United States Court of Appeals
For the First Circuit
No. 04-1168
LOUIS J. GIULIANO; GTWO, LLC,
A Massachusetts Limited Liability Company,
Plaintiffs, Appellants,
v.
STANLEY FULTON; MY WAY HOLDINGS, LLC;
ANCHOR PARTNERS, LLC.,
Defendants, Appellees.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Robert E. Keeton, U.S. District Judge]
Before
Torruella, Circuit Judge,
Campbell, Senior Circuit Judge,
and Howard, Circuit Judge.
Robert S. Ovoian for appellants.
Thomas A. Reed, with whom J. Owen Todd, David H. Rich, and
Todd & Weld LLP were on brief, for appellees.
March 7, 2005
HOWARD, Circuit Judge. Louis Giuliano and GTWO, LLC
(“GTWO/MA”) brought this civil action alleging that defendants
Stanley Fulton, Anchor Partners, LLC (“Anchor”),1 and My Way
Holdings, LLC (“My Way”) conspired to participate and participated,
through repeated acts of mail and wire fraud, in an illegal
racketeering scheme in violation of the Racketeer Influenced and
Corrupt Organizations Act (“RICO”), 18 U.S.C. §§ 1962(b)-(d). The
district court dismissed the amended complaint for failure to state
a claim. See Fed. R. Civ. P. 12(b)(6). We affirm.
I.
We take as true the facts alleged in the complaint when
reviewing a dismissal for failure to state a claim. Soto-Negrón v.
Taber Partners I, 339 F.3d 35, 36 (1st Cir. 2003). At the heart of
this lawsuit is a joint venture gone sour. We note that the
parties who were principally involved in the venture, and in the
subsequent conduct that has been alleged to constitute a RICO
violation, are not defendants in this action. Indeed, the
defendants here are accused of financing and furthering the
racketeering scheme only after it had already been initiated by
these other parties, who have been sued by the plaintiffs in state
1
Although the amended complaint refers mostly to an entity
named Anchor Gaming, Inc., it appears that Anchor Gaming was a
subsidiary controlled by Anchor Partners, LLC. Because the
distinction is not critical to our disposition, we refer to both
entities as “Anchor.”
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court, and whom we shall, at times, refer to as the “alleged
conspirators.”
The dispute centers around a 92-acre property in
Massachusetts that Giuliano and an associate, Gary Piontkowski,
discussed purchasing in 1997 for the purpose of operating a harness
racing track. Piontkowski entered into a purchase and sale
agreement with the owner of the property and, in 1998, formed
Plainville Racing Company, LLC (“PRC”) to operate the proposed
racetrack. Shortly thereafter, Piontkowski assigned his rights in
the property to Giuliano with the understanding that Giuliano,
through his company GTWO/MA, would secure financing to complete the
purchase of the property and to build the necessary facilities.
Before acquisition of the property was complete, Giuliano executed
a sublease whereby PRC leased, for the purpose of operating the
racetrack, a 52-acre portion of the property from GTWO/MA for
below-market rent. An addendum to the sublease granted PRC the
right to exercise an option to purchase the subleased premises for
fair market value.
Following execution of the sublease, the Massachusetts
Racing Commission (“Commission”) granted PRC a 1999 harness racing
license (racing licenses are awarded annually by the Commission)
conditioned on Giuliano completing acquisition of the property by
December 1, 1998. Giuliano obtained the necessary financing and a
deed to the property was executed in favor of GTWO/MA on November
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16, 1998. Shortly after closing, however, and less than two weeks
before expiration of the purchase and sale agreement, Giuliano's
lender threatened to back out if the loan was not restructured
under new terms. Given that both the Commission's deadline and the
expiration of the purchase and sale agreement were fast
approaching, Giuliano agreed to the new terms.
Under the restructured loan, a nominee of the lender, a
limited liability company formed by the lender under Rhode Island
law, GTWO, LLC (“GTWO/RI”), took title to the property. Giuliano
received an option to purchase the property and a master lease
giving him control of the property during the pendency of the
option. Giuliano could exercise the option, at any time before
January 28, 2000, by paying back his loan advancement in full plus
interest. The lender required GTWO/MA and PRC to execute a First
Amendment to Lease (“First Amendment”) to confirm that the sublease
between GTWO/MA and PRC was subordinate to the master lease between
GTWO/RI and GTWO/MA. The First Amendment also converted PRC's
option to purchase the subleased premises into an option to
purchase GTWO/MA's one-year leasehold interest. Giuliano and
Piontkowski signed the First Amendment with Russell Paige, an
employee of GTWO/MA, serving as an attesting witness.
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Shortly after the restructuring, and in response to the
negative cash flow created by PRC's below-market rent,2 Giuliano
insisted that Piontkowski provide him with an option to purchase
all of Piontkowski's shares of PRC stock for $1 million.
Piontkowski agreed and a stock purchase agreement was executed in
favor of Giuliano. When Giuliano subsequently learned that another
Piontkowski-owned company was also a part-owner of PRC, Giuliano
had Piontkowski execute a second stock purchase agreement that gave
Giuliano the option to purchase all of the shares of that company.
Piontkowski then asked Giuliano to sign a Lease Confirmation and
Acknowledgment agreement (“Lease Confirmation”) that essentially
stated, in contravention of the First Amendment, that PRC's option
to purchase the subleased premises was binding upon GTWO/RI.
Giuliano refused to sign the Lease Confirmation, believing that he
did not have authority to sign for GTWO/RI.
Beginning in June of 1999, PRC began breaching its
obligations under the terms of the sublease and GTWO/MA provided
PRC with several written notices of default. According to
Giuliano, this is when Piontkowski hatched a scheme to seize
Giuliano's property. On June 25, 1999, Piontkowski sent a letter
to Giuliano asserting PRC's purported right to purchase the
subleased premises. Attached to the letter was a copy of the Lease
2
While Giuliano's rent accrued at a rate of $180,000 per month
under the master lease, he only collected $81,000 per month from
PRC under the sublease.
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Confirmation (that Giuliano had previously refused to sign, but
which seemingly bore his signature), that PRC asserted created
privity between PRC and the record title owner of the property.
Giuliano denied the authenticity of the document, alleging that it
was a “switched-page” forgery -- the attached signature page
actually coming from the First Amendment that Giuliano had
previously signed for his lender.
In two separate letters in the fall of 1999, Giuliano
notified Piontkowski first, of his intent to exercise his options
under the stock purchase agreements to acquire all of Piontkowski's
interests in PRC and in the other Piontkowski-owned entity, and
second, of the termination of PRC's sublease due to PRC's defaults.
Piontkowski, however, refused to sell his ownership interest in PRC
and refused to surrender the subleased premises.
In late September 1999, Piontkowski called a meeting of
PRC's investors to discuss PRC's application, to be filed in
competition with Giuliano, for a year 2000 racing license. After
the investors concluded that the switched-page Lease Confirmation
was not authentic, Paige, now employed by PRC, manufactured a new
version of the Lease Confirmation by cutting and pasting Giuliano's
signature onto a blank Lease Confirmation form. Paige forwarded
this “cut-and-paste” forgery to Piontkowski, who later circulated
it to the PRC investors.
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In October 1999, PRC submitted a year 2000 application
stating that PRC had long-term control of the subleased premises.
At a series of Commission hearings in October and November 1999,
Piontkowski and PRC presented the switched-page forgery as evidence
of PRC's rights to the property. Piontkowski and Paige testified
that Piontkowski had never signed the First Amendment and had never
agreed to subordinate PRC's sublease to Giuliano's master lease.
Moreover, they testified that Giuliano had signed the Lease
Confirmation, which acknowledged that PRC had a 30-year lease with
an option to purchase the premises. Piontkowski asserted that it
was Giuliano who had perpetrated the fraud by attaching the
signature page from the Lease Confirmation onto the First
Amendment. When the authenticity of the switched-page Lease
Confirmation was questioned, Piontkowski submitted the cut-and-
paste Lease Confirmation. Relying on the forged documents and
perjured testimony, the Commission concluded that PRC's sublease
had not been subordinated to the master lease and thus PRC had a
long-term right to control of the premises. Accordingly, on
November 15, 1999, the Commission granted a year 2000 racing
license to PRC.
Piontkowski and PRC then filed a complaint in
Massachusetts state court seeking a declaration that PRC had
validly exercised its option to purchase the subleased premises.
On November 1, 1999, PRC used the cut-and-paste forgery and
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perjured testimony to obtain a Memorandum of Lis Pendens from the
court that effectively clouded title to the property. Throughout
the course of these state proceedings, PRC submitted numerous
fraudulent filings to the court. The state court relied on these
fraudulent misrepresentations in denying Giuliano's motion to
dismiss.
On November 12, 1999, Giuliano filed his own
Massachusetts state court action against Piontkowski and PRC
seeking specific performance of the stock purchase agreements. In
their answer, Piontkowski and PRC again relied on the cut-and-paste
forgery. Because the ultimate objective of the racketeering scheme
was to unite the alleged conspirators' control of both the racing
license and the racetrack property, and since PRC was the entity
they were using to achieve that end, the alleged conspirators'
misrepresentations in this state action were intended to further
the scheme by preventing Giuliano from seizing control of PRC.
In December 1999, anticipating the expiration of
Giuliano's option, Alfred Ross, one of PRC's investors, solicited
financing from Stanley Fulton and Anchor. Fulton and senior
management from Anchor met with Ross and Piontkowski in Arizona
later that month to discuss financing the acquisition of the
property. Fulton was apprised of the fraudulent basis of PRC's and
Piontkowski's claims against Giuliano and was made aware of the
means and objectives of the illegal scheme. Despite this
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knowledge, Fulton and Anchor agreed to provide $5 million toward
acquisition of the property. Mindful of Giuliano's outstanding
claims under the stock purchase agreements, the alleged
conspirators formed a straw holding company to shield the property
from the potential reach of Giuliano. All of PRC's investors,
including Ross and Piontkowski, combined with Fulton and Anchor to
create Ourway Realty, LLC (“Ourway”).
The scheme was successful. With the lis pendens clouding
record title, Giuliano was unable to obtain the financing necessary
to exercise his option before it expired on January 28, 2000.
Shortly thereafter, PRC released, without consideration, its claim
against GTWO/RI that it had a 30-year lease with an option to
purchase, thus lifting the cloud on title. The alleged
conspirators then acquired the property, Ourway took title, and PRC
entered into a series of one-year leases with Ourway. PRC did not,
however, pay any rent to Ourway, and the leases explicitly provided
for the automatic termination of PRC's leasehold interest should
Giuliano gain control of PRC.3
According to Giuliano, the alleged conspirators have
persisted in their misrepresentations to the state courts and to
the Commission. In the three years following Ourway's acquisition
of the property, PRC and Piontkowski continued to deny falsely, in
3
In June of 2000, Giuliano was granted summary judgment by the
Massachusetts court as to his right to enforce the stock purchase
agreements.
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state court and Commission filings, any knowledge concerning the
origin of the cut-and-paste forgery. These misrepresentations were
allegedly made with the full knowledge and acquiescence of the
defendants.
On October 1, 2003, Ourway filed an application for a
year 2004 racing license. The application stated Ourway's
intention to purchase all of PRC's assets in exchange for a
cancellation of debt owed by PRC to Ourway for accrued unpaid rent.
Ourway's application stated that Piontkowski would continue as the
manager of the racetrack. The proposed transfer of PRC's assets to
Ourway is the most recent ploy to defeat Giuliano's efforts to
reacquire control of the property.
On October 10, 2003, Giuliano and GTWO/MA (henceforth
“Giuliano”) moved to file an amended complaint in Massachusetts
federal district court alleging that the defendants were
conspirators and active participants in a pattern of racketeering
activity whereby mail and wire communications were used to defraud
the plaintiffs of valuable property in violation of 18 U.S.C. §§
1962(b)-(d). The district court allowed the amended complaint, but
nevertheless dismissed the case for failure to state a claim. The
court held that the plaintiffs failed to allege a pattern of
racketeering activity sufficient to make out a RICO claim because
the alleged predicate acts did not “amount to or pose a threat of
continued criminal activity.”
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In this appeal, Giuliano argues that the district court
minimized or ignored three important factors: (1) that the alleged
illegal scheme was carried out over a period of more than four
years; (2) that the alleged scheme was both extensive and complex;
and (3) that the alleged scheme posed a “societal threat” because
it perpetrated a fraud on the Massachusetts state courts and on the
Commission. According to Giuliano, having overlooked these
factors, the court failed to comprehend the true breadth and depth
of the alleged racketeering activity.
II.
We review de novo a district court's dismissal of a
complaint for failure to state a claim. Soto-Negrón, 339 F.3d at
38. When reviewing a Fed. R. Civ. P. 12(b)(6) dismissal, “[w]e
accept as true the well-pleaded factual allegations of the
complaint, draw all reasonable inferences therefrom in the
plaintiff's favor and determine whether the complaint, so read,
sets forth facts sufficient to justify recovery on any cognizable
theory.” Martin v. Applied Cellular Tech., Inc., 284 F.3d 1, 6
(1st Cir. 2002).
To state a RICO claim, plaintiffs must allege four
elements: “(1) conduct, (2) of an enterprise, (3) through a
pattern, (4) of racketeering activity.” Kenda Corp. v. Pot O'Gold
Money Leagues, Inc., 329 F.3d 216, 233 (1st Cir. 2003) (quoting
Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 496 (1985)).
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“Racketeering activity” means any act that violates one of the
federal laws specified in the RICO statute, see 18 U.S.C. §
1961(1), including the mail and wire fraud statutes, 18 U.S.C. §§
1341 and 1343. At least two acts of racketeering activity must
occur within ten years of each other to constitute a “pattern.”
Id. § 1961(5). The Supreme Court has construed the pattern element
as additionally requiring a showing that “the racketeering
predicates are related, and that they amount to or pose a threat of
continued criminal activity.” H.J. Inc. v. Northwestern Bell Tel.
Co., 492 U.S. 229, 239 (1989). This is the so-called “continuity
plus relationship” standard. Efron v. Embassy Suites (P.R.), Inc.,
223 F.3d 12, 15 (1st Cir. 2000).
The Supreme Court has identified two methods for
establishing continuity. Under the “closed-ended” approach,
continuity is established by showing “a series of related
predicates extending over a substantial period of time” that
“amount to” a threat of continued criminal activity. H.J., 492
U.S. at 242. Because the RICO statute was only intended to reach
long-term criminal conduct, “[p]redicate acts extending over a few
weeks or months and threatening no future criminal conduct do not
satisfy [the continuity] requirement.” Id. Under the “open-ended”
approach, a RICO plaintiff need not wait for a long-term pattern to
develop, but may state a claim so long as the alleged “racketeering
acts themselves include a specific threat of repetition extending
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indefinitely into the future [or] . . . are part of an ongoing
entity's regular way of doing business.” Id.
In this case, the district court declined to find either
“open-ended” or “closed-ended” continuity. The court concluded
that the plaintiffs failed to establish open-ended continuity
because the only scheme alleged in the amended complaint, “to take
over certain valuable real estate . . . in Massachusetts,”
presented no danger of continuing racketeering activity
“indefinitely into the future.” Relying on Efron, 223 F.3d at 18,
the court also concluded that the plaintiffs had not shown closed-
ended continuity because the alleged racketeering activity
concerned a single scheme with a closed group of targeted victims.
Because the parties focus their arguments on the correctness of the
court's closed-ended continuity holding, we begin our analysis
there.
Giuliano's primary appellate argument is that the amended
complaint alleged numerous predicate acts extending over four years
and that these allegations of temporal duration and extensive
conduct satisfy the requirement for closed-ended continuity. He
points out that a closed-ended pattern sometimes can be established
by examining only the number of alleged predicate acts and the
duration of the alleged racketeering activity. See H.J., 492 U.S.
at 242. This is because, where the temporal duration of the
alleged activity and the alleged number of predicate acts are so
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extensive that “common sense compels a conclusion of continuity,”
closed-ended continuity should be found. Efron, 223 F.3d at 18;
see also Fleet Credit Corp. v. Sion, 893 F.2d 441, 446-47 (1st Cir.
1990) (holding that an allegation of 95 fraudulent mailings over a
period of four and one-half years is sufficient, without more, to
state a pattern of racketeering activity).
Conversely, where only a few predicate acts are alleged,
or where the period of time is short, continuity can never be
established. See Sion, 893 F.2d at 447. This is because “[t]oo
few acts would suggest that the defendants were engaged in only
'sporadic activity,' . . . and too short a period of time would
suggest that defendants were not engaged in 'long-term criminal
conduct.'” Id. (quoting H.J., 492 U.S. at 239, 242).
Some cases, however, fall into a middle ground where the
duration and extensiveness of the alleged conduct does not easily
resolve the issue. In these cases, we examine other indicia of
continuity, see Efron, 223 F.3d at 17 (where plaintiff alleged 17
acts of wire and mail fraud over 21 months, the time frame was “not
so long[,]” nor were the predicate acts “so many[,]” that “other
indicators of continuity--or the lack of them--are without
significance”), including whether the RICO allegation concerns only
a single scheme that is not far reaching, see Kenda Corp., 329 F.3d
at 233; Apparel Art Int'l, Inc. v. Jacobson, 967 F.2d 720, 723-24
(1st Cir. 1992) (Breyer, C.J.). In such cases, we decline to find
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the requisite continuity. See Sys. Mgmt., Inc. v. Loiselle, 303
F.3d 100, 105-06 (1st Cir. 2002) (“RICO is not aimed at a single
narrow criminal episode, even if that single episode involves
behavior that amounts to several crimes.”).
In light of these principles, our first task is to
determine whether the duration of the alleged racketeering conduct
is either so long or so short that the continuity determination can
be resolved on that basis alone. In performing this task, we
evaluate the complaint through the particularity prism of Fed. R.
Civ. P. 9(b), see New England Data Servs., Inc. v. Becher, 829 F.2d
286, 290 (1st Cir. 1987), considering “only those predicate acts
specifically alleged” in the complaint, Efron, 223 F.3d at 16.
Also, we do not credit generic allegations of common law fraud that
do not implicate the mails or wires, as these acts do not
constitute racketeering activity under RICO. See Sion, 893 F.2d at
445; see also Efron, 223 F.3d at 20 (noting that “RICO claims
premised on mail or wire fraud must be particularly scrutinized
because of the relative ease with which a plaintiff may mold a RICO
pattern from allegations that, upon closer scrutiny, do not support
it”).
With this in mind, we give the amended complaint the
required scrutiny.4 Many of the specific allegations of fraud do
4
The defendants also contend that the plaintiffs failed to
allege a conspiracy adequately, and thus we should not consider any
acts committed by the non-defendant conspirators. They also say
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not implicate the mail or the wires. For example, it is claimed
that Piontkowski submitted the switched-page forgery and testified
falsely concerning that document at an October 21, 1999 Commission
hearing. While this allegation, if true, may constitute fraud or
other common law or statutory violations, it does not amount to a
RICO predicate act because Piontkowski is not alleged to have
utilized the mail or the wires. We will not imply or read into the
amended complaint the mail or wire connection where it is not
alleged specifically. See Sion, 893 F.2d at 444 (we have “no duty
to conjure up unpled allegations in order to bolster the
plaintiff's chances of surviving a 12(b)(6) motion to dismiss”)
(internal quotation marks omitted).
With respect to the actual named defendants, the most we
are told is that “[t]he arrangements for the Arizona meeting [with
Piontkowski and Ross], the agreements calling for Fulton [and
Anchor] to provide financing in furtherance of the Illegal Scheme,
[and] the actual transfer of the funds Fulton provided for the
financing were all accomplished through the use of the mail and
interstate wire communications.” We are also told that “[o]n
multiple occasions on and after December of 1999, Fulton consulted
that misrepresentations made to the state courts and to the
Commission, as well as the attempts to conceal underlying
racketeering activity through fraudulent misrepresentations, are
not predicate acts under RICO. Because the amended complaint fails
to state a viable RICO claim even if these allegations are taken
into account, we bypass these arguments.
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and communicated by mail, telephone and interstate wire
transmission with the other participants in the Illegal Scheme, to
discuss the planning and to make decisions about the method and
strategy of carrying out the Illegal Scheme.” These vague
allegations do not satisfy Fed. R. Civ. P. 9(b). See North Bridge
Assocs., Inc. v. Boldt, 274 F.3d 38, 43 (1st Cir. 2001) (RICO
plaintiff must state “the time, place and content of the alleged
mail and wire communications perpetrating” the fraud) (internal
quotation marks omitted); Sion, 893 F.2d at 444-45.
The attempt to establish the ongoing nature of the
racketeering activity also falls short. Giuliano alleges that the
alleged conspirators maintained their misrepresentations, with the
full knowledge and acquiescence of the defendants, throughout the
pendency of the two state court proceedings and each year, from
1999 to 2003, when the Commission considered racing license
applications. But even assuming these misrepresentations could be
actionable under RICO, all of Giuliano's post-1999 allegations fall
well short of satisfying Fed. R. Civ. P. 9(b). For example, the
amended complaint alleged that “[c]ontinuously since the start of
the state court litigation between the parties in 1999, and after
Fulton, Anchor Partners and My Way joined the Illegal Scheme
shortly thereafter, Piontkowski [and] PRC have made innumerable
fraudulent misrepresentations to the state court and to the
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Commission.” No specificity is provided with regard to the time,
place or content of these alleged misrepresentations.
Giuliano additionally alleges that Ourway's October 1,
2003 filing with the Commission, stating its intention to purchase
all of PRC's assets, establishes a proposed fraudulent transfer of
assets designed to frustrate Giuliano's efforts to regain control
of the racetrack.5 However, a proposed or anticipated fraudulent
act cannot be counted as a predicate act in furtherance of a
closed-ended racketeering scheme. Cf. Lincoln House, Inc. v.
Dupre, 903 F.2d 845, 847 (1st Cir. 1990) (affirming the dismissal
of a RICO claim as unripe where the plaintiff's alleged injury was
“contingent on events that may not occur as anticipated or may not
occur at all”).
Having pruned the amended complaint to its properly
pleaded allegations, we are left with an alleged scheme that is far
less extensive than portrayed by the plaintiffs. On June 25, 1999
Piontkowski and PRC allegedly sent correspondence to Giuliano via
mail and fax asserting the right under the forged Lease
Confirmation to purchase the subleased premises. Similar
correspondence was sent to Giuliano by mail on October 1 and again
on October 5, 1999. Around this time, Paige allegedly faxed the
cut-and-paste forgery to Piontkowski, who then faxed it to the
5
Giuliano's appellate brief asserts that the allegedly
fraudulent transfer was indeed consummated after the amended
complaint was filed.
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other PRC investors. Paige also allegedly e-mailed PRC's attorney
a draft of the false statement that he planned to deliver to the
Commission at the November 1999 hearings. Regarding the allegedly
fraudulent PRC filings, the amended complaint provided details on
three: (1) a post-hearing submission sent by mail to the
Commission and Giuliano on November 9, 1999; (2) PRC's request to
the state court for a lis pendens sent by mail in December 1999;
and (3) PRC's opposition to Giuliano's motion to remove the lis
pendens sent by mail in December 1999.
Finally, the amended complaint alleged that PRC and
Piontkowski attempted to conceal the underlying fraud through (1)
an affidavit by Piontkowski, denying any knowledge of the
forgeries, that was faxed to the state court in a December 1999
opposition to Giuliano's motion to dismiss the lis pendens action,
and (2) a written discovery response, sent by mail to Giuliano's
counsel sometime in 2001, falsely omitting any reference to the
draft statements created for Paige's November 1999 Commission
testimony.
Thus, we are left with approximately 16 alleged predicate
acts6 conducted almost exclusively between June and December of
6
Given the vagueness inherent throughout the amended
complaint, even after culling it to its properly plead allegations,
it is difficult to come to a precise figure. For example, it is
alleged that Piontkowski faxed the cut-and-paste forgery to the PRC
investors. The amended complaint does not quantify exactly how
many PRC investors this document was sent to. Elsewhere the
amended complaint mentions at least four people who were PRC
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1999, the only exception being the allegedly misleading discovery
response in 2001. Our case law suggests that the commission of 16
predicate acts over a six-month period is inadequate to establish
a closed-ended pattern of racketeering activity. See Loiselle, 303
F.3d at 106 (21-month scheme involving mail fraud was not
actionable under RICO); Boldt, 274 F.3d at 43 (two acts of mail
fraud over four months insufficient to support a RICO claim).
But even assuming that this case falls into the middle
ground, the plaintiffs have failed to allege a pattern of
racketeering activity with the required closed-ended continuity.
As discussed above, where a case falls into the middle ground, we
have consistently declined to find continuity where the RICO claim
concerns a single, narrow scheme targeting few victims. See Efron,
223 F.3d at 19 (“[C]ombination of single scheme, single injury, and
few victims . . . makes it virtually impossible for plaintiffs to
state a RICO claim.”) (internal quotation marks omitted). At most,
the plaintiffs' amended complaint establishes a situation similar
to Efron, where we held that the plaintiff's allegation that his
business partners engaged in a series of 17 predicate acts over a
21-month period failed to state a pattern of racketeering activity.
We concluded that while the 21-month period fell into the middle
ground, the claim failed because all of the alleged acts of
investors at around that time. For the sake of our analysis,
therefore, we will assume that Piontkowski faxed the forgery four
times on this occasion.
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deception “were aimed at the single goal of transforming the
ownership of the [business]” and harmed only three named victims.
Efron, 223 F.3d at 18; see also Apparel Art, 967 F.2d at 723. So
too here. The amended complaint alleges a six-month scheme7 to
fraudulently procure ownership of a single piece of property from
one individual victim and his company.8 Their only injury was the
loss of the property and the accompanying racetrack. There is no
allegation that anything broader or more far reaching was
attempted. Thus, this case falls squarely within our precedent
rejecting closed-ended continuity. See Efron, 223 F.3d at 21
(“Taken together, the acts as alleged comprise a single effort,
over a finite period of time, to wrest control of a particular
[business venture] from a limited number of [victims]. This cannot
be a RICO violation.”).
7
The allegedly fraudulent 2001 discovery response does nothing
to extend the scheme, as a “pattern is not formed by sporadic
activity.” H.J., 492 U.S. at 239.
8
Contrary to the plaintiffs' assertion, we do not view the
Massachusetts state courts or the Commission as “victims” of the
alleged racketeering scheme. Moreover, merely alleging that the
defendant used a governmental body as a tool for facilitating a
racketeering scheme that ultimately harmed the plaintiff is not
enough to transform a narrow scheme into a broad and far reaching
scheme. See Apparel Art, 967 F.2d at 721-24 (finding no pattern of
racketeering activity and placing no import on the plaintiff-
subcontractor's allegation that the defendant-contractor's scheme
to obtain a government contract included submission of false
statements to the United States Department of Defense); see also
Loiselle, 303 F.3d at 105-06 (finding the absence of a broad and
far reaching racketeering scheme where the defendant had secured
and maintained a contract with a state-run college system through
several acts of mail fraud).
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The district court's ruling that there was no open-ended
continuity is similarly unassailable. The amended complaint did
not allege a specific threat of repetition extending indefinitely
into the future, nor did it allege that the racketeering acts were
a part of the defendants' regular way of doing business. To the
contrary, it acknowledged that all of the racketeering activity was
focused on the singular objective of wresting control of the
racetrack away from Giuliano. Once achieved, the illegal scheme,
as alleged, would end. The amended complaint does not suggest that
the defendants or the alleged conspirators would “seek to repeat
their fraud in other . . . similar business settings,” or that they
would “employ mail and wire fraud indefinitely” in their future
racing or gaming operations. Id. at 19.
III.
For the foregoing reasons, the district court concluded
correctly that the plaintiffs' amended complaint alleged neither a
closed-ended nor an open-ended pattern of racketeering activity.
Therefore, the amended complaint was properly dismissed.
Affirmed.
-22-
Guiliano v. Fulton
Court: Court of Appeals for the First Circuit
Date filed: 2005-03-07
Citations: 399 F.3d 381
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