Elsevier Inc. et al v. Memon et al

Filing 167

MEMORANDUM & ORDER granting in part and denying in part 84 Motion for Judgment on the Pleadings; granting 146 Motion to Strike; For the foregoing reasons, the Memon Defendants' motion for judgment on the pleadings, (Docket Entry 84), is G RANTED IN PART AND DENIED IN PART. Specifically, the Civil RICO claims brought against Hanif Memon, Samina Memon, Abdul Karar, and Muhammad Tobria and Plaintiffs' RICO conspiracy claim, brought pursuant to 18 U.S.C. 1962(d) are DISMISSED WITHOU T PREJDICE. Plaintiffs' aiding and abetting fraud claim and conspiracy to commit fraud claim are also DISMISSED WITHOUT PREJUDICE. Plaintiffs' conversion claim is DISMISSED WITH PREJUDICE. The balance of the Memon Defendants' motion is DENIED. If Plaintiffs' wish to file an Amended Complaint, they must do so within thirty (30) days of the date of this Order. Plaintiffs' motion to strike the Gaziani Defendants' Answer and enter a default judgment against them, (D ocket Entry 146), is GRANTED. Therefore, the Clerk of the Court is directed to enter certificates of default for Defendants Haji Suleman Gaziani and Mohammad Iqbal Gaziani. The Court will defer ruling on the measure of damages owed by the Gaziani Defendants until the case is resolved against all non-defaulting defendants. So Ordered by Judge Joanna Seybert on 3/23/2015. C/ECF (Valle, Christine)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
---------------------------------------X
ELSEVIER INC.; ELSEVIER B.V.;
ELSEVIER LTD.; ELSEVIER IRELAND LTD.;
JOHN WILEY & SONS, INC.; WILEY
PERIODICALS, INC.; and BLACKWELL
PUBLISHING, LTD.
Plaintiffs,
-againstHAROON MEMON; BOB MEMON; KULSOOM MEMON,
HANIF MEMON; SAMINA MEMON a/k/a SAMINA
KHMISA; IQBAL GABA a/k/a IQBAL HUSSAIN
GABA a/k/a IQBAL H. GABA a/k/a MR.
IKQBAL JABA a/k/a M.I. GABA a/k/a MR.
GABA a/k/a DR. I. GABA; HAJI SULEMAN
GAZIANI a/k/a SULEMAN HAJI a/k/a H.
SULEMAN; MOHAMMAD IQBAL GAZIANI a/k/a
MOHAMMAD IQBAL a/k/a MOHAMMAD GAZIANI;
JAVARIA IQBAL a/k/a JAVARIA GAZIANI
a/k/a JAVARIA IQBAL GAZIANI; MUHAMMAD
OWAIS; ABDUL KARAR; IQBAL KAPADWALA;
MUHAMMAD TOBRIA a/k/a M. TOBRIA; ZAHIDA
JAMAL; MUHAMMAD SHAHID; SARDAR AHMED
a/k/a S. AHMED; and FEROZA BANO,

MEMORANDUM & ORDER
13-CV-0257(JS)(AKT)

Defendants.
--------------------------------------X
APPEARANCES
For Plaintiffs:
James A. Moss, Esq.
Nicole Haff, Esq.
Balber Pickard Maldonado &
Van Der Tuin PC
1370 Avenue of the Americas
New York, NY 10019
For Defendants
Haroon Memon, Bob
Memon, Kulsoon Memon,
Hanif Memon, Samina
Memon, Abdul Karar:

Arshad Majid, Esq.
Majid & Associates, P.C.
300 Rabro Drive, Suite 112
Hauppauge, NY 11788

Iqbal Gaba:

Iqbal Gaba, pro se
12 Grays Croft Road
Streatham Vale
London SW 165UP, U.K.

Haji Suleman Gaziani:

Haji Suleman Gaziani, pro se
c/o Latif & Latif Advocates
154-155, Sunny Plaza
Hasrat Mohani Road
Off I.I. Chundrigar
Karachi, Pakistan

Iqbal Kapadwala:

Iqbal Kapadwala, pro se
772 Franklin Ave.
Valley Stream, NY 11580

Mohammad Iqbal Gaziani:

Mohammad Iqbal Gaziani, pro se
c/o Latif & Latif Advocates
154-155, Sunny Plaza
Hasrat Mohani Road
Off I.I. Chundrigar
Karachi, Pakistan

Remaining Defendants:

No appearances.

SEYBERT, District Judge:
This action was commenced on January 16, 2013 by eight
publishing
defendants

companies

against

(collectively,

sixteen

“Defendants”).

separate

individual

Plaintiffs

Elsevier

Inc., Elsevier B.V., Elsevier Ltd., Elsevier Ireland Ltd., John
Wiley

&

Sons,

Publishing,

Inc.,

Ltd.

Wiley

Periodicals,

(collectively,

Inc.,

“Plaintiffs”)

and

Blackwell

assert

claims

against Defendants for violating the Racketeer Influenced and
Corrupt Organizations Act, 18 U.S.C § 1961 et. seq. (“RICO”), and
state law claims for fraud, conspiracy to commit fraud, aiding and
abetting fraud, breach of contract, and conversion.
2

Two motions

are pending before the Court.

First, defendants Haroon Memon, Bob

Memon, Kulsoom Memon, Hanif Memon, Samina Memon a/k/a Samina
Khmisa,

Muhammad

Tobria

a/k/a

M.

Tobria,

and

Abdul

Karar

(collectively the “Memon Defendants”) move for judgment on the
pleadings pursuant to Federal Rule of Civil Procedure 12(c).
(Docket Entry 84.)

Second, Plaintiffs move to strike the Answer

filed by defendants Haji Suleman Gaziani and Mohammad Iqbal Gaziani
(collectively,

the

"Gaziani

Defendants")

and

enter

a

default

judgment against them pursuant to Federal Rules of Civil Procedure
37(b)(2) and 55(a).

(Docket Entry 146.)

For the foregoing

reasons, the Memon Defendants’ motion for judgment on the pleadings
is GRANTED IN PART and DENIED IN PART, and Plaintiffs’ motion to
strike the Gaziani Defendants’ Answer is GRANTED.
BACKGROUND1
I.

Factual Background
Plaintiffs publish leading academic journals in the

fields of science, technology, and medicine.

(Compl. ¶ 1.)

The

journals are composed of peer-reviewed articles and are sold to
two

types

(Compl.

¶¶

of
1,

end
29.)

users--individuals
Individuals

pay

a

and

institutions.

discounted

rate

for

subscriptions, while institutions--such as hospitals, schools, and

The following facts are taken from Plaintiffs’ Complaint and
are presumed to be true for the purposes of this Memorandum and
Order.
1

3

government

entities--pay

expected readership.”

full

price

because

(Compl. ¶ 31.)

of

their

“larger

To accomplish the work of

selling subscriptions, Plaintiffs use “subscription agents” as
intermediaries between themselves and customers.

(Compl. ¶ 36.)

Using subscription agents is convenient because customers can
purchase subscriptions from different publishers at one location
and streamline the billing process. (Compl. ¶ 36.)
To protect the higher price that institutions pay for
journals, Plaintiffs’ terms and conditions prohibit the “resale,
or

institutional

use”

of

discounted

individuals. (Compl. ¶¶ 41-45.)

subscriptions

and

conditions

are

to

However, Plaintiffs’ terms and

conditions are located in different places.
terms

sold

found

on

the

For example, “Wiley’s
agent

price

list

and

Elsevier’s terms and conditions are referenced in its invoices and
purchase order forms.”

(Compl. ¶ 38.)

To enforce their terms and

conditions, Plaintiffs require subscription agents to “identify
the end user” for each sale.

(Compl. ¶ 39.)

Plaintiffs also rely

on end users to correctly identify themselves to the subscription
agent as either an institution or individual subscriber.

(Compl.

¶ 40.)
Infotech

and

Progressive

subscription agents (Compl. ¶ 47.)

are

two

Plaintiffs’

All of the Defendants are

alleged to be associated with these two companies.
Compl.)

of

(See generally

Defendant Bob Memon, for example, is alleged to be the
4

owner of Infotech, (Compl. ¶ 60), while defendant Mohammad Iqbal
Gaziani is allegedly the owner of Progressive, (Compl. ¶ 66).
Plaintiffs claim that Defendants used Infotech and Progressive to
perpetrate

a

subscription

(Compl. ¶ 48.)
participated

in

fraud

scheme

against

them.

Specifically, Plaintiff allege that Defendants
an

organized

effort

to

order

discounted

subscriptions under the names of individuals, then resold the
journals they received to institutions at higher prices.
Compl. ¶¶ 48, 50.)

(See

Through this scheme, Defendants allegedly

deprived Plaintiffs of the revenue they should have received if
the institutions had paid full price for journal subscriptions.
(See Compl. ¶¶ 48, 50.)
In total, Plaintiffs claim that defendants purchased 880
discount subscriptions between 1998 and 2010 that were intended
for institutional, rather than personal use.

(Compl. ¶¶ 52-53.)

Plaintiffs’ forty-six page Complaint provides some details about
the transactions at issue and the purported nature of the scheme.
Orders were placed by mail, by phone, and over the internet.
(Compl. ¶ 55.)

Defendants used their own names, as well as the

names of friends and fictitious names.

(Compl. ¶ 51.)

Many of

the subscriptions were ordered to Infotech’s business address at
21 Meyer Avenue in Valley Stream, New York, which is co-owned by
defendants Haroon Memon and Kulsoom Memon.

(Compl. ¶¶ 77-79.)

However, subscriptions were also sent to P.O. boxes and other
5

business and residential addresses.
Plaintiffs
Defendants

to

the

assert
same

(Compl. ¶ 96.)

that

there

fraudulent

is

evidence

scheme.

linking

Specifically,

Plaintiffs claim both Infotech and Progressive used 21 Meyers
Avenue to purchase purportedly fraudulent discount subscriptions.
(Compl.

¶¶

89,

114.)

In

addition,

Plaintiffs

allege

that

Defendants are linked together through personal relationships, as
evidenced by social media connections.

(Compl. ¶ 122.)

Finally,

Plaintiffs claim that checks issued in sequence that were used to
pay for certain discount rate subscriptions links a number of the
defendants together. (Compl. ¶ 112.)
Below

is

a

recitation

of

the

specific

allegations

pertaining to each individually named defendant who now moves for
judgment on the pleadings:
A. Haroon Memon
Haroon Memon is an owner of Infotech.

(Compl. ¶ 60.)

The Complaint alleges that he ordered discount subscriptions in
his own name which were not for his own use.

(Compl. ¶ 59.)

The

Complaint also alleges that he provided false names and addresses
of others to Plaintiffs in order to obtain discount subscriptions.
(Compl. ¶ 59.)
sold

the

Further, the Complaint alleges that Haroon Memon

discount

subscriptions

www.wholesalebooks.net.

(Compl.

¶

on

a

59.)

website
The

he

operated,

Complaint

also

provides the names of the journal issues and the year they were
6

purchased.

(Compl. ¶¶ 80-86.)

B. Kulsoom Memon
The Complaint alleges, upon information and belief, that
Kulsoom Memon is a co-owner of the house located at 21 Meyers
Avenue, Infotech’s business address.

(Compl. ¶ 79.)

An email as

well as checks numbered in sequence that were received as payment
for magazine subscriptions links him to the purchasing activities
of several other defendants.

(Compl. ¶¶ 112, 121.)

The Complaint

also provides the names and dates of various journals he purchased
from Defendants. (See Compl. Schedule A.)
C. Hanif Memon
Hanif Memon is the son of Haroon Memon.

The Complaint

alleges, upon information and belief, that Hanif Memon is one of
the “leaders” of Infotech.
alleges

that

Hanif

(Compl. ¶ 58.)

Memon

ordered

The Complaint further

and

received

discount

subscriptions in his own name that were not for his personal use
and registered websites on behalf of Infotech to resell journals
to institutions. (Compl. ¶ 61, 94.)
the

names

and

dates

of

various

The Complaint also provides
journals

individually purchased from Defendants.

that

Hanif

Memon

(See Compl. Schedule A.)

D. Samina Memon
The Complaint asserts that Samina Memon is one of the
“leaders”

of

Infotech

(Compl. ¶¶ 58, 62.).

and

the

daughter

of

Haroon

Memon.

She resides at 21 Meyer Avenue, Infotech’s
7

business address, and ordered discount subscriptions in her own
name to that address.

(Compl. ¶¶ 16, 147-48.)

Plaintiffs claim

that Samina Memon ordered and received discount subscriptions in
her name that were not for her personal use and provides the names
and dates of various journals that she purchased. (See Compl. ¶¶
62, 87, 88, Schedule A.)
E. Abdul Karar
The Complaint alleges upon information and belief that
Abdul Karar is one of the “leaders” of Infotech.
Abdul

Karar

allegedly

ordered

and

(Compl. ¶ 58.)

received

discounted

subscriptions in his own name that were not for his personal use.
(Compl. ¶ 63.)

He ordered discount subscriptions to a P.O. box

used by other alleged co-conspirators to order similar discount
subscriptions.
names

and

(Compl. ¶ 96.)

dates

of

various

The Complaint also provides the
journals

that

he

purchased

from

Defendants. (See Compl. Schedule A.)
F. Muhammad Tobria
The Complaint alleges upon information and belief that
Muhammad Tobria is one of the “leaders” of Infotech and that he
ordered discounted subscriptions in his own name that were not for
his personal use.

(Compl. ¶¶ 58, 65.)

The Complaint identifies

the names and dates of the journals that he purchased and alleges
that he used the same P.O. box to order subscriptions as Abdul
Karar.

(Compl. ¶ 96, Schedule A.)
8

II. Procedural Background
Plaintiffs’ commenced this action on January 16, 2013,
alleging that Defendants violated RICO, and asserting state law
causes of action for fraud, conspiracy to commit fraud, aiding and
abetting fraud, breach of contract, and conversion.
Defendants filed an Answer on March 6, 2013.
Entry 18.)
pleadings

The Memon

(Memon Ans., Docket

The Memon Defendants now move for judgment on the
dismissing

the

case

in

its

entirety.

In

seeking

dismissal of the RICO claims (Counts I and II), Defendants make
the following arguments: (1) the Complaint fails to plead the
predicate acts with particularly in compliance with Rule 9(b); (2)
the Complaint fails to plead that Memon Defendants engaged in a
pattern of racketeering activity; (3) the Complaint fails to
properly allege that the Memon Defendants participated in a RICO
enterprise; (4) the Plaintiff is time-barred from alleging any
violations that occurred before January 2009; and (5) the Complaint
fails to adequately plead a RICO conspiracy.

(Defs.’ Br., Docket

Entry 84-4, at 5-15.) The Memon Defendants also seek dismissal of
the Plaintiff’s state law claims for common law fraud, conspiracy
to commit fraud, aiding and abetting fraud, breach of contract,
and conversion.

(Defs.’ Br. at 15-21.)

The Gaziani Defendants answered the Complaint on March
12, 2013.

(Docket Entry 20.)

Plaintiffs move to strike their

Answer and enter a default judgment pursuant to Federal Rules of
9

Civil

Procedure

Defendants’

37(b)(2)

failure

to

and

55(a)

participate

because

in

the

of

the

discovery

Gaziani
process.

(Pls.’ Br. Supp. Mot. Strike, Docket Entry 146, at 2.)
DISCUSSION
The

Court

will

first

address

the

Memon

Defendants’

motion for judgment on the Pleadings.
I.

The Memon Defendants’ Motion for Judgment on the Pleadings
A. Legal Standard
The standard for evaluating a motion for judgment on the

pleadings, pursuant to Rule 12(c), is the same as the standard for
a motion to dismiss under Rule 12(b).

See Karedes v. Ackerley

Group, Inc., 423 F.3d 107, 113 (2d Cir. 2005).

In deciding a Rule

12(b)(6) motion to dismiss, the Court applies a “plausibility
standard,” which is guided by “[t]wo working principles.” Ashcroft
v. Iqbal, 556 U.S. 662, 678, 129 S. Ct. 1937, 173 L. Ed. 2d 868
(2009) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 127 S.
Ct. 1955, 167 L.Ed.2d 929 (2007); accord Harris v. Mills, 572 F.3d
66, 71–72 (2d Cir. 2009).

First, although the Court must accept

all allegations as true, this “tenet” is “inapplicable to legal
conclusions;” thus, “[t]hreadbare recitals of the elements of a
cause of action, supported by mere conclusory statements, do not
suffice.”

Iqbal, 556 U.S. at 678; accord Harris, 572 F.3d at 72.

Second, only complaints that state a “plausible claim for relief”
can survive a Rule 12(b)(6) motion to dismiss.
10

Iqbal, 556 U.S. at

679.

Determining whether a complaint does so is “a context-

specific task that requires the reviewing court to draw on its
judicial experience and common sense.”

Id.; accord Harris, 572

F.3d at 72.
The Court is confined to “the allegations contained
within the four corners of [the] complaint.”

Pani v. Empire Blue

Cross Blue Shield, 152 F.3d 67, 71 (2d Cir. 1998).

However, this

has been interpreted broadly to include any document attached to
the complaint, any statements or documents incorporated in the
complaint by reference, any document on which the complaint heavily
relies, and anything of which judicial notice may be taken.

See

Chambers v. Time Warner, Inc., 282 F.3d 147, 152–53 (2d Cir. 2002)
(citations omitted); Kramer v. Time Warner Inc., 937 F.2d 767, 773
(2d Cir. 1991).
B.

RICO Claims
The Memon Defendants move for judgment on the pleadings

dismissing Plaintiffs’ RICO claims.

RICO was enacted to “‘prevent

organized crime from infiltrating America’s legitimate business
organizations.’”

Manley v. Doby, No. 12–CV–4835, 2012 WL 5866210,

at *3 (E.D.N.Y. Nov. 19, 2012) (quoting Moccio v. Cablevision Sys.
Corp., 208 F. Supp. 2d 361, 371 (E.D.N.Y. 2002)). The Act contains
a criminal provision, see 18 U.S.C. § 1962, and a civil provision,
see 18 U.S.C. § 1964.

The civil provision permits the recovery of

treble damages and reasonable attorney’s fees for any person who
11

is “injured in his business or property by reason of a violation
of” the criminal provision.

18 U.S.C. § 1964(c).

To establish a civil RICO claim, “a plaintiff must show:
‘(1) a violation of the RICO statute, 18 U.S.C. § 1962; (2) an
injury to business or property; and (3) that the injury was caused
by the violation of Section 1962.’”

DeFalco v. Bernas, 244 F.3d

286, 305 (2d Cir. 2001) (quoting Pinnacle Consultants, Ltd. v.
Leucadia Nat’l Corp., 101 F.3d 900, 904 (2d Cir. 1996)).

The

Second Circuit has held that a RICO plaintiff has two pleading
burdens.

First, a plaintiff “must allege that the defendant has

violated the substantive RICO statute, 18 U.S.C. § 1962, commonly
known as criminal RICO.”

Moss v. Morgan Stanley, Inc., 719 F.2d

5, 17 (2d Cir. 1983) (internal quotation marks omitted).

To

satisfy this burden, the plaintiff must allege the following “seven
constituent elements: (1) that the defendant (2) through the
commission of two or more acts (3) constituting a ‘pattern’ (4) of
‘racketeering activity’ (5) directly or indirectly invests in, or
maintains an interest in, or participates in (6) an ‘enterprise’
(7) the activities of which affect interstate or foreign commerce.”
Id. (quoting 18 U.S.C. § 1962(a)-(c)). A plaintiff must adequately
allege these seven elements “before turning to the second burden-i.e., invoking RICO’s civil remedies.”

Id. (citation omitted).

To satisfy the second burden, a plaintiff “must allege that he was

12

‘injured in his business or property by reason of a violation of
section 1962.’”
1.

Id. (quoting 18 U.S.C. § 1964(c)).
Predicate Acts

The Memon Defendants argue that the Complaint fails to
plead the predicate acts of mail and wire fraud with sufficient
particularity. (Defs.’ Br. at 5-8.) The Court disagrees, however,
because there is sufficient detail in the Complaint to put the
Memon Defendants on notice of their allegedly fraudulent acts.
A RICO pattern of racketeering activity must consist of
two or more predicate defined as “any act ‘chargeable’ under
several

generically

described

state

criminal

laws,

any

act

‘indictable’ under numerous specific federal criminal provisions,
including

mail

and

wire

fraud,

and

any

‘offense’

involving

bankruptcy or securities fraud or drug-related activities that is
‘punishable’ under federal law.”

Sedima, S.P.R.L. v. Imrex Co.,

473 U.S. 479, 481–82, 105 S. Ct. 3275, 87 L. Ed. 2d 346 (1985)
(quoting 18 U.S.C. § 1961(1)).

Here, Plaintiffs allege that

Defendants engaged in mail and wire fraud in violation of 18 U.S.C.
§§ 1341 and 1343.

(Compl. ¶ 55.)

Federal Rule of Civil Procedure

9(b) requires allegations sounding in fraud to be "state[d] with
particularly.” FED. R. CIV. P. 9(b).

To comply with 9(b), "the

complaint must: (1) specify the statements that the plaintiff
contends were fraudulent, (2) identify the speaker, (3) state where
and

when

the

statements

were

made,
13

and

(4)

explain

why

the

statements were fraudulent.”

Lerner v. Fleet Bank N.A., 459 F.3d

273, 290 (2d Cir. 2006) (internal quotation marks and citation
omitted).

However, Rule 9(b) provides that “intent, knowledge,

and other conditions of a person’s mind may be alleged generally.”
FED. R. CIV. P. 9(b).
Here,

the

Memon

scheme

with

sufficient particularity to survive a motion to dismiss.

The

Defendants

Complaint

the

took

to

alleges

Complaint
further

that

each

a

describes

the

subscription

Memon

acts

fraud

Defendant

ordered

discount

subscriptions, claiming that they were for personal use in order
to resell the subscriptions to institutions at a higher price.
Moreover, the Complaint contains a chart listing names and years
of the journals that were purchased by each Memon Defendant in
furtherance of their scheme.

See Elsevier Inc. v. W.H.P.R., Inc.,

692

(S.D.N.Y.

F.

Supp.

2d

297,

304

2010)

(holding

that

the

defendants were “sufficiently advised” that they had engaged in
fraudulent conduct by “placing subscription orders under false
pretenses” when each order was “identified by both the name of the
journal and the approximate time the subscription was placed”);
Sky Med. Supply Inc. v. SCS Support Claims Servs., Inc., No. 12CV-6383, 2014 WL 1801139 (E.D.N.Y. May 7, 2014) (“Under the
circumstances, the specificity requirement of 9(b) requires no
more regarding the who, what, where, when, how, and why of the

14

alleged fraud in this case.”) (quoting Allstate Ins. Co. v. Lyons,
843 F. Supp. 2d 358, 373 (E.D.N.Y. 2012)).
The Memon Defendants argument that Plaintiffs did not
sufficiently plead fraudulent intent is also without merit.

Under

Rule 9(b), “[m]alice, intent, knowledge, and other conditions of
a person’s mind may be alleged generally.”
The

Second

Circuit

explained

that

Fed. R. Civ. P. 9(b).

“[t]he

requisite

‘strong

inference’ of fraud may be established either (a) by alleging facts
to show that defendants had both motive and opportunity to commit
fraud,

or

(b)

by

alleging

facts

that

constitute

strong

circumstantial evidence of conscious misbehavior or recklessness.”
Lerner v. Fleet Bank, N.A., 459 F.3d 273, 290-91 (2d Cir. 2006)
(quoting Shields v. Citytrust Bancorp, Inc., 25 F.3d 1124, 1128
(2d Cir. 1994).

Here, Plaintiffs sufficiently pleaded that the

Memon Defendants had the motive and opportunity to commit fraud.
The

Complaint

contends

that

the

Memon

Defendants

were

all

associated subscription agent organizations and therefore were
aware

of

the

subscriptions

price
and

difference
full

price

between

discounted

institutional

individual

subscriptions.

Moreover, as associates of subscription agent businesses, the
Memon Defendants had the means to resell subscriptions purchased
at a discount to institutions.

Thus, Defendants are sufficiently

advised of their purported fraudulent conduct by the allegations
of the Complaint.
15

2.

Pattern of Racketeering Activity

To establish a “pattern of racketeering activity,” the
predicate acts of racketeering activity must ‘amount to or pose a
threat of continued criminal activity.’”

Cofacredit, S.A. v.

Windsor Plumbing Supply Co., 187 F.3d 229, 242 (2d Cir. 1999)
(quoting H.J., Inc. v. Nw. Bell Tel. Co., 492 U.S. 229, 239, 109
S. Ct. 2893, 2900, 106 L. Ed. 2d 195 (1989)).

This continuity

requirement “can be satisfied either by showing a ‘closed-ended’
pattern--a series of related predicate acts extending over a
substantial period of time--or by demonstrating an ‘open-ended’
pattern of racketeering activity that poses a threat of continuing
criminal conduct beyond the period during with the predicate acts
were performed.”

Spool v. World Child Int’l Adoption Agency, 520

F.3d 178, 183 (2d Cir. 2008) citing H.J., Inc., 492 U.S. at 241,
109 S. Ct. at 2902.
a.
The

Memon

Open-Ended Continuity
Defendants

claim

that

Plaintiffs

did

not

sufficiently allege open-ended continuity because they cannot show
that the acts of wire and mail fraud perpetrated by Kulsoom Memon,
Hanif Memon, and Abdul Karar continued beyond their respective
ordering activities in 2002, 2008, and 2010.

(Defs.’ Br.

at 8-

10.)
Open-ended continuity exists “even if the predicate acts
were not engaged in over an extended period of time.
16

Instead,

there must be a threat of continuing criminal activity ‘extending
indefinitely

into

the

future.’”

SKS

Constructors,

Inc.

v.

Drinkwine, 458 F. Supp. 2d 68, 79–80 (E.D.N.Y. 2006) (quoting H.J.,
Inc., 492 U.S. at 242, 109 S. Ct. at 2901).

“In assessing whether

or not the plaintiff has shown open-ended continuity, the nature
of the RICO enterprise and of the predicate acts are relevant.”
Cofacredit, S.A. v. Windsor Plumbing Supply Co., 187 F.3d 229, 242
(2d Cir. 1999).

When an enterprise engages in legitimate business

activities, as opposed to an organization that solely exists for
criminal purposes, “there must be some evidence from which it may
be inferred that the predicate acts were the regular way of
operating that business, or that the nature of the predicate acts
themselves implies a threat of continued criminal activity.

Id.;

see also GICC Capital Corp. v. Tech. Fin. Grp., Inc., 67 F.3d 463,
466 (2d Cir. 1995).
Here, Plaintiffs have sufficiently pleaded open-ended
continuity.

Defendants allege that predicate acts of fraudulently

purchasing discount subscriptions for resale to institutions was
the regular means by which Defendants’ group operated.

See SKS

Constructors, 458 F. Supp. 2d at 80 (“Where defendants are engaged
in a legitimate business, open ended continuity can exist if the
predicate acts are the regular way in which the enterprise conducts
its business.”)

Once an enterprise has been established, it is

necessary look at the criminal activities of the enterprise as a
17

whole, rather than viewing each member’s activities in isolation.
See G-I Holdings, Inc. v. Baron & Budd, 238 F. Supp. 2d 521, 545
(S.D.N.Y.

2002)

(finding

open-ended

continuity

because

“the

falsification of [ ] affidavits were part of a larger scheme that
was part of [a company’s] regular course of business”).

Thus, the

mere fact that some of the Memon Defendants ceased their individual
ordering activities in 2002, 2007, and 2010 does not establish, at
the motion to dismiss stage, that the organization as a whole
ceased operation.

Given that Defendants’ purportedly fraudulent

activity occurred consistently from 1998 to 2011, Plaintiffs have
sufficiently alleged open-ended continuity.
b. Closed-Ended Continuity
The Memon Defendants claim that closed-ended continuity
was

also

not

sufficiently

stated

because

the

Complaint

only

provides the year of each alleged instance of mail and wire fraud,
not the exact date each order was placed.

(Defs.’ Br. at 11.)

“To satisfy closed-ended continuity, the plaintiff must prove a
series of related predicates extending over a substantial period
of time.”

Cofacredit, 187 F.3d at 242 (internal quotation marks

and citation omitted); accord Spool, 520 F.3d at 184.

Although

there are a variety of non-dispositive factors relevant to the
inquiry of whether closed-ended continuity exists, including “the
length of time over which the alleged predicate acts took place,
the number and variety of acts, the number of participants, the
18

number of victims, and the presence of separate schemes,” GICC
Capital

Corp.,

primarily

a

67

F.3d

temporal

at

467,

concept,”

“closed-ended

Cofacredit,

187

continuity
F.3d

at

is

242.

However, “[a]t the pleading stage, . . . whether ‘defendants’
actions are continuing in nature or isolated or sporadic will be
the subject of proof at trial.”

Dymm v. Cahill, 730 F. Supp. 1245,

1261 (S.D.N.Y. 1990) (quoting Procter & Gamble Co. v. Big Apple
Indus. Bldgs., Inc., 879 F.2d 10, 18 (2d Cir. 1989)).

Here, the

Complaint alleges that Defendants engaged in a subscription fraud
scheme which spanned more than a decade and included hundreds of
alleged predicate acts.

Thus, the Complaint sufficiently alleges

a closed period of continuing conduct spanning multiple years.
Just because the exact date of each subscription order was not
listed in the Complaint does not warrant dismissal for failure to
plead a pattern of racketeering activity at this stage.
3. Participation in a RICO Enterprise
A

RICO

“enterprise”

is

defined

as

“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).

The Memon Defendants

concede that Plaintiffs properly alleged the existence of three
separate RICO enterprises: (1) Infotech, (2) Progressive, and (3)
an association in fact composed of individuals affiliated with
both Infotech and Progressive.

(Defs.’ Br. at 12; Pls.’ Opp. Br.,
19

Docket Entry 89, at 15.)
that

the

Complaint

does

The Memon Defendants argue, however,
not

allege

facts

demonstrating

actually participated in any of these enterprises.

they

(Defs.’ Br. at

12.)
A plaintiff alleging a violation of RICO must allege in
the complaint that she “participat[ed], directly or indirectly, in
the conduct of such enterprises affairs.”

18 U.S.C.§ 1962(c).

This requirement is analyzed under the “operation or management
test.”

DeFalco, 244 at 312 n.16.

Under that test, “in order to

‘conduct or participate directly or indirectly, in the conduct of
[an] enterprise’s affairs’ . . . ‘one must participate in the
operation or management of the enterprise itself,’ and play ‘some
part in directing the enterprise’s affairs,’”

United States v.

Allen, 155 F.3d 35, 40 (2d Cir. 1998) (quoting Reves v. Ernst &
Young, 507 U.S. 170, 185, 113 S. Ct. 1163, 1173, 122 L. Ed. 2d 525
(1993)

(emphasis

in

original)).

Although

the

operation

and

management test has been found to be a “relatively low hurdle for
plaintiffs to clear” at the pleading stage, First Capital Asset
Mgmt, Inc. v. Satinwood, Inc., 385 F.3d 159, 176 (2d Cir. 2004),
it is insufficient to merely “allege that a defendant provided
services that were helpful to an enterprise, without alleging facts
that, if proved, would demonstrate some degree of control over the
enterprise,”

Elsevier, 692 F. Supp. 2d at 307-08 (citing City of

N.Y. v. Smokes–Spirits.com. Inc., 541 F.3d 425, 449 (2d Cir. 2008),
20

rev’d on other grounds, 559 U.S. 1, 130 S. Ct. 983, 175 L. Ed. 2d
943 (2010)).
Here, the Complaint sufficiently pleads that Haroon
Memon and Kulsoom Memon exercised some degree of control over one
or more RICO enterprises.

Haroon Memon allegedly ordered discount

subscriptions in his own name and provided plaintiffs with false
names and addresses.

(Compl. ¶ 59.)

Haroon Memon also allegedly

operated a website on which he sold the discounted journals.
(Compl. ¶ 59.)

Similarly, Kulsoom Memon is allegedly the co-owner

of 21 Meyers Avenue, which is Infotech’s address and the location
where numerous discount subscriptions were shipped.
¶ 79.)

(See Compl.

Moreover, checks in sequence link Kulsoom Memon to the

ordering activities of several other Defendants.

(Compl. ¶ 112.)

However, the Complaint does not plead sufficient facts
showing that Hanif Memon, Samina Memon, Abdul Karar, or Muhammad
Tobria exercised control over a RICO enterprise.

Rather, the

Complaint only states that they ordered discount subscriptions
under false pretenses and states, in conclusory fashion, that they
are each “leaders” of Infotech.

(See Compl. ¶¶ 61-62, 63, 65.)

Thus, from the face of the Complaint, Hanif Memon, Samina Memon,
and Abdul Karar and Muhammad Tobria only provided a service that
was

helpful

to

the

association

exercising direct control over it.

in

fact

enterprise

without

Since Plaintiff must plead

that all of the Memon Defendants “played some part in directing
21

the enterprise’s affairs,” Reves, 507 U.S. at 179, 113 S. Ct. at
1170, the Civil RICO claims against Hanif Memon, Samina Memon,
Abdul Karar, and Muhammad Tobria are DISMISSED WITHOUT PREJUDICE.
However, Plaintiffs are GRANTED leave to replead.
C. Timeliness
The Memon Defendants argue that Plaintiffs’ RICO claims
are

barred

by

the

four-year

statute

of

limitations

because

Plaintiffs should have detected Defendants’ alleged fraud years
earlier.

(Defs.’ Br. at 12-13.)

Plaintiffs argue in opposition

that the Memon Defendants’ statute of limitations argument is
premature because it is unclear when Plaintiffs’ discovered or
should have discovered Defendants’ fraud.

(Pls.’ Opp. Br. at 19.)

The four-year statute of limitations for a civil RICO
action “begins to run . . . when the plaintiff discovers--or should
have reasonably discovered--the alleged injury.”

World Wrestling

Entm’t, Inc. v. Jakks Pac., Inc., 328 F. App’x 695, 697 (2d Cir.
2009) (quoting McLaughlin v. Am. Tobacco Co., 522 F.3d 215, 233
(2d Cir. 2008).
a

‘separate

In addition,

accrual

rule’;

“civil RICO actions are subject to
that

is,

‘a

new

claim

accrues,

triggering a new four-year limitations period each time plaintiff
discovers, or should have discovered an injury caused by the
predicate RICO violations.’”

State Farm Mut. Auto. Ins. Co. v.

Grafman, 655 F. Supp. 2d 212, 225 (E.D.N.Y. 2009) (quoting Bingham
v. Zolt, 66 F.3d 553, 560 (2d Cir. 1995)).
22

Here, Defendants tried

to conceal their fraud by using different names and addresses to
disguise their ordering activities.

It is therefore premature to

rule on the Memon Defendants’ statute of limitations defense
because

there

is

insufficient

evidence

to

determine

when

Plaintiffs should have discovered Defendants’ scheme.
D.

RICO Conspiracy
The

Memon

Defendants

argue

that

Plaintiffs’

RICO

conspiracy claim brought pursuant to 18 U.S.C. § 1962(d) must be
dismissed because the Complaint does not set forth sufficient facts
suggesting that Defendants agreed to participate in a conspiracy.
(Defs.’

Br.

at

14-15.)

Plaintiffs

counter

that

Defendants’

intention to participate in a conspiracy can be inferred from their
conduct.

(Pls.’ Opp. Br. at 19.)
To

plead

a

RICO

conspiracy

claim

with

sufficient

particularity, the complaint must allege facts “implying an [ ]
agreement involving each of the defendants to commit at least two
predicate acts.”

Hecht v. Commerce Clearing House, Inc., 897 F.2d

21, 25 (2d Cir. 1990). “Because the core of a RICO civil conspiracy
is an agreement to commit predicate acts, a RICO civil conspiracy
complaint, at the very least, must allege specifically such an
agreement.” Id. Thus, the mere allegation that defendants engaged
in “parallel conduct,” standing alone, “affords an insufficient
basis for inferring that an agreement was reached.”

Elsevier,

Inc. v. W.H.P.R., Inc., 692 F. Supp. 2d 297, 313 (S.D.N.Y. 2010);
23

see also Naso v. Park, 850 F. Supp. 264, 275 (S.D.N.Y. 1994)
(finding that “[t]he Complaint simply does not make specific
factual allegations from which we can conclude that defendants
consciously agreed to commit predicate acts with knowledge of the
scope of the enterprise and intent to further its affairs”); Andreo
v. Friedlander, Gaines, Cohen, Rosenthal & Rosenberg, 660 F. Supp.
1362, 1372 (D. Conn. 1987) (explaining that “although [ ] parts of
the

amended

complaint

set

forth

in

detail

various

alleged

acts . . . they do not allege any objective manifestation of an
agreement

to

participate

in

a

RICO

enterprise

through

the

Plaintiffs’

conspiracy

claim,

the

commission of predicate acts”).
In

support

of

Complaint alleges simply that “Defendants conspired to defraud
Plaintiffs by agreeing, between and among each other, to purchase,
or cause the purchase of, subscriptions at discounted rates from
Plaintiffs.”

(Compl. ¶ 141.)

Other portions of the Complaint

discuss social links between Defendants.

For example, discount

subscriptions ordered by various Defendants were shipped to the
same address, 21 Meyers Avenue, and the Complaint claims that
social media connections link various defendants to one another.
(See Compl. ¶¶ 89, 114 115).

However, the fact that Defendants

engaged in parallel conduct and shared social connections is not
sufficient to allege a RICO conspiracy.
RICO

conspiracy

claim

is

DISMISSED.
24

Therefore, Plaintiffs’
For

the

same

reasons,

Plaintiffs’ fourth cause of action for conspiracy to commit fraud
is DISMISSED.

See In re Monahan Ford Corp. of Flushing, 340 B.R.

1, 36 (Bankr. E.D.N.Y. 2006) (dismissing a conspiracy to commit
fraud claim for failure to plead, with sufficient particularity,
that the parties entered into an agreement to engage in fraud).
E.

Aiding and Abetting Fraud
The Memon Defendants argue that Plaintiffs’ aiding and

abetting fraud must claim be dismissed because Plaintiffs did not
plead

sufficient

facts

establishing

that

all

Defendants had knowledge of the fraudulent scheme.
19.)

of

the

Memon

(Defs.’ Br. at

The Court agrees.
To state a claim for aiding and abetting fraud under New

York law, a plaintiff must plead facts showing: “1) the existence
of a fraudulent scheme, 2) that the defendant had actual knowledge
of the fraud, and 3) that the defendant provided substantial
assistance to the fraudulent scheme.”

Rosner v. Bank of China,

349 F. App’x 637, 638 (2d Cir. 2009) (citation omitted).

Wight v.

BankAmerica Corp., 219 F.3d 79, 91 (2d Cir. 2000) (collecting
cases).

The allegation that the Defendants had actual knowledge

of the fraudulent scheme need not meet the heightened pleading
requirements

of

Rule

9(b).

See

Wight,

219

F.3d

at

91.

Nevertheless, the Complaint must allege some facts tending to show
that Defendants’ had knowledge of the fraudulent scheme at issue.
Mazzaro de Abreu v. Bank of Am. Corp., 525 F. Supp. 2d 381, 389
25

(S.D.N.Y. 2007) (holding that the plaintiff properly alleged that
bank defendant had knowledge of fraud because, inter alia, they
made transfers to “entities [they] knew were ‘black market currency
traders’”) (citation omitted).

Here, Plaintiffs failed to allege

sufficient facts showing that Hanif Memon, Samina Memon, Abdul
Karar, and Muhammad Tobria knew that Defendants were engaged in a
subscription fraud scheme. The Complaint merely alleges that these
defendants ordered subscriptions in their own names, shared social
connections,

and

“[u]pon

information

purported subscription fraud scheme.
not enough.

and

belief,”

knew

about

These bare allegations are

Therefore, Plaintiffs’ claim for aiding and abetting

fraud is DISMISSED WITHOUT PREJUDICE.
F.

Common Law Fraud
The Memon Defendants argue that Plaintiffs’ common law

fraud allegations must be dismissed because they are duplicative
of their breach of contract claims.

(Defs.’ Br. at 17.)

In

opposition, Plaintiffs argue that their fraud allegations are
different from their breach of contract claims because the two
causes of action rely on distinct conduct.

(Pls.’ Opp. Br. at

23.)
Under New York law, “a cause of action to recover damages
for fraud does not lie when the only fraud alleged relates to a
breach of contract.”

Jim Longo, Inc. v. Rutigliano, 251 A.D.2d

547, 548, 674 N.Y.S.2d 730 (2d Dep’t 1998).
26

However, “parallel

fraud

and

contract

claims

may

be

brought

if

the

plaintiff

(1) demonstrates a legal duty separate from the duty to perform
under the contract; (2) points to a fraudulent misrepresentation
that is collateral or extraneous to the contract; or (3) seeks
special

damages

that

are

unrecoverable

as

contract

damages.”

Merrill Lynch & Co. v. Allegheny Energy, Inc., 500 F.3d 171, 183
(2d Cir. 2007); see also Koch v. Greenberg, No. 07-CV-9600, 2008
WL 4778813, at *4 (S.D.N.Y. Oct. 31, 2008).

Plaintiffs’ common

law fraud claim overlaps to some degree with their breach of
contract allegations because both causes of action are based upon
the premise the Defendants were buying discount journals to sell
to institutions at a higher price.

However, the Complaint alleges

conduct that specifically sounds in fraud--namely that Defendants
provided Plaintiffs with false end-user information, including
fake names in an effort to secure a larger supply of discount
subscriptions.

Such

conduct

does

Plaintiffs’ breach of contract claim.

not

fit

squarely

within

Since Plaintiffs’ fraud

allegation will “not expand the scope of discovery, it makes sense
to permit [them to] . . . proceed at this stage, and to revisit
the issue of whether the contract claim subsumes the fraud claim
after discovery, via a summary judgment motion.”

Kermanshah v.

Kermanshah, 580 F. Supp. 2d 247, 268 (S.D.N.Y. 2008).

27

G.

Breach of Contract Claims
The Memon Defendants ask the Court to rule that any

breach of contract allegations that occurred before January 16,
2007 be barred by New York’s six-year statute of limitations.
(Defs.’ Br. at 20.)

Plaintiffs concede that the statute of

limitations for breach of contract claims is six years, but argues
that the limitations period should be equitably tolled because the
Memon Defendants concealed their breaches of contract.

(Pls.’

Opp. Br. at 23.)
In New York, the statute of limitations for breach of
contract claims is six years.

See N.Y. CPLR § 213.

However, the

doctrine of equitable tolling can permit a “claim to be filed
outside of the applicable limitations period where some action on
the plaintiff’s part made it such that the defendants were unaware
that the cause of action existed.”

Meridien Int’l Bank Ltd. v.

Gov’t of the Republic of Liberia, 23 F. Supp. 2d 439, 446 (S.D.N.Y.
1998); Long v. Frank, 22 F.3d 54, 58 (2d Cir. 1994), cert. denied,
513 U.S. 1128, 115 S. Ct. 938, 130 L. Ed. 2d 883 (1995).

The

Court already determined that the Complaint sets forth facts
showing that Defendants took steps to conceal their scheme and
neither party can estimate, at this juncture, when Plaintiffs
discovered Defendants’ conduct.

Therefore, the Memon Defendants’

statute of limitations argument is premature.

28

H.

Conversion
The Memon Defendants claim that Plaintiffs’ conversion

claim must be dismissed because it is duplicative of their breach
of contract claim.

(Defs.’ Br. at 20-21.)

Plaintiffs assert that

the Memon Defendants’ argument “ignores [the] allegations that the
Memon Defendants took possession of Plaintiffs’ revenue.”

(Pls.’

Opp. Br. at 24.)
Under

New

York

Law,

“[c]onversion

occurs

when

a

defendant exercises unauthorized dominion over personal property
in interference with a plaintiff’s legal title or superior right
of possession.”

LoPresti v. Terwilliger, 126 F.3d 34, 41 (2d Cir.

1997). “To maintain a claim for conversion, a plaintiff must show:
(1) the property subject to conversion is a specific identifiable
thing; (2) plaintiff had ownership, possession or control over the
property before its conversion; and (3) defendant exercised an
unauthorized dominion over the thing in question, to the alteration
of its condition or to the exclusion of the plaintiff’s rights.”
Moses v. Martin, 360 F. Supp. 2d 533, 541 (S.D.N.Y. 2004) (internal
quotation marks and citation omitted).

However, “to sustain a

conversion claim, a plaintiff must allege acts that are unlawful
or wrongful as distinguished from acts that are a mere violation
of contractual rights.”

Fraser v. Doubleday & Co., 587 F. Supp.

1284, 1288 (S.D.N.Y. 1984); AD Rendon Commc’ns, Inc. v. Lumina
Americas, Inc., No. 04-CV-8832, 2006 WL 1593884, at *4 (S.D.N.Y.
29

June 7, 2006) (finding a conversion claim to be duplicative of a
breach of contract claim when the defendant merely “transferred
and

retained

p]laintiff”).

monies

that

contractually

belonged

to

[the

Plaintiffs’ conversion claim is based upon the

premise that Defendants “transferred and retained monies that
contractually belonged to Plaintiff.”

Id.

In other words, the

only reason Defendants’ resale of the journals at issue was
wrongful was because Defendants breached their written promises.
Plaintiffs’ conversion claim therefore does not addresses a wrong
separate and apart from their breach of contract claim.

Since

Plaintiffs’ conversion claim fails as a matter of law, it is
therefore DISMISSED WITH PREJUDICE.
II.

Plaintiffs’ Motion for a Default Judgment
Plaintiffs

move

pursuant

to

Federal

Rule

of

Civil

Procedure 37 to strike the Gaziani Defendants’ Answer and enter a
default

judgment

against

them

because

participate in the discovery process.

of

their

failure

to

(Pls.’ Br. Supp. Mot.

Strike, at 1.)
A.

Relevant Facts
On January 17, 2013, Plaintiffs attempted to serve the

Gaziani

Defendants

through

Docket Entry 146-1, ¶ 3.)
submitting

a

document

on

the

Hague

Convention

(Haff

Decl.,

The Gaziani Defendants responded by
March

12,

2013

titled

“Written

Submission/Objections on Behalf of Muhamad Iqbal Gaziani and Haji
30

Suleman Gaziani,” which was docketed as the Gaziani Defendants’
Answer.

(Docket Entry 20.)

Plaintiffs served discovery requests

and interrogatories on the Gaziani Defendants in December 2013 but
the Gaziani Defendants never responded.
The

Gaziani

Defendants

have

never

(Haff. Decl. ¶¶ 6-8.)

appeared

at

a

discovery

conference and, apart from submitting an Answer and letters to the
Court, they have not participated in this case.

(See Order to

Show Cause, Docket Entry 99 at 3; Defs.’ January 1, 2015 Ltr.,
Docket Entry 161, at 1-2.)
On July 18, 2014, Magistrate Judge Tomlinson issued an
Order to Show Cause directing the Gaziani Defendants to appear on
September

12,

2014

and

show

cause

why

recommend that their Answer be stricken.
3-4.)

the

Court

should

not

(Order to Show Cause at

The Order to Show Cause also stated:
THE
GAZIANI
DEFENDANTS
ARE
HEREBY
OFFICIALLY ON NOTICE THAT ANY FAILURE TO
APPEAR AT THE SEPTEMBER 12, 2014 ORDER TO
SHOW CAUSE HEARING AT 10:30 A.M., AS
ORDERED BY THIS COURT, MAY RESULT IN THIS
COURT’S RECOMMENDATION TO JUDGE SEYBERT
THAT THEIR ANSWER BE STRICKEN AND THAT
PLAINTIFFS BE PERMITTED TO MOVE FORWARD
WITH A MOTION FOR ENTRY OF A DEFAULT
JUDGMENT AGAINST THEM, FOR THEIR FAILURE
TO COMPLY WITH THE COURT’S ORDERS AND
FAILURE TO COMPLY WITH THEIR DISCOVERY
OBLIGATIONS.

(Order to Show Cause at 4 (emphasis in original).)

The Gaziani

Defendants responded by submitting a document titled “Application
for Exemption for Appearance,” asking the Court to find that they
31

were “exempt” from appearing. (See Gaziani Affidavit, Docket Entry
109,

¶

2.)

The

Affidavit

also

asked

the

Court

to

direct

Plaintiffs’ to engage a lawyer in Pakistan to sue them locally.
(See Gaziani Affidavit ¶ 4.)

In light of the Gaziani Defendants’

response, Judge Tomlinson issued an Order on August 20, 2014
directing Plaintiffs’ counsel to contact the Gaziani Defendants in
an effort to facilitate their appearance in Court via Skype.
August 18, 2014 Order, Docket Entry 110, at 2.)

(See

Plaintiffs’

counsel attempted to contact the Gaziani Defendants at least ten
different

times--by

email,

phone,

and

through

Gaziani Defendants could not be reached.

Skype--but

the

(Haff. Decl. ¶¶ 16-35;

October 28, 2014 Minute Order, Docket Entry 138.)
On September 30, 2014, a hearing on the Order to Show
Cause

was

held,

but

the

Gaziani

Defendants

did

not

appear.

Following the hearing, Judge Tomlinson authorized Plaintiffs to
move to strike the Gaziani Defendants’ Answer and enter a default
judgment against them.
Judge

Tomlinson

noted

(October 28, 2014 Minute Order at ¶ 1)
that

the

Gaziani

Defendants

“have

not

complied with their discovery obligations.” (October 28, 2014
Minute Order at ¶ 1.)

In response to Plaintiffs’ motion to strike

the Gaziani Defendants submitted a letter to the Court stating
that they were facing “difficulty [] follow[ing] US Civil Laws”
and again asking Plaintiffs to bring suit against them locally in

32

Pakistan.

(Defs.’ January 16, 2015 Ltr., Docket Entry 161, at 1-

2.)
B.

Default Judgment
Rule 37 allows the Court to impose sanctions on a party

that fails to Comply with discovery orders.
37(b)(2).

See FED. R. CIV. P.

“The imposition of sanctions under Rule 37 lies within

the discretion of the district court,” and may including striking
pleadings

or

entering

a

default

judgment.

Stirrat

v.

Ace

Audio/Visual, Inc., No. 02-CV-2842, 2004 WL 2212096, at *1 (E.D.N.Y
Sept. 24, 2004).

Rule 55(a) also allows the Court to enter a

default judgment against a party for failing to “plead or otherwise
defend.” FED. R. CIV. P. 55(a).
Although

entering

a

default

judgment

is

a

“harsh

remedy,” Dodson v. Runyon, 86 F.3d 37, 39 (2d Cir. 1996), when
discovery orders are willfully breached, imposing a litigationending sanction may be appropriate.

Bambu Sales, Inc. v. Ozak

Trading, Inc., 58 F. 3d 849, 853 (2d. Cir. 1995).

Courts have

considered the following factors before deciding whether to enter
a default judgment: “(a) willfulness or bad faith on the part of
the noncompliant party; (b) the history, if any, of noncompliance;
(c)

the

effectiveness

noncompliant

party

had

of

lesser

been

sanctions;

warned

about

(d)

the

whether

possibility

the
of

sanctions; (e) the client’s complicity; and (f) prejudice to the
moving party.”

Am. Cash Card Corp. v. AT&T Corp., 184 F.R.D. 521,
33

524 (S.D.N.Y. 1999) aff’d Am. Cash Card Corp. v. AT&T Corp., 210
F.3d 354 (2d Cir. 2000).
Here, the equities weigh in favor of striking the Gaziani
Defendants’ Answer and entering a default judgment.

The Court has

made every effort to accommodate the Gaziani Defendants and attempt
to compel their appearance.

But beyond submitting an Answer and

three letters, the Gaziani Defendants have not participated in
this case in any meaningful way, and have repeatedly disobeyed the
Court’s

orders.

It

can

only

be

surmised

that

the

Gaziani

Defendants’ conduct is willful and they have no intention of
litigating

this

action.

Silverman

&

Silverman

v.

Pacifica

Foundation, 11-CV-1894, 2014 WL 3724801, at *4 (striking the
defendant’s answer and entering a default judgment when defendant
provided “minimal discovery . . . failed to communicate with [the]
plaintiff and [] repeatedly failed to follow . . . [the] court’s
orders”); Chopen v. Olive Vine, Inc., No. 12-CV-2269, 2014 WL
198814, at *3 (E.D.N.Y. Jan. 15, 2014) (striking answer and
entering a default judgment when the defendant repeatedly failed
to appear at scheduled discovery conferences).
sanction is appropriate.

Thus, no lesser

Plaintiffs’ motion to strike the Gaziani

Defendants’ Answer and enter a default judgment is therefore
GRANTED.

34

C.

Damages
“A default constitutes an admission of all well-pleaded

factual allegations in the complaint and the allegations as they
pertain to liability are deemed true.”

Krevat v. Burgers to Go,

Inc., No. 13-CV-6258, 2014 WL 4638844, at *5 (E.D.N.Y. Sept. 16,
2014).

However, entry of a default judgment does not resolve the

question of damages.
be

held

jointly

“Where there are multiple defendants who may

and

severally

liable

and

‘some

but

not

all

defendants have defaulted, ‘the courts have consistently held that
it is appropriate to enter judgment solely as to liability and not
as to the amount of damages to be assessed against the defaulting
party . . . .’”

Krevat, 2014 WL 4638844, at *15 (quoting Montcalm

Publ’g Corp. v. Ryan, 807 F. Supp. 975, 978 (S.D.N.Y. 1992); Long
Island Hous. Servs. v. Greenview Props., Inc., No. 07-CV-0352,
2008 WL 150222, at *1 (E.D.N.Y. Jan. 11, 2008) (“When there are
multiple defendants who may be jointly and severally liable for
damages alleged by plaintiff, and some but less than all of those
defendants default, the better practice is for the district court
to stay its determination of damages against the defaulters until
plaintiff’s

claim

against

the

nondefaulters

is

resolved.”).

Although the Gaziani Defendants refuse to participate in this case,
the

Memon

Defendants

Plaintiffs’ claims.

and

others

are

actively

litigating

It would therefore be premature to discuss

damages because of the possibility of inconsistent rulings.
35

III. Leave to Amend
The Second Circuit has stated that “[w]hen a motion to
dismiss is granted, the usual practice is to grant leave to amend
the complaint.”

Hayden v. Cnty. of Nassau, 180 F.3d 42, 53 (2d

Cir. 1999); see also Fed. R. Civ. P. 15(a)(2) (“The court should
freely

give

leave

[to

amend]

when

justice

so

requires.”).

“Nonetheless, courts may deny leave to replead where amendment
qualifies as futile.”

Herbert v. Delta Airlines, No. 12–CV–1250,

2014 WL 4923100, at *5 (E.D.N.Y. Sept. 30, 2014) (citing Cuoco v.
Moritsugu, 222 F.3d 99, 112 (2d Cir. 2000)). Therefore, Plaintiffs
are granted leave to replead their RICO claims brought against
Hanif Memon, Samina Memon, Abdul Karar, and Muhammad Tobria; their
RICO conspiracy claim brought pursuant to 18 U.S.C. 1962(d); their
aiding and abetting fraud claim; and their conspiracy to commit
fraud claim.

Because Plaintiffs’ conversion claim fails as a

matter of law, however, any attempt to replead would be futile.
Therefore, Plaintiffs’ are not granted leave to replead their
conversion claim.
CONCLUSION
For the foregoing reasons, the Memon Defendants’ motion
for judgment on the pleadings, (Docket Entry 84), is GRANTED IN
PART AND DENIED IN PART.
brought

against

Hanif

Specifically, the Civil RICO claims

Memon,

Samina

Memon,

Abdul

Karar,

and

Muhammad Tobria and Plaintiffs’ RICO conspiracy claim, brought
36

pursuant to 18 U.S.C. 1962(d) are DISMISSED WITHOUT PREJDICE.
Plaintiffs’ aiding and abetting fraud claim and conspiracy to
commit

fraud

claim

are

also

DISMISSED

WITHOUT

PREJUDICE.

Plaintiffs’ conversion claim is DISMISSED WITH PREJUDICE.
balance of the Memon Defendants’ motion is DENIED.

The

If Plaintiffs’

wish to file an Amended Complaint, they must do so within thirty
(30) days of the date of this Order.
Plaintiffs’ motion to strike the Gaziani Defendants’
Answer and enter a default judgment against them, (Docket Entry
146), is GRANTED.

Therefore, the Clerk of the Court is directed

to enter certificates of default for Defendants Haji Suleman
Gaziani and Mohammad Iqbal Gaziani.

The Court will defer ruling

on the measure of damages owed by the Gaziani Defendants until the
case is resolved against all non-defaulting defendants.

SO ORDERED.

/s/ JOANNA SEYBERT______
Joanna Seybert, U.S.D.J.
Dated:

March
23 , 2015
Central Islip, New York

37