Opinion
01 Civ. 9319 (SHS)
November 26, 2002
OPINION AND ORDER
Plaintiff Alvin Lapides has brought this action to recover for injuries allegedly arising from a scheme to coerce, intimidate and force him to accept Rachel Tarlow as his business partner and to give her title to certain properties. Lapides seeks damages pursuant to the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961 et seq., and asserts New York state law claims for extortion, fraud, embezzlement, intentional interference with contractual relations and intentional interference with business relations. He also asserts a claim for malpractice and breach of fiduciary duty against Howard I. Rhine and two law firms in which he was a partner. Defendants have now moved, pursuant to Fed.R.Civ.P. 12(b)(6), for failure to state a claim for relief. That motion is granted on the grounds that (1) plaintiff's RICO claims were not asserted within the time permitted by the applicable statute of limitations and (2) the Court declines to assert supplemental jurisdiction over the state law claims.
BACKGROUND
The factual allegations of the Amended Complaint are as follows: plaintiff and Moses Tarlow, deceased husband of Rachel Tarlow, entered into a partnership agreement in May 1971 for the purpose of owning and operating "the property known as 38 and 45 Canal Street . . . as an asset of the Partnership." (Compl. ¶¶ 22, 27). Upon the death of Moses in 1983, the partnership was dissolved, and ownership of 38 and 45 Canal Streets (collectively, the "Properties") passed solely to plaintiff. (Compl. ¶¶ 2, 28, 31).
References to "Compl. ¶ ___" are to the Amended Complaint.
Moses' widow, defendant Rachel Tarlow, continued to be a tenant of the Properties "but failed to pay any rent." (Compl. ¶ 36). Between 1988 and 1992, Tarlow and her attorney, Howard I. Rhine, wrote letters "designed to intimidate, defraud, extort money, and force the plaintiff into accepting Rachel Tarlow as a partner." (Compl. ¶ 41). Although these letters allegedly included a demand to execute a business certificate that would have made plaintiff and Tarlow partners, as well as demands for accountings and money, Lapides allegedly refused to comply fully. (Compl. ¶¶ 36, 38, 41, Appendix A).
In addition, in October 1988, Rhine, with Tarlow's approval, allegedly fraudulently represented to the Merchants Bank of New York that the Properties were jointly owned by Lapides and Mrs. Tarlow, and deceived the bank into making Tarlow a co-signatory on the Partnership account. (Compl. ¶ 40).
Moreover, Rhine and his law firm allegedly fraudulently presented themselves as the attorneys for the dissolved partnership and collected, or attempted to collect, rent from several major tenants of the Properties. (Compl. ¶ 41). Defendants also fraudulently listed Rachel Tarlow as the owner of record of the Properties. (Id.). Following Mrs. Tarlow's death in 1998, Rhine demanded that plaintiff pay money to her estate. (Compl. ¶¶ 15, 41).
On October 1, 2001, Lapides commenced this action in Supreme Court, New York County. Defendants subsequently removed the action to this Court and now move to dismiss.
DISCUSSION
In reviewing a motion to dismiss a complaint, a court must accept as true the factual allegations in the complaint. See Weinstein v. Albright, 261 F.3d 127, 131 (2d Cir. 2001); Bolt Elec., Inc. v. City of New York, 53 F.3d 465, 469 (2d Cir. 1995). Dismissal of the complaint is proper only when "it appears beyond doubt that plaintiff can prove no set of facts in support of his claim which would entitle him to relief."Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957). The review is limited, and "[t]he issue is not whether a plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support the claims." Villager Pond, Inc. v. Town of Darien, 56 F.3d 375, 378 (2d Cir. 1995) (quoting Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974)). The Court's function on a motion to dismiss is "not to weigh the evidence that might be presented at trial but merely to determine whether the complaint itself is legally sufficient." Goldman v. Belden, 754 F.2d 1059, 1067 (2d Cir. 1985).
CIVIL RICO CLAIMS
As noted above, Lapides alleges that defendants have violated the federal RICO statute, 18 U.S.C. § 1961 et seq. Specifically, he claims that subsections (b), (c) and (d) of 18 U.S.C. § 1962 have been violated. To be liable pursuant to subsection (b), a defendant must (1) acquire or maintain (2) any interest in a control of any "enterprise" (3) through a "pattern" of (4) "racketeering activity." See 18 U.S.C. § 1962 (b). A violation of subsection (c) requires (1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity. See Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 496, 102 S.Ct. 3275, 87 L.Ed.2d 346 (1985); Cofacredit, S.A. v. Windsor Plumbing Supply Co. Inc., 187 F.3d 229, 242 (2d Cir. 1999). A "pattern of racketeering activity" requires the commission of at least two predicate acts of racketeering activity within a 10 year period. See 18 U.S.C. § 1961 (5); see also Arzielli v. Cohen Law Offices, 21 F.3d 512, 520 (2d Cir. 1994). Lapides has attempted to establish the predicate racketeering acts of federal mail and wire fraud in violation of 18 U.S.C. § 1341 and 1343. Subsection 1962(d) makes it unlawful to conspire to violate §§ 1962(a)-(c).
The statute of limitations period for bringing civil RICO actions is four years. See Agency Holding Corp. v. Malley-Duff Associates, 483 U.S. 143, 156, 107 S.Ct. 2759, 97 L.Ed.2d 121 (1987); Pearl v. City of Long Beach, 296 F.3d 76, 80 (2d Cir. 2002). These claims begin to accrue at the time a plaintiff knew about the injury resulting in the cause of action, regardless of when the racketeering activity causing that injury is discovered. See Rotella v. Wood, 528 U.S. 549, 554-55, 120 S.Ct. 1075, 145 L.Ed.2d 1047 (2000); 131 Maine St. Assoc. v. Manko, 179 F. Supp.2d 339, 345 (S.D.N.Y. 2002).
Although the U.S. Supreme Court in Rotella declined to "settle upon a final rule" for when civil RICO claims accrue, see Rotella, 528 U.S. at 554 n. 2, the remaining rule discussed by the Supreme Court — the "injury occurrence rule" — entails accruing a claim when the injury occurred, regardless of when the injured party became aware of the injury. Id. Under any of these formulations, the statute of limitations has not been met in this action. In addition, the issue of whether the limitations period also begins when a plaintiff "should have known" of the injury is not at issue here.
This action was filed on October 1, 2001. Accordingly, Lapides must establish that his alleged injuries were not discovered before October 1, 1997. He has failed to make such a showing here. Plaintiff asserts that he was the sole owner of the Properties since Moses Tarlow's death in 1983, that defendants Tarlow and Rhine "both knew that Plaintiff refused to enter into a new partnership" after Moses' death and that, from the time of Moses' death "Rachel Tarlow was never satisfied that Moses' partnership with Plaintiff had terminated." (Compl. at ¶¶ 3, 32, 37). Therefore, Lapides knew from approximately 1983 that defendants were asserting that Rachel Tarlow was a partner of Lapides'. In fact, the predicate mail fraud acts explicitly relied upon — all written communications to Lapides or to third parties with his authorized signature — occurred between January 15, 1988 and May 22, 1992. (Compl. Appendix A). Therefore, plaintiff's RICO claims are time-barred on the ground that such injuries were discovered more than four years before this action was commenced. Accordingly, plaintiff's RICO claims should be dismissed.
Lapides also alleges predicate wire fraud acts that occurred as late as August 6, 2001. (Compl. Appendix B). This would arguably be within the period of limitations if recovery could be had for injuries predating the four year period as long as one predicate act was completed within it. However, this rule, known as the "last predicate act rule," was disapproved by the Supreme Court in 1997. See Klehr v. A.O. Smith Corp., 521 U.S. 179, 111 S.Ct. 1984, 138 L.Ed.2d 373 (1997); see also Jed S. Rakoff Howard W. Goldstein, RICO; Civil and Criminal Strategy, § 3.04[2] (2002).
STATE LAW CLAIMS
As all of plaintiff's federal claims should be dismissed, the Court declines to exercise jurisdiction over the remaining state claims. See 28 U.S.C. § 1367 (c)(3); Purgess v. Sharrock, 33 F.3d 134, 138 (2d Cir. 1994); Greicus v. Liz Claiborne, Inc., No. 00 Civ. 9518, 2002 WL 244598, at *4 (S.D.N.Y. Feb. 20, 2002). Section 1367 expressly provides that a district court may decline to exercise supplemental jurisdiction if it "has dismissed all claims over which it has original jurisdiction." 28 U.S.C. § 1367(c)(3); see also K.M.B. Warehouse Distributors, Inc. v. Walker Mfg. Co., 61 F.3d 123, 131 (2d Cir. 1995). In addition, the Supreme Court has opined that "in the usual case in which all federal-law claims are eliminated before trial, the balance of factors to be considered . . . will point toward declining to exercise jurisdiction over the remaining state-law claims." Carnegie-Mellon University v. Cohill, 484 U.S. 343, 350 n. 7, 108 S.Ct. 614, 98 L.Ed.2d 720 (1988) (citations omitted). This action presents no reason to depart from the general rule. To the contrary, the relevant factors of judicial economy, convenience, fairness and comity all weigh in favor of declining supplemental jurisdiction here. Accordingly, the New York state law claims are dismissed without prejudice.
CONCLUSION
Defendants' motion to dismiss the complaint is granted in its entirety on the grounds that plaintiff failed to assert his RICO claims within the proper time period and the Court declines to accept supplemental jurisdiction over the state law claims. The Clerk of the Court is directed to enter judgment dismissing plaintiff's RICO claims with prejudice and plaintiff's state claims without prejudice.