Reich et al v. Lopez et al

Filing 164

OPINION AND ORDER re: 64 MOTION for Reconsideration or, in the alternative, for Interlocutory Appeal, filed by Otto Reich Associates, LLC, Otto J Reich, 81 MOTION for Leave to File Surreply Memorandum of Law in Further Opposition to Plaintiffs' Motion for Partial Reconsideration of the Court's August 18, 2014 Opinion, filed by Leopoldo Alejandro Betancourt Lopez, Francisco D'Agostino Casado, Pedro Jose Trebbau Lopez. For the foregoing reasons, Plaintiffs' motion for partial reconsideration or, in the alternative, for certification for interlocutory appeal, is DENIED. Defendants' motion to file a sur-reply is GRANTED. The Clerk of Court is directed to close the motions at Docket Numbers 64 and 81. (Signed by Judge J. Paul Oetken on 4/13/2015) (kko) Modified on 4/13/2015 (kko).

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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:
THE HONORABLE OTTO J. REICH and OTTO :
:
REICH ASSOCIATES, LLC,
:
Plaintiffs, :
:
-v:
:
LEOPOLDO ALEJANDRO BETANCOURT
:
LOPEZ, PEDRO JOSE TREBBAU LOPEZ, and :
FRANCISCO D’AGOSTINO CASADO,
:
:
Defendants. :
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13-CV-5307 (JPO)
OPINION AND ORDER

J. PAUL OETKEN, District Judge:
Plaintiffs Otto J. Reich, a former United States ambassador to Venezuela, and his
consulting company, Otto Reich Associates, LLC (collectively, “Plaintiffs”), allege that the
activities of Leopoldo Alejandro Betancourt Lopez, Pedro Jose Trebbau Lopez, and Francisco
D’Agostino Casado (collectively, the “Defendants”), caused injury to their property and
reputation. They assert claims under the Racketeer Influenced and Corrupt Organizations Act,
18 U.S.C. § 1961 et seq. (“RICO”), as well as various claims under New York State common
law. (See Dkt. No. 29 (“Am. Compl.”).) On February 28, 2014, Defendants moved to dismiss
the complaint. (Dkt. No. 31.) In an Opinion and Order dated August 18, 2014 (the “Opinion”),
the Court granted the motion in part and denied it in part. (Dkt. No. 59.) Plaintiffs have moved
for partial reconsideration of the Court’s decision, or, in the alternative, for certification for
interlocutory appeal pursuant to 28 U.S.C. § 1292(b). (Dkt. No. 64 (“Motion for
Reconsideration”).) For the reasons that follow, Plaintiffs’ motion is denied.

1

I.

Background
The Court assumes familiarity with the underlying facts and procedural history, as set

forth in the Court’s Opinion. As explained in the Opinion, the Court dismissed Plaintiffs’ civil
RICO claims (Claims I and II), 1 and Plaintiffs’ civil conspiracy claim (Claim VII). For the
remaining claims, the Court held that Plaintiffs have not made a prima facie showing that the
Court has personal jurisdiction over defendants Betancourt and Trebbau, and granted Plaintiffs
permission to engage in discovery on this issue. Finally, the Court held that it has personal
jurisdiction over defendant D’Agostino, and that Plaintiffs have adequately pleaded various state
law claims against him.
Plaintiffs ask the Court to reconsider its dismissal of their civil RICO claims. The Court
dismissed the civil RICO claims on two independent grounds. The Court held, first, that
Plaintiffs have failed to allege the elements of one of the predicate acts, namely wire fraud; and
second, that Plaintiffs have failed to show that the predicate acts together form “a pattern of
racketeering activity,” as required to plead a RICO violation under 18 U.S.C. § 1962(c).
Plaintiffs contend that both holdings are erroneous.
II.

Legal Standard
“A motion for reconsideration is an extraordinary remedy to be employed sparingly in the

interests of finality and conservation of scarce judicial resources.” Drapkin v. Mafco Consol.
Grp., Inc., 818 F. Supp. 2d 678, 695 (S.D.N.Y. 2011) (internal quotations omitted). The
standard for granting a motion for reconsideration is accordingly high, Nakshin v. Holder, 360 F.
App’x 192, 193 (2d Cir. 2010) (summary order), and such motions “are properly granted only if

1

Plaintiffs pleaded both a substantive RICO violation and a RICO conspiracy claim under 18
U.S.C. § 1962(d). The Court dismissed the latter because Plaintiffs failed to adequately allege
the former. (Opinion at 19.)
2

there is a showing of: (1) an intervening change in controlling law; (2) the availability of new
evidence or (3) a need to correct a clear error or prevent manifest injustice,” Drapkin, 818 F.
Supp. 2d at 696 (citing Bergerson v. N.Y. State Office of Mental Health, Cent. N.Y. Psychiatric
Ctr., 652 F.3d 277, 288-89 (2d Cir. 2011)). “Reconsideration should not be granted where the
moving party seeks solely to relitigate an issue already decided; in addition, the moving party
may not ‘advance new facts, issues or arguments not previously presented to the Court.’”
Christoforou v. Cadman Plaza N., Inc., No. 04 Civ. 8403 (KMW), 2009 WL 723003, at *7
(S.D.N.Y. Mar. 19, 2009) (quoting Shamis v. Ambassador Factors Corp., 187 F.R.D. 148, 151
(S.D.N.Y. 1999)). “The decision to grant or deny the motion is within the sound discretion of
the district court.” Id. (citing Devlin v. Transp. Commc’n Int’l Union, 175 F.3d 121, 132 (2d Cir.
1999)).
III.

Discussion
A.

Wire Fraud

Plaintiffs argue that the Opinion misstates the elements of wire fraud. Specifically, they
assert that, in interpreting “scheme to defraud” within the meaning of the wire fraud statute, the
Court erred in requiring Plaintiffs to allege both that Defendants intended to deprive them of
money or property, and that Defendants intended to obtain money or property as a result of the
scheme. Only the former showing, Plaintiffs argue, is required under Supreme Court and Second
Circuit precedent. (Motion for Reconsideration at 3-8.)
The Court acknowledges that this issue is not as clear as the Opinion may suggest. 2 In
fact, there is disagreement among the federal courts of appeals on this very issue, namely,
2

The Court’s Opinion states:
While Plaintiffs have sufficiently alleged actual injury, a wire fraud scheme to defraud
also requires that Defendants intend to obtain property, a claim which is lacking in
Plaintiffs’ allegations. Although it is well established in this Circuit that wire fraud does
3

whether a plaintiff must show—or at this stage, must allege—that a defendant intended to obtain
money or property as part of a scheme to defraud. Compare, e.g., United States v. Hedaithy, 392
F.3d 580, 601-02 (3d Cir. 2004) (rejecting the argument that “any violation of the mail fraud
statute must involve a scheme for obtaining the victim’s property”), with United States v.
Walters, 997 F.2d 1219, 1227 (7th Cir. 1993) (“[W]e hold that only a scheme to obtain money or
other property from the victim by fraud violates [18 U.S.C.] § 1341.”) 3 Although the Second
Circuit has not directly addressed the question, it has suggested, in a case distinguishable from
this one, that it is inclined to follow the Third Circuit’s holding that a plaintiff need not allege
that a defendant intended to obtain money or property to make out a wire fraud claim. See
United States v. Males, 459 F.3d 154, 158 (2d Cir. 2006) (“We . . . agree[] with the Third Circuit
that ‘a mail fraud violation may be sufficiently found where the defendant has merely deprived
another of a property right.’” (quoting Hedaithy, 392 F.3d at 602 n.21)); see also Porcelli v.
United States, 404 F.3d 157, 162 & n.5 (2d Cir. 2005) (“Under this Court’s analysis, the
defendant does not need to literally ‘obtain’ money or property to violate the [mail fraud]
statute.” (citing Hedaithy, 392 F.3d at 602 n.21)). 4 On reconsideration, the Court concludes that

not require proof of actual profit from the scheme to defraud, intent to profit is still
necessary. In this case, while Plaintiffs allege that Defendants intended to deprive them
of money or property, they have not alleged that Defendants intended to obtain money or
property as a result of their scheme. Nor could they plausibly do so: Defendants are not a
market competitor of Plaintiffs such that they would expect to gain from Plaintiffs’ loss
of clients. Consequently, while there may be intent to harm, there is no intent to obtain
property from Plaintiffs, and there is no scheme to defraud within the wire fraud statute.
(Opinion at 14-15 (citations omitted).)
3

Although Walters and Hedaithy involved mail fraud, “[t]he mail and wire fraud statutes share
the same language in relevant part, and accordingly we apply the same analysis to both sets of
offenses here.” Carpenter v. United States, 484 U.S. 19, 25 n.6 (1987).
4

At the same time, the court in Porcelli stated that an “essential element[]” of mail fraud is that
“money or property [b]e the object of the scheme” to defraud. 404 F.3d at 162.
4

it need not decide this issue because Plaintiffs’ civil RICO claim fails on a separate ground,
namely that Plaintiffs have failed to show that the alleged predicate acts upon which their civil
RICO claim is based are sufficiently “related” such that they constitute a pattern of racketeering
activity.
B.

Relatedness

In its Opinion, the Court held that Plaintiffs have failed to allege predicate acts that are
sufficiently “related” such that they form “a pattern of racketeering activity,” as required under
18 U.S.C. § 1962(c). (Opinion at 15-18.) Plaintiffs assert that, in so holding, the Court
erroneously distinguished between “relatedness” in civil and criminal RICO cases. (Motion for
Reconsideration at 11-13.) To the extent that the Court suggested such a distinction, it was
incorrect. See Koal Indus. Corp. v. Asland, S.A., 808 F. Supp. 1143, 1161 (S.D.N.Y. 1992)
(“The proof required to show a pattern of racketeering activity in a civil RICO suit brought under
§ 1964(c) is the same as that required in a criminal action.”); see also Sedima, S.P.R.L. v. Imrex
Co., 473 U.S. 479, 489 (1985) (“Section 1962 renders certain conduct ‘unlawful’; § 1963 and
§ 1964 impose consequences, criminal and civil, for ‘violations’ of § 1962. We should not
lightly infer that Congress intended the term to have wholly different meanings in neighboring
subsections.”). The fact that “relatedness” bears the same meaning in civil and criminal RICO
cases does not, however, change the outcome in this case. 5

5

Defendants urge the Court to adopt what they view as a distinction in the case law between the
requirements for showing relatedness for criminal and civil enterprises—that is, enterprises
established solely for the sake of racketeering and enterprises that have other, legitimate
purposes. (Dkt. No. 77 at 7-9.) Defendants are correct that the Second Circuit has stated that
“[t]he question of whether acts form a pattern rarely is a problem with a criminal enterprise, as
distinct from a lawful enterprise that commits occasional criminal acts.” United States v.
Minicone, 960 F.2d 1099, 1108 (2d Cir. 1992) (internal quotation marks omitted). Defendants
are not correct, however, that the requirements of relatedness are clearly distinct between these
two types of enterprises. The statement cited by Defendants on this point concerns continuity,
not relatedness. See United States v. Indelicato, 865 F.2d 1370, 1383-84 (2d Cir. 1989) (“Where
5

In determining whether predicate acts are sufficiently related such that they form a
“pattern” of racketeering activity, the Court considers the factors articulated by the Supreme
Court in H.J. Inc. v. Northwestern Bell Tel. Co.: whether the acts “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.” 492 U.S. 229, 240 (1989) (internal
quotation marks omitted). Plaintiffs contend that the Court’s Opinion “runs afoul of the holding
in H.J. Inc. by seeming to require that Plaintiffs satisfy each of the H.J. Inc. factors.” (Motion
for Reconsideration at 15.) Plaintiffs are mistaken. The Court used the elements articulated in
H.J., Inc. merely as “a guidepost, a starting point for the relatedness inquiry as a whole, not a list
of elements, each of which must be proven in order to establish a pattern of racketeering
activity.” United States v. Daidone, 471 F.3d 371, 375 (2d Cir. 2006). Indeed, the Court
heeds—both in its Opinion and now—the Second Circuit’s warning against an “overly formal
conception” of relatedness. 6 Id. “In essence, the overall pattern requirement, of which
relatedness is one component, is a bulwark against the application of RICO to the perpetrators of
isolated or sporadic criminal acts.” Id. at 375-76 (internal quotation marks omitted). “Thus, it is
with an eye toward that outer limit that we consider whether predicate racketeering acts are
related enough to form a pattern.” Id. at 376.

the enterprise is an entity whose business is racketeering activity, an act performed in furtherance
of that business automatically carries with it the threat of continued racketeering activity.”)
6

For this reason, the Court rejects Plaintiffs’ “reading of H.J. Inc. as delineating specific
requirements for finding horizontal relatedness distinct from vertical relatedness,” as “such a
reading “creates an overly formal conception of [relatedness].” Daidone, 471 F.3d at 375. (See
Motion for Reconsideration at 15.)

6

Here, Plaintiffs have not adequately pleaded that the alleged predicate acts—bribery in
violation of the Travel Act, 18 U.S.C. § 1952(a), and wire fraud—are sufficiently related such
that they form a pattern of racketeering activity. As the Court held in its Opinion, “very little
links the two predicates together.” (Opinion at 17.) Central to this conclusion is the fact that the
purpose and victims of the two offenses are distinct. 7 Accordingly, the Court denies
reconsideration of its dismissal of Plaintiffs’ civil RICO claims. 8
III.

Certification for Interlocutory Appeal

7

The purpose of the alleged bribery was to allow Defendants to obtain inflated construction
contracts from the Venezuelan government. (Compl. ¶¶ 3-5.) The purpose of the alleged wire
fraud was to induce Banco Venezolana and Eligio Cedeno to stop retaining Plaintiffs’ consulting
services, where both the bank and Cedeno were staunch opponents of Defendants and had sought
to expose Defendants’ illegal activities. (Id. ¶¶ 7-14.) Plaintiffs allege that these acts share the
uniform purpose of “securing monetary benefits for [Defendants], and . . . cover[ing] up this
illegal scheme.” (Id. ¶ 264.) “[T]he fact that two acts ‘both have the effect of generally
increasing defendants’ funds,’” however, “is not enough to support a RICO claim.” Cohen v.
Cohen, 993 F. Supp. 2d 414, 426 (S.D.N.Y. 2014) (quoting Ray Larsen Assocs. v. Nikko Am.,
Inc., No. 89 Civ. 2809 (BSJ), 1996 WL 442799, at *7 (S.D.N.Y. Aug. 6, 1996)).
Further, while Plaintiffs are the victims of the alleged wire fraud, the bribery would
theoretically harm not Plaintiffs, but Defendants’ business competitors. RICO was not designed,
however, “to punish isolated instances of lawbreaking, and the test [for relatedness] prevents
plaintiffs from pleading unrelated predicate acts allegedly committed against other victims to
extend the scope of the pattern of racketeering activity.” Id. at 425 (internal quotation marks,
ellipsis, and alterations omitted).
8

The Court also notes that courts in this district have “repeatedly cautioned against plaintiffs’
attempts to mold their claims to the RICO form even though their injuries do not fall within
those intended to be addressed by the Act.” Lefkowitz v. Reissman, No. 12 Civ. 8703 (RA), 2014
WL 925410, at *4 (S.D.N.Y. Mar. 7, 2014) (internal quotation marks omitted). To this end,
RICO claims “merit particular scrutiny” where, as here, “the predicate acts are mail and wire
fraud, and where the use of mail or wires to communicate is not in and of itself illegal, unlike
other predicate acts such as murder or extortion. Permitting plaintiffs to advance RICO claims in
such cases would threaten to federalize garden-variety state common law claims, and offer a
remedy grossly out of proportion to any public harm or larger societal interests associated with
localized wrongful conduct ordinarily involved in such actions.” Id. (internal quotation marks
and citation omitted).
7

Plaintiffs request that the Court certify the issues discussed above for interlocutory
appeal. (Motion for Reconsideration at 19-23.) It is a “basic tenet of federal law to delay
appellate review until a final judgment has been entered.” Koehler v. Bank of Bermuda, Ltd.,
101 F.3d 863, 865 (2d Cir. 1996). However, a court, in its discretion, may certify an
interlocutory ruling for appeal if the ruling involves (1) “a controlling issue of law” as to which
(2) “there is substantial ground for difference of opinion” and (3) “an immediate appeal . . . may
materially advance the ultimate termination of the litigation.” 28 U.S.C. § 1292(b). Even if
these three criteria are met, “district courts retain unfettered discretion to deny certification if
other factors counsel against it.” In re Facebook, Inc., IPO Secs. & Derivative Litig., 986 F.
Supp. 2d 524, 530 (S.D.N.Y. 2014) (internal quotation marks omitted).
Due to the Court’s conclusion on reconsideration that it is unnecessary to resolve
whether Plaintiffs have adequately pleaded the predicate act of wire fraud, the only issue that
remains for interlocutory appeal is whether the predicate acts are sufficiently “related” such that
they form a pattern of racketeering activity. This issue, while controlling, is not purely one of
law, but rather one of mixed law and fact. To resolve it, the Second Circuit would be required to
review this Court’s application of the law to the allegations in the amended complaint. It is thus
not an appropriate issue for interlocutory review. See Century Pac. v. Hilton Hotels Corp., 574
F. Supp. 2d 369, 371 (S.D.N.Y. 2008) (“The ‘question of law’ certified for interlocutory appeal
must refer to a pure question of law that the reviewing court could decide quickly and cleanly
without having to study the record.”) (internal quotation marks omitted). The Court denies
Plaintiffs’ request for certification of an interlocutory appeal. 9

9

Plaintiffs have articulated two purely legal issues for interlocutory appeal that concern the
“relatedness” inquiry. (Motion for Reconsideration at 20 (requesting interlocutory appeal to
determine whether there is “a distinction in the application of relatedness as between criminal
and civil RICO cases” and whether “a plaintiff in a civil RICO action [is] required to satisfy each
8

IV.

Conclusion
For the foregoing reasons, Plaintiffs’ motion for partial reconsideration or, in the

alternative, for certification for interlocutory appeal, is DENIED. Defendants’ motion to file a
sur-reply is GRANTED. The Clerk of Court is directed to close the motions at Docket Numbers
64 and 81.

SO ORDERED.
Dated: April 13, 2015
New York, New York
____________________________________
J. PAUL OETKEN
United States District Judge

of the non-exclusive H.J. Inc. factors to show relatedness”).) On reconsideration, however, the
Court has clarified that Plaintiffs are correct on both issues.
9