District Court Rules That Plaintiff Entitled to Strict Additional Discovery to Adequately Plead Mail Fraud RICO Predicate Crimes

Norfe Group Corp. v. R.Y. Espinoza Inc., 2021 WL 1845329 (D. P.R. May 7, 2021) 

Norfe alleges that defendants used the mails and wires to execute a fraudulent scheme whereby they would avoid their obligations to their insureds. Id. Defendants moved to dismiss for failure to state a claim, and the court found that Norfe’s amended complaint failed to comply with Rule 9(b)’s particularity requirement, as it borderline failed to plead mail fraud with specificity.  Rather than dismiss the action, the court granted Norfe limited discovery under New England Data Services, Inc. v. Becher, 829 F.2d 286 (1st Cir. 1987).  For the reasons described in the opinion, Norfe was  permitted additional strictly limited additional discovery.

A. Documents Solely in Possession of Defendant May Permit Plaintiff to Have Additional Limited Discovery

As the court has previously explained, certain of Plaintiff’s allegations did not comply with Rule 9(b)’s particularity requirement, as they borderline failed to plead mail fraud with specificity.  Nonetheless, Norfe’s RICO claims were not dismissed outright. Despite Rule 9(b)’s heightened pleading requirements, the First Circuit recognizes that “it will often be difficult for a plaintiff to plead with specificity when the facts that would support her claim are solely in the possession of a defendant….,” Cordero-Hernández v. Hernández-Ballesteros, 449 F.3d 240, 244 (1st Cir. 2006) (citing Becher, 829 F.2d at 290), a circumstance which can frequently arise in RICO mail and wire fraud cases. See Becher, 829 F.2d at 290-91 (“In the instant case, it is seemingly impossible for the plaintiff to have known exactly when the various defendants phoned or wrote to each other or exactly what was said.”). Thus, “a court faced with an insufficiently specific claim may permit limited discovery in order to give a plaintiff an opportunity to develop the claim and amend the complaint.” See Cordero-Hernández, 449 F.3d at 244 (citing Becher, 829 F.2d at 290). 

This discovery is neither automatic nor offered to plaintiffs as a matter of right. Defendants maintain that the court never authorized written discovery and that, even if written discovery were permitted, Norfe seeks material outside the scope of the limited discovery permitted under Becher. *4. 

B. Rule 9(b) Does Not Require Plaintiff to Plead Every Individual Misrepresentation with Specific Detail

Even assuming that Norfe would need information regarding other insureds’ claims for purposes of its own RICO cause of action, it would not need to provide specific details regarding each and every one of those 250 insurance claims, related emails, internal reports, and invoices to satisfy Rule 9(b)See Puerto Rico Med. Emerg. Group, Inc. v. Iglesia Episcopal Puertorriqueña, Inc., 118 F. Supp. 3d 447, 458 (D.P.R. 2015) (“To be sure, because [plaintiff] alleges an expansive scheme spanning several years and including hundreds of misrepresentations, Rule 9(b) does not require it to plead every individual misrepresentation with specific detail.”). “Setting forth the date, sender, recipient [ ], and mode of delivery for a representative sample … would suffice.” Id.

Norfe thus also sought information related to its RICO allegations and peculiarly within defendants’ control. Mindful both of the challenges inherent to pleading RICO mail fraud claims and of Rule 9(b)’s purpose to protect defendants from the harms of groundless fraud claims, the court permitted  strictly limited additional discovery, and Norfe could send new written requests to defendants within certain parameters. 

Ed. Note:   This case provides useful reiteration of the rules regarding the pleading of mail and wire fraud allegations, and appears to be a more liberal test for seeking discovery at the pleading stage than other circuits.

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