Opinion
019510/2006.
Decided June 23, 2008.
Westerman Ball Ederer Miller Sharfstein, LLP, Attention: Jeffrey A. Miller, Esq., Mineola, NY, for Third Party Defendants.
Forchelli Curto Schwartz Mineo Carlino Cohn, LLP, Attention: Andrew E. Curto, Esq., Mineola, NY, for Plaintiff Greenstone/Fontana,
Ackerman Levine Cullen Brickman Limmer, LLP, Attention: John M. Brickman, Esq., Great Neck, NY, for Neil Feldstein and corporate defendants/ counter Claim Plaintiffs.
The motion by counterclaim-defendants, Jeanne Fontana, Robert Williams, Ron Greenstone ("Principals") and Rebecca Kopprasch ("Kopprasch"), for an order pursuant to CPLR 3211(a)(7) dismissing all counterclaims asserted by defendants-counterclaim plaintiffs, Neil Feldstein individually, Neil Buick Corporation, Neil Lincoln-Mercury/Hyundai Corporation, Worldwide Automotive, LLC, and Worldwide Automotive III, LLC's, ("Dealerships") against them, or, in the alternative, an order pursuant to CPLR 3211(a)(5) dismissing the Dealerships' second, third, fourth, fifth, sixth, seventh, eighth, ninth, tenth, eleventh and twelfth counterclaims as barred by the doctrines of res judicata and/or collateral estoppel, is determined as follows.
The motion by plaintiff, Greenstone/Fontana Corporation, and Topline Advertising, Inc. as a defendant on the counterclaim, ("Agencies") for an order pursuant to CPLR 1003 and 3211(a) dismissing all of the Dealerships' counterclaims against them is determined as follows.
In this action, the Agencies seek to recover sums allegedly due to them for advertising services they provided to the Dealerships from 1988 up until August 14, 2006. They allege that they prepared and designed advertisements, purchased media space and time, and placed advertisements in print and electronic media on the Dealerships' behalf and that the Dealerships have a balance owing of $118,462.52. The Agencies also allege that with intentional malice and disregard of their rights, the Dealerships have misappropriated and converted their advertising designs resulting in both unfair competition and the Dealerships' unjust enrichment and that the Dealerships have breached the covenant of good faith and fair dealing.
The Dealerships plead counterclaims against the Agencies, the Principals and Kopprasch, an employee of the Agencies, seeking to recover damages for fraud and violations of the Racketeering Influenced and Corrupt Organizations Act ("RICO") ( 18 U.S.C. § 1962); the defendant Worldwide Automotive III seeks to recover for breach of contract. The remaining Dealerships advanced claims sounding in breach of contract in a prior action, Neil Buick Corporation, Neil Lincoln-Mercury/Hyundai Corp. and Worldwide Automotive III, LLC v Topline Advertising Inc. and Greenstone/Fontana Corporation, Index No. 016004-06 (Supreme Court Nassau County) ("Prior Action"). The Dealerships claim that the Agencies and Principals agreed to charge their the lowest commission rates of all and that they failed to do so. The Dealerships' fraud and RICO counterclaims are premised upon the Agencies', the Principals' and/or Kopprasch's alleged falsification of billing records, specifically, Affidavits of Performance, which were supplied to the Agencies by the television and radio stations and which set forth the pertinent information concerning each ad run as well as the amount due the radio or television station and the agency.
In the Prior Action, the Dealerships, with the exceptions of Worldwide Automotive LLC, sought to recover damages from the Agencies for breach of contract, fraud, unjust enrichment, breach of fiduciary duty, and to impose a constructive trust on the Agencies' assets. In response to the Agencies' motion pursuant to CPLR 3211 to dismiss that complaint, on January 24, 2007, the Dealerships stipulated to discontinue all claims except the breach of contract claims and "any cause[s] of action against defendants [which are] based upon misrepresentations made by defendants, their agents, principals, employees, or assigns, which . . . were extraneous to any contract that was then being negotiated between the parties or existed previously between the parties." (Emphasis added).
The Agencies, Principals and Kopprasch seek dismissal of the fraud and RICO causes of action pursuant to the doctrines of res judicata and collateral estoppel based on that Stipulation of Discontinuance. In the alternative, they seek dismissal of those causes of action for failure to state a cause of action. Dismissal of Worldwide Automotive LLC's breach of contract claims is also sought due to the identical claims which were brought by the other Dealerships in the prior pending action.
In determining whether a complaint is sufficient to withstand a motion to dismiss pursuant to CPLR § 3211(a)(7) "the sole criterion is whether the pleading states a cause of action, and if from its four corners factual allegations are discerned which taken together manifest any cause of action cognizable at law." Guggenheimer v Ginzburg, 43 NY2d 268 (1977). The facts as alleged must be accepted by the court as true and are to be accorded every favorable inference. On a motion to dismiss for failure to state a cause of action, the court's attention "should be focused on whether the plaintiff has a cause of action rather than on whether he has properly stated one." Rovello v Orofino Realty Co., 40 NY2d 633, 634 (1976).
"Under the transactional approach to res judicata issues, once a claim is brought to a final conclusion, all other claims arising out of the same transaction or series of transactions are barred, even if based upon different theories or if seeking a different remedy.'" State of New York v Seaport Manor, 19 AD3d 609, 610 (2d Dept. 2005) quoting O'Brien v City of Syracuse, 54 NY2d 353, 357 (1981). "A Stipulation of Settlement which discontinues a claim with prejudice is subject to the doctrine of res judicata." Id. at 610. And, the doctrine of res judicata applies not only to parties of record, but to those in privity with them as well. Id., citing Watts v Swiss Bank Corp., 27 NY2d 270 (1970).
The First and Second Counterclaims: Fraud
"The essential elements of a cause of action sounding in fraud are a misrepresentation or a material omission of fact which was false and known to be false by defendant, made for the purpose of inducing the other party to rely upon it, justifiable reliance of the other party on the misrepresentation or material omission, and injury." Orlando v Kukielka, 40 AD3d 829, 831 (2d Dept. 2007), citing Lama Holding Co. v Smith Barney, Inc., 88 NY2d 413, 421(1996); Channel Master Corp. v Aluminum Limited Sales, Inc., 4 NY2d 403, 406-407 (1958); Urguhart v Philbor Motors, Inc., 9 AD3d 458 (2nd Dept. 2004).
Here, whether the fraud causes of action survive the Stipulation of Discontinuance and whether they state a claim under CPLR 3211(a)(7) present the identical issue: The Stipulation of Discontinuance permits fraud claims based on misrepresentations "extraneous to the contract" to be advanced. While a fraud claim does not lie where the only fraud alleged arises from the breach of contract, "a misrepresentation of material fact that is collateral to the contract and serves as an inducement for the contract is sufficient to sustain a cause of action alleging fraud." Selinger Enterprises, Inc. v Cassuto, 50 AD3d 766 (2d Dept. 2008) citing WIT Holding Corp. v Klein, 282 AD2d 527, 528 (2d Dept. 2001); Tiffany at Westbury Condominium v Marelli Dev. Corp., 40 AD3d 1073, 1076 (2d Dept. 2007).
By way of their first and second counterclaims, the Dealerships seek to recover of the Agencies and Principals respectively for fraud based upon falsified billing. The Dealerships claim that pursuant to their agreement, the commission due the Agencies was equal to a percentage of the amount charged by a radio or television station for an ad. The Dealerships allege that in an attempt to curtail fraudulent billing in the advertising industry, the Association of National Advertisers and the Radio and Television Advertising Bureau, which are national industry trade groups, require radio and television stations to maintain "Affidavits of Performance." These Affidavits of Performance are made under oath and the contents are averred under the penalties of perjury. They attest to an ad's content, the costs, and date and time of air play as proof of services. The Dealerships allege that the Affidavits of Performance which were provided to the Agencies by the radio and television station reflected the total amount owed, i.e., the amount due the radio or television station as well as the commission due the Agencies.
The Dealerships allege that rather than forwarding a true copy of the Affidavits of Performance to them with the accompanying invoice, the Agencies, at the direction of the Principals and/or Kopprasch, sent altered Affidavits of Performance with the total cost of the advertisements "whited out" and a higher figure including additional commissions substituted, thereby resulting in the Dealerships being regularly overcharged.
The Dealerships assert that they did not learn of this fraudulent practice until 2005 when their relationship with the Dealerships drew to a close. Thus, the Dealerships allege that the Agencies, by their Principals and/or Kopprasch, knowingly made material misrepresentations of fact, i.e., the commission amount due them and the radio or television stations, which the Dealerships reasonably relied upon resulting in their being over billed.
In their second counterclaim, the Dealerships allege that the Principals, personally, knowingly directed or actually participated in the aforementioned fraudulent conduct.
In response, the Agencies maintain that they never agreed to charge the Dealerships the lowest commission rate. They allege that that amount is charged to those clients which generate the greatest volume of advertisements and resulting revenues. The Agencies maintain that what they agreed to, was to charge the Dealerships less than they would pay if they procured the services for themselves. Concerning the Affidavits of Performance, the Agencies maintain that they did not agree to charge the Dealerships only what the radio and television stations determined their commission should be because that amount reflects the Agencies' entire proprietary discount. The Agencies maintain that they determine the commission charged each customer, i.e., their profit margin, and that they never agreed to pass along their discounted agency rate to the Dealerships. And, to the extent that the Affidavits of Performance were altered, the Agencies maintain that they were simply forwarding a courtesy copy and withholding their proprietary information from the Dealerships.
In the Prior Action, the Dealerships alleged that the Agencies knowingly overcharged for radio and television advertising, and their commissions, and that the Agencies failed to refund commissions which were paid to them on print advertising overcharges which had been perpetrated and refunded by Newsday. They also alleged that the Agencies and Principals not only contracted to charge them the lowest commission rate, but repeatedly assured them during their long relationship that that was being done.
Contrary to the Agencies', the Principals' and Kopprasch's allegation, what is alleged in this action is not identical to what was alleged in the Prior Action. The Dealerships have added allegations concerning altered Affidavits of Performance leading to misleading, excessive bills, and representations which were extraneous to the contract. Accordingly, the Stipulation of Discontinuance does not bar the fraud claims as part of what could have been litigated.
Nor is the fraud claim duplicative of the breach of contract claim. Again, the Dealerships' breach of contract claims are premised upon the Agencies' alleged agreement to bill them at their lowest rate. The Dealerships' fraud claims are premised upon the Agencies', Principals' and Employees' alleged alteration of the Affidavits of Performance which were provided to the Agencies by the radio and television stations and accompanied the invoices the Agencies sent to the Dealerships, thereby deceiving them and resulting in their being over billed. Again, these misrepresentations are extraneous to the contract and in view of this distinction, the fraud claims survive. See, Tsimerman v Janoff, 40 AD3d 242 (1st Dept. 2007) (fraud claim based on padded bills survives 3211 motion); see also, Wright v Selle, 27 AD3d 1065 (4th Dept. 2006); but see, Krantz v Chateau Stores of Canada, Ltd., 256 AD2d 186, 187 (1st Dept. 1998). Accordingly, the motion to dismiss on the grounds of collateral estoppel and res judicata are denied.
The RICO Claims
"In evaluating the sufficiency of a RICO pleading, the Court must read the facts alleged in the complaint in the light most favorable to the plaintiffs.?? Polycast Technology Corp. v Uniroyal, Inc., 728 F.Supp. 926, 947 (S.D.NY 1989) quoting H.J. Inc. v Northwestern Bell Telephone Co., 492 US 229, (1989). "A RICO claim may be dismissed at this stage of the litigation only if it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations (quotations omitted)." Polycast Technology Corp. v Uniroyal, Inc., supra, at p. 947, quoting H.J. Inc. v Northwestern Bell Telephone Co., supra.
18 USC § 1962(c) makes it 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 . . .
"To allege a violation of section 1962(c), a plaintiff must show that he was injured by defendants' (1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity.?? Manhattan Telecommunications Corporation, Inc. v DialAmerica Marketing, Inc., 156 F.Supp.2d 376, 380 (S.D.NY 2001) quoting Cofacredit, S.A. v Windsor Plumbing Supply Co., Inc., 187 F.3d 229, 242 (2d Cir. 1999); see also, Podraza v Carriero, 212 AD2d 331 (4th Dept. 1995), quoting Sedima, S.P.R.L. v Imrex Co. ., 473 U.S. 479, 496 (1985) and citing McCool v Strata Oil Co., 972 F.2d 1452, 1464 (7th Cir. 1992).
An "enterprise" is defined as "any individual, partnership, corporation, association or other legal entity, and any union or group of individuals associated in fact although not a legal entity." 18 USC § 1961(4). "[A]n enterprise must be a group of persons associated together for a common purpose of engaging in a course of conduct.?? Manhattan Telecommunications Corporation, Inc. v Dialamerica Marketing, Inc., 156 F.Supp. at 380, quoting United States v Turkette, 452 US 576, 583 (1981). The enterprise is the criminal tool and is not a liable defendant in a RICO action. Odishelidze v Aetna Life Cas. Co., 853 F.2d 21, 24 (1st Cir. 1988), citing Schofield v First Commodity Corp. of Boston, 793 F.2d 28, 29-30 (1st Cir. 1986). "[T]he existence of a RICO enterprise is established by evidence of an ongoing organization, formal or informal, and by evidence that the various associates function as a continuing unit.?? Singh v Parnes, 199 F.Supp.2d 152, 162 (S.D.NY 2002), quoting United States v Turkette, supra, at p. 583.
The enterprise must be distinct from the person(s) accused of conducting the racketeering activity. Tuscano v Tuscano, 403 F.Supp.2d 214, 226 (E.D.NY 2005) citing Anatian v CouttsBank (Switzerland) Ltd., 193 F.3d 85, 88-89 (2d Cir. 1999, cert den. 528 U.S. 1188 (2000); see also, Singh v Parnes, supra, at p. 162, citing Cedric Kushner Promotions, Ltd. v King, 533 U.S. 158, 161 (2001); Bennett v U.S. Trust, 770 F.2d 308, 315 (2d Cir. 1985). However, "[l]inguistically speaking, an employee who conducts the affairs of a corporation through illegal acts comes within the terms of a statute that forbids any person' unlawfully to conduct an enterprise,' particularly when the statute explicitly defines person to include any individual capable of holding a legal or beneficial interest in property' and defines enterprise' to include a corporation.?? Cedric Kushner Promotions, Ltd. v King, supra, at 163, quoting 18 USC § 1961(3), (4). Thus, "[a] corporate employee who conducts the corporation's affairs through an unlawful RICO pattern of activity,' § 1962(c), uses that corporation as a vehicle' whether he is, or is not, its sole owner." Cedric Kushner Promotions, Ltd. v King, at 164-165. While a corporation may be the "person" liable for a RICO violation where it associates with others to form an enterprise that is sufficiently distinct from itself, the corporation cannot be the person if its employee and agents are the alleged enterprise under § 18 USC 1962(c). Riverwoods Chappagna Corp. v Marine Midland Bank, 30 F.3d 339, 344 (2d Cir. 1994); see also, Cedric Kushner Promotions, Ltd. v King, at 164.
"To satisfy the pattern of racketeering' requirement, a RICO claimant must plead at least two predicate acts, show that the acts are related and that they amount to, or pose a threat of, continuing criminal activity." Singh v Parnes, at 161, citing H.J., Inc. v Northwestern Bell Tel. Co., supra, at 239. As for criminal activity, under 18 USC § 1341, "whoever having devised or intended to devise any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations or promises . . . for the purpose of executing such scheme or artifice . . . places in any post office or authorized depository for mail, any matter or thing to be sent or delivered by the Post Office" commits a federal offense. To establish a pattern of racketeering, a plaintiff must show the occurrence of at least two predicate acts of "racketeering;" the specific instances of qualifying criminal conduct must have taken place within ten years of each other, ( see, 18 USC § 1961), and, the alleged acts must be related and amount to a threat of continuing specified unlawful conduct. Singh v Parnes, supra, at p. 161 citing H.J., Inc. v Northwestern Bell Tel. Co., supra at p. 238-244. Separate, discreet acts which are not related do not suffice. Id.
The continuity standard can be met by factual assertions which demonstrate a "closed-ended" pattern of past criminal activities occurring over an extended period of time or an "open-ended" pattern of such past activities along with a threat of continuing occurrence. Id. In evaluating whether a "pattern of racketeering" has been sufficiently pled," what is required [to allege continuity] is that the complaint plead a basis from which it could be inferred that the acts were neither isolated or sporadic.?? Polycast Technology Corp. v Uniroyal, Inc., supra, at 947-48, quoting Beauford v Helmsley, 865 F.2d 1386, 1391 (2d Cir. 1989), (en banc), vacated and remanded mem., 492 US 914 (1989), adhered to on remand, 893 F.2d 1433 (2d Cir. 1989). The courts have focused on the duration, number of acts, number of participants, and the number of victims. Polycast Technology Corp. v Uniroyal, Inc., at 948. Numerous victims are not necessarily required. See, Polycast Technology Corp. v Uniroyal, Inc., at 948 fn. 5; citing Swistock v Jones, 884 F.2d 755, 758 (3rd Cir. 1989); Levine v Torino, 2006 WL 709098 (S.D.NY 2006).
18 USC § 1962(a) provides that:
it shall be unlawful for any person who has received any income directly or indirectly, from a pattern of racketeering activity . . . to use or invest, directly or indirectly, any part of such income, in acquisition of any interest in, or the establishment or operation of, any enterprise which is engaged in, or the activities of which affect, interstate or foreign commerce.
18 USC § 1962(b) provides that
it shall be unlawful for any person through a pattern of racketeering activity . . . to acquire or maintain, directly or indirectly, any interest in or control of any enterprise which is engaged in, or the activities which affect, interstate or foreign commerce.
"In order to plead a violation of subsection (a) of the RICO statute, the plaintiff must allege that each defendant "has received any income derived, directly or indirectly, from a pattern of racketeering activity . . . to use or invest, directly or indirectly, . . . in acquisition of any interest in, or the establishment or operation of, any enterprise." Tuscano v Tuscano, 403 F.Supp. 2d at 227, quoting 18 USC § 1962(a). The "enterprise" in this subsection refers to another legitimate business, not the racketeering enterprise. A reinvestment in the "racketeering enterprise" does not suffice. Id. at 228. Tuscano v Tuscano, supra, at p. 227-228, citing USA Certified Merchants, LLC v Koebel, 262 F.Supp.2d 319, 331 (S.D.NY 2003); Kaczmarek v International Business Machines Corp., 30 F.Supp.2d 626, 628 (S.D.NY 1998).
"To state a claim under Section 1962(b), the plaintiff must allege that: (1) the purpose of the defendants racketeering activity was to acquire an interest or to maintain control of the enterprise; (2) that the defendants in fact acquired an interest or maintained control of the enterprise through their pattern of racketeering activity; and (3) that the plaintiff suffered injury as a result of the acquisition of the enterprise." Tuscano at 228, citing Black Radio Network, Inc. v NYNEX Corp., 44 F.Supp.2d 565, 579 (S.D.NY 1999) aff'd., 113 F.3d 1229 (2nd Cir. 1997); O G Carriers v Smith, 799 F.Supp. 1528 (S.D.NY 1992). Like under § 18 USC 1962(a), the "enterprise" in § 18 USC 1962 (b) is not the "racketeering enterprise," either, but also contemplates investment in some other, legitimate business. That is, "the term enterprise under this section contemplates that the defendants' racketeering activity [enabled or] will enable them to acquire or maintain an interest in some legitimate company, other than the organization through which they conducted their racketeering activity." Tuscano at 229, citing USA Certified Merchants, LLC v Koebel, supra; see also, National Organization for Women, Inc. v Scheidler, 510 U.S. 249, 259 (1994); DeFazio v Wallis, 500 F.Supp.2d 197, 208 (E.D.NY 2007). "The enterprise in subsections (a) and (b) is something acquired through the use of illegal activities or by money obtained from illegal activities." National Organization for Women, Inc. v Scheidler, at 259. It is the victim of unlawful activity. Id. In addition, "[t]he acquisition or maintenance injury' must be separate and apart from the injury suffered as a result of the predicate acts or racketeering." Tuscano at 228, citing Katzman v Victoria's Secret Catalogue, 167 F.R.D. 649, 657 (S.D.NY 1996) citing Official Publications, Inc. v Kable News Co., Inc., 775 F.Supp. 631, 635 (S.D.NY 1991). "Without a distinct acquisition injury,' [a plaintiff] cannot state a cause of action under subsection 1962(b)." Discon, Inc. v NYNEX Corp., 93 F.3d 1055, 1063 (2d Cir. 1996), vacated on other grounds 525 U.S. 128 (1998); Redtail Leasing, Inc. v Bellezza, 1997 WL 603496 (S.D.NY, September 30, 1997).
18 USC § 1962(d) makes it unlawful for any person to conspire to violate any of the provisions of 18 USC §§ (a), (b) or (c). Thus, a failure to state a cause of action under Sections (a), (b) and/or (c) precludes a claim under section (d). Tuscano at 229. Furthermore, "[i]n order to state a claim under 18 USC § 1962(d) for conspiracy, the plaintiff must allege facts from which it can be inferred that there was an agreement involving each of the defendants to commit at least two predicate acts." Id., citing Hecht v Commerce Clearing House, Inc., 897 F.2d 21, 25 (2d Cir. 1995); Rose v Bartle, 871 F.2d 331, 366 (3rd Cir. 1989); Black Radio Network, Inc. v NYNEX Corp., supra, at p. 581; Naso v Park, 850 F.Supp.264, 275 (S.D.NY 1994).
The Dealerships have pled in the alternative. In some counterclaims, they have pled that the Principals and Kopprasch were the "persons" and the Agencies were the "Enterprises." In others, they have pled that Kopprasch and other similar employees were the "person" and that the Principals and Agencies were the "Enterprises." Standing alone, pleading in the alternative does not provide grounds for dismissal. See, Gold v 29-15 Queens Plaza Realty, LLC, 43 AD3d 866, 867 (2d Dept. 2007); Raglan Realty Corp. v Tudor Hotel Corp., 149 AD2d 373, 375 (1st Dept. 1989).
The Third, Fourth, Fifth, Sixth, Seventh, Eighth Counterclaims:
As their third counterclaim seeking relief pursuant to 18 USC § 1962(c) from the Principals and Kopprasch, the Dealerships allege that the Principals controlled, directed, were employed by and associated with the Agencies within the meaning of 18 USC § 1962(c), and that Kopprasch was employed by, directed certain affairs and was associated with the Agencies within the meaning of 18 USC § 1962(c) as well. The Dealerships allege that the Agencies engaged in or affected interstate commerce and that they were "enterprises" within the meaning of 18 USC § 1961(4). The Dealerships allege that the Principals as well as Kopprasch conducted or participated in the Agencies' affairs within the meaning of 18 USC § 1962(c), more specifically, the commission of acts relating to mail fraud in violation of 18 USC § 1341. The Dealerships allege that Kopprasch directed, participated in, caused and/or directed the "whiting out" and alterations of the Affidavits of Performance as well as their mailing, thereby causing them to be defrauded. The Dealerships allege that these altered Affidavits of Performance were sent on a monthly basis for 17 years with artificially inflated invoices, resulting in their fraudulent billings and overpayment for services. The Dealerships further allege that these activities constituted racketeering activities. As such, the Dealerships seek treble damages pursuant to 18 USC § 1964(c).
As and for the fourth counterclaim seeking relief pursuant to 18 USC § 1962(d) from the Principals and Kopprasch, the Dealerships allege that the Principals and Kopprasch agreed with one another to commit the acts of racketeering set forth in their third counterclaim knowing that their conduct was violative of USC § 1962(c) and that they agreed to violate 18 USC § 1961(c), thereby violating 18 USC § 1962(d) as well. Again, treble damages are sought pursuant to 18 USC § 1964(c).
The third counterclaim is adequately pled. Kopprasch and the Principals are the "persons" and the Agencies are the alleged "enterprises" through which the persons have engaged in a pattern of racketeering. Furthermore, the Dealerships have met their burden of pleading a "pattern of racketeering." Assuming, arguendo, that the Dealerships are the only victims, there are four of them. More importantly, the pattern is alleged to have been systematically employed over a 17 year period. That is sufficient. See, Polycast Technology Corp. v Uniroyal, Inc., supra, at p. 948, citing Swistock v Jones, supra.
The fourth counterclaim pursuant to 18 USC § 1962(d) properly states a claim since the third one does.
As and for the fifth counterclaim seeking relief pursuant to 18 USC § 1962(c) from the Agencies and the Principals, the Dealerships allege that Kopprasch and others who were in her position and are presently unknown were an "Enterprise" ("Kopprasch Enterprise") within the meaning of 18 USC § 1961(4) and that the Kopprasch Enterprise's affairs included remitting invoices to them for advertising services, including the altered Affidavits of Service. They allege that the Kopprasch Enterprise was engaged in or affected interstate or foreign commerce when it rendered invoices. They further allege that the Agencies and Principals controlled, directed, participated in and were associated with the Kopprasch Enterprise's affairs within the meaning of 18 USC § 1962(c) and that the Agencies and Principals supplied the Kopprasch Enterprise with the "whited out" altered Affidavits of Performance with the expectation that the Kopprasch Enterprise would forward them to the Dealerships with the invoices, thereby causing the Kopprasch Enterprise to fraudulently bill them. Thus, the Agencies and Principals allegedly conducted the Kopprasch Enterprise's affairs and caused the Kopprasch Enterprise to defraud the Dealerships. The Dealerships allege that the Agencies and Principals participated or conducted the Kopprasch Enterprises' affairs through this pattern of racketeering in violation of 18 USC § 1962(c) by committing mail fraud in violation of 18 USC § 1341. They allege that the Agencies and Principals participated in, caused or directed the "whiting out" of the Affidavits of Performance which the Agencies and Principals caused the Kopprasch Enterprise to send to them monthly for 17 years, resulting in mail fraud and overpayment of invoices by them. Again, treble damages pursuant to 18 USC § 1964(c) are sought.
Their sixth counterclaim is seeking relief pursuant to 18 USC § 1962(d) from the Agencies and the Principals; the Dealerships allege that the Agencies and Principals knowingly agreed with one another to commit the acts of racketeering set forth in their fifth counterclaim knowing that their conduct was violative of 18 USC § 1962(c) and that they agreed to violate 18 USC § 1961(c), thereby violating 18 USC § 1962(d). Treble damages pursuant to 18 USC § 1964(c) are sought.
Similarly, by way of their seventh counterclaim seeking relief pursuant to 18 USC § 1962(c) from only the Principals, the Dealerships allege that the Principals caused the "whiting out" of the Affidavits of Performance and provided them to the Kopprasch Enterprise with the expectation that it would forward them to the Dealerships with separate invoices thereby causing the Kopprasch Enterprise to fraudulently overbill them throughout the relevant period. The Dealerships allege that this racketeering activity was engaged in with the specific intent of defrauding them. Treble damages pursuant to 18 USC § 1964(c) are sought.
By way of their eighth counterclaim seeking relief pursuant to 18 USC § 1962(d) from the Principals, the Dealerships allege that the Principals knowingly agreed, consented to and conspired with one another to commit the acts of racketeering activity set forth in their seventh counterclaim knowing that their conduct was violative of 18 USC § 1962(c) and that they agreed to violate 18 USC § 1961(c), thereby violating 18 USC § 1962(d). Treble damages pursuant to 18 USC § 1964(c) are sought.
The fifth and seventh counterclaim pursuant to 18 USC § 1962(c) and as a result the sixth and eighth counterclaims pursuant to 18 USC § 1962(d) fail. Under the fifth and seventh counterclaims pursuant to 18 USC § 1962(c), Kopprasch, alone, is alleged to be the "enterprise" through which the racketeering was conducted. The allegations necessary to establish Kopprasch as an enterprise are completely absent. Not a single case allowing one person, more specifically the employee of corporations which are the alleged "persons" to function as the "enterprise," has been cited.
By way of their ninth counterclaim seeking relief from the Principals pursuant to 18 USC § 1962(a), the Dealerships allege that the Principals derived income from the racketeering activity and invested it in the Agencies, in violation of 18 USC § 1962(b), again entitling them to treble damages pursuant to 18 USC § 1964(c).
By way of their tenth counterclaim seeking relief pursuant to 18 USC § 1962(d) from the Principals, the Dealerships allege that the Principals knowingly agreed, consented to and conspired with one another to commit the acts of racketeering activity set forth in their ninth counterclaim knowing that their conduct was violative of 18 USC § 1962(a) and that they agreed to violate 18 USC § 1961(a), thereby violating 18 USC § 1962(d). Treble damages pursuant to 18 USC § 1964(c) are sought.
By way of their eleventh counterclaim seeking relief pursuant to 18 USC § 1962(b) from the Principals, the Dealerships allege that through the pattern of racketeering activity, the Principals acquired an interest in the Agencies in violation of 18 USC § 1962(b), entitling them to treble damages pursuant to 18 USC § 1964(c).
By way of their twelfth counterclaim pursuant to 18 USC § 1962(d) seeking relief from the Principals, the Dealerships allege that the Principals knowingly agreed and consented to commit the acts of racketeering activity set forth in their eleventh counterclaim knowing that their conduct was violative of 18 USC § 1962(b) and that they agreed to violate 18 USC § 1961(b), thereby violating 18 USC § 1962(d). Treble damages pursuant to 18 USC § 1964(c) are sought.
The ninth and eleventh counterclaims pursuant to 18 USC § 1962(b) and as a result the tenth and twelfth counterclaims pursuant to 18 USC § 1962(d) fail also. There is no independent enterprise alleged to have been invested in or acquired by the principals which is required under 18 USC § 1962(b) and an "acquisition injury" has not been alleged by the Dealerships, either. Because the claim under 18 USC 1962(b) fails, so do the tenth and twelfth counterclaims pursuant to 18 USC 1962(d).
Worldwide Automotive LLC Breach of Contract Claim:
By way of their thirteenth counterclaim, Worldwide Automotive LLC alleges that Williams and Fontana told their managing member Feldstein that the Agencies would charge them the lowest commission rate it charged to any automobile dealership and that other automobile dealerships were in fact charged less than it for newspaper and media purchases.
By way of their fourteenth counterclaim, Worldwide Automotive LLC, also allege that the Agencies received refunds from Newsday to compensate their customers for inflated charges which resulted from Newsday's overstatement of circulation and that the Agencies wrongfully retained the refunds in full.
By way of their fifteenth counterclaim, Worldwide Automotive alleges that Principals Williams and Fontana represented to their manager Feldstein that they would charge them the same amount for electronic media as for Newsday ads and that the Agencies in fact charged them more for electronic media ads than Newsday ads, thereby breaching their agreement.
The Agencies, Principals and Kopprasch maintain that dismissal of Worldwide Automotive III, LLC's breach of contract claims would serve the interest of judicial economy and prevent inconsistent results. In the alternative, the Agencies and Principals seek to stay those claims pursuant to CPLR 3211(a)(4) or to dismiss those claims here without prejudice to them being advanced in the Prior pending Action. In view of the parties' request, inter alia, to stay these claims pursuant toCPL3211(a)(4), as well as the glaring overlapping of issues in both actions, a joint trial of Neil Buick Corporation, Neil Lincoln-Mercury/Hyundai Corp. and Worldwide Automotive III, LLC v Topline Advertising Inc. and Greenstone/Fontana Corporation (Index No. 01600-06 [Supreme Court Nassau County]) and this action is directed. See, John J. Campagna, Jr., Inc. v Dune Alpin Farm Associates, 81 AD2d 633 (2d Dept. 1981).
In conclusion, the Principals', Agencies' and Kopprasch's motions are granted to the extent that the fifth, sixth, seventh, eighth, ninth, tenth, eleventh and twelfth counterclaims are dismissed.
A Preliminary Conference (see NYCRR 202.12) shall be held on July 31, 2008, at 9:30 A.M., before the undersigned in the Supreme Court of Nassau County.
Counsel for all parties are reminded that this matter has been assigned to the Commercial Division of the Supreme Court of Nassau County and the parties are directed to follow the Rules of this Division.