District Court Judge Denies Defendant’s Motion to Dismiss A Civil RICO Claim Finding Enterprise and Pattern of Racketeering Adequately Pleaded

Foster et al v. Attias, et al., 2019 WL 676402 (E.D. Pa., Dec. 11, 2019)

Judge Goldberg issued a thorough and thoughtful opinion in denying Defendant Moshe Attias’s motion to dismiss a civil RICO claim. The Amended Complaint alleges a pattern of racketeering activity conducted by Attias through an association in fact enterprise of various LLCs of which he is the owner, including Unity Loft, LLC and Lippincott Lofts, LLC. Defendant used these entities to siphon money from Plaintiffs through various real estate transactions. The Judge concluded the allegations give rise to an actionable claim for relief under RICO.

A. RICO Enterprise

1. Distinctness Between Individual Person and Enterprise Found

First, the Judge found “distinctness.” The Amended Complaint (AC) alleged an enterprise consisting of Defendant/Individual Attias’ companies and himself as an individual. The Judge stated that it is well-settled that an “association-in-fact” enterprise may consist of a corporation together with non-employee individuals. Moreover, a RICO enterprise “may be comprised only of defendants, or of defendants and non-defendants.” *4 citing to United States v. Urban, 404 F.3d 754, 782 (3d Cir. 2005).

Defendant Attias challenged the distinctness between the enterprise and the individual defendant but the Judge correctly cited to Cedric Kushner Promotions, Ltd. v. King, 533 U.S. 158, 163 (2001) and Third Circuit law to find the Amended Complaint plausibly pleaded both a “person” and a distinct “enterprise.” The RICO cause of action has been brought against Defendant Attias as a “person” within the meaning of 18 U.S.C. § 1961(3) and § 1964(c). Thus, the “enterprise,” an association-in-fact consisting of Attias together with the separate legal entities of which he is the owner, including Unity Loft, LLC and Lippincott Lofts, LLC. was distinct from Attias, the person.

2. Association in Fact Enterprise Adequately Alleged

The Judge found the enterprise was properly alleged. The Amended Complaint goes on to contend that the enterprise, “an association in fact of an individual and legal entities, has a structure separate and apart from the pattern of racketeering activity in which Defendant engaged.” Finally, the Amended Complaint asserted that “members and associates of the Enterprise, an association in fact enterprise, functioned together as a continuing unit, with a common purpose for the economic benefit and gain of the RICO Defendant Attias.” At this stage of the litigation, these allegations plausibly plead RICO’s second element of enterprise.

Defendants urged that these allegations are insufficient because the Amended Complaint does not identify acts engaged in by Defendant Unity or any non-parties towards a common purpose. They assert that Defendant Unity and non-party Lippincott Lofts, LLC “were each only involved in one of the many transactions in dispute and therefore can neither be part of the RICO enterprise nor can they have engaged in a pattern of racketeering activity.” Without citation to any authority, Defendants contend that absent allegations that each of the members of the enterprise participated in each of the challenged transactions, no RICO enterprise exists.

The Judge rejected this argument citing to Boyle v. United States, 556 U.S. 938 (2009), wherein the Supreme Court noted that an association-in-fact enterprise “need not have a hierarchical structure or a ‘chain of command’; decisions may be made on an ad hoc basis and by any number of methods—by majority vote, consensus, a show of strength, etc. Members of the group need not have fixed roles; different members may perform different roles at different times.” Id. at 948.

In compliance with Boyle principles, the Amended Complaint alleges that the enterprise acted outside the normal affairs of a business relationship and “functioned for the purpose of defrauding Plaintiffs and enriching the Enterprise’s members and associates through falsely claiming that funds provided by Plaintiffs would be used to acquire and develop real property but instead were used for Defendants’ personal enrichment.” In furtherance of this scheme, Plaintiff alleges that Defendant Attias used fraudulent communications to cause Plaintiffs to wire funds to Attias under the representation that the properties acquired with the funds would be placed in Plaintiff Foster’s name, even though Attias actually used the funds to purchase the properties in the name of enterprise members Unity and Lippincott Lots, LLC.

Given that these allegations sufficiently plead both a “person” and a distinct RICO “enterprise,” the Judge declined to dismiss the RICO count on this ground.

B. Pattern of Racketeering Activity

1. Only The Person Named as Defendant Need Commit Acts

The Judge rejected the Defendant’s argument that the RICO claim cannot survive because Plaintiffs do not sufficiently plead a pattern of racketeering activity underlying Plaintiffs’ claims in this action. Here, Plaintiffs alleged predicate acts of racketeering activity involving fraud. Defendants now contend that, “[a]t most, Plaintiffs’ factual averments infer only that one individual, Defendant Attias, allegedly made certain statements and received certain payments by wire transfer. There is no fact asserted that any other individual or entity, including Defendant Unity, committed any predicate act, let alone the two predicate acts necessary to establish a pattern of racketeering activity.” In turn, Defendants claim that the unilateral actions of only Defendant Attias cannot establish a pattern of racketeering activity.

The Judge found that contrary to Defendants’ argument, however, Plaintiffs need not allege that more than one individual or entity that is part of the enterprise committed a predicate act. Rather, RICO liability requires a showing that the defendant participated in the conduct or affairs of the enterprise “through a pattern of racketeering activity that must include the allegation of at least two racketeering acts.”

Here, the RICO cause of action is brought only against Attias as a “person” acting through an “enterprise” that includes non-RICO Defendant Unity and non-party Lippincott Lots, LLC. As such, it is only Attias, as the sole RICO Defendant, who must commit the predicate acts and conduct the enterprise’s affairs through a pattern of racketeering.

2. Closed Ended Continuity Found for Conduct of 20 Months

According to the Amended Complaint, Defendant Attias satisfied this requirement by using multiple interstate wires to defraud Plaintiffs of millions of dollars, all of which were done close in time, were related, and occurred over a substantial period of time (from April 2016 through January 2018). Note: This finding of closed ended continuity based on a closed period of time of about 20 months is significant.

Because Defendants have not cited any authority for the proposition that all members of the enterprise—whether or not defendants in the RICO claim—must commit at least two predicate acts, the Judge denied their motion for dismissal.

Ed. Note: David J. Stander Esq. focuses on civil RICO litigation. Along with named counsel, Mr. Stander provided assistance in the litigation of the above claim, including substantial assistance drafting the Amended Complaint and Plaintiffs’ Response memorandum.

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