application
Defendants have moved for summary
judgment on plaintiffs’ securities fraud
claim on the ground that plaintiffs have
failed to establish that Adamo’s sale of coins
to Marini constituted an “investment
10

Adamo explained to Marini that, while
Adamo viewed their portfolios similarly,
their portfolios were not identical in that
Adamo owned certain coins that Marini did
not: “I may have two of something where
you have one. I may have four of something
and you have three. You know, a few odds
and ends that I have because I liked that I
wouldn’t recommend to you for investment .
. . .” (Marini Decl. Ex. A, PL001123.)

intertwined such that Marini’s and Adamo’s
fortunes had to rise and fall together. Stated
otherwise, because plaintiff was free to
direct the sale of his coins separate and apart
from Adamo’s decision to sell his coins, the
fortunes of Marini and Adamo clearly were
not directly linked. In fact, this exact
scenario arose in this case in May 2008,
when Adamo paid Marini $1 million to
liquidate certain coins in Marini’s portfolio.
Marini does not claim that Adamo made any
profit or otherwise benefited from this
transaction, or that Adamo sold his coins at
the same time for a similar amount.11 To the
contrary, the record reflects that Adamo
used his “emergency” funds to make this
payment to Marini (Marini Decl. Ex. A,
PL003718) and, in any event, Marini’s
fortunes rose (Marini acknowledged that he
made a profit on these coins) while Adamo’s
fortunes fell. Further, Marini acknowledged
in his deposition that Adamo had never
expressed any concern that the prices of his
coins would be impacted by Marini’s
decision to sell a particular coin or to buy a
coin that Adamo already owned. (Id. at
146:6-147:2.) Therefore, based upon the
facts presented in this case, the Court rejects
plaintiffs’ argument that Marini and
Adamo’s ownership of the same coins
establishes the existence of strict vertical
commonality.

Most important, Adamo was under no
obligation to sell his coins at the same time
that Marini sold his (Defs. 56.1 ¶ 9); in other
words, Adamo was free either to sell his
coins before Marini, if an opportunity arose,
or to hold onto his coins longer to capitalize
on any long-term appreciations in value.
Accordingly, while the valuation of their
portfolios may have paralleled one another
given their similar contents, and any deal
that Adamo found could have affected the
prices of the coins that Adamo and Marini
each owned,10 the portfolios were not
10

For example, on one occasion, Adamo
emailed Marini about a potential sale that would
“push up the prices of our same coins
tremendously.”
(Marini 12/31/09 Depo. at
144:15-154:145:15.)
Similarly, on another
occasion, Adamo led Marini to believe that they
were both selling their identical coins to a
purchaser for the same sale price. (Id. at 9:1524.) However, even in this latter deal, it is clear
that Marini and Adamo’s portfolios and fortunes
were not inextricably linked.
Specifically,
although Adamo was selling his coin because
the offered sale price was “great” and he was
“advising” Marini to do the same (id. at 9:2324), there is nothing in the record to indicate that
Marini had to sell his coin because Adamo so
advised. To the contrary, Marini could have
chosen to hold onto his coin, which would have
resulted in Adamo earning a profit on his coin
when Marini did not (or did not until a later,
unspecified date). Under these circumstances,
the “profits and losses of the investment” clearly
were not “interdependent.” Kaplan, 655 F.
Supp. at 341.

Indeed, the cases cited by plaintiffs to
support
their
argument
are
all
distinguishable from this case. For example,
although the plaintiffs in Howey had
purchased separate parcels of land in a citrus
grove—just as Marini and Adamo had
purchased
separate
coins
here—the
transactions
were
transformed
into
11

Marini’s claim that Adamo earned
commissions based on the sale of Marini’s coins
is addressed infra. As set forth below, there are
disputed issues of fact as to whether Adamo
actually earned such commissions.

11

“investment contracts” not because of the
ownership of separate parcels, but instead
because plaintiffs had been “offer[ed] an
opportunity to contribute money and to
share in the profits of a large citrus fruit
enterprise managed and partly owned by
respondents.” 328 U.S. at 299. The Second
Circuit has interpreted Howey to mean that
“[a] common enterprise within the meaning
of Howey can be established by a showing
of ‘horizontal commonality’: the tying of
each individual investor’s fortunes to the
fortunes of the other investors by the
pooling of assets, usually combined with the
pro-rata distributions of profits.” Revak, 18
F.3d at 87. Here, in contrast, Adamo was
not offering Marini the opportunity to
contribute funds and share in the profits of a
coin portfolio that would be managed by
Adamo.
Indeed, it is undisputed that
horizontal commonality is not present in this
case. Accordingly, the fact that plaintiffs in
Howey owned separate parcels of land does
not change in the Court’s conclusion here.
Likewise,
Securities
&
Exchange
Commission v. C.M. Joiner Leasing Corp.,
320 U.S. 344 (1943) involved thousands of
leaseholders “sharing in discovery values”
in connection with oil exploration on plots
of land. Id. at 348 (emphasis added).
Again, there is no allegation here that
plaintiffs were investing with others and
sharing in profits.12

Furthermore, the Second Circuit’s
opinion in Glen-Arden Commodities v.
Costantino, 493 F.2d 1027 (2d Cir. 1974), is
also inapposite insofar as the Second Circuit
primarily was focused in that case on the
importance of the promoter’s efforts, a
factor that relates not to the common
enterprise prong of the Howey test, but
instead to the fourth prong (i.e., that the
profits be derived solely from the efforts of a
promoter or third party), which is not atissue in this case. See id. at 1035 (“Here the
customer, . . . while purchasing actual
tangible
property,
was
upon
the
representations of appellants buying in
addition services absolutely necessary to the
turning of the promised profit. . . . An
investor was dependent upon appellants for
the utilization of their ‘expertise in selecting
the type and quality of Scotch whisky and
casks to be purchased’ . . . . This brings this
scheme within the facts of a long line of
cases where purported sales of tangible
property, service contracts, or both were
held to be investment contracts. There have
been many schemes, in short, where the
public was led into buying what purported to
be tangible items when in fact what was
being sold was an investment entrusting the
promoters with both the work and the
expertise to make the tangible investment
pay off.” (internal citations and alterations
omitted)).13

12

The Court also notes that, in Howey, the
Supreme Court “narrowed the Joiner . . . test
[for determining the existence of an investment
contract].” Gary Plastic Packaging Corp., 756
F.2d at 239. In Joiner, the Court stated that the
test was “what character the instrument is given
in commerce by the terms of the offer, the plan
of distribution, and the economic inducements
held out to the prospect.” 320 U.S. at 352-53
(emphasis added). In Howey, however, the
Court “narrowed the Joiner ‘character in
commerce’ test,” and set forth the “specific
requirements that continue to be the analytical

foundation for determining what constitutes an
investment contract.” Gary Plastic Packaging
Corp., 756 F.2d at 239. Accordingly, it is
Howey, and not Joiner, that sets forth the
relevant analysis for determining whether a
particular investment constitutes an investment
contract for purposes of the securities laws.
13

As noted supra, the Second Circuit in Revak
rejected the broad vertical commonality test,
which requires that “the fortunes of the investors
. . . be linked only to the efforts of the
promoter.” 18 F.3d at 88 (emphasis in original).

12

As to plaintiff’s second theory of
commonality, the Court finds that disputed
issues of material fact exist as to whether
Adamo earned commissions on the sale of
Marini’s coins and, accordingly, the Court
cannot conclude as a matter of law whether
Adamo’s fortunes would rise and fall with
plaintiffs’ fortunes. As a threshold matter,
other courts have found that, where an
investment manager, such as Adamo, earns a
fee based on the ultimate performance of an
investment, strict vertical commonality does
exist. For example, in In re J.P. Jeanneret
Assocs., Inc., the plaintiff demonstrated that
the investment manager was to be paid, in
part, through a performance fee equal to
20% of the profits in the investment account.
769 F. Supp. 2d at 360. Consequently,
defendant’s compensation was “dependent
on the successful performance of the
investment account” and strict vertical
commonality therefore existed because “[i]f
profits were not generated in a calendar
year, or if the profits did not exceed the
preferred return, then [defendant] did not
receive a performance fee” and therefore

“financial compensation was linked to the
fortunes of the investors.” Id. Similarly, in
Walther, the court found that the “success of
[plaintiff’s] investments [was] directly tied
to the fortunes of the defendants” and strict
vertical commonality therefore existed
because defendants “were to be paid only if
[plaintiff’s] funds made substantial gains.”
1998 WL 186736, at *7. In other words, the
fortunes of plaintiff and defendants were
linked because “if [plaintiff’s] funds
appreciated in value, the defendants were
financially compensated,” whereas “if
[plaintiff’s] investment did not perform well,
the defendants were not paid.” Id.
In this case, plaintiffs assert that Adamo
“retain[ed] a percentage commission on
each eventual sale” of Marini’s coins. (Pls.’
Opp. at 29.) Accordingly, because Adamo
asked that Marini sell his coins only through
Adamo (Marini 12/31/09 Depo. at 5:21-7:3),
if Adamo were to receive a commission on
the sale of the coins, his fortunes would be
inextricably tied to those of Marini’s.
However, the record is not clear as to
whether Adamo did, in fact, receive a
commission based on the sale of coins. As
described by Marini, when Marini asked
Adamo how Adamo would be making
money and what the structure of the deals
was, Adamo responded that “[h]e would be
making between 5 and 10 percent,
depending on what coin.” (T&R 12/23/09
Depo. at 290:15-22.) It is not clear from this
testimony, however, whether this percentage
commission would be earned at the time of
purchase or at the time of sale. Moreover,
Marini indicated elsewhere in his deposition
that Adamo’s commission was earned at the
time of purchase and that the benefit Adamo
received at the time of sale was the
availability of Marini’s coins to market to
other potential customers:

Accordingly, to the extent that the holding in
Glen-Arden implies that a common enterprise
may be established solely through a showing
that a plaintiff’s fortunes are linked to the work
and efforts of an investment manager, the
Second Circuit has explicitly rejected such
reasoning in Revak. For this reason, this Court
also declines to rely upon Kemmerer v. Weaver,
445 F.2d 76 (7th Cir. 1971), also cited by
plaintiffs, given that the Kemmerer court applied
the broad vertical commonality test in reaching
its ruling. See id. at 79-80 (holding that the
“investment scheme involved in the present case
clearly qualified as an investment contract”
because “the investment by members of the
public was a profit-making venture in a common
enterprise, the success of which was inescapably
tied to the efforts of the ranchers and the other
defendants and not to the efforts of the
investors” (internal quotation marks, citations,
and alterations omitted)).

13

Q: Did you pay Mr. Adamo a
premium for the right to resell the
items, the coins, at any time?

issues of material fact exist as to whether
Adamo earned a commission upon the sale
of Marini’s coins, the Court cannot
determine as a matter of law whether
Adamo’s and Marini’s fortunes were
inextricably linked for purposes of
establishing the existence of a common
enterprise. Therefore, defendants’ motion
for summary judgment on plaintiffs’
securities fraud claim is denied.15

A: No, it was discussed that he
would charge me, depending on the
coin or the particular dealings,
anywhere between 5 to 10 percent on
the purchase and he did say that
when it came time to cash out, he
would benefit from that, as well.

B. RICO
Q: How he would [sic] benefit from
that?

Defendants also move for summary
judgment on plaintiffs’ RICO claim on the
grounds that plaintiffs cannot establish
either the continuity necessary to establish a
RICO pattern of racketeering activity, or
that their injuries were caused by
defendants’ alleged RICO predicate acts.

A: Well, the one thing that he
constantly reiterated, that the biggest
problem in his industry is finding
coins to sell, there was no shortage
of buyers, so having the access to a
portfolio of this caliber would be
very beneficial to him.

reports and various other written materials,” and
later met with company representatives and
invested in rare coins, court found that plaintiff
had not established strict vertical commonality
because “[t]he economic fortunes of plaintiff . . .
were independent, not interdependent, of the
economic fortunes of defendants”).

(Marini 12/31/09 Depo. at 30:12-31:3.)
Although this testimony establishes that
Adamo definitely earned a commission at
the time of purchase, it does not rule out the
possibility that Adamo could also have
earned a commission at the time of sale.
Because a finding of strict vertical
commonality hinges on this latter salesbased commission,14 and because disputed

15

Defendants have also argued that if plaintiffs’
securities fraud claim is allowed to proceed,
plaintiffs’ RICO claims are barred under the
PSLRA, which provides that if conduct is
actionable under the federal securities laws, the
same transaction cannot also be the basis for
liability under RICO. See MLSMK Inv. Co. v.
JP Morgan Chase & Co., --- F.3d ----, 2011 WL
2640579, at *4-5 (2d Cir. 2011). However,
because it is not clear based on the current
record whether the transactions at issue here
involved “securities,” it consequently is unclear
whether defendants’ alleged conduct is
“actionable” under the securities laws.
Therefore, the Court is unable to determine at
this stage of the litigation—i.e., prior to a jury’s
determination on the question of whether the
transactions here were investment contracts—
whether the PSLRA bar applies to preclude
plaintiffs’ civil RICO claims.

14

See, e.g., Copeland v. Hill, 680 F. Supp. 466,
467-68 (D. Mass. 1988) (sale for the purchase of
rare coins did not constitute an investment
contract where, inter alia, there was “no
indication that [the coin dealer] was to receive
any compensation other than the profit received
on the initial sale of coins to the plaintiffs” and
“the gallery would not gain or lose anything if
the coins had appreciated or depreciated in
market value”); accord Zion v. Standard Fin.
Mgmt. Corp., No. 86-cv-3272, 1988 WL 82043,
at *1-2 (D. Mass. July 26, 1988) (where plaintiff
responded to an advertisement from coin dealer,
received “extensive information about [the
dealer’s] services in the form of brochures,

14

predicates
extending
over
a
substantial period of time. . . . Often
a RICO action will be brought before
continuity can be established in this
way. In such cases, liability depends
on whether the threat of continuity is
demonstrated. . . . [T]he threat of
continuity is sufficiently established
where the predicates can be
attributed to a defendant operating as
part of a long-term association that
exists for criminal purposes.”).

Defendants also argue that plaintiffs are
unable to demonstrate that defendants Lisa
Adamo or The Bolton Group are part of any
RICO enterprise. For the reasons set forth
below, the Court denies defendants’ motion.
1. Continuity
a. Legal Standard
To establish a RICO violation, a plaintiff
“must plead at least two predicate acts, show
that the predicate acts are related, and that
they amount to, or pose a threat of,
continuing criminal activity.”
Schlaifer
Nance & Co. v. Estate of Warhol, 119 F.3d
91, 97 (2d Cir. 1997) (citing H.J. Inc. v.
Northwestern Bell Tel. Co., 492 U.S. 229,
239 (1989)). “Predicate acts are ‘related’ for
RICO purposes when they ‘have the same or
similar purposes, results, participants,
victims, or methods of commission, or
otherwise are interrelated by distinguishing
characteristics and are not isolated events.’”
Id. (quoting H.J. Inc., 492 U.S. at 240). As
to the threat of continued criminal activity,
“a plaintiff in a RICO action must allege
either an ‘open-ended’ pattern of
racketeering activity (i.e., past criminal
conduct coupled with a threat of future
criminal conduct) or a ‘closed-ended’
pattern of racketeering activity (i.e., past
criminal conduct ‘extending over a
substantial period of time’).” GICC Capital
Corp. v. Tech. Fin. Grp., Inc., 67 F.3d 463,
466 (2d Cir. 1995). As explained by the
Supreme Court:

H.J. Inc., 492 U.S. at 241-43 (emphasis in
original).
“To satisfy open-ended continuity, the
plaintiff . . . must show that there was a
threat of continuing criminal activity beyond
the period during which the predicate acts
were performed.”
Cofacredit, S.A. v.
Windsor Plumbing Supply Co., 187 F.3d
229, 242 (2d Cir. 1999). Alternatively, to
establish a “closed period of repeated
conduct” sufficient to satisfy the continuity
requirement, H.J., Inc., 492 U.S. at 241, “‘a
plaintiff must provide some basis for a court
to conclude that defendants’ activities were
neither isolated nor sporadic,’” and that
defendants engaged in such activity for a
substantial period of time. De Falco v.
Bernas, 244 F.3d 286, 321 (2d Cir. 2001)
(quoting GICC Capital Corp., 67 F.3d at
467 (additional quotation marks omitted));
accord Kades v. Organic Inc., No. 00-CV3671 (LTS), 2003 U.S. Dist. LEXIS 2591, at
*35 (S.D.N.Y. Feb. 24, 2003). “Predicate
acts extending over a few weeks or months .
. . do not satisfy this requirement.”
Cofacredit, 187 F.3d at 242 (quoting H.J.,
Inc., 492 U.S. at 242)). In calculating the
duration of the pattern of racketeering
activity, actions that do not constitute
predicate racketeering activity are not
included; rather, the duration “is measured
by the RICO predicate acts the defendants
commit.” De Falco, 244 F.3d at 321 (citing

“Continuity” is both a closed- and
open-ended concept, referring either
to a closed period of repeated
conduct, or to past conduct that by its
nature projects into the future with a
threat of repetition. . . . A party
alleging a RICO violation may
demonstrate continuity over a closed
period by proving a series of related

15

HealthNow New York, Inc., No. 03-cv-831S,
2006 WL 2827675, at *11 (W.D.N.Y. Sept.
29, 2006) (“[P]laintiff’s allegations that
[defendant] committed numerous acts of
mail fraud, wire fraud and conversion of
funds belonging to an employee welfare
benefit plan between 1997 and 2001 and
then engaged in a separate scheme to
deceive the plaintiff from discovering this
unlawful activity are sufficient to meet the
pleading requirements, under a closed-ended
continuity theory, of a pattern of
racketeering.” (internal citations omitted));
State Wide Photocopy Corp. v. Tokai Fin.
Servs., Inc., 909 F. Supp. 137, 140-41
(S.D.N.Y. 1995) (“Plaintiff alleged that
defendants committed, over the course of
approximately four to five years, specific
RICO predicate acts. . . . [These alleged
acts] involved systematic and repeated
attempts to induce State Wide into
transmitting
client
information
and
continuous conversion of the information to
State Wide’s rival. Clearly, these acts were
not sporadic. While, generally, plaintiff was
the only victim of the alleged scheme,
defendants’ repeated, related and continuous
acts during the course of four years formed a
RICO pattern.” (internal citations omitted));
Com-Tech Assocs. v. Computer Assocs.
Int’l, Inc., 753 F. Supp. 1078, 1091
(E.D.N.Y. 1990) (“The conduct allegedly
took place over a period of several years,
from approximately 1980 to the present
[1990]. . . . [T]hese fraudulent acts were all
allegedly intended to further an overall
scheme to defraud the limited partners of
COM-TECH. . . . Although the letters are
written by separate individual defendants, all
are related to the same subject matter (the
purported effect of the computer industry
developments on the development of the
COM-TECH program), with the same
purpose and same victims (to defraud the
limited partners of royalty payments).
Furthermore, the plaintiffs allege that the

Cofacredit, 187 F.3d at 243 and GICC
Capital Corp., 67 F.3d at 467). Notably,
“[s]ince the Supreme Court decided H.J.,
Inc., [the Second Circuit] has never held a
period of less than two years to constitute a
‘substantial period of time’” for purposes of
closed-ended continuity. De Falco, 244
F.3d at 321. Furthermore “[w]hile closed
ended continuity is primarily concerned with
the time period of the activities, the court
also considers factors such as the ‘number
and variety of predicate acts, the number of
both participants and victims, and the
presence of separate schemes’ as relevant
when determining whether closed ended
continuity exists.” SKS Constructors, Inc. v.
Drinkwine, 458 F. Supp. 2d 68, 78
(E.D.N.Y. 2006) (quoting De Falco, 244
F.3d at 321).
b. Application
Here, the Court finds that plaintiffs have
put forth sufficient factual allegations
regarding the existence of closed-ended
continuity to survive a motion for summary
judgment. Specifically, plaintiffs allege that
defendants defrauded them over the course
of approximately six years, during which
time plaintiffs purchased 144 coins from
defendants for a total alleged loss of
approximately $14.5 million. Courts have
routinely found that continuity exists where
the alleged scheme spans such a substantial
period of time, even where only a single
victim or single scheme was involved. See,
e.g., Jacobson v. Cooper, 882 F.2d 717, 718,
720 (2d Cir. 1989) (where plaintiff alleged
that his son and another individual
“engag[ed] in a scheme to appropriate
[plaintiff’s]
real
estate
enterprise,”
continuity was present because “[t]he related
predicates extended over a substantial period
of time, here a matter of years, from 1980
until the filing of this action” (internal
quotation marks, citation, and alterations
omitted)); Columbus McKinnon Corp. v.
16

Moreover, as to the other non-dispositive
factors that are relevant to the continuity
analysis, the Court concludes that, after
construing the evidence and drawing all
reasonable inferences in plaintiffs’ favor,
these factors, on balance, preclude the Court
from granting summary judgment for
defendants.
Specifically, plaintiffs here
have alleged over 100 predicate acts of mail
and wire fraud16 spanning a variety of
activities,
including
the
alleged
“confiscation” of the Stella coin in May
2008, dozens of payment executions and
fund
transfers,
and
numerous
communications with Adamo, during which
Adamo is alleged to have proposed deals,
made statements to induce deals with
plaintiffs, and fraudulently misrepresented
coin values. (See generally Pls.’ Opp. Ex. A
(“Predicates Catalog”).) In other words,
plaintiffs here have not merely alleged acts
of wire fraud that were incidental to the
operation of a legitimate business, but
instead have put forth evidence that these
wires themselves contained purportedly
fraudulent statements and representations.
See Com-Tech, 753 F. Supp. at 1090
(relying upon acts of mail fraud to find
continuity where mailings themselves
contained fraudulent statements); cf. Jerome
M. Sobel & Co. v. Fleck, No. 03-cv-1041,
2003 WL 22839799, at *10 (S.D.N.Y. Dec.
1, 2003) (finding no continuity where, inter
alia, “the predicate acts of mail and wire
fraud were of the ‘innocent’ variety—that is,
they are not alleged to have themselves been
fraudulent” and instead “were merely the
instrumentalities used to effectuate Fleck’s
fraudulent scheme”); Schnell v. Conseco,
Inc., 43 F. Supp. 2d 438, 446 (S.D.N.Y.

scheme continued in 1981 and 1982 by
concealing the true and accurate amount of
receipts received from marketing the
program, which scheme was carried out
through the numerous fraudulent letters,
royalty statements and royalty conciliation
reports mailed to the individual limited
partners. In light of [the Supreme Court’s
decision in] H.J., Inc., it matters not that
there is a single victim (the limited partners)
and a single overall scheme to defraud
(diversion or underreporting of royalties) . . .
. [P]laintiffs have sufficiently pled a ‘pattern
of racketeering activity’ under section 1962
of RICO.”).
Indeed, the Second Circuit has stressed
that “[w]hether closed-ended or open-ended,
continuity is ‘centrally a temporal concept,’”
and “[a]lthough GICC identified several
‘non-dispositive factors’ that courts must
consider in assessing whether closed-ended
continuity has been established, 67 F.3d at
467, those factors are more significant in
cases where the period of time over which
the alleged racketeering acts borders on
‘substantial.’” Fresh Meadow Food Servs.,
LLC v. RB 175 Corp., 282 F. App’x 94, 99
(2d Cir. 2008) (quoting H.J., Inc., 492 U.S.
at 242)). Accordingly, in Fresh Meadow,
the Second Circuit found that continuity
existed where the alleged racketeering acts
spanned almost three and one-half years
and, thus, “the presence or absence of the
other factors [was] less critical.”
Id.
Likewise, here, plaintiffs have asserted that
defendants defrauded them in connection
with well over 100 coin transactions over
the course of approximately six years.
Drawing all reasonable inferences in
plaintiffs’ favor, the Court concludes that
plaintiffs have put forth sufficient factual
evidence of a pattern of racketeering activity
occurring over a substantial period of time
to survive defendants’ motion for summary
judgment.

16

Plaintiffs have conceded that certain acts of
wire
fraud
involved
purely
intrastate
communications. As set forth infra, because
intrastate communications fall outside of the
scope of RICO, the Court has not considered
these communications in its analysis.

17

avoid detection and that these payments
accordingly were made in furtherance of
defendants’ alleged scheme to defraud. Cf.
United States v. Angelilli, 660 F.2d 23, 37
(2d Cir. 1981) (noting in the context of mail
fraud that “‘lulling mailings” may be
“essential to the fraudulent schemes . . .
where the frauds are not isolated and
unrelated swindles” (citing United States v.
Ashdown, 509 F.2d 793, 800 (5th Cir. 1975)
(“[P]ost-purchase mailings which are
designed to lull the victim into a false sense
of security, postpone inquiries or
complaints, or make the transaction less
suspect are mailings in furtherance of the
scheme.”))).17
As further examples,
plaintiffs claim that Adamo overcharged
Bain in connection with approximately
twenty-five to fifty coin transactions and
that he attempted to confiscate a coin from
Albanese, just as Adamo purportedly had
overcharged plaintiffs and confiscated
Marini’s Stella coin. Accordingly, plaintiffs
have put forth sufficient evidence to create a
material issue of fact as to whether there was
a pattern of racketeering, and, as such,
defendants’ motion for summary judgment
on this ground is denied.18

1999) (“While plaintiff’s complaint alleges a
number of predicate mail and wire fraud acts
in furtherance of this scheme, these acts are
in themselves innocuous and are not alleged
to be false or misleading in any way. These
acts, though allegedly undertaken over a
period of 23 months, are insufficient to state
a closed-ended pattern of racketeering
activity.”). Moreover, based on the current
record, the Court finds that plaintiffs have
not “‘artificially fragment[ed] a singular act
[i.e., the negotiation of a licensing
agreement] into multiple acts simply to
invoke RICO.’” Fresh Meadow, 282 F.
App’x at 100 (quoting Schlaifer Nance, 119
F.3d at 98). Instead, plaintiffs have put forth
evidence of a series of predicate acts that are
related to defendants’ ultimate purported
goal of overcharging and defrauding
plaintiffs, but that nonetheless arise out of
separate events, including 144 distinct coin
transactions, numerous allegedly fraudulent
communications,
and
the
purported
confiscation of a coin by Adamo. See Fresh
Meadow, 282 F. App’x at 100 (vacating
district court’s dismissal of RICO action
where the alleged predicate acts bore “the
same relationship to [defendant’s] alleged
fraudulent plan to maximize the value of his
property, but they [arose] out of distinct
events—the faxing of the fabricated
affidavit . . . in 1997 and the fraudulent
inducement of [plaintiff] to execute the lease
in 2001”).

17

The Court also notes that plaintiffs here are
not seeking to recover damages for any fraud
allegedly perpetrated on Brancato and, instead,
are putting forth allegations regarding Brancato
solely to support their claim that Adamo
engaged in a pattern of racketeering activity.
Accordingly, the cases cited by defendants for
the proposition that a victim may not maintain a
RICO cause of action where the victim has
already been “made whole” by defendants with
regard to losses (see Defs.’ Mem. of Law at 23,
n.6) are inapposite under these circumstances.

Furthermore, plaintiffs have put forth
evidence that other victims were targeted by
defendants’ schemes.
For example,
plaintiffs have put forth evidence that Frank
Brancato was targeted by Adamo through
the same allegedly fraudulent assurances
that Adamo made to Marini. Although
Brancato ultimately sold his coins back to
Adamo for a profit, drawing all reasonable
inferences in plaintiffs’ favor, a reasonable
jury could conclude that Adamo made such
payments to Brancato solely in order to

18

The Court recognizes that only a limited
number of defendants allegedly participated in
the claimed scheme to defraud. However, given
that the Court must construe the facts and draw
all reasonable inferences in plaintiffs’ favor for
purposes of defendants’ motion, the Court

18

2. Causation

Bank, 27 F.3d at 769); accord Hemi Grp.,
130 S.Ct. at 989 (“[T]o state a claim under
civil RICO, the plaintiff is required to show
that a RICO predicate offense ‘not only was
a ‘but for’ cause of his injury, but was the
proximate cause as well.’” (quoting Holmes,
503 U.S. at 268)). In establishing the
existence of a “direct relation between the
injury asserted and the injurious conduct
alleged[,] [a] link that is too remote, purely
contingent, or indirect is insufficient.” Hemi
Grp., 130 S.Ct. at 989 (internal quotation
marks, alterations, and citations omitted).
Moreover, “[a]n act which proximately
caused an injury is analytically distinct from
one which furthered, facilitated, permitted or
concealed an injury which happened or
could have happened independently of the
act.” Red Ball Interior Demolition Corp. v.
Palmadessa, 874 F. Supp. 576, 587
(S.D.N.Y. 1995). “Thus, a predicate act
cannot be deemed to have proximately
caused a plaintiff’s injury, even if it was an
integral part of the underlying criminal
scheme, unless the plaintiff’s original loss
could not have occurred without the
commission of the predicate act.” Leung v.
Law, 387 F. Supp. 2d 105, 122 (E.D.N.Y.
2005).

a. Legal Standard
RICO provides a private cause of action
for “[a]ny person injured in his business or
property by reason of a violation of section
1962 of this chapter.” 18 U.S.C. § 1964(c).
“From this language, courts have extracted
the conditions a plaintiff must meet to
satisfy RICO’s standing requirements: (1) a
violation of section 1962; (2) injury to
business or property; and (3) causation of
the injury by the violation.”
First
Nationwide Bank v. Gelt Funding Corp., 27
F.3d 763, 767 (2d Cir. 1994) (internal
quotation marks and citation omitted). As to
the causation element, “the compensable
injury flowing from a RICO violation
necessarily is the harm caused by the
predicate acts.” Hemi Grp., LLC v. City of
New York, N.Y., --- U.S. ----, 130 S.Ct. 983,
991 (2010) (internal quotation marks,
alterations, and citation omitted).
To
establish that a predicate act caused the
harm alleged, a plaintiff must make two
showings. See UFCW Local 1776 v. Eli
Lilly & Co., 620 F.3d 121, 132 (2d Cir.
2010). First, the plaintiff must prove “but
for” causation, “meaning that but for the
RICO violation, [the plaintiff] would not
have been injured.” Id. (citing Holmes v.
Sec. Investor Prot. Corp., 503 U.S. 258, 268
(1992)). Second, a plaintiff must establish
proximate cause, “meaning ‘there was a
direct relationship between the plaintiff’s
injury and the defendant’s injurious
conduct.’” Id. (quoting First Nationwide

b. Application
Plaintiffs allege that Adamo carried out
his scheme through numerous purported acts
of mail and wire fraud that allegedly
occurred between 2002 and 2008. (See
generally Predicates Catalog.) In particular,
plaintiffs have alleged that Adamo engaged
in fifty-five acts of mail fraud and 135 acts
of wire fraud. (Id.) Defendants, however,
contend that plaintiffs cannot prove that
their injuries were caused by these predicate
acts.

concludes that this factor does not outweigh the
other considerations discussed supra and does
not allow the Court to conclude, as a matter of
law, that no reasonable jury could find that
defendants’ engaged in a pattern of racketeering
activity, particularly in light of the substantial
period of time over which defendants are alleged
to have engaged in such racketeering activity.

As an initial matter, the Court disagrees
with plaintiffs that they need not show that
the predicate acts themselves caused their

19

for the coins that he sold to Marini, and
there is no evidence that Marini either was
involved in or even was aware of the
transactions through which Adamo obtained
the coins. Accordingly, while these acts of
mail fraud may be used by plaintiffs to
demonstrate a pattern of racketeering
activity, plaintiffs may not rely upon these
acts to demonstrate proximate cause. As to
the other five alleged mail fraud predicates,
two of them involved Adamo’s alleged
dealings with other victims or customers.
(See
Predicates
Catalog:
Mailings
Qualifying as Mail Fraud, Predicate Acts 23.) Again, while these allegations relate to
the demonstration of a pattern of
racketeering activity, they clearly did not
cause plaintiffs’ injuries and, therefore, may
not be used to show proximate cause.
Further, as to plaintiffs’ allegations that
Adamo mailed coins after his repurchase of
those coins at allegedly fraudulent prices
from Marini (see id. Mail Fraud Predicate
Acts 51-52), these mailings occurred after
the transactions with Marini were
completed, and Marini’s loss—namely, his
overpayment for coins—could have
occurred without commission of these
alleged acts. Accordingly, plaintiffs may
not rely upon these acts to establish
proximate cause. However, as to plaintiffs’
allegation that Adamo mailed the Stella coin
that he purportedly confiscated from Marini,
the Court concludes that plaintiffs have put
forth sufficient proof in order to survive
summary judgment that this act proximately
caused their injury. Specifically, plaintiffs
claim that Adamo essentially stole this coin
from Marini by taking possession of the coin
and selling it without Marini’s permission.
Under these circumstances, the mailing of
the coin to the dealer whom plaintiffs claim
purchased the coin clearly was an integral
part of the confiscation of the coin from
plaintiffs without which the injury of Marini
could not have been completed. Therefore,

injuries. (See Pls.’ Opp. at 66-72.) As noted
supra, the Supreme Court plainly stated in
Hemi Group that “the compensable injury
flowing from a RICO violation necessarily
is the harm caused by the predicate acts.”
130 S.Ct. at 991 (emphasis added) (internal
quotation marks, alterations, and citation
omitted); see also id. at 989 (“[T]o state a
claim under civil RICO, the plaintiff is
required to show that a RICO predicate
offense ‘not only was a ‘but for’ cause of his
injury, but was the proximate cause as
well.’” (quoting Holmes, 503 U.S. at 268)
(emphasis added)). Nevertheless, despite
plaintiffs’ misstatement of the law, the Court
concludes that plaintiffs have presented
sufficient evidence regarding their wire
fraud allegations and their mail fraud
allegations
concerning
the
alleged
confiscation of the Stella coin to survive
summary judgment. However, the Court
also concludes that plaintiffs cannot
establish that the remaining alleged acts of
mail fraud were the proximate cause of their
injuries, and, therefore, plaintiffs are
precluded from relying upon these acts to
prove causation.
Moreover, the Court
concludes that any acts of alleged wire fraud
that are based on intrastate communications
fall outside the scope of RICO.
First, as to plaintiffs’ mail fraud
allegations, all but five of the purported acts
of mail fraud involved either Adamo’s
receipt of coins that he later sold to Marini
or Adamo’s payment for such coins.
Although Adamo’s receipt and payment for
coins is a “but for” cause of Marini’s
injuries—insofar as Adamo could not have
sold these coins to Marini without first
purchasing and possessing them—the Court
concludes that these mailings are too
attenuated from the ultimate sale of these
coins to Marini to constitute the proximate
cause of Marini’s injuries.
Indeed,
plaintiffs’ injury had nothing to do with the
manner in which Adamo received or paid
20

because had Adamo not proposed these
deals, plaintiffs would not have purchased
the coins in question and, consequently,
would not have been injured. Indeed,
carrying defendants’ logic to its reasonable
end, plaintiffs could establish proximate
cause through wire fraud only if the
communication in question represented the
entirety of the negotiations and transaction
between Adamo and Marini. In other
words, under defendants’ theory, an act of
wire fraud could proximately cause
plaintiffs’ injury only if the act involved a
proposal to do a deal, negotiations about the
price of the deal, a finalized agreement, and
the consummation of the deal through
payment. That theory, however, is incorrect.
As described supra, although “[a] link that is
too remote, purely contingent, or indirect is
insufficient” to establish proximate cause,
Hemi Group, 130 S.Ct. at 989 (internal
quotation marks, alterations, and citation
omitted), a plaintiff may establish proximate
cause where the “original loss could not
have occurred without the commission of
the predicate act.” Leung, 387 F. Supp. 2d
at 122. Based upon the current record, the
Court concludes that a reasonable jury could
find that plaintiffs’ loss could not have
occurred without their payments to
defendants, defendants’ requests for such
payments, and Adamo’s proposals of certain
deals.

plaintiffs may rely upon this alleged act of
mail fraud in proving the existence of
proximate cause.
As to the alleged acts of wire fraud,
plaintiffs acknowledge that four faxes
allegedly sent from Adamo to Marini were
all sent and received in New York State.
(Defs. 56.1 ¶ 26.) Accordingly, because
intrastate communications fall outside the
scope of RICO, Cofacredit, 187 F.3d at 243,
plaintiffs may not rely upon these faxes in
support of their RICO claim. Plaintiffs’
remaining wire fraud allegations relate to
payments made to defendants by plaintiffs,
requests by defendants for such payments,
and various communications between
Adamo and Marini. As to the paymentrelated acts, defendants argue that these acts
did not cause plaintiffs’ injuries because
these payments often were made after
Adamo and Marini had agreed upon a price
for the coin transaction in question.
Conversely, defendants also argue that
certain communications that contained
proposals for deals cannot be the proximate
cause of plaintiffs’ injuries because those
deals were only agreed to “after further
conversation.” (Defs. Mem. of Law at 39.)
The Court disagrees with defendants’
reasoning. As a threshold matter, even
assuming that certain payments and requests
for payments were made after price
negotiations had occurred and a price had
been finalized, these payments, and requests
for such payments, clearly were an
indispensible part of the alleged fraud
without which plaintiffs’ injury would not
have occurred. Stated otherwise, if plaintiffs
had not made such payments, the alleged
purpose of defendants’ fraud—namely,
overcharging plaintiffs and defrauding them
out of their money—would have been
thwarted and plaintiffs would have suffered
no injury at all. Likewise, plaintiffs’ injury
could not have occurred without Adamo’s
proposal to enter into other coin deals,

Plaintiffs also rely upon communications
between Adamo and Marini that did not
either result in or represent the culmination
of specific coin transactions and, instead,
involved proposed deals that may not have
come to fruition, statements by Adamo to
induce deals, fraudulently misrepresented
coin values, or other fraudulent assurances
by Adamo regarding the viability of the coin
transactions. As with plaintiffs’ other wire
fraud allegations, a reasonable jury could
conclude that these communications induced
plaintiffs to continue making payments to
21

defendants and to otherwise continuing
transacting with defendants, not only by
purchasing coins but also by giving Adamo
possession of the Stella coin in May 2008
for regrading.
Accordingly, accepting
plaintiffs’ evidence as true and drawing all
reasonable inferences in plaintiffs’ favor, the
Court cannot conclude, as a matter of law,
that plaintiffs are unable to establish that the
alleged acts of wire fraud proximately
caused their injury. Therefore, defendants’
motion for summary judgment on this
ground is denied.19

3. Enterprise
a. Legal Standard
A RICO enterprise under Section
1961(4)
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.” 18 U.S.C. § 1961(4). An
association-in-fact enterprise is “a group of
persons associated together for a common
purpose of engaging in a course of conduct”
which is “proved by evidence of ongoing
organization, formal or informal, and by
evidence that the various associates function
as a continuing unit.” United States v.
Turkette, 452 U.S. 576, 583 (1981). Where
a complaint alleges an association-in-fact
enterprise, courts in this Circuit look to the
“hierarchy, organization, and activities” of
the association to determine whether “its
members functioned as a unit.”
First
Capital Asset Mgmt. v. Satinwood, Inc., 385
F.3d 159, 174 (2d Cir. 2004) (citations and
quotation marks omitted).

19

Defendants also argue that plaintiffs cannot
establish “but for” causation because, according
to defendants, “Marini began purchasing coins
in September 2002, before any predicate RICO
acts are alleged to have occurred.” (Defs.’
Mem. of Law at 35 (emphasis in original).) The
Court disagrees.
As discussed supra in
connection with the alleged acts of wire fraud,
plaintiffs have put forth evidence that they made
numerous payments to defendants beginning as
early as September 2002. (See, e.g., Predicates
Catalog: Wirings Qualifying as Wire Fraud,
Predicate Acts 30-45.) Again, as discussed
herein, plaintiffs’ injuries could not have
occurred without these payments. To the extent
defendants argue that these payments do not
constitute wire fraud because there is “no
evidence that these transactions between parties
with New York bank accounts involved
interstate wires,” (Defs.’ Mem. of Law at 39),
the Court concludes that plaintiffs have put forth
sufficient evidence to create a disputed issue of
fact on this point. Specifically, plaintiffs have
provided a sworn declaration from a former
Bank of New York employee, who stated that all
payments (whether wire or check) made or
received by a Bank of New York account holder
involved interstate wire transmissions. (Moss
Decl. Ex. A.) Defendants remaining arguments
regarding causation—including that the only
reason Marini invested with Adamo was because
of Adamo’s initial assurances in 2002 and not
because of any alleged predicates acts and that
plaintiffs cannot establish that each and every
coin transaction was caused by a predicate act—

The Second Circuit has made clear that
“the person and the enterprise referred to
must be distinct,” and, therefore, “a
corporate entity may not be both the RICO
person and the RICO enterprise under
section 1962(c).” Riverwoods Chappaqua
Corp. v. Marine Midland Bank, N.A., 30
F.3d 339, 344 (2d Cir. 1994). However,
all go to factual and credibility determinations
that are inappropriate for the Court to make on a
motion for summary judgment. As outlined
supra, construing the evidence and drawing all
reasonable inferences in plaintiffs’ favor, as the
Court must on defendants’ motion for summary
judgment, plaintiffs have put forth sufficient
evidence to create a disputed issue of fact
regarding the cause of plaintiffs’ injuries.
Accordingly, for the reasons set forth supra,
defendants’ motion is denied.

22

“[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.
(emphasis added). Thus, “a defendant may
be a RICO person and one of a number of
members of the RICO enterprise.” Id.
(internal
quotation
marks
omitted).
Furthermore, an employee of a corporation
is legally distinct from the corporation itself
and therefore can function as a RICO person
where the corporation is the alleged RICO
enterprise. See Cedric Kushner Promotions,
Ltd. v. King, 533 U.S. 158, 163 (2001).

overturning the Second Circuit’s decision
that the president was not separate from the
corporation, and in holding, instead, that the
president and the corporate enterprise were
distinct for purposes of the RICO analysis,
the Supreme Court explained:
While accepting the “distinctness”
principle, we nonetheless disagree
with the appellate court’s application
of that principle to the present
circumstances—circumstances
in
which a corporate employee, acting
within the scope of his authority,
allegedly conducts the corporation’s
affairs in a RICO-forbidden way.
The corporate owner/employee, a
natural person, is distinct from the
corporation itself, a legally different
entity with different rights and
responsibilities due to its different
legal status. And we can find nothing
in the statute that requires more
“separateness” than that.

b. Application
Here, plaintiffs have asserted that
Adamo is the RICO person and that Adamo
together with The Bolton Group is the
enterprise. Defendants argue that, despite
Bolton’s incorporation under the laws of the
New York, Bolton is not sufficiently
separate and distinct from Adamo for it to be
part of a RICO enterprise with Adamo.20
The Court agrees with plaintiffs that the
Supreme Court’s decision in Cedric
Kushner forecloses defendants’ line of
argument. Specifically, in Cedric Kushner,
the plaintiff alleged that the president and
sole shareholder of a closely held
corporation was a RICO person who had
conducted the corporation’s affairs through
a pattern of racketeering activity.
In

533 U.S. at 163 (internal quotation marks
and citations omitted). Furthermore, the fact
that the individual defendant was the sole
owner of the corporation did not change the
Court’s conclusion:
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,”

20

Defendants have also moved for summary
judgment on the RICO claim with regard to
defendant Lisa Adamo, arguing that Lisa Adamo
was not part of any RICO enterprise. Plaintiffs
acknowledge, however, that Lisa Adamo was
not part of any alleged RICO enterprise and, in
fact, Lisa Adamo in not named as a defendant in
connection with the RICO count in the Second
Amended Complaint. Accordingly, the Court
need not reach defendants’ arguments with
regard to Lisa Adamo.

23

even where the employee is the
corporation’s sole owner. After all,
incorporation’s basic purpose is to
create a distinct legal entity, with
legal rights, obligations, powers, and
privileges different from those of the
natural individuals who created it,
who own it, or whom it employs.

Moreover, defendants’ arguments that
Bolton “merely served as an incidental bank
account” and “as a separate entity did
nothing to Marini” (Defs. Mem. of Law at
45) require the Court to make credibility
determinations about the parties’ respective
evidence that are inappropriate for the Court
to make on a motion for summary judgment.
Plaintiffs here have presented sufficient
factual proof, including evidence that Bolton
received payments from plaintiffs, from
which a rational jury could conclude (if all
plaintiffs’ evidence is credited) that Adamo
conducted the affairs of the enterprise
through a pattern of racketeering activity. In
short, drawing all reasonable inferences in
plaintiffs’ favor, the Court cannot conclude,
as a matter of law, that no reasonable jury
could find that a RICO enterprise existed in
this case. Accordingly, defendants’ motion
for summary judgment on this ground is
denied.

Id. (citations omitted). Similarly, in this
case, plaintiffs have alleged that a corporate
employee (Adamo) is the “person” and the
corporation,
with
Adamo,
is
the
“enterprise.” The fact that Bolton was coowned and controlled by Adamo and that
Bolton did not have a website, email
address, or phone number are not controlling
here, where it is undisputed that Bolton has
been incorporated as legally separate
identity from Adamo. Indeed, defendants
have not presented a single case to support
their argument that Bolton is not sufficiently
distinct from Adamo, despite Bolton’s
incorporation under the laws of the State of
New York.21

Bank, N. A., 30 F.3d 339, 344 (1994)
(affirming dismissal of complaint). It is
less natural to speak of a corporation as
“employed by” or “associated with” this
latter oddly constructed entity. And the
Second Circuit’s other precedent also
involved
significantly
different
allegations compared with the instant
case. See Anatian v. Coutts Bank
(Switzerland) Ltd., 193 F.3d 85, 89
(1999) (affirming dismissal where
plaintiff alleged that same bank was
both “person” and “enterprise”), cert.
denied, 528 U.S. 1188 (2000); Discon,
Inc. v. NYNEX Corp., 93 F.3d 1055,
1064 (1996) (involving complaint
alleging that corporate subsidiaries were
“persons” and subsidiaries, taken
together as parent, were “enterprise”),
vacated on other grounds, 525 U.S. 128,
119 S.Ct. 493, 142 L.Ed.2d 510 (1998);
Bennett [v. United States Trust Co. of
New York, 770 F.2d 308, 315, and n. 2
(2d Cir. 1985)], (same as Anatian).

21

The Court also notes that, as was the case in
Cedric Kushner, the allegations here are
distinguishable from the factual circumstances
of other Second Circuit decisions in which a
corporate defendant “person” was found not to
be distinct from the corporate “enterprise.” As
explained in Cedric Kushner:
[T]hat precedent involved quite different
circumstances which are not presented
here. This case concerns a claim that a
corporate employee is the “person” and
the corporation is the “enterprise.” It is
natural to speak of a corporate employee
as a “person employed by” the
corporation. § 1962(c). The earlier
Second Circuit precedent concerned a
claim that a corporation was the
“person” and the corporation, together
with all its employees and agents, were
the “enterprise.”
See Riverwoods
Chappaqua Corp. v. Marine Midland

533 U.S. at 164.

24

153, 160-61 (2d Cir. 1996) (“Generally,
punitive damages are not available for a
breach of contract. . . Thus, a private party
seeking to recover punitive damages must
not only demonstrate egregious tortious
conduct by which he or she was aggrieved,
but also that such conduct was part of a
pattern of similar conduct directed at the
public generally.” (internal quotation marks
and citations omitted)). However, the Court
concludes that these cases are inapposite to
the fraud claims here, in support of which
plaintiffs have put forth evidence of
fraudulent misrepresentations that extend far
beyond any alleged contractual agreement
between the parties. Indeed, plaintiffs’
breach of contract claim focuses solely on
Adamo’s alleged agreement to repurchase
coins from Marini within twenty-four to
forty-eight hours of such a request from
Marini. (See SAC ¶¶ 240-46.) This alleged
conduct represents only a small subset of the
business relations and transactions that
plaintiffs claim were fraudulent in this case.
Accordingly, plaintiffs’ motion for summary
judgment with respect to the fraud claim is
denied.

C. State-Law Claims
Defendants have also moved for
summary judgment on plaintiffs’ claims for
common law fraud, breach of contract, and
violations of New York General Business
Law § 349. For the reasons set forth infra,
the Court grants defendants’ motion with
respect to the General Business Law claim,
but denies the motion with respect to the
fraud and breach of contract claims.
1. Common Law Fraud
Defendants have moved for summary
judgment on plaintiffs’ fraud claim to the
extent that this claim seeks punitive
damages. Specifically, defendants argue
that plaintiffs’ case is, in actuality, premised
on a contractual agreement between Adamo
and Marini “under which Adamo would
choose coins for Marini to buy at their
current value plus a 5% to 10%
commission,” (Defs.’ Reply at 40), and that,
as such, plaintiffs’ punitive damages claim
must be dismissed, because punitive
damages are not available in breach of
contract cases without a requisite showing of
fraud aimed at the public generally, a
showing that defendants contend plaintiffs
are unable to make here. (See Defs.’ Mem.
of Law at 53-54; Defs.’ Reply at 40-43.)

2. General Business Law § 349
New York General Business Law § 349
prohibits “[d]eceptive acts or practices in the
conduct of any business, trade or commerce
or in the furnishing of any service.” N.Y.
G.B.L. § 349(a) (McKinney’s 2004); accord
Securitron Magnalock Corp. v. Schnabolk,
65 F.3d 256, 264 (2d Cir. 1995). Under this
provision, “the gravamen of the complaint
must be consumer injury or harm to the
public interest,” and, as such, “[t]he critical
question . . . is whether the matter affects the
public interest in New York, not whether the
suit is brought by a consumer or a
competitor.” Securitron Magnalock, 65
F.3d at 264 (internal quotation marks and
citation omitted). Accordingly, to state a
claim under Section 349, a plaintiff must

As an initial matter, the Court notes that
defendants have correctly pointed to a line
of cases under New York law which have
held that punitive damages are not available
for fraud claims arising from a contractual
relationship between the parties.
See
Rocanova v. Equitable Life Assur. Soc’y,
634 N.E.2d 940, 943 (N.Y. 1994) (“Punitive
damages are not recoverable for an ordinary
breach of contract as their purpose is not to
remedy private wrongs but to vindicate
public rights.”); see generally United States
ex rel. Evergreen Pipeline Constr. Co. v.
Merritt Meridian Constr. Corp., 95 F.3d

25

judgment.
The statement of plaintiffs’
expert is sufficient to create a genuine issue
of material fact on damages that precludes
summary judgment, and, accordingly,
defendants’ motion for summary judgment
on this claim is denied.

allege, inter alia, “that defendants engaged
in a consumer-oriented act,” a requirement
that “has been construed liberally.” New
York v. Feldman, 210 F. Supp. 2d 294, 301
(S.D.N.Y. 2002) (internal quotation marks
and citations omitted). “Based on this
standard, courts have found sufficient
allegations of injury to the public interest
where plaintiffs plead repeated acts of
deception directed at a broad group of
individuals.” Id. (collecting cases).

IV. Conclusion
For the reasons set forth herein,
defendants’ motion for summary judgment
is denied with respect to plaintiffs’ securities
fraud, RICO, and state-law fraud and breach
of contract claims. Defendants’ motion is
granted, however, with respect to plaintiffs’
General Business Law claim.

In this case, plaintiffs have proferred no
evidence that defendants’ scheme was aimed
at the public generally.
For example,
plaintiffs have not put forth any evidence
that defendants maintained a website,
circulated marketing materials, or made
other efforts to make misrepresentations to
the public generally, or even to a broad
group of people. In the absence of any
allegations or factual proof that defendants’
engaged in consumer-oriented activity
within the meaning of the statute, plaintiffs
cannot survive defendants’ motion for
summary judgment on this claim.
Accordingly, plaintiffs’ General Business
Law § 349 claim is dismissed.

SO ORDERED.

________________________
JOSEPH F. BIANCO
United States District Judge
Date: September 26, 2011
Central Islip, NY
***
Plaintiffs are represented by Paul A.
Brancato, 106-43 157th Street, Jamaica, NY
11433, and by Marianna Moss and Scott A.
Moss, 7775 E 28th Avenue, Denver, CO
80238.
Defendants are represented by
Andrew Seth Harris and Samuel Lucien Butt
of Schlam Stone & Dolan LLP, 26
Broadway, New York, NY 10004, and by
Leonard Sclafani, Leonard A. Sclafani, P.C.,
18 East 41st Street, 15th Floor, New York,
NY 10017.

3. Breach of Contract
Defendants argue that plaintiffs’ breach
of contract claim must be dismissed because
plaintiffs’ have not produced sufficient
evidence of their damages. Specifically,
defendants’ contend that plaintiffs’ expert’s
sworn statement that, because of market
fluctuations, “many of the coins . . . [in
plaintiffs’] collection may have a current
market value that is below their peaks of just
a few years ago,” (Parrella Decl. Ex. A at 2)
is insufficient to create a triable issue of fact.
The Court, however, disagrees and finds that
defendants’ argument would require the
Court to make credibility determinations
regarding plaintiffs’ expert’s testimony that
are not appropriate on a motion for summary

26