Brookhaven Town Conservative Committee v. Walsh et al

Filing 36

ORDER granting 29 Motion to Dismiss for Failure to State a Claim. For the reasons stated herein, the Court grants defendants' motion to dismiss the RICO claim with prejudice. Given the dismissal of plaintiffs' federal claim, the Court declines, in its discretion, to exercise supplemental jurisdiction over plaintiffs' state law claim for fraudulent inducement and, thus, dismisses this claim without prejudice to re-filing in state court. The Clerk of the Court shall enter judgment accordingly and close this case. SO ORDERED. Ordered by Judge Joseph F. Bianco on 6/15/2017. (Zbrozek, Alex)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
_____________________
No 14-CV-6097 (JFB)(ARL)
_____________________

BROOKHAVEN TOWN CONSERVATIVE COMMITTEE, ET AL.,
Plaintiffs,
VERSUS

EDWARD M. WALSH, JR., ET AL.,
Defendants.
_______________________
MEMORANDUM AND ORDER
June 15, 2017
_______________________

JOSEPH F. BIANCO, District Judge:
Plaintiff Brookhaven Town Conservative
Committee (“BTCC”), along with several
individuals
and
corporate
entities
(collectively, “plaintiffs”), brings this action
against defendants Edward M. Walsh, Jr.
(“Walsh”), Suffolk County Conservative
Party of New York State (the “SCCP”),
Suffolk County Conservative Chairman’s
Committee H.K., and Suffolk County
Conservative Chairman’s Club (collectively,
(“defendants”). Plaintiffs allege (1) an 18
U.S.C. § 1962(c) cause of action predicated
on mail and wire fraud claims that stem from
Walsh’s purported diversion of monetary
donations; and (2) a New York State law
fraudulent inducement claim.
This is plaintiff BTCC’s third attempt to
plead a claim under the Racketeer Influenced
and Corrupt Organizations (“RICO”) Act.
By Memorandum and Order dated March 23,
2016 (the “Memorandum and Order”), the
Court dismissed BTCC’s First Amended
Complaint (“FAC”) but granted leave to re-

plead. See Brookhaven Town Conservative
Comm. v. Walsh, No. 14-CV-6097 (JFB)
(ARL), 2016 WL 1171583, at *1 (E.D.N.Y.
Mar. 23, 2016). The Court concluded that
BTCC had failed to allege a cognizable RICO
injury based on the “the loss of its WilsonPakula authority”—an authorization given by
a New York political party that allows an
individual not registered with that party to
run as its candidate in a given election—
because BTCC “had no right to the WilsonPakula authority in the first place.” Id. at *1,
6. However, “in an abundance of caution,”
the Court permitted BTCC to file another
pleading containing “additional factual
allegations with respect to the alleged
diversion of its funds.” Id. at *7. The Court
concluded that “it may be possible to allege a
RICO injury based upon” such conduct, but
cautioned that “it is entirely unclear that
plaintiff could plausibly allege all of the
elements of a civil RICO claim under this
theory . . . .” Id.

Defendant Walsh has been the Chairman
of the SCCP since 2006. (Id. ¶¶ 10, 27.) The
SCCP is the governing body of the Suffolk
County Committee of the Conservative Party
of New York State. (Id. ¶ 11.) After Walsh
was elected as Chairman of the SCCP, he
“caused to be formed” the political
committees of defendants Suffolk County
Conservative
Chairman’s
Club
(the
“SCCCC”) and Suffolk County Conservative
Chairman’s
Committee
H.K.
(the
“SCCCHK”); both are controlled by Walsh.
(Id. ¶¶ 12-15, 28-29.) Plaintiffs allege that
Walsh’s “purposes, among others, are to
increase his political clout in Suffolk County
by absolutely and exclusively controlling the
affairs of the BTCC (and similar committees
within the County) and by diverting funds
intended for the SCCP to his own purposes”
through mail and wire fraud. (Id. ¶¶ 24, 31.)

Subsequently, on April 22, 2016,
BTCC—together with plaintiffs Cartier,
Bernstein, Auerbach & Dazzo, P.C.;
Homeside Realty Group, Inc.; Johannesen &
Johannesen, PLLC; Linda Boswell; Donald
S. Sullivan; Brocato & Byrne, LLP; and
Vincent Finnegan—filed a Second Amended
Complaint (“SAC”), which principally
alleges that Walsh committed mail and wire
fraud by siphoning plaintiffs’ contributions to
the SCCP for his personal use. Defendants
now move to dismiss the SAC pursuant to
Federal Rules of Civil Procedure 9(b),
12(b)(1), and 12(b)(6).
For the reasons set forth below, the Court
again dismisses plaintiffs’ RICO claim for
failure to plead mail and wire fraud with the
requisite particularity.
Given plaintiffs’
evident inability to state a plausible RICO
claim despite multiple attempts to do so, this
dismissal is with prejudice. Finally, the
Court declines, in its discretion, to exercise
supplemental jurisdiction over plaintiffs’
New York State law claim and dismisses that
cause of action without prejudice to re-filing
in state court.

Specifically, plaintiffs assert that, in or
around 2009, Walsh “during the course of a
Suffolk
County
Conservative
Party
Executive Committee meeting, placed a
Resolution on the record granting himself a
$65,000 per year annual stipend” that the
SCCP Executive Committee unanimously
approved. (Id. ¶ 30.) Further, at least twice
a year since becoming Chairman, Walsh has
sent fundraising announcements to members
of all town committees and other registered
conservatives by electronic and paper mail.
(Id. ¶¶ 32, 34.) Walsh uses the SCCP’s
official seal and party mailing list to advertise
and fundraise. (Id. ¶ 33.) The recipients of
those fundraising announcements, including
plaintiffs, donated money to advance the
political goals of the SCCP. (Id. ¶ 37; see
also id. ¶¶ 38-45 (delineating specific
contributions made by plaintiffs in response
to Walsh’s solicitations).)

I. BACKGROUND
A. Factual Background
The Court takes the following facts from
the SAC. (ECF No. 22.) The Court assumes
these facts to be true for purposes of deciding
this motion and construes them in the light
most favorable to plaintiffs as the nonmoving party.
Plaintiff BTCC is the governing body of
the Town of Brookhaven Conservative
Committee.
(SAC ¶ 1.)
BTCC was
organized to conduct “a local political
committee for purposes of promoting,
screening, and nominating local candidates
with conservative values within the Town of
Brookhaven” and to raise money to support
such candidates. (Id. ¶ 21.)

For instance, plaintiffs contend that
fundraisers were held on or about June 20,
2011; October 19, 2011; October 30, 2012;
April 1, 2014; and October 29, 2014. (Id.
2

20, 2016 (ECF No. 29); plaintiffs filed their
opposition on December 23, 2016 (ECF No.
32); and defendants replied on January 28,
2017 (ECF No. 34). The Court held oral
argument on February 8, 2017 (ECF No. 35)
and has fully considered the parties’
submissions.

¶¶ 62-66.) They allege that the invitations
for those fundraisers stated that checks
should be made out to the SCCCC, which is
controlled exclusively by Walsh without
oversight by other SCCP members. (Id.)
Plaintiffs further allege that the money
received through those fundraisers is
deposited into the bank accounts of either the
SCCCHK or SCCCC, which are under
Walsh’s control, and that Walsh’s monthly
SCCP stipend of $5,117.00 is paid through
those contributions. (Id. ¶¶ 46-47.) Walsh
purportedly created both of these entities “to
receive and divert funds intended to be
contributed to the SCCP.” (Id. ¶¶ 35-36.)
Plaintiffs further allege that Walsh receives
other funds for his benefit through the
SCCCHK and the SCCCC that were never
authorized by the SCCP Executive
Committee, such as $1,200 per month for his
car,
gas
reimbursement,
insurance
reimbursement, and miscellaneous office
expenses. (Id. ¶¶ 48-49, 67.) Plaintiffs assert
that, during 2013 and 2014, the majority of
SCCCHK and SCCCC’s expenditures were
for Walsh’s individual gain; specifically,
SCCCHK’s July 2014 disclosure to the New
York State Board of Elections showed that of
the $44,950.13 in total expenditures,
$41,711.87 was used for Walsh’s personal
benefit. (Id. ¶ 68.)

II. STANDARD OF REVIEW
In reviewing a motion to dismiss pursuant
to Federal Rule of Civil Procedure 12(b)(6),
the Court must accept the factual allegations
set forth in the complaint as true and draw all
reasonable inferences in favor of the plaintiff.
See Cleveland v. Caplaw Enters., 448 F.3d
518, 521 (2d Cir. 2006); Nechis v. Oxford
Health Plans, Inc., 421 F.3d 96, 100 (2d Cir.
2005). “In order to survive a motion to
dismiss under Rule 12(b)(6), a complaint
must allege a plausible set of facts sufficient
‘to raise a right to relief above the speculative
level.’” Operating Local 649 Annuity Trust
Fund v. Smith Barney Fund Mgmt. LLC, 595
F.3d 86, 91 (2d Cir. 2010) (quoting Bell Atl.
Corp. v. Twombly, 550 U.S. 544, 555
(2007)). This standard does not require
“heightened fact pleading of specifics, but
only enough facts to state a claim to relief that
is plausible on its face.” Twombly, 550 U.S.
at 570.
The Supreme Court clarified the
appropriate pleading standard in Ashcroft v.
Iqbal, setting forth a two-pronged approach
for courts deciding a motion to dismiss. 556
U.S. 662 (2009). The Supreme Court
instructed district courts to first “identify[]
pleadings that, because they are no more than
conclusions, are not entitled to the
assumption of truth.” Id. at 679 (explaining
that though “legal conclusions can provide
the framework of a complaint, they must be
supported by factual allegations”). Second,
if a complaint contains “well-pleaded factual
allegations, a court should assume their
veracity and then determine whether they

B. Procedural Background
Plaintiff BTCC commenced this action
on October 17, 2014 (ECF No. 1) and filed
the FAC on November 24, 2014 (ECF No. 9).
Defendants moved to dismiss on March 13,
2015 (ECF No. 16), and after the parties fully
briefed that motion and the Court heard oral
argument, the Court issued the Memorandum
and Order dismissing the RICO claim with
leave to re-plead (ECF No. 21).
Thereafter, plaintiffs filed the SAC on
April 22, 2016. (ECF No. 22.) Defendants
moved to dismiss that pleading on September
3

949 F.2d 42, 48 (2d Cir. 1991) (“[T]he
district court . . . could have viewed [the
documents] on the motion to dismiss because
there was undisputed notice to plaintiffs of
their contents and they were integral to
plaintiffs’ claim.”).

plausibly give rise to an entitlement to relief.”
Id. A claim has “facial plausibility when the
plaintiff pleads factual content that allows the
court to draw the reasonable inference that
the defendant is liable for the misconduct
alleged. The plausibility standard is not akin
to a ‘probability requirement,’ but it asks for
more than a sheer possibility that a defendant
has acted unlawfully.” Id. at 678 (quoting
and citing Twombly, 550 U.S. at 556-57
(internal citation omitted)).

III. DISCUSSION
Defendants move to dismiss the SAC on
the following grounds: (1) plaintiffs lack
standing; (2) plaintiffs fail to state a claim for
a civil RICO violation; (3) the RICO claim is
time-barred; (4) the SAC raises only nonjusticiable
political
questions;
and
(5) plaintiffs fail to state a New York State
law claim for fraudulent inducement. As set
forth below, the Court concludes that
plaintiffs have standing to assert their RICO
claim but have failed to plead their mail and
wire fraud claims with the requisite
particularity. 1
The Court, therefore,
dismisses that claim with prejudice. In
addition, the Court declines, in its discretion,
to exercise supplemental jurisdiction over
plaintiffs’ state law claim and dismisses that
cause of action without prejudice to re-filing
in state court.

The Court notes that in adjudicating a
Rule 12(b)(6) motion, it is entitled to
consider:
(1) facts alleged in the complaint and
documents attached to it or
incorporated in it by reference,
(2) documents ‘integral’ to the
complaint and relied upon in it, even
if not attached or incorporated by
reference,
(3)
documents
or
information contained in defendant’s
motion papers if plaintiff has
knowledge or possession of the
material and relied on it in framing
the complaint, (4) public disclosure
documents required by law to be, and
that have been, filed with the
Securities
and
Exchange
Commission, and (5) facts of which
judicial notice may properly be taken
under Rule 201 of the Federal Rules
of Evidence.

A. RICO
1. Applicable Law
Under RICO, it is “unlawful for any
person employed by or associated with any
enterprise engaged in, or the activities of
which affect, interstate or foreign commerce,
to conduct or participate, directly or
indirectly, in the conduct of such enterprise’s
affairs through a pattern of racketeering
activity or collection of unlawful debt.” 18
U.S.C. § 1962(c). “When § 1962 is violated,
in addition to criminal penalties, the RICO

In re Merrill Lynch & Co., 273 F. Supp. 2d
351, 356-57 (S.D.N.Y. 2003) (internal
citations omitted), aff’d in part and reversed
in part on other grounds sub nom. Lentell v.
Merrill Lynch & Co., 396 F.3d 161 (2d Cir.
2005), cert. denied, 546 U.S. 935 (2005); see
also Cortec Indus., Inc. v. Sum Holding L.P.,
1

Accordingly, the Court need not, and does not,
address defendants’ other arguments in support of
dismissing the RICO claim, including that the

communications at issue did not pass through
interstate commerce and that plaintiffs have failed to
plead a pattern of racketeering activity.

4

plaintiffs wielding RICO almost always miss
the mark. See Gross v. Waywell, 628 F.
Supp. 2d 475, 479-83 (S.D.N.Y. 2009)
(conducting survey of 145 civil RICO cases
filed in the Southern District of New York
from 2004 through 2007, and finding that all
thirty-six cases resolved on the merits
resulted in judgments against the plaintiffs,
mostly at the motion to dismiss stage).
Accordingly,
courts
have expressed
skepticism toward civil RICO claims. See,
e.g., DLJ Mortg. Capital, 726 F. Supp. 2d at
236 (“[P]laintiffs have often been
overzealous in pursuing RICO claims,
flooding federal courts by dressing up run-ofthe-mill fraud claims as RICO violations.”).

statutes also authorize civil lawsuits, which,
if successful, can entitle a plaintiff to treble
damages, costs, and attorney’s fees.” DLJ
Mortg. Capital, Inc. v. Kontogiannis, 726 F.
Supp. 2d 225, 236 (E.D.N.Y. 2010) (citing 18
U.S.C. § 1964(c)).
Specifically, 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).
“To establish a civil RICO claim [under
18 U.S.C. § 1964(c)], a plaintiff must allege
‘(1) conduct, (2) of an enterprise, (3) through
a pattern (4) of racketeering activity,’ as well
as ‘injury to business or property as a result
of the RICO violation.’” Lundy v. Catholic
Health Sys. of Long Island Inc., 711 F.3d 106,
119 (2d Cir. 2013) (quoting Anatian v. Coutts
Bank Ltd., 193 F.3d 85, 88 (2d Cir. 1999)).
“The pattern of racketeering activity must
consist of two or more predicate acts of
racketeering.”
Id. (citing 18 U.S.C.
§ 1961(5)). Racketeering activity is defined
as “any act which is indictable” under
specified provisions of Title 18, including
mail fraud, wire fraud, extortion, and bank
fraud. 18 U.S.C. § 1961(1)(B).

Although civil RICO presents many
hurdles for a plaintiff to overcome, the
Supreme Court has also “made clear that it
would not interpret civil RICO narrowly.”
Attorney Gen. of Canada v. R.J. Reynolds
Tobacco Holdings, Inc., 268 F.3d 103, 139
n.6 (2d Cir. 2001) (citing Sedima, S.P.R.L. v.
Imrex Co., 473 U.S. 479 (1985)). In Sedima,
the Supreme Court rejected an interpretation
of civil RICO that would have confined its
application to “mobsters and organized
criminals.” 473 U.S. at 499. Instead, the
Court held: “The fact that RICO has been
applied in situations not expressly anticipated
by Congress does not demonstrate ambiguity.
It demonstrates breadth.”
Id. (internal
citation omitted); see also Anza v. Ideal Steel
Supply Corp., 547 U.S. 451, 479 (2006)
(Breyer, J., concurring in part and dissenting
in part) (“RICO essentially seeks to prevent
organized criminals from taking over or
operating legitimate businesses.
Its
language, however, extends its scope well
beyond those central purposes.”). Thus, a
court should not dismiss a civil RICO claim
if the complaint adequately alleges all
elements of such a claim, even if the alleged
conduct is not a quintessential RICO activity.

Courts have described civil RICO as “‘an
unusually potent weapon—the litigation
equivalent of a thermonuclear device.’”
Katzman v. Victoria’s Secret Catalogue, 167
F.R.D. 649, 655 (S.D.N.Y. 1996) (quoting
Miranda v. Ponce Fed. Bank, 948 F.2d 41, 44
(1st Cir. 1991)), aff’d, 113 F.3d 1229 (2d Cir.
1997). “Because the ‘mere assertion of a
RICO claim . . . has an almost inevitable
stigmatizing effect on those named as
defendants, . . . courts should strive to flush
out frivolous RICO allegations at an early
stage of the litigation.’”
Id. (quoting
Figueroa Ruiz v. Alegria, 896 F.2d 645, 650
(1st Cir. 1990)); see also DLJ Mortg. Capital,
726 F. Supp. 2d at 236. Indeed, although
civil RICO may be a “potent weapon,”
5

207, 231 (E.D.N.Y. 2014) (same);
Westchester Cnty. Indep. Party v. Astorino,
137 F. Supp. 3d 586, 612-13 (S.D.N.Y. 2015)
(collecting cases).

2. Analysis
Here, plaintiffs have (for the third time)
attempted to plead a RICO claim with mail
and wire fraud as the alleged underlying
predicate acts. (See SAC ¶¶ 50-72.) As a
threshold matter, the Court concludes that
plaintiffs have standing to assert that cause of
action, but it determines that they have failed
a state a plausible claim because they have
not pled their fraud claims with the requisite
particularity.

In the Memorandum and Order, the Court
found that BTCC had failed to allege
standing based on the loss of its WilsonPakula authorization because “such a claim
ignore[d] the simple fact that plaintiff had no
right to the Wilson-Pakula authority in the
first place” since “the decision whether to
grant or withhold Wilson-Pakula authority to
a town committee is a discretionary
determination . . . .” Brookhaven, 2016 WL
1171583, at *6. The Court further observed
that the FAC did not sufficiently support
BTCC’s allegation that it “suffered injury
based on a loss of diverted funds” and said
that if BTCC wished to advance that claim, it
“must file a second amended complaint that
more fully sets forth such a theory of RICO
injury.” Id. at *6 n.2.

a. Standing
“Standing” under RICO, for purposes of
a motion to dismiss, is not a jurisdictional
concept, but instead is analyzed as a merits
issue under Federal Rule of Civil Procedure
12(b)(6). See Lerner v. Fleet Bank, N.A., 318
F.3d 113, 116-17, 129-30 (2d Cir. 2003)
(“We hold that lack of RICO standing does
not divest the district court of jurisdiction
over the action, because RICO standing,
unlike other standing doctrines, is
sufficiently intertwined with the merits of the
RICO claim that such a rule would turn the
underlying
merits
questions
into
jurisdictional issues. . . . In sum, despite
describing
the
proximate
causation
requirement as ‘RICO standing,’ such
standing is not jurisdictional in nature under
Fed. R. Civ. P. 12(b)(1), but is rather an
element of the merits addressed under a Fed.
R. Civ. P. 12(b)(6) motion for failure to state
a claim.”). The Second Circuit has described
RICO standing as “a more rigorous matter
than standing under Article III.” Denney v.
Deutsche Bank AG, 443 F.3d 253, 266 (2d
Cir. 2006).

The SAC remedies this defect by
enumerating “clear and definite” monetary
contributions that plaintiffs made based on
Walsh’s
(supposedly
fraudulent)
solicitations. (SAC ¶¶ 38-45.) Nevertheless,
defendants summarily claim that, “[a]lthough
the Second Amended Complaint alleges that
plaintiffs have made political contributions,
there is simply no plausible allegation of any
injury in fact.” (Defs.’ Mot. Br., ECF No. 291, at 5.) However, assuming the truth of
plaintiffs’ allegations, their “economic losses
would constitute an injury to both the
plaintiffs’ business and property. Money
constitutes ‘property’ within the meaning of
RICO.” Blue Cross & Blue Shield of New
Jersey, Inc. v. Philip Morris, Inc., 36 F. Supp.
2d 560, 569 (E.D.N.Y. 1999); see also
Astorino, 137 F. Supp. 3d at 600 (“For both
wire and mail fraud, the object of the scheme
to defraud must be money or property.”).
Simply put, if defendants falsely represented
that plaintiffs’ financial donations would be

A plaintiff has standing to bring a RICO
claim only if he has been injured in his
business or property by the conduct
constituting the RICO violation, and only
when his actual loss is clear and definite. See
id.; see also Sky Med. Supply Inc. v. SCS
Support Claims Servs., Inc., 17 F. Supp. 3d
6

example, in Moore, the court held that a
complaint met this heightened pleading
standard where it “contain[ed] a chart listing
twelve different mailings said to contain
fraudulent representations, along with the
dates of these mailings and cross-references
to the paragraphs of the complaint in which
the mailings [were] further discussed.” 189
F.3d at 173; see also ABF Capital Mgmt. v.
Askin Capital Mgmt., L.P., 957 F. Supp.
1308, 1326 (S.D.N.Y. 1997) (holding that
complaint met particularity requirement
where, for each defendant, the “[p]laintiffs
identif[ied] and quote[d] from specific
written materials they allege[d] were
distributed to and relied upon by them, and
describe[d] how these materials were false or
failed to disclose material information”). By
contrast, in Colony at Holbrook, 928 F. Supp.
at 1231, the court held that a complaint did
not meet Rule 9(b)’s heightened pleading
standard because it did not include
“statements setting forth the content, date, or
place of any alleged misrepresentations, and
the identity of the persons making them.” Id.
(brackets omitted). Instead, the complaint
“contain[ed]
sweeping
and
general
allegations of mail and wire fraud directed at
all the defendants rather than connecting the
alleged fraud to the individual defendants.”
Id.; see also McGee v. State Farm Mut. Auto.
Ins. Co., No. 08-CV-392 FB CLP, 2009 WL
2132439, at *5 (E.D.N.Y. July 10, 2009)
(holding that a plaintiff failed to plead fraud
with particularity where he “loosely allege[d]
throughout his complaint that the defendants
contacted each other by means of the mails
and/or the wires, without specifying precise

used for some purpose, such as SCCP
political activities, and then used those funds
for Walsh’s personal benefit, then
“defendants fraudulently induced plaintiffs to
take actions and make expenditures that
would result in their financial injury.”
Standardbred Owners Ass’n v. Roosevelt
Raceway Assocs., L.P., 985 F.2d 102, 105 (2d
Cir. 1993). This purported harm falls
squarely within RICO’s statutory ambit. 2 See
Kerik v. Tacopina, 64 F. Supp. 3d 542, 560
(S.D.N.Y. 2014) (“Courts have required that
the plaintiff show ‘concrete financial loss’ in
order to show injury under RICO.”
(collecting cases)).
b. Particularity
As predicate acts for its RICO claim,
plaintiffs allege that defendants engaged in
mail and wire fraud in violation of 18 U.S.C.
§§ 1341 and 1343. 3 (See SAC ¶¶ 50-72.)
When alleging fraudulent activities as
predicate acts for a RICO claim, a plaintiff
must satisfy the particularity requirements of
Federal Rule of Civil Procedure 9(b). Moore
v. PaineWebber, Inc., 189 F.3d 165, 172-73
(2d Cir. 1999).
Accordingly, a RICO
plaintiff must “(1) specify the statements that
the plaintiff contends were fraudulent,
(2) identify the speaker, (3) state where and
when the statements were made, and
(4) explain why the statements were
fraudulent.” Anatian, 193 F.3d at 88. If
“there are multiple defendants involved, the
plaintiff must connect the allegations of fraud
to each individual defendant.” Colony at
Holbrook, Inc. v. Strata G.C., Inc., 928 F.
Supp. 1224, 1231 (E.D.N.Y. 1996). For
2

3

To the extent that defendants argue that plaintiffs
lack Article III standing for failing to allege an injuryin-fact, the same pecuniary losses also satisfy that
requirement. See Czyzewski v. Jevic Holding Corp.,
137 S. Ct. 973, 983 (2017) (“For [constitutional]
standing purposes, a loss of even a small amount of
money is ordinarily an ‘injury.’”).

“The elements of wire fraud under 18 U.S.C. § 1343
are (i) a scheme to defraud (ii) to get money or
property, (iii) furthered by the use of interstate wires.”
Tymoshenko v. Firtash, 57 F. Supp. 3d 311, 321
(S.D.N.Y. 2014) (quoting United States v. Pierce, 224
F.3d 158, 165 (2d Cir. 2000)). “The elements of mail
fraud under 18 U.S.C. § 1341 are identical, except that
mail fraud must be furthered by use of the mails.” Id.

7

Brokers.” Id. at 1327. On the other hand, in
Odyssey Re (London) Ltd. v. Stirling Cooke
Brown Holdings Ltd., 85 F. Supp. 2d 282,
298 (S.D.N.Y. 2000), aff’d, 2 F. App’x 109
(2d Cir. 2001), the court concluded that a
plaintiff did not allege “conscious behavior”
that plausibly asserted fraudulent intent
where the “facts [in the complaint could] only
lead to the inference that [the defendant] and
its principals successfully did business with
their long-time business contacts,” who had
allegedly committed fraud.

methods of communication” or identifying
“any specific fraudulent statement”).
Further, although a plaintiff may “allege
fraudulent intent generally” under Rule 9(b),
he still “must provide some minimal factual
basis for conclusory allegations of scienter
that give rise to a strong inference of
fraudulent intent.” Powers v. British Vita,
P.L.C., 57 F.3d 176, 184 (2d Cir. 1995); see
also Moore, 189 F.3d at 173. A complaint
satisfies this standard by either (1) “alleg[ing]
a motive for committing fraud and a clear
opportunity for doing so” or (2) “identifying
circumstances indicating conscious behavior
by the defendant.” Powers, 57 F.3d at 184.
Under the “motive and opportunity”
approach, “[a]lthough the desire to enhance
income may motivate a person to commit
fraud, allegations that a defendant stands to
gain economically from fraud do not satisfy
the heightened pleading requirements of Rule
9(b).” ABF Capital, 957 F. Supp. at 1327
(citing Shields v. Citytrust Bancorp, Inc., 25
F.3d 1124, 1130 (2d Cir. 1994)). Indeed, “a
generalized profit motive that could be
imputed to any company . . . has been
consistently rejected as a basis for inferring
fraudulent intent.” Brookdale Univ. Hosp. &
Med. Ctr., Inc. v. Health Ins. Plan of Greater
N.Y., No. 07-CV-1471 RRM/LB, 2009 WL
928718, at *6 (E.D.N.Y. Mar. 31, 2009)
(collecting cases).

Here, plaintiffs have not adequately
particularized their fraud allegations. Like
the complaint in Colony at Holbrook, the
SAC does not identify any statements made
by defendants that were fraudulent, much less
the dates and the times those statements were
made or the identities of the recipients. See
Colony at Holbrook, 928 F. Supp. at 1231;
see also McGee, 2009 WL 2132439, at *5.
Instead, it merely asserts that Walsh
“engaged in a scheme to unlawfully deprive
the BTCC and all similarly situated plaintiffs
of financial donations and contributions and
to divert those resources to the SCCP” by
“solicit[ing] contributions from registered
Conservatives and Town Committees by mail
and e-mail in April and October of each year
referenced herein seeking contributions
allegedly to be used for the benefit of and in
furtherance of the business of the
Conservative party.” (SAC ¶¶ 53, 57.) The
SAC then states that fundraisers were held on
or about June 20, 2011; October 19, 2011;
October 30, 2012; April 1, 2014; and October
29, 2014, and it alleges that the invitations for
those fundraisers stated that checks should be
made out to the SCCCC. (Id. ¶¶ 62-66.) The
SAC does not, however, describe when the
invitations for these events were mailed (or emailed), nor does it provide a recipient list.

Meanwhile, under the “conscious
behavior” approach, “the strength of the
circumstantial evidence must be greater.”
ABF Capital, 957 F. Supp. at 1326 (citing
Powers, 57 F.3d at 184). In ABF Capital, for
example, a plaintiff adequately alleged
“conscious behavior” indicative of fraud
where the facts showed that the defendant
“represented that it had reduced the art of
valuing and modeling [collateralized
mortgage obligations] to a ‘proprietary,
quantitative’ science, when in fact it was
relying on intuition and pressure from [its]

These allegations are a far cry from
Moore’s highly detailed chart that laid out
with specificity the allegedly fraudulent
8

Party members is the inherent representation
that these funds so collected will be utilized
for the benefit of the Conservative Party and
for the furtherance of conservative ideals and
the party platform,” as opposed to benefitting
Walsh personally. (Pls.’ Opp’n Br., ECF No.
32, at 5-6.) However, there is nothing in the
SAC or the documents attached thereto that
indicates that defendants represented to
plaintiffs how they would spend their money.
Plaintiffs submitted a copy of a fundraiser
invitation with the SAC for a March 27, 2015
SCCP Annual Spring Dinner, which states
that tickets for that event cost $200 per person
and indicates that attendees could attain
various sponsorship designations for
additional contributions (for instance, an
attendee could become an “Event Sponsor”
with a donation of $25,000). (SAC, Exh. A.)
That invitation does not, however, state how
the SCCP or the SCCCC would spend those
funds. Insofar as defendants did use such
donations to remunerate Walsh with a
monthly stipend and for his automobileassociated expenses (see SAC ¶¶ 47-49),
those distributions could qualify as legitimate
business expenditures. 4 At best, an improper
“diversion of funds” to benefit Walsh that
was not approved by the SCCP’s Executive
Committee only evinces a failure to comply
with the SCCP’s internal financial
procedures,
which,
absent
any
misrepresentation to the contrary, does not
establish a fraud on the plaintiff donors. See
de Kwiatkowski v. Bear, Stearns & Co., 306
F.3d 1293, 1311 (2d Cir. 2002) (citing
Farmland
Indus.
v.
Frazier-Parrott
Commodities, Inc., 871 F.2d 1402, 1407 (8th
Cir. 1989) (“[F]ailure to follow [internal
policies and procedures] will not give rise to

statements. 189 F.3d at 173. Instead, they
are much closer to the “sweeping and general
allegations of mail and wire fraud” that
proved insufficient to meet Rule 9(b)’s
heightened pleading standard in Colony at
Holbrook. 928 F. Supp. at 1231. More to the
point, the SAC does not “specify the
statements that the plaintiff contends were
fraudulent . . . state where and when the
statements were made, and . . . explain why
the statements were fraudulent.” Anatian,
193 F.3d at 88; see also Colony at Holbrook,
928 F. Supp. at 1231; McGee, 2009 WL
2132439, at *5. Even assuming the truth of
plaintiffs’ core premise—that Walsh utilized
money intended for the SCCP to make certain
unauthorized expenditures—plaintiffs have
not shown that he, or any other defendant,
misrepresented what plaintiffs’ donations
would be used for. On the contrary, the SAC
explicitly acknowledges that plaintiffs were
instructed to make checks payable to the
SCCCC and does not explain why that
instruction was fraudulent.
Compare
Houraney v. Burton & Assocs., P.C., 701 F.
Supp. 2d 258, 262 (E.D.N.Y. 2010) (holding
that plaintiff failed to explain why statement
was fraudulent where it was “not necessarily
inconsistent” with plaintiff’s factual
allegations), with Nanjing Standard Int’l,
Ltd. v. DMD Int’l Ltd., No. 12 CIV. 8248
LLS, 2013 WL 5882928, at *3 (S.D.N.Y.
Oct. 25, 2013) (holding that plaintiff
explained why statements were fraudulent
where “[t]he complaint allege[d] that
defendants’ statements request[ed] port fees
and customs taxes . . . [but] no such fees or
taxes were due”).
Notwithstanding these deficiencies,
plaintiffs contend that “[i]nherent in the
solicitations and the request by Defendant
WALSH for payment from Conservative
4

Defendants also claim that “[a]ll of the information
regarding the expenditure of such funds is disclosed to
the New York State Board of Elections and is publicly

available for review,” and that plaintiffs were,
therefore, on notice of those expenses. (Defs.’ Mot.
Br. at 9.)

9

B. Fraudulent Inducement

a cause of action in the absence of
independent facts establishing fraud.”)).

Plaintiffs also allege a fraudulent
inducement claim under New York law.
However, having determined that plaintiffs’
federal claim does not survive defendants’
motion to dismiss, the Court concludes that
retaining jurisdiction over any state law claim
is unwarranted. See 28 U.S.C. § 1367(c)(3);
United Mine Workers of Am. v. Gibbs, 383
U.S. 715, 726 (1966). “In the interest of
comity, the Second Circuit instructs that
‘absent exceptional circumstances,’ where
federal claims can be disposed of pursuant to
Rule 12(b)(6) or summary judgment grounds,
courts should ‘abstain from exercising
pendent jurisdiction.’” Birch v. Pioneer
Credit Recovery, Inc., No. 06-CV-6497T,
2007 WL 1703914, at *5 (W.D.N.Y. June 8,
2007) (quoting Walker v. Time Life Films,
Inc., 784 F.2d 44, 53 (2d Cir. 1986)).

In sum, even assuming that “the amended
complaint set[] forth the dates, locations,
senders and recipient of the allegedly
fraudulent communications, its assertions as
to their contents and the reason each
communication
was
fraudulent
are
conclusory.” Knoll v. Schectman, 275 F.
App’x 50, 51 (2d Cir. 2008). Further, the
SAC’s general contention that Walsh
“engaged in a scheme to unlawfully deprive
the BTCC and all similarly situated plaintiffs
of financial donations and contributions”
(SAC ¶ 53) is “the kind of conclusory
allegation[] that Rule 9(b) is meant to
dissuade,” Knoll, 275 F. App’x at 51. “While
courts have made an exception to the
particularity requirements and have allowed
‘allegations [to] be based on information and
belief when facts are peculiarly within the
opposing party's knowledge,’ this exception
‘must not be mistaken for license to base
claims of fraud on speculation and
conclusory allegations,’ especially in the
context of RICO claims.” Purchase Real
Estate Grp. Inc. v. Jones, No. 05 CIV. 10859,
2010 WL 3377504, at *8 (S.D.N.Y. Aug. 24,
2010) (quoting Wexner v. First Manhattan
Co., 902 F.2d 169, 172 (2d Cir. 1990)).
Thus, for these reasons, plaintiffs have failed
to plead their predicate mail and wire fraud
claims with particularity and therefore cannot
state a cause of action under RICO. 5 See
Town of Islip v. Datre, --- F.3d ---, No. 16CV-2156 (JFB), 2017 WL 1157188, at *13
(E.D.N.Y. Mar. 28, 2017).

Therefore, in the instant case, the Court,
in its discretion, “‘decline[s] to exercise
supplemental jurisdiction’” over plaintiffs’
state law claim because “it ‘has dismissed all
claims over which it has original
jurisdiction.’” Kolari v. N.Y.-Presbyterian
Hosp., 455 F.3d 118, 122 (2d Cir. 2006)
(quoting 28 U.S.C. § 1367(c)(3)); see also
Cave v. E. Meadow Union Free Sch. Dist.,
514 F.3d 240, 250 (2d Cir. 2008) (“We have
already found that the district court lacks
subject matter jurisdiction over appellants’
federal claims. It would thus be clearly
inappropriate for the district court to retain
jurisdiction over the state law claims when
there is no basis for supplemental
jurisdiction.”); Karmel v. Claiborne, Inc.,
No. 99-CV-3608 (WK), 2002 WL 1561126,
at *4 (S.D.N.Y. July 15, 2002) (“Where a
court is reluctant to exercise supplemental

5

Moreover, even assuming that plaintiffs had
sufficiently particularized their fraud claims against
Walsh, they have not alleged any misrepresentations
by defendants SCCP, SCCCC, or SCCCHK. Indeed,
the SAC imputes all of the fundraising announcements

and solicitations at issue to Walsh.
For that
independent reason, the RICO claim against
defendants SCCP, SCCCC, and SCCCHK must be
dismissed. See Colony at Holbrook, 928 F. Supp. at
1231.

10

Kosakoff & Messina LLP, 267 Carleton
Avenue, Suite 301, Central Islip, New York
11722.

jurisdiction because of one of the reasons put
forth by § 1367(c), or when the interests of
judicial economy, convenience, comity and
fairness to litigants are not violated by
refusing to entertain matters of state law, it
should decline supplemental jurisdiction and
allow the plaintiff to decide whether or not to
pursue the matter in state court.”).
Accordingly, pursuant to 28 U.S.C.
§ 1367(c)(3), the Court declines to retain
jurisdiction over the remaining state law
claim against defendants given the absence of
any federal claim against them that survives
the motion to dismiss, and it dismisses
plaintiffs’ fraudulent inducement claim
without prejudice to re-filing in state court.
IV. CONCLUSION
For the foregoing reasons, the Court
grants defendants’ motion to dismiss the
RICO claim with prejudice. Given the
dismissal of plaintiffs’ federal claim, the
Court declines, in its discretion, to exercise
supplemental jurisdiction over plaintiffs’
state law claim for fraudulent inducement
and, thus, dismisses this claim without
prejudice to re-filing in state court. The Clerk
of the Court shall enter judgment accordingly
and close this case.
SO ORDERED.
______________________
JOSEPH F. BIANCO
United States District Judge
Dated:

June 15, 2017
Central Islip, NY

***
Plaintiffs are represented by Thomas G.
Teresky, 191 New York Avenue,
Huntington, New York 11743. Defendants
are represented by Timothy F. Hill and
Vincent J. Messina, Jr. of Sinnreich,
11