New York Attorneys JHA handles range the gamut of complex financial and commercial litigation and arbitration, including securities, RICO, corporate and contract disputes, credit default swaps, derivatives, and class, mass, and derivative actions. The firm also represents law firms in major disputes.

Commercial Litigation and Arbitration

New York Attorneys JHA handles range the gamut of complex financial and commercial litigation and arbitration, including securities, RICO, corporate and contract disputes, credit default swaps, derivatives, and class, mass, and derivative actions. The firm also represents law firms in major disputes.
Commercial Litigation and Arbitration
« Back to Complex Lit Blog

RICO Claim Based on Underpayment of Wages Cannot Be Predicated on Pay Stubs That Reveal, Not Promote, the Fraud — Error to Prevent Motion to Amend by Immediate Entry of Judgment on Dismissal of Complaint

Download PDF

Nakahata v. N.Y. -Presbyterian Healthcare Sys., Inc., Nos. 11-0734, 11-0710, 11-0713, 11-0728 (2d Cir. July 11, 2013):

***Plaintiffs -- current and former healthcare employees -- allege that the Defendants -- healthcare systems, hospitals, corporate heads, and affiliated entities -- violated the Fair Labor Standards Act ("FLSA"), New York Labor Law ("NYLL"), Racketeer Influenced and Corrupt Organizations Act ("RICO"), and New York common law by failing to compensate Plaintiffs for work performed during meal breaks, before and after scheduled shifts, and during required training sessions. ***

Plaintiffs allege that it is Defendants' policy not to pay employees for all hours worked, including some overtime hours. In particular, Plaintiffs allege: (1) Defendants have a policy of automatically deducting time for meal breaks from employees' paychecks despite consistently requiring employees to work during meal breaks; (2) employees engage in work activities both before and after their shift without compensation; and (3) Defendants require employees to attend training sessions for which they are not compensated. Based on these allegations, Plaintiffs seek to recover unpaid compensation pursuant to the FLSA, NYLL, and New York common law. Plaintiffs further allege that their paychecks were misleading and part of a fraudulent scheme to hide the underpayment in violation of RICO and New York common law.***

We review a district court's denial of leave to amend for abuse of discretion. See Anatian, 193 F.3d at 89. As a general principle, district courts should freely grant a plaintiff leave to amend the complaint. Kleinman v. Elan Corp., 706 F.3d 145, 156 (2d Cir. 2013). Nonetheless, "we will not deem it an abuse of the district court's discretion to order a case closed when leave to amend has not been sought." Anatian, 193 F.3d at 89 (quoting Campaniello Imps., Ltd. v. Saporiti Italia, S.p.A., 117 F.3d 655, 664-65 n.3 (2d Cir. 1997)) (internal quotation marks omitted). Nor will we upset a decision denying leave to amend if the denial was harmless error. See In re "Agent Orange" Prod. Liability Litig., 517 F.3d 76, 104 (2d Cir. 2008).

While we will not upset a denial of leave to amend where the plaintiff failed to seek such leave, the record in this case indicates that Plaintiffs were not provided an opportunity to seek leave to amend in response to the District Court's order of dismissal. The District Court ordered the cases terminated with no indication that final judgment should await a motion for leave to amend. See Nakahata I, 2011 WL 321186, at *7. The clerk of the court entered final judgment the next business day after the opinion was issued.... Absent an opportunity to seek leave to amend, Plaintiffs cannot be held accountable for failing to make the necessary motion.

Nor can we deem this error harmless. The District Court did permit Plaintiffs to refile their FLSA and NYLL claims in a new action, which obviated much -- but not all -- of the prejudice Plaintiffs experienced from the denial of leave to amend. The option to file a new action preserved the FLSA and NYLL claims that remained timely on the date the new action was filed, but Plaintiffs lost the opportunity to pursue claims that became time-barred pursuant to the statute of limitations in the interim between the filing of the original complaints and the filing of the new complaints. ***

In addition to the claims for unpaid wages, Plaintiffs allege that the Defendants committed mail fraud in violation of RICO. Plaintiffs allege that their paychecks, delivered through the U.S. mail, misleadingly purported to pay Plaintiffs for all hours worked. Plaintiffs further allege that the purportedly complete paychecks concealed a scheme by Defendants to undercompensate the Plaintiffs.

RICO makes it unlawful "for any person employed by or associated with any enterprise . . . to conduct or participate, directly or indirectly, in the conduct of such enterprise's affairs through a pattern of racketeering activity . . . ." 18 U.S.C. § 19 62(c) (2006); First Capital Asset Mgmt., Inc. v. Satinwood, Inc., 385 F.3d 159, 173 (2d Cir. 2004). Mail fraud, pursuant to 18 U.S.C. § 1341, is among the activities defined as racketeering. Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 482 n.3 (1985) (quoting 18 U.S.C. § 1961(1) (1982 ed., Supp. III)).

The District Court dismissed the RICO claims because the paychecks did not perpetuate a fraud; rather, they disclosed any alleged underpayment.... Lundy endorsed this reasoning, holding that the "mailing of pay stubs cannot further the fraudulent scheme because the pay stubs would have revealed (not concealed) that Plaintiffs were not being paid for all of their alleged compensable overtime." Lundy, 711 F.3d at 119. Thus, the District Court properly dismissed the RICO claims, and, because the claims cannot be pled on these facts, they were properly dismissed with prejudice.

Share this article:

Facebook
Twitter
LinkedIn
Email

Recent Posts

Rule 41(b): Five Factors to Be Weighed in Deciding Whether Dismissal Is Appropriate (Second Circuit) — Is A Finding of Bad Faith or Fault Required if Dismissal Is Without Prejudice? — Undecided If Truly Without Prejudice But It Is Required If the Without Prejudice Dismissal Will Act as a Dismissal on the Merits (Here, Because of the Statute of Limitations) — Failure To Consider A Lesser Sanction Than Dismissal Is Generally An Abuse Of Discretion

Spoliation Sanctions/Mootness: Stipulation Resolving “All Pending Discovery Disputes,” Which Are Enumerated, Does Not Moot Subsequent Sanctions Motion for ESI Spoliation — Postjudgment Sanctions Order Is Appealable When District Court Has Finally Disposed of Both Liability and Amount

Rule 37 Default Judgment Sanction: (1) Default Judgment Appropriate Only As a Last Resort, When Less Drastic Sanctions Would Not Ensure Compliance with the Court’s Orders — (2) Default Judgment Sanction Requires Willful or Bad Faith Failure to Obey Discovery Order — (3) Fugitive Defendant’s Failure to Appear at Court-Ordered, Remote Deposition Despite Court Warning That Sanctions Could Follow Disobedience Warrants Default Judgment — (4) District Court Afforded Wide Discretion in Interpreting Its Own Orders — (5) Filing a Notice of Appeal from a Non-Appealable Order (Here, a Discovery Order) Does Not Deprive the District Court of Jurisdiction over the Case

RICO and Injunctions: (1) State Court Actions Designed to Perpetuate and Monetize a RICO Violation Are Enjoinable under RICO, Even Though They Are Not Themselves Alleged to Be Predicate Acts [Note: Noerr Pennington Applies in RICO Actions] — (2) Although Civil RICO’s Text and Legislative History Fail to Reveal Any Intent to Override the Provisions of the Federal Arbitration Act, Arbitrations Are Enjoinable Under the “Effective Vindication” Doctrine Where They Operate As a Prospective Waiver of a Party’s Right to Pursue Statutory RICO Remedies — (3) Arbitration Findings May Be Given Collateral Estoppel Effect in a Civil RICO Action — (4) Injunction of Non-Corrupt State Court Litigations That Furthers a RICO Violation Are Enjoinable Under the Anti-Injunction Act’s “Expressly Authorized” Exception — (5) “The Irreparable Harm Requirement Is The Single Most Important Prerequisite For The Issuance Of A Preliminary Injunction” (Good Quote) — (6) When Injunction Is Based on “Serious Questions on the Merits” Rather Than “Likelihood of Success,” Court May Rely on Unverified Pleadings and Attached Exhibits to Assess the Merits, Unless the Opponent Has Raised Substantial Questions (Here, the Opponent Failed to Request an Evidentiary Hearing) — (7) Whether Amended Pleading Moots An Appeal Turns on Whether It Materially Changes the Substantive Basis for the Appeal — (8) Meaning of “In That” (“Used To Introduce A Statement That Explains Or Gives More Specific Information” About A Prior Statement)

RICO: Fraudulent Concealment Must Prevent Discovery of the Injury to Toll Statute of Limitations

Rule 37 Default Judgment Sanction: (1) Abuse of Discretion Review = Legal Conclusions De Novo. Factual Findings for Clear Error — (2) Client May Be Sanctioned for Misconduct of Its Counsel, Though Here Client Was Directly Involved in Bad Faith Misbehavior — (3) Is There A Difference, Under Rule 11 As Opposed to Rule 37, Concerning Whether A Client Can Be Sanctioned for Its Counsel’s Misconduct? — (4) While Sanctions of Last Resort (Dismissal/Default) Are Apt Only If Lesser Sanctions Wouldn’t Ensure Compliance, Rule 37 Doesn’t Require the Vain Gesture of First Imposing Lessert Sanctions When It Is Clear They Would be Ineffective — (5) Court’s Reconsideration of Non-Final Orders Is Governed by Rule 54(b), And Court’s Discretion under That Rule Is Governed by the Law-of-the-Case-Doctrine

RICO: (1) Special Pleading Requirements? — (2) Although Enterprise Must Be More Than a Summation of the Predicate Acts, The Predicate Acts Can Demonstrate the Existence of the Enterprise — (3) Requirement That Association-in-Fact Exist For Purposes Other Than Just to Commit Predicate Acts Merely Requires Continuity — (4) To State an Association-in-Fact Enterprise Consisting of One Natural Person and Collection of Legal Fictions Requires Factual Detail As to How They Acted Together — (5) “A § 1962(c) Enterprise Must Be More Than An Association of Individuals Or Entities Conducting the Normal Affairs of a Defendant Corporation” (Good Quote)

RICO: (1) Fee Award May Exceed Amount Recovered — Strict Proportionality Not Required — (2) Nonmonetary Benefits and Injunctive Relief Recovered Also Relevant Factors — (3) Loss on Some Claims Need Not Result in Lowered Fees, Especially When Both Arise Out of The Same Nucleus of Operative Facts

RICO: Indirect Purchasers (Car Buyers/Renters) Lack Standing to Sue Manufacturers for RICO Violations Even Though Intermediaries (Auto Dealer Direct Purchasers) Lack Any Damages

RICO: Statutory Requirement that RICO Be Liberally Construed Does Not Establish a More Liberal Pleading Standard for RICO Claims — “To Be Sure, Adequately Pleading a RICO Claim Can Be Challenging” (Good Quote) — Court May Dismiss Action Pursuant to Rule 41(b) Absent A Motion

Archives
New York Attorneys JHA handles range the gamut of complex financial and commercial litigation and arbitration, including securities, RICO, corporate and contract disputes, credit default swaps, derivatives, and class, mass, and derivative actions. The firm also represents law firms in major disputes.
New York Attorneys JHA handles range the gamut of complex financial and commercial litigation and arbitration, including securities, RICO, corporate and contract disputes, credit default swaps, derivatives, and class, mass, and derivative actions. The firm also represents law firms in major disputes.

New York Office

© 2024 Joseph Hage Aaronson LLC  
Disclaimer | Attorney Advertising Notice | Legal Notice