United States Court of Appeals
For the First Circuit
No. 01-1622
NORTH BRIDGE ASSOCIATES, INC., AND
RALPH H. SCOTT, III,
Plaintiffs, Appellants,
v.
BENJAMIN J. BOLDT, BOLDT FAMILY TRUST,
MARTHA'S VINEYARD HARBOR LANDINGS CONDOMINIUM TRUST,
AND ARTHUR D. SMITH,
Defendants, Appellees.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Mark L. Wolf, U.S. District Judge]
Before
Selya, Circuit Judge,
Coffin, Senior Circuit Judge,
and Lipez, Circuit Judge.
Glenda H. Ganem, with whom Michael L. Snyder and McGovern,
Hug & Ganem were on brief, for appellants.
Peter E. Ball, with whom Seth B. Kosto and Hill & Barlow
were on brief, for appellees.
December 19, 2001
COFFIN, Senior Circuit Judge. Appellants claim that they
twice were victims of real estate frauds perpetrated by appellee
Benjamin Boldt and others.1 They brought suit alleging a variety
of state law claims and a violation of the Racketeer Influenced
and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1962(c).
The district court concluded, inter alia, that appellants could
not show the pattern of racketeering activity required to
support RICO liability and therefore dismissed the complaint.2
Appellants argue that their factual allegations were sufficient
to support recovery and that, in any event, the court should not
have dismissed the complaint without providing them a hearing
and an opportunity to amend or conduct discovery. We affirm.
I. Background
In summarizing plaintiffs' allegations, we are mindful that
we must accept the well pled facts of the complaint as true and
1 We view the plaintiffs pragmatically as Ralph H. Scott
III, his father, Ralph H. Scott II, and his mother, Betty Scott,
although the suit technically is brought by Ralph III in his
capacity as trustee for a family trust (Angels Realty Trust) and
by a closely held corporation (North Bridge Associates, Inc.),
whose officers and shareholders are the elder Scotts. See infra
at 5. The appellees are Boldt, two trusts for which Boldt has
served as trustee (Boldt Family Trust and Martha's Vineyard
Harbor Landings Condominium Trust), and an attorney for Boldt
Family Trust, Arthur D. Smith. In essence, this case involves
the Scotts' claims that they were defrauded by Boldt, who is the
only defendant in the RICO cause of action.
2The court dismissed the RICO claim with prejudice and the
state law causes of action without prejudice.
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indulge every reasonable inference in favor of allowing the
lawsuit to proceed. See Tompkins v. United Healthcare of New
England, Inc., 203 F.3d 90, 93 (lst Cir. 2000); Fed. R. Civ. P.
12(b)(6). We thus sketch the facts relating to the two alleged
frauds as if they were proven.
Time-Share Scheme. Between 1977 and 1980, Ralph and Betty
Scott purchased three time-share condominium unit intervals from
appellee Martha's Vineyard Harbor Landings Condominium Trust
("Harbor Landings Trust"). Appellee Boldt, a Harbor Landings
trustee, lent the Scotts about $6,500 toward the purchase price
of the units in exchange for a promissory note ("the Note") and
a security interest. The Note barred the Scotts from
transferring title to the units and provided that transfer of
the Note could result in its acceleration and foreclosure. The
Note also provided that the Scotts would be liable for costs of
collection, including reasonable attorney's fees.
Sometime later, the Scotts assigned title to the units to
Angels Realty Trust ("Angels"), which was set up for the benefit
of their children, and Boldt assigned the Note and Mortgage to
appellee Boldt Family Trust. In 1992, Angels began withholding
payments because Boldt refused to provide information about
whether he was protecting the corpus of the Harbor Landings
Trust. In retaliation, Boldt Family Trust in 1995 accelerated
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the Note under the pretext that the Scotts had improperly
transferred title to Angels. Boldt Family Trust threatened to
institute foreclosure proceedings.
In response to Angels' request in July 1996 for a payoff
figure, Boldt Family Trust demanded about $10,000 in principal,
interest and legal fees. Through its counsel, appellee Smith,
the Trust also instituted foreclosure proceedings. Angels paid
the approximately $7,000 in principal and interest, but refused
to pay "spurious and unsubstantiated legal fees."3 In April
1997, the time-share units were sold at foreclosure. Appellants
claim that Boldt and Smith fraudulently inflated legal fees for
the purpose of bringing about foreclosure.
Lot 1 Fraud. In July 1978, Boldt sold Betty Scott
approximately thirty acres of land, designated Lot 1, in
Edgartown, Massachusetts. Scott informed Boldt that she
intended to develop and subdivide the lot into single-family
homes. At the time of purchase, the lot was not connected to a
state road, and Boldt advised Scott that he would provide an
easement through a neighboring property he owned. Boldt,
however, failed to obtain permission for the easement from his
partner, and he later offered Scott the alternative of obtaining
3In April 1997, the amount demanded for attorney's fees
increased from about $3,000 to about $5,200.
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access to the highway through purchase of a lot, No. 407, in an
adjacent development, Edgartown Forest. The $12,000 purchase
price included a $2,000 cash payment and a $10,000 note. Boldt,
who had been hired to sell residential lots in Edgartown Forest,
told Scott that he would pay the note because of his failure to
secure the right of way that he previously had promised. Boldt,
however, again failed to follow through.
In 1980, the Town of Edgartown granted Scott subdivision
approval for Lot 1 based on plans showing highway access across
Lot 407. Construction of roads, utilities and foundations for
forty-three residences was begun, and development costs reached
approximately $2 million. In November 1987, Scott conveyed her
interest in Lot 1 to appellant North Bridge Associates, Inc.,
whose officers, directors and shareholders are Scott and her
husband.
Appellants contend that Boldt undermined the Lot 1
development by encouraging purchasers of lots in Edgartown
Forest to take legal action to prevent highway access across Lot
407 from the North Bridge development. The property owners
filed a lawsuit in October 1988. Although the litigation
ultimately was unsuccessful, a lis pendens (notice of pending
suit) was placed on Lot 1, prompting the bank that had advanced
funds for the development to demand immediate repayment of its
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loans. The loss of funding, in turn, caused the development to
fail. North Bridge claims that Boldt urged the meritless suit
so that he could reacquire Lot 1, which he later did at a
mortgagee's sale.
In their complaint, appellants alleged violations of RICO,4
and also brought state law claims for breach of contract, breach
of the implied covenant of good faith and fair dealing, fraud,
and unfair business practices in violation of Mass. Gen. L. ch.
93A. In addition, Angels brought a state-law claim against
Boldt and Boldt Family Trust for lender liability, and a claim
against Smith alleging unjust enrichment. Appellees filed a
motion to dismiss that asserted a variety of defects in the RICO
cause of action, including lack of particularity in the
allegations and a failure to show a pattern of racketeering
activity.
In a two-page decision, the district court ruled in favor
of appellees "[f]or the reasons stated in [their] memorandum."
The court noted that, had the complaint's only problem been its
lack of particularity, appellants might have been given an
opportunity to amend. The court concluded that revision would
be fruitless, however, because "the plaintiff has not, and
4
The complaint alleged in Count VII that Boldt violated two
RICO sections, but appellants seek review of only the claim
under 18 U.S.C. § 1962(c).
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evidently cannot, properly allege the required pattern of
racketeering activity." The court declined to retain
jurisdiction over the pendent state law claims and dismissed
them without prejudice. This appeal followed.
II. Discussion
We begin by examining de novo the court's conclusion that
the complaint as filed is inadequate to support a RICO cause of
action. Bessette v. Avco Fin. Servs., Inc., 230 F.3d 439, 443
(lst Cir. 2000). Because we agree with that determination, we
go on to consider whether appellants should have been afforded
the opportunity to amend their complaint or obtain discovery
before the RICO claim was dismissed with prejudice.
A. The RICO Allegations
To state a claim under section 1962(c), a plaintiff must
allege each of the four elements required by the statute: (1)
conduct (2) of an enterprise, (3) through a pattern (4) of
racketeering activity. Bessette, 230 F.3d at 448; Feinstein v.
Resolution Trust Corp., 942 F.2d 34, 41 (lst Cir. 1991) (citing
Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 496 (1985)); see
also 18 U.S.C. § 1962(c). Appellees argue that the complaint in
this case was deficient in multiple respects, but we focus on
the shortcomings in the "pattern" showing because we view them
as both serious and irremediable.
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By statute, a successful RICO plaintiff seeking to establish
a pattern must show at least two predicate acts of "racketeering
activity," conduct that includes mail and wire fraud. Efron v.
Embassy Suites (P.R.), Inc., 223 F.3d 12, 15 (lst Cir. 2000)
(citing 18 U.S.C. § 1961(1)(B), (5)). In addition, the
plaintiff must demonstrate that the "'predicates are related,
and that they amount to or pose a threat of continued criminal
activity,'" id. (quoting H.J. Inc. v. Northwestern Bell Tel.
Co., 492 U.S. 229, 239 (1989)). Acts are "related" if they have
"'"the same or similar purposes, results, participants, victims,
or methods of commission, or otherwise are interrelated by
distinguishing characteristics and are not isolated events."'"
Id. (quoting H.J., 492 U.S. at 240 (quoting 18 U.S.C. §
3575(e))). To establish continuity, "the plaintiff must show
that the related predicates 'amounted to, or posed a threat of,
continued criminal activity.'" Feinstein, 942 F.2d at 45
(quoting Fleet Credit Corp. v. Sion, 893 F.2d 441, 445-46 (lst
Cir. 1990)).
Plaintiffs specifically allege two predicate acts, both of
which are mailings connected with the time-share scheme. A
letter sent on January 2, 1997, demanded payment of the full sum
due on the Note, plus legal expenses. A second letter was sent
on April 2, after the Note had been paid, stating that Boldt
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would "continue with foreclosure proceedings" if the legal fees
were not paid. Appellants contend that, by demanding
"manufactured legal expenses," these mailings aided the scheme
to unlawfully force Angels into default on the Note, and thus
constituted mail fraud.
Assuming that these two letters are related acts of mail
fraud, they nonetheless fail to support a RICO cause of action
because continuity is wholly lacking. Predicate acts can
satisfy the requirement of continuous criminal activity if they
either comprise a closed series of past conduct that "'extend[s]
over a substantial period of time,'" or indicate a "realistic
prospect" that they will "'extend[] indefinitely into the
future,'" Feinstein, 942 F.2d at 45 (quoting H.J., 492 U.S. at
242); see also Efron, 223 F.3d at 16.
The two 1997 letters are inadequate to establish a closed
period of continuous criminal activity. Both the number of acts
(two) and the span of time over which they extend (four months)
were minimal. See H.J., 492 U.S. at 242 ("Predicate acts
extending over a few weeks or months and threatening no future
criminal conduct do not satisfy this requirement . . . .");
Sion, 893 F.2d at 447 ("Had the number of acts . . . been few or
the period of time short, the predicate acts would not have
amounted to continued criminal activity."). Although appellants
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sought to expand both the length of time and the number of
predicate acts by alleging that Boldt "used the United States
Mail" on at least two occasions in 1988 or later in furtherance
of the Lot 1 fraud, they failed to identify the time, place or
content of any particular mailing. Such vague allegations are
insufficient:
As in any other fraud case, the pleader is required
"to go beyond a showing of fraud and state the time,
place and content of the alleged mail and wire
communications perpetrating that fraud." . . . It is
not enough for a plaintiff to file a RICO claim, chant
the statutory mantra, and leave the identification of
predicate acts to the time of trial.
Feinstein, 942 F.2d at 42 (quoting New England Data Servs., Inc.
v. Becher, 829 F.2d 286, 291 (lst Cir. 1987)).
Nor have appellants shown that the two 1997 mailings
foreshadowed similar acts occurring repeatedly into the future,
thereby establishing "open-ended" continuity and the prospect of
"long-term criminal conduct," H.J., 492 U.S. at 242. The
alleged fraud concluded with the foreclosure of appellants'
time-share units, and they allege neither an ongoing
relationship between themselves and appellees nor any other
similar scheme involving others. The complaint's allegations,
though perhaps supporting fraud and other state-law claims, thus
do not establish the continuity necessary to prove a violation
of the RICO statute.
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B. Discovery, Amendment and Hearing
Appellants invoke our decision in Becher, 829 F.2d at 290-
92, to argue that, even if the district court correctly ruled
that their complaint was deficient, it improperly failed to
grant them the opportunity to remedy the complaint's
shortcomings. They also assert that the court should not have
granted defendants' motion to dismiss without conducting a
hearing.
In Becher, we concluded that the plaintiff's complaint did
not satisfy the requirement of Fed. R. Civ. P. 9(b) that fraud
be pled with particularity, but also ruled that the district
court abused its discretion in dismissing the case without
providing further opportunity for discovery and amendment in
light of the plaintiff's "specific allegations" and the
difficulties of pleading a RICO mail or wire fraud case. See
id. at 292.
We held, in essence, that there are certain
circumstances in the RICO context where the district
court must not only apply Rule 9(b), but must proceed
a step further before granting a motion to dismiss:
In an appropriate case, where, for
example[,] the specific allegations of the
plaintiff make it likely that the defendant
used interstate mail or telecommunications
facilities, and the specific information as
to use is likely in the exclusive control of
the defendant, the court should make a
second determination as to whether the claim
as presented warrants the allowance of
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discovery and if so, thereafter provide an
opportunity to amend the defective
complaint.
Feinstein, 942 F.2d at 43 (discussing and quoting Becher, 829
F.2d at 290).
This is not a case to which the generosity of our approach
in Becher is applicable. The plaintiff there had "assiduously
pursued discovery," Feinstein, 942 F.2d at 43 n.10, its
allegations rendered it likely that the defendants committed
mail or wire fraud, see Becher, 829 F.2d at 292, and the
original allegations likely were deficient only because the
details of the relevant communications were "peculiarly within
defendants' knowledge and difficult to expose," id.
The present case is dissimilar in several respects. First,
appellants never asked for the opportunity to conduct discovery,
even in their opposition to defendants' motion to dismiss.
Second, their complaint does not present "specific allegations"
of additional mail or wire fraud episodes whose details could be
expected to be exclusively within the defendants' knowledge.
Rather, as noted above, appellants broadly allege that at least
two mailings were sent in connection with the Lot 1 fraud, but
they offer no "detailed facts that make it seem likely that
interstate mail or telecommunications facilities were used," id.
at 291. To the contrary, the allegations strongly suggest a
series of verbal communications between Boldt and the purchasers
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of residential lots in the Edgartown Forest development. Though
perhaps aiding a claim of fraud, such conversations would not
bolster appellants' RICO claim. See Sion, 893 F.2d at 445
("[A]cts of common law fraud that do not implicate the mails (or
the wires) do not constitute 'racketeering activity' under the
definition found within the RICO statute."). Finally, it is not
simply details that appellants lack, but the substance of a RICO
claim. The district court was not obliged to give appellants a
second chance to construct a pattern of racketeering activity
out of two separate real estate frauds. See Ahmed v.
Rosenblatt, 118 F.3d 886, 889-90 (lst Cir. 1997) (application
of Becher "second determination" approach "is neither automatic,
nor of right, for every plaintiff").
Appellants also argue that it was impermissible for the
district court to grant the motion to dismiss without conducting
a hearing. It does not appear from the record, however, that
appellants sought a hearing under either Fed. R. Civ. P. 12(d),
which provides for preliminary hearings "on application of any
party," or District of Massachusetts Local Rule 7.1(D), which
provides, in substance, that a party who desires a hearing must
ask for one. Instead, in their 24-page response to appellees'
motion, appellants requested thirty days to file an amended
complaint to cure any defects the court found in their original
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pleading. It can hardly be error for the court to withhold an
opportunity appellants did not request to add to their already
substantial response to the motion. Cf. In Re Thirteen Appeals
Arising Out of San Juan Dupont Plaza Hotel Litig., 56 F.3d 295,
302 (lst Cir. 1995) (key factor in reviewing a refusal to grant
a hearing is whether "'the parties [had] a fair opportunity to
present relevant facts and arguments to the court, and to
counter the opponents' submissions'") (quoting Aoude v. Mobil
Oil Corp., 862 F.2d 890, 894 (lst Cir. 1988)); United States v.
McGill, 11 F.3d 223, 225 (lst Cir. 1993) (motions typically may
be "heard" effectively on the papers).
III. Conclusion
The district court properly found that appellants' complaint
fails to establish a RICO cause of action, and the court acted
within its discretion in refusing to allow plaintiffs a second
chance to generate a pattern of racketeering activity through
discovery and amendment. The lack of a hearing on the dismissal
motion was of no consequence. Having concluded that the RICO
claim was unavailing, the court properly dismissed the pendent
state law claims without prejudice.
Affirmed.
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