RICO: Injury from 1 Predicate Act Enough — Mail Fraud: Must ID a Mailing; 9(b)/Iqbal Caution — No Causation If Injury Could Occur w/o Predicate Act Or Is Not Directly Tied to Predicate Act — Only Bank Can Sue for Financial Institution Fraud
Empire Merchants, LLC v. Reliable Churchill LLLP, 2017 U.S. Dist. LEXIS 186669 (E.D.N.Y. Mar. 16, 2017):
Plaintiff, Empire Merchants, LLC ("Empire"), is a liquor [*2] wholesaler operating in New York City. Empire brings this action against numerous defendants, including a liquor wholesaler operating in Maryland; that wholesaler's parent company; individual employees of the parent company; a liquor retailer in Cecil County, Maryland; liquor retailers in New York City; and individual proprietors of those liquor retailers. Empire alleges that defendants conspired to illegally smuggle alcohol from Maryland to New York. Specifically, Empire alleges that this smuggling scheme (a) allowed defendants to avoid paying New York's higher liquor excise tax; (b) contravened contracts between Empire and liquor suppliers that made Empire the exclusive distributor of certain brands of liquor in New York; and (c) violated New York State's liquor licensing laws because defendants made sales without a New York State liquor license. Empire asserts a substantive violation of the Racketeering Influenced and Corrupt Organizations Act (RICO) under 18 U.S.C. § 1962(c) and RICO conspiracy under 18 U.S.C. § 1962(d). Plaintiff also asserts a claim under 42 U.S.C. § 1985 against two of the defendants, Reliable Churchill LLLP ("Reliable") and Breakthru Beverage Group, LLC ("Breakthru"), for a conspiracy to interfere with an ongoing [*3] federal court proceeding. Defendants have moved to dismiss plaintiff's federal claims under Federal Rule of Civil Procedure 12(b)(6). For the reasons that follow, defendants' motions are granted.
FACTUAL AND PROCEDURAL BACKGROUND
The following facts are drawn from the allegations in plaintiff's amended complaint, which are accepted as true for the purposes of a motion to dismiss. See Taylor v. Vt. Dep't of Educ., 313 F.3d 768, 776 (2d Cir. 2002).
A. Defendants' Smuggling Scheme
From at least 2008 through 2014, defendants conspired to transport liquor from Maryland to New York for illegal sale in New York. Specifically, defendants' scheme operated as follows:
Liquor retailers located in New York City (the "New York retailers"1) submitted orders to liquor retailers located in Cecil County, Maryland (the "Maryland retailers"2) via interstate telephone calls, emails, and faxes. Am. Compl. ¶ 82, ECF No. 46. In these orders, the New York retailers informed the Maryland retailers which types and quantities of liquor they sought to purchase. Id. The Maryland retailers then purchased the requested liquor from the Maryland wholesalers, defendant Reliable and non-party Republic National Distributing Company ("RNDC"), on behalf of the New York retailers. Id. The Maryland wholesalers delivered the purchased [*4] liquor to the liquor stores of the Maryland retailers. See id. 1194. The New York retailers drove vans or trucks from New York to the liquor retailers' stores in Cecil County, Maryland to pick up the liquor that they had ordered. Id. ¶ 82. The New York retailers paid cash for their purchases to the Maryland retailers, who deposited the cash in their bank accounts. Id. In turn, the Maryland retailers wrote checks against those bank accounts to pay the Maryland wholesalers. Id. The New York retailers then drove the alcohol back to New York. Id. In New York, the New York retailers re-sold the alcohol to the public. Id.
1 The term "New York retailers" refers to defendants who are liquor retailers in New York and defendants who are individual proprietors of those retailers: Sam Liquors Inc., Bin Luo, Bao Liquors Inc., Bao Xiong Zheng, Our Liquor, Inc., Alexander J. Lew, Ting Wei, LTT Whiskey Inc., Ke Yao, and Yi Feng Gao. See Am. Compl. ¶¶ 43-53.
2 The term "Maryland retailers" refers to a defendant who is a liquor retailer in Cecil County, Maryland, Tech Pride of America, Inc., and defendants who are individual proprietors of Cecil County, Maryland liquor retailers: Tushar Patel, Nileshkumar Patel, Pratibha Patel, Anil Patel, Dilip C. Patel, and Prakash Patel. See Am. Compl. ¶¶ 35-42.
The Maryland wholesalers (defendant Reliable and non-party RNDC) were aware of and actively participated in this scheme. Id. ¶ 91. Specifically, Reliable worked closely with the Maryland retailers with the intention that the orders made by those retailers would be smuggled to New York. Id. Reliable employees provided specific information to employees of the Maryland retailers that allowed them to further the bootlegging scheme. Id. ¶ 95. For example, one Reliable employee instructed a liquor retailer's employee regarding how to remove stickers from liquor cases using a torch, [*5] so that New York inspectors would not be able to identify the out-of-state source of the product sold. Id.
Because of this scheme, retailers in Cecil County, Maryland purchased a hugely disproportionate amount of alcohol for the county's population of only 78,000 -- for example, in one year they purchased the highest quantity of Johnnie Walker Black of any county in the United States. Id. ¶ 99. The United States Attorney's Office for the District of Maryland investigated this scheme. Id. ¶ 21. Some of the liquor retailer defendants in this case, as well as non-party RNDC, were indicted on criminal charges relating to this scheme in the District of Maryland. Id. 11107.
B. The Smuggling Scheme's Illegal Nature
Empire asserts that defendants' smuggling scheme was illegal in three distinct ways:
First, defendants illegally avoided paying New York's liquor excise tax, which is significantly higher than liquor excise tax in Maryland. See id. ¶ 5. Specifically, defendants "paid the lower excise tax in Maryland and then re-sold the liquor in New York without alerting New York's tax authorities to the sales, thereby avoiding New York's higher excise tax. In so doing, Defendants deprived New York State and [*6] New York City (and their respective residents) of tens of millions of dollars in tax revenue." Id.
Second, defendants' sales were made in contravention of Empire's exclusive distribution agreements with liquor suppliers. Large liquor suppliers often enter into exclusive distribution agreements with one licensed wholesaler in each state. Id. ¶ 73. These agreements provide that within that state the supplier will sell only to that wholesaler, thereby giving the wholesaler the exclusive right to distribute the supplier's products in the state. Id. As a result, for a retailer in the state to sell a particular brand of liquor to the public, it is required to purchase that liquor from the wholesaler who has entered into the exclusive distribution agreement with the supplier of that brand. See id. When such an agreement is in effect, each bottle of a particular brand of liquor lawfully sold in a state was purchased from the same wholesaler.3 See id.
3 Defendants dispute that the exclusive distribution agreements have such an effect. See, e.g., LTT Whiskey's Mem. of Law in Supp. of Mot. to Dismiss ("LTT Mem.") at 9-10, ECF No. 141-1 ("Plaintiffs allege that every bottle of alcohol purchased by a New York Retailer without the payment of taxes would otherwise have been purchased by that New York Retailer from Empire. However, many other logical scenarios also exist."); Reply Mem. of Law in Supp. of Reliable and Breakthru's Mot. to Dismiss and Mot. to Strike ("Reliable Reply") at 19-20, ECF No. 155 ("[Empire's] contractual right to buy exclusively from a supplier does not impose obligations on New York Retailers to purchase the supplier's brands solely from Empire Merchants. Moreover . . . [,] New York State alcohol regulations provid[e] other legal sources for New York Retailers to purchase alcohol."). At the motion to dismiss stage, however, I must "accept the allegations contained in the complaint as true and draw all reasonable inferences in favor of the nonmoving party" -- here, Empire. See Taylor, 313 F.3d at 776. Accordingly, I accept as true Empire's explanation of the effect of the exclusive distribution agreements.
Plaintiff, Empire, is a licensed liquor wholesaler operating in New York City. See id. ¶ 285. Empire entered into exclusive distribution agreements with "some of the largest and best-known liquor and wine manufacturers in the world," [*7] making Empire "their sole and exclusive distributor in the New York metropolitan area." Id. ¶ 3. For example, Empire entered into an agreement with the supplier of Johnnie Walker Black to be the exclusive distributor of that brand in New York. See id. ¶ 79. Pursuant to that agreement, Empire was the only licensed wholesaler authorized to sell Johnnie Walker Black in New York, so all liquor retailers could legally purchase Johnnie Walker Black only from Empire. Thus, each bottle of Johnnie Walker Black legally sold in New York was purchased from Empire. See id. When defendants sold brands of liquor for which Empire was the exclusive New York distributor, they violated Empire's exclusive distribution agreements. See id. ¶ 92.
The third illegal aspect of the charged scheme was that defendants illegally sold liquor to New York State retailers in violation of the New York State licensure regulations. See id. 114. New York has a "three-tier licensing structure for the sale and distribution of alcoholic beverages":
The three tiers are: (1) the producer, (2) the . . . wholesaler, and (3) the retailer. Under this system, the producer sells to a licensed in-state wholesaler, who pays excise taxes and [*8] delivers the alcohol to a licensed in-state retailer. The retailer, in turn, sells the alcohol to consumers, collecting sales taxes where applicable.
Arnold's Wines, Inc. v. Boyle, 571 F.3d 185, 187 (2d Cir. 2009) (citing N.Y. Alco. Bev. Cont. Law §§ 79, 102). Here, defendants violated New York State's licensing scheme by selling liquor to New York retailers without a New York State wholesaler's license. See N.Y. Alco. Bev. Cont. Law §§ 62, 102.
Empire asserts that it was directly injured by defendants' scheme because defendants "stole sales from Empire." See Am. Compl. ¶ 75. It explains: "Empire possessed the exclusive right to distribute certain brands of liquor in New York. Every time a case of liquor that Empire had the exclusive right to sell was illegally sold by the Maryland Defendants to the New York Retailers, Empire lost a sale to which it was entitled." Id. ¶ 194. In Empire's estimation, the damages resulting from this scheme might exceed $100 million. Id. ¶ 195.
C. This Lawsuit, the Amended Complaint, and Motions to Dismiss
Empire Merchants filed this civil action on September 20, 2016. See Compl., ECF No. 1. Empire's original complaint asserted RICO and RICO conspiracy claims, as well as various state law claims, against Reliable, New York retailers, and Maryland retailers. Id.
On December 9, 2016, plaintiff [*9] filed its amended complaint ("the FAC"). Am. Compl. The FAC alleges violations of RICO and RICO conspiracy and various state law claims. See id. ¶¶ 237-86 (RICO); 287-93 (RICO conspiracy); 301-08 (tortious interference with contract); 309-13 (deceptive trade practices); 314-21 (unfair competition); 322-30 (fraud); 331-43 (unjust enrichment); 344-53 (conspiracy). The FAC also adds a new claim under 42 U.S.C. § 1985 for conspiracy to retaliate against Empire for bringing this lawsuit in federal court. Id. ¶11 294-300. Specifically, Empire alleges that, after this action was filed, Reliable conspired with Breakthru (Reliable's parent company) and Breakthru's employees to retaliate against Empire for filing this action. See id. ¶¶ 214-36. The FAC adds additional defendants to the lawsuit, including Breakthru, Breakthru's employees, and two additional individual proprietors of New York liquor retailers.4
4 The FAC also added a new plaintiff, Empire Merchants North. Empire Merchants North was dismissed as a party to this action in the court's prior Opinion and Order. See Op. & Order, ECF No. 131.
On December 15, 2016, the court authorized defendants to prepare motions to dismiss plaintiff's federal law claims. See Order at 2-3 (Dec. 15, 2016), ECF No. 53. Nine defendants have filed four separate motions to dismiss plaintiff's federal claims under Federal Rule of Civil Procedure 12(b)(6), which are now before me.5 These motions are opposed [*10] by plaintiff.6
5 See Mem. of Law in Supp. of Yi Feng Gao's Mot. to Dismiss ("Gao Mem."), ECF No. 140-2; LTT Whiskey's Mem. of Law in Supp. of Mot. to Dismiss ("LTT Mem."), ECF No. 141-1; Mem. of Law in Supp. of Defs.' Mot. to Dismiss ("Luo Mem"), ECF No. 142-2 (on behalf of Sam Liquors, Inc., Bin Luo, Bao Liquors, Inc., Bao Xiong Zheng, and Ting Wei); Mem. of Law in Supp. of Reliable and Breakthru's Mot. to Dismiss and Mot. to Strike ("Reliable Mem."), ECF No. 143-1; see also Reply Mem. of Law in Supp. of Reliable and Breakthru's Mot. to Dismiss and Mot. to Strike ("Reliable Reply"), ECF No. 155.
6 See Pl.'s Omnibus Mem. of Law in Opp'n to Defs.' Mots. to Dismiss ("Pl.'s Opp'n"), ECF No. 145; Pl.'s Sur-Reply Mem. of Law in Opp'n to Def.'s Mots. to Dismiss and Mot. to Strike ("Pl.'s Sur-Reply"), ECF No. 167.
STANDARD OF REVIEW
Federal Rule of Civil Procedure 12(b)(6) requires that a complaint "contain sufficient factual matter ... to 'state a claim to relief that is plausible on its face." Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S. Ct. 1937, 173 L. Ed. 2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S. Ct. 1955, 167 L. Ed. 2d 929 (2007)). "In ruling on a Rule 12(b)(6) motion, [the court] accept[s] the allegations contained in the complaint as true and draw[s] all reasonable inferences in favor of the nonmoving party." Taylor, 313 F.3d at 776; see also Emergent Capital Inv. Mgmt., LLC v. Stonepath Grp., Inc., 343 F.3d 189, 194 (2d Cir. 2003).
I. Empire's RICO Claims
Empire asserts a substantive violation of RICO under 18 U.S.C. § 1962(c), and a claim of RICO conspiracy under 18 U.S.C. § 1962(d). Section 1962(c) prohibits conducting the affairs of an enterprise through a pattern of racketeering activity, and section 1962(d) prohibits a conspiracy to do so. "Racketeering activity" is defined as the commission of particular federal crimes ("predicate acts") identified in the statute. See 18 U.S.C. § 1961(1).
As an initial matter, I must determine whether Empire is authorized under RICO's private right of action to sue for defendants' alleged violations. RICO's private right of action provides that "[a]ny person injured in his business or property by reason of a violation of [18 U.S.C. § 1962] may sue therefor in any appropriate United States district court." 18 U.S.C. § 1964(c) (emphasis added). In Holmes v. Securities Investor Protection Corp., 503 U.S. 258, 112 S. Ct. 1311, 117 L. Ed. 2d 532 (1992), the Supreme Court held that this language requires a plaintiff to "show that the defendant's violation [*11] not only was a 'but for' cause of his injury, but was the proximate cause as well." Id. at 268.
Defendants argue that Empire cannot sue for defendants' alleged RICO violations because Empire's injury was not proximately caused by defendants' actions. See Gao Mem. at 3-4; LTT Mem. at 5-10; Luo Mem. at 25-35; Reliable Mem. at 30-38.7 I agree, albeit on grounds largely different from those advanced by defendants. See supra n.3. As explained below, plaintiff's RICO claim must be dismissed because the predicate acts alleged to have been committed by defendants did not proximately cause plaintiff's injury.
7 The parties, following prior caselaw, refer to this question as "RICO standing." However, in Lexmark International, Inc. v. Static Control Components, Inc., 134 S. Ct. 1377, 188 L. Ed. 2d 392 (2014), the Supreme Court explained that "'standing is a misnomer' where, as here, the inquiry is "whether 'this particular class of persons has a right to sue under this substantive statute.' Id. at 1387 (alteration omitted) (quoting Ass'n of Battery Recyclers, Inc. v. E.P.A., 716 F.3d 667, 675-76, 405 U.S. App. D.C. 100 (D.C. Cir. 2013) (Silberman, J., concurring)); see also id. at 1391 n.6 ("Proximate causation is not a requirement of Article III standing . . [I]t is an element of the cause of action under the statute.").
A. A Plaintiff May Sue Under RICO's Private Right of Action Only If One or More of Defendants' Predicate Acts Directly Caused Plaintiff's Injury.
In Holmes, the Supreme Court articulated the basic principle underlying proximate cause analysis in the RICO context: proximate cause demands a "direct relation between the injury asserted and the injurious conduct alleged," 503 U.S. at 268, whereas "[a] link that is 'too remote,' 'purely contingent,' or 'indirec[t]' is insufficient," Hemi Grp., LLC v. City of New York, 559 U.S. 1, 9, 130 S. Ct. 983, 175 L. Ed. 2d 943 (2010) (quoting id. at 271, 274).
In Anza v. Ideal Steel Supply Corporation, 547 U.S. 451, 126 S. Ct. 1991, 164 L. Ed. 2d 720 (2006), the Supreme Court elaborated on this principle. Anza began by reiterating Holmes's holding that a RICO plaintiff's injury must have [*12] been directly caused by a defendant's violation. In the words of the Anza Court, "[w]hen a court evaluates a RICO claim for proximate causation, the central question it must ask is whether the alleged violation led directly to the plaintiffs injuries." Id. at 461. The Court then explained that "the compensable injury flowing from a violation of [RICO] 'necessarily is the harm caused by predicate acts . . . [,] for the essence of the violation is the commission of those acts in connection with the conduct of an enterprise.'" Id. at 457 (quoting Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 497, 105 S. Ct. 3275, 87 L. Ed. 2d 346 (1985)). The proximate cause inquiry thus focuses on the directness of the relationship between plaintiff's injury and the predicate acts committed by the defendants. Justice Scalia explained this principle in his concurrence in Holmes:
[T]he proximate-cause test . . . that will be applied to the various causes of action created by 18 U.S.C. § 1964 [is] not uniform, but var[ies] according to the nature of the criminal offenses upon which those causes of action are based. The degree of proximate causality required to recover damages caused by predicate acts of sports bribery, for example, will be quite different from the degree required for damages caused by predicate acts of transporting stolen property.
Holmes, 503 U.S. at 288 (Scalia, [*13] J., concurring in the judgment) (citations omitted).
The Supreme Court's analysis of the relationship between the defendants' predicate acts and the plaintiff's injury in Anza is instructive. In Anza, a store selling steel mill products filed a RICO suit against the owners of its principal competitor. 547 U.S. at 453-54. Plaintiff alleged that defendants illegally failed to charge New York sales tax to customers who paid cash for their products, and committed RICO predicate acts of mail and wire fraud in doing so. Id. at 454.
Plaintiff asserted that it was injured by defendants' fraud: the proceeds from defendants' nonpayment of taxes allowed defendants to undercut plaintiff's prices, which enabled defendants to attract more customers than plaintiff, thereby decreasing plaintiff's profit. Id. at 457-58. The Court held that plaintiff's injury was not proximately caused by defendants' predicate acts of mail and wire fraud, foreclosing plaintiff's civil suit under RICO. The court explained:
The RICO violation alleged by [plaintiff] is that the [defendants] conducted [their] affairs through a pattern of mail fraud and wire fraud. The direct victim of this conduct was the State of New York, not [plaintiff]. It was the State that [*14] was being defrauded and the State that lost tax revenue as a result. . . . [Plaintiff] asserts it suffered its own harms when the [defendants] failed to charge customers for the applicable sales tax. The cause of [plaintiff's] asserted harms, however, is a set of actions (offering lower prices) entirely distinct from the alleged RICO violation (defrauding the State).
Id. at 458.
Subsequent caselaw has reaffirmed Anza's holding that proximate cause under RICO requires the defendants' predicate acts to have directly caused plaintiff's injury. See Hemi, 559 U.S. at 10-11 (describing "RICO's 'requirement of a direct causal connection' between the predicate offense and the alleged harm" (quoting Anza, 547 U.S. at 460-61)). Further, Anza's holding applies not only to substantive RICO violations under 18 U.S.C. § 1962(c), but also to violations of RICO conspiracy under § 1962(d). Beck v. Prupis, 529 U.S. 494, 505, 120 S. Ct. 1608, 146 L. Ed. 2d 561 (2000) ("[I]njury caused by an overt act that is not an act of racketeering or otherwise wrongful under RICO . . . is not sufficient to give rise to [a RICO conspiracy claim]."); European Cmty. v. RJR Nabisco, Inc., 764 F.3d 149, 151 (2d Cir. 2014) (per curiam) ("[T]he Supreme Court's conclusion that RICO's remedial provisions are addressed to violations of RICO predicates still stands when applied to . . . conspiracies to commit violations of those sections charged under § 1962(d).").
The weight [*15] of authority suggests that a plaintiff need only show that one of defendants' predicate acts proximately caused its injury. As one treatise succinctly explains:
Under § 1964(c), a plaintiff may proceed only if it has been "injured in [its] business or property by reason of a violation of Section 1962." Sedima teaches that "the compensable injury necessarily is the harm caused by predicate acts sufficiently related to constitute a pattern." This might appear to lead to the conclusion that the plaintiff must be injured by each predicate act forming the pattern. That conclusion would be incorrect. . . . The plaintiff is not obliged to plead or prove that it has been injured by multiple predicate acts, as long as it has been injured by at least one predicate act. .. .
Gregory P. Joseph, Civil RICO: A Definitive Guide 73 (4th ed. 2015) (citation omitted).8
8 See also Just Film, Inc. v. Buono, 847 F.3d 1108, 2017 WL 510452, at *6 (9th Cir. 2017) (finding plaintiff's allegation that a "specific predicate act . . . caused her injury" to be "sufficient"); RWB Servs., LLC v. Hartford Computer Grp., Inc., 539 F.3d 681, 687 (7th Cir. 2008) ("[T]he plaintiff . . . must allege an injury resulting from one of the predicate acts. . . ."); Deppe v. Tripp, 863 F.2d 1356, 1366 (7th Cir. 1988) ("[N]o requirement exists that the plaintiff must suffer an injury from two or more predicate acts, or from all of the predicate acts."); Town of Kearny v. Hudson Meadows Urban Renewal Corp., 829 F.2d 1263, 1268 (3d Cir. 1987) (finding that "a civil plaintiff [can] prove injury . . . from any predicate act" because, "[f]or example, if an organized crime group were to operate a protection racket, extorting money from each merchant in a community, then each merchant's injury would be separate, and therefore . . . none could recover"); Chevron Corp. v. Donziger, 974 F. Supp. 2d 362, 601 (S.D.N.Y. 2014) ("A 'plaintiff must prove only . . . an injury directly resulting from some or all of the activities comprising the violation . . .' and need not prove that every predicate act constituting the pattern injured the plaintiff in some way." (quoting Marshall & Ilsley Tr. Co. v. Pate, 819 F.2d 806, 809 (7th Cir. 1987)), aff'd, 833 F.3d 74 (2d Cir. 2016).
If none of defendants' predicate acts proximately caused plaintiff's injury, the plaintiff cannot sue under RICO -- even if the plaintiff's injury was proximately caused by defendants' other violations of law. See Baisch v. Gallina, 346 F.3d 366, 373 (2d Cir. 2003) ("[A] plaintiff [cannot sue under RICO] if he suffered an injury that was indirectly (and hence not proximately) caused by the racketeering [*16] activity or RICO predicate acts, even though the injury was proximately caused by some non-RICO violations committed by the defendants."). This rule holds true even when the alleged RICO predicates and the non-RICO violations stem from the same conduct. See Lerner v. Fleet Bank, N.A., 459 F.3d 273, 285 (2d Cir. 2006) ("Even when stemming from the same fact pattern . . . , proximate causation may be present or absent depending on the cause of action under which the plaintiff brings suit. . . . RICO and common-law claims will often depend on different chains of causation stemming from the same underlying conduct.").
Empire has alleged that defendants committed five RICO predicate acts: mail fraud, wire fraud, bank fraud, money laundering, and violation of the Travel Act. I analyze each below to determine whether any of these alleged predicate acts caused plaintiff's injury.
B. Plaintiff Has Not Pled as Plausible Mail Fraud Claim.
Empire alleges that defendants committed mail fraud, in violation of 18 U.S.C. § 1341. See Am. Compl. ¶¶ 246-50. However, plaintiff's amended complaint fails to identify any specific use of the mails by defendants. Rather, plaintiff repeatedly makes general allegations that defendants "communicat[ed] by . . . mail." See, e.g., id. ¶ 247. In its opposition [*17] brief, plaintiff again fails to refer to any specific mailings, instead focusing only on its wire fraud allegations. See, e.g., Pl.'s Opp'n at 87 ("Reliable Churchill and the other Defendants were central players in a criminal scheme that made regular and necessary use of interstate wires."). Without the specific identification of any mailing, Empire's general allegations of mail fraud plainly do not suffice. See Iqbal, 556 U.S. at 678.
C. Plaintiff's Injuries Were Not Caused by Any Cognizable Wire Fraud Violation.
Empire alleges that defendants committed wire fraud in violation of 18 U.S.C. § 1343 by "us[ing] telephones and email to coordinate the sales of large quantities of bootlegged liquor into New York and further their plan to steal New York sales." Pl.'s Opp'n at 30; see also Am. Compl. ¶¶ 246-50; Am. Compl. App'x A, ECF No. 46-1 (listing dozens of specific wire communications allegedly made by defendants).
The "essential elements of a . . . wire fraud violation are (1) a scheme to defraud, (2) money or property as the object of the scheme, and (3) use of the . . . wires to further the scheme." Fountain v. United States, 357 F.3d 250, 255 (2d Cir. 2004) (alterations omitted). The "gravamen of the offense" of wire fraud "is the scheme to defraud," rather than the wire communication [*18] itself. Bridge v. Phoenix Bond & Indem. Co., 553 U.S. 639, 647, 128 S. Ct. 2131, 170 L. Ed. 2d 1012 (2008).9 Accordingly, "not every use of the . . . wires in furtherance of an unlawful scheme to deprive another of property constitutes . . . wire fraud. . . . Rather, the scheme must be intended to deceive another. . . ." A. Terzi Prods., Inc. v. Theatrical Protective Union, 2 F. Supp. 2d 485, 500 (S.D.N.Y. 1998) (alterations omitted) (quoting McEvoy Travel Bureau, Inc. v. Heritage Travel, Inc., 904 F.2d 786, 791 (1st Cir. 1990)). "The term 'scheme to defraud' is measured by a 'nontechnical standard. It is a reflection of moral uprightness, of fundamental honesty, fair play and right dealing in the general [and] business life of members of society.'" United States v. Trapilo, 130 F.3d 547, 550 n.3 (2d Cir. 1997) (quoting United States v. Von Barta, 635 F.2d 999, 1005 n.12 (2d Cir. 1980)).
9 The identical language in the mail and wire fraud statutes is interpreted identically. See Pasquantino v. United States, 544 U.S. 349, 355 n.2, 125 S. Ct. 1766, 161 L. Ed. 2d 619 (2005).
Further, the Second Circuit has cautioned that "RICO claims premised on mail or wire fraud must be particularly scrutinized because of the relative ease with which a plaintiff may mold a RICO pattern from allegations that, upon closer scrutiny, do not support it." Crawford v. Franklin Credit Mgmt. Corp., 758 F.3d 473, 489 (2d Cir. 2014) (quoting Efron v. Embassy Suites (Puerto Rico), Inc., 223 F.3d 12, 20 (1st Cir. 2000)).
i. Empire Does Not Allege that Defendants Committed Wire Fraud by Smuggling Alcohol Across State Lines Without Paying State Liquor Excise Taxes. In Any Event, Defendants' Failure to Pay Taxes Did Not Proximately Cause Empire's Injury.
It is well-established that a smuggling scheme to defraud the government of excise taxes constitutes a "scheme to defraud" under the wire fraud statute. Pasquantino v. United States, 544 U.S. 349, 357, 125 S. Ct. 1766, 161 L. Ed. 2d 619 (2005); Fountain, 357 F.3d at 255; Trapilo, 130 F.3d at 550 n.3; see also Anza, 547 U.S. at 454; United States v. 1,920,000 Cigarettes, No. 02-CV-437A, 2003 U.S. Dist. LEXIS 12603, 2003 WL 21730528, at *5 (W.D.N.Y. Mar. 31, 2003) ("The [*19] Second Circuit has consistently held that the wire fraud statute is applicable to schemes to defraud governments of excise taxes.").
However, Empire does not allege that defendants committed wire fraud by smuggling liquor to evade state excise taxes. To the contrary, Empire specifically disclaims any reliance on defendants' tax evasion in its RICO allegations. See e.g., Pl.'s Opp'n at 27 ("Defendants misrepresent the scheme detailed in the FAC . . . [by providing a] false narrative that this is a case about unpaid taxes."); id. at 30 (describing connection between predicate acts and plaintiff's injury without any mention of tax evasion); id. at 31 (Defendants "distort the racketeering enterprise as actually alleged into a mere tax avoidance scheme.").10
10 See also. e.g., Pl.'s Opp'n at 4 ("Empire is not seeking to recover the government's lost taxes."); id. at 5 ("Unlike here, the plaintiffs in [cases cited by defendants] alleged predicate acts of wire and mail fraud directed primarily at tax avoidance."); id. at 35 ("Empire does not even allege that Reliable Churchill . . . or the Cecil County Retailers engaged in tax evasion."); id. ("[T]his is not a run-of-the-mill suit between competitors who may have avoided their tax obligations.").
Further, even if Empire had pled wire fraud based on smuggling, such allegations would be of no help to Empire because defendants' tax evasion did not cause plaintiff's injuries. Empire asserts no causal connection between its injury and defendants' tax avoidance, see Am. Compl. ¶¶ 194-97S -- let alone the direct causal connection required under Anza to establish proximate cause, 547 U.S. at 457-58. Indeed, Anza explained that the State of New York is "[t]he direct [*20] victim" of a mail and wire fraud scheme based on submission of fraudulent tax returns. Id. at 458. When a private plaintiff "accuses the [defendants] of defrauding the State of New York out of a substantial amount of money. . . [,] the State can be expected to pursue appropriate remedies." Id. at 460. Accordingly, "the proximate cause requirement leads courts in this Circuit and elsewhere to conclude that . . . individuals (as opposed to . . . a government entity that has been defrauded)" cannot sue for "injuries related to lost tax revenue." Beecher v. Riverdale Riding Corp., No. 08 Civ. 6062, 2010 U.S. Dist. LEXIS 137136, 2010 WL 5298017, at *4 (S.D.N.Y. Dec. 21, 2010). Thus, even if Empire had pled a wire fraud claim based on smuggling, it could not demonstrate that this violation proximately caused its injury. See Reliable Mem. at 33 (With respect to "predicate acts . . . directed at . . . avoiding payment of New York excise taxes, any injury was suffered by the State of New York and the City of New York [and] [a]ny alleged harm allegedly suffered by Empire Merchants as a byproduct of this alleged scheme is, therefore, impermissibly indirect and attenuated.").
In sum, Empire has not pled -- and could not plead -- a wire fraud claim based on tax avoidance that proximately caused its injury.
ii. Defendants' Sales of Liquor in Violation [*21] of Empire's Private Contracts Was Not Deceptive. Therefore, the Sales Did Not Give Rise to a "Scheme to Defraud," Essential to Pleading Cognizable Wire Fraud.
Empire entered into "exclusive distribution agreements" with certain liquor suppliers, which provided that Empire was the only wholesaler to which those suppliers would sell their liquor for distribution in New York. Am. Compl. ¶ 79. Those exclusive distribution agreements "grant[ed] Empire the exclusive rights to distribute those suppliers' products in the New York metropolitan area," id., and "each of the . . . Defendants was forbidden from competing with Empire by selling Empire's exclusive brands in New York," Pl.'s Opp'n at 32.
Empire's complaint asserts a wire fraud allegation based on defendants' sale of liquor in violation of Empire's exclusive distribution agreements with New York liquor suppliers. See Am. Compl. ¶ 246 ("Defendants engaged in a scheme to defraud Empire and the State of New York in connection with their purchase [and] sale . . . [of] products sold in New York--products which could be sold lawfully only by Empire."). Empire further asserts that it was injured by defendants' sales in violation of these agreements: [*22] "Defendants' illegal sales of the bootlegged liquor directly stole sales from Empire because of its exclusive right to distribute the subject brands." Pl.'s Opp'n at 29.11
11 See also, e.g., Pl.'s Mem. at 4 ("[Empire] is here as the direct victim . . . seeking to recover the many millions of dollars in actual sales revenue it lost as the exclusive New York distributor of this bootlegged product."); id. at 26 ("Empire was the direct target of Defendants' racketeering and it lost exclusive sales as a direct result of the racketeering." (quotations omitted)); id. at 29 ("[The] FAC alleg[es] that Defendants' illegal sales of the bootlegged liquor directly stole sales from Empire because of its exclusive right to distribute the subject brands."); id. at 31 n.19 ("Th[e] flood of illegal liquor into Empire's exclusive territory directly harmed Empire."); id. at 32 ("Empire was harmed by every illegal sale of these bootlegged brands within its exclusive territory."); id. at 34 ("Empire is suing . . . for the sales that Defendants knowingly stole from the only distributor entitled to make them.").
It is well-established that "a defendant, by his conduct alone, can . . . engage in a scheme to defraud, even though the defendant's statements themselves contain no misrepresentations." A. Terzi Prods., 2 F. Supp. 2d at 501; see also Trapilo, 130 F.3d at 550 n.3. In order to constitute a "scheme to defraud," however, a defendant's conduct must be deceptive. See McLaughlin v. Anderson, 962 F.2d 187, 192 (2d Cir. 1992) ("'[N]ot every use of the . . . wires in furtherance of an unlawful scheme to deprive another of property constitutes mail or wire fraud.' The [wire] fraud statute requires some element of deception." (citation omitted) (quoting McEvoy, 904 F.2d at 790).12 Here, Empire's asserted wire fraud violation is not cognizable, because the defendants' conduct -- selling liquor in violation of Empire's private contractual agreements -- was not deceptive.
12 See also, e.g., United States ex rel. O'Donnell v. Countrywide Home Loans, Inc., 822 F.3d 650, 660 (2d Cir. 2016) ("[A]t its core, fraud requires proof of deception. . . ."); McEvoy, 904 F.2d at 791 ("[T]he scheme [to defraud] must be intended to deceive another, by means of false or fraudulent pretenses, representations, promises, or other deceptive conduct."); Curtis & Assocs., P.C. v. Law Offices of David M. Bushman, Esq., 758 F. Supp. 2d 153, 179 (E.D.N.Y. 2010) ("[T]he required element of deception . . . must underlie any 'scheme to defraud' pursuant to the mail and wire fraud statutes."), aff'd, 443 F. App'x 582 (2d Cir. 2011).
Defendants' liquor sales in violation of Empire's exclusive distribution agreements were not "calculated to deceive anyone. . . . [N]o one [was] intended to be duped or taken in." McGee v. State Farm Mut. Auto. Ins. Co., No. 08-CV-392, 2009 U.S. Dist. LEXIS 60229, 2009 WL 2132439, at *6 (E.D.N.Y. July 10, 2009); see also United States v. Hanson, 41 F.3d 580, 583 (10th Cir. 1994) ("[A] scheme to defraud is conduct intended or reasonably calculated to deceive [*23] persons of ordinary prudence or comprehension."). The Maryland wholesalers and retailers, who were the sellers of the liquor, were not deceived -- they knowingly participated in the scheme. See Am. Compl. ¶¶ 91-159. The New York retailers, who purchased the liquor, were also knowing participants. See id. ¶¶ 160-93; see also McGee, 2009 U.S. Dist. LEXIS 60229, 2009 WL 2132439, at *6 (finding falsified reports did not deceive defendant who "ordered the falsification in the first place").
Nor does Empire allege facts supporting any inference that the sales were calculated to deceive Empire. Empire may not have been aware of these sales when they occurred, but the act of selling was not itself deceitful and Empire does not allege that defendants took any measures to conceal the sales from Empire. To the contrary, Empire could have identified these sales by reviewing its internal sales data. Had it done so, Empire could have identified New York retailers who had reduced their purchases from Empire of particular brands of liquor or ceased purchasing from Empire altogether, clearly implying that the retailer was purchasing liquor illegally. See, e.g., Am. Compl. ¶¶ 166, 167, 174, 185, 186. Had Empire then visited any of these retailers and observed [*24] that brands to which Empire had exclusive distribution rights were on the shelves, it would have been obvious to Empire that another wholesaler had interfered with its exclusive contractual arrangements.
There was also no deception of the public. The liquor allegedly sold by defendants to the New York retailers is the identical liquor sold by Empire to New York retailers. See id. ¶ 1 (Empire has "exclusive distribution arrangements to sell the very same alcohol that [defendants] smuggled into New York."). Accordingly, the consumers who purchased liquor from the New York retailers were not in any way deceived by the defendants' sales.
The thrust of plaintiffs allegation is that defendants' sales injured it because they interfered with its private contractual agreements with third-party liquor suppliers. This is a paradigmatic claim of tortious interference with contract -- which Empire indeed pleads based on these facts. See id. ¶¶ 301-08. But the fact that Empire's actions may have been tortious does not convert them into acts that were deceptive or fraudulent, and conduct is not deceptive merely because it is wrongful or because it harms another. Lakonia Mgmt. Ltd. v. Meriwether, 106 F. Supp. 2d 540, 554 (S.D.N.Y. 2000) (finding "unjustified . . . and harmful" [*25] conduct not deceptive); Schnell v. Conseco, Inc., 43 F. Supp. 2d 438, 445 (S.D.N.Y. 1999) (finding "aggressive [and] self-interested" conduct not deceptive); A. Terzi Prods., 2 F. Supp. 2d at 500 (finding "wrongful . . . [and] reprehensible" conduct not deceptive); see also United States v. Colton, 231 F.3d 890, 901 (4th Cir. 2000) ("[T]he 'fraud statutes do not cover all behavior which strays from the ideal.'" (quoting United States v. Brown, 79 F.3d 1550, 1562 (11th Cir. 1996))).
Indeed, courts that have considered the issue have easily concluded that tortious interference with contact does not constitute a RICO predicate act. See Annulli v Panikkar, 200 F.3d 189, 199-200 (3d Cir. 1999) ("[I]ntentional interference with contract . . . is not a predicate act of racketeering activity enumerated in § 1961(1). . . . [i]f garden-variety state law crimes, torts, and contract breaches were to constitute predicate acts of racketeering (along with mail and wire fraud), civil RICO law, which is already a behemoth, would swallow state civil and criminal law whole." (citing Brokerage Concepts, Inc. v. U.S. Healthcare, Inc., 140 F.3d 494, 529 (3d Cir. 1998))), overruled on other grounds by Rotella v. Wood, 528 U.S. 549, 120 S. Ct. 1075, 145 L. Ed. 2d 1047 (2000); Home Orthopedics Corp. v. Rodriguez, No. Civ. 11-1591, 2012 U.S. Dist. LEXIS 191241, 2012 WL 12533038, at *8 (D.P.R. May 21, 2012) ("[Plaintiff's] claims that various parties tortiously interfered with its contracts could not, under any circumstances, be RICO predicates."), adopted as modified, 2012 U.S. Dist. LEXIS 191238, 2012 WL 12533035 (D.P.R. Sept. 30, 2012), aff'd, 781 F.3d 521 (1st Cir. 2015); Cal. Pharmacy Mgmt., LLC v. Redwood & Cas. Ins. Co., No. SACV 09-0141, 2009 U.S. Dist. LEXIS 105770, 2009 WL 3514571, at *6 (C.D. Cal. Oct. 26, 2009) ("Plaintiff asserts that Defendants' fraudulent conduct interfered with its current and prospective contractual relationships . . . . Interference with contractual relations cannot serve as the predicate act for a RICO [*26] claim.").
The only authority Empire invokes to demonstrate that it has pled a "scheme to defraud" within the meaning of the wire fraud statute is inapposite here. Empire cites to a footnote in United States v. Trapilo, 130 F.3d 547 (2d Cir. 1997), in which the Second Circuit states that "smuggling . . . is an act within the meaning of a 'scheme to defraud." Id. at 550 n.3; see Pl.'s Opp'n at 83. But Trapilo specifically involved smuggling for the purpose of evading liquor excise taxes, a type of concealment consistently recognized as a deceptive act as it implicitly misrepresents that there is no tax to be paid. See Pasquantino, 544 U.S. at 357; Fountain, 357 F.3d at 255. Here, by contrast, Empire has specifically disclaimed any reliance on defendants' tax evasion, a deception that did not proximately cause plaintiff's injury in any event. Rather, Empire claims injury as a result of plaintiff's liquor sales that interfered with Empire's rights under its private exclusive contractual agreements. Empire's sole authority supporting its claim that its lost sales were caused by a fraudulent scheme is thus irrelevant. Plaintiff has not -- and cannot -- assert a wire fraud claim based on liquor sales by defendants that violated plaintiff's private contractual agreements.
iii. To the Extent That Empire Alleges [*27] Wire Fraud Based on Defendants' Sale of Liquor in Violation of New York State's Licensing Scheme, That Violation Did Not Proximately Cause Plaintiff's Injury.
Empire is a liquor wholesaler licensed by the State of New York. See Am. Compl. ¶¶ 285, 292. Other licensed wholesalers also operate in the State of New York. See id. ¶¶ 3, 79 n.63. Defendants, however, "were not licensed" in New York, "and therefore could not lawfully sell products" to New York retailers. Pl.'s Opp'n at 31. Empire asserts that defendants violated New York State's licensing scheme by selling liquor directly to New York retailers without a New York State wholesaler's license. See id. at 28 (citing N.Y. Alco. Bev. Cont. Law §§ 62, 123).
It is not clear whether plaintiff asserts defendants' alleged licensure violation as the basis of its wire fraud claim. At times, Empire couches that claim in very general terms that could encompass a licensure violation. It alleges, for example, that defendants committed wire fraud by "us[ing] telephones and email to coordinate the sales of large quantities of bootlegged liquor into New York and further their plan to steal New York sales." Pl.'s Opp'n at 30; see also, e.g., Pl.'s Sur-Reply at 12 ("Empire lost tens of millions of [*28] dollars in sales to New York Retailers to which Empire had the exclusive right to sell as the exclusive distributor of those products, both pursuant to contract, and under applicable New York State law." (emphasis added) (citations omitted)).
Unlike defendants' conduct in allegedly interfering with plaintiff's contractual arrangements, defendants' violation of New York State's liquor licensing scheme might be viewed as including as an element the deception essential to a "scheme to defraud" within the wire fraud statute. Specifically, defendants' sale of liquor without a license might be perceived as deceiving the New York State licensing authority by implicitly representing that the liquor sales were authorized by New York State law. Even assuming arguendo that Empire's complaint asserts a wire fraud scheme based on defendants' sales in violation of New York State's licensing laws, and assuming also that such sales constitute a cognizable wire fraud violation,13 that violation could not ground a viable RICO predicate on behalf of Empire as it was not a proximate cause of Empire's injury.
13 Although defendants' conduct of selling liquor without a license might be viewed as deceiving the New York State licensing authority, I have serious doubts that it constitutes a "scheme to defraud" under the wire fraud statute. Empire has not cited to any case that has found actionable wire fraud based solely on a defendant's violation of a state licensing scheme, nor has my own research revealed any such authority. Moreover, the Supreme Court's decision in Cleveland v. United States, 531 U.S. 12, 121 S. Ct. 365, 148 L. Ed. 2d 221 (2000), suggests that caution is warranted in expanding the scope of the mail and wire fraud statutes to include state licensure violations.
In Cleveland, the Court held that a misrepresentation on an application for a state license does not constitute actionable mail or wire fraud (although its holding pertained to a different portion of the statutory language than is at issue in this case -- that is, the existence of a "property" interest rather than the existence of a "scheme to defraud"). Id. at 20. In reaching its decision, the Court reasoned that expanding the reach of the federal mail and wire fraud statutes would engulf entire state regulatory schemes. Id. at 24. It explained that making misrepresentations on state license applications actionable "would subject to federal mail fraud prosecution a wide range of conduct traditionally regulated by state and local authorities. . . . '[U]nless Congress conveys its purpose clearly, it will not be deemed to have significantly changed the federal-state balance in the prosecution of crimes. . . .' [A narrow interpretation] is especially appropriate . . . because . . . mail fraud is a predicate offense under RICO." Id. at 24-25 (quoting Jones v. United States, 529 U.S. 848, 858, 120 S. Ct. 1904, 146 L. Ed. 2d 902 (2000)). Mindful of this admonition in Cleveland, I am hesitant to interpret the statutory term "scheme to defraud" to include conduct that violates a state licensing scheme because doing so would yield the same untenable result cautioned against in Cleveland: it would subject a wide array of state offenses to federal prosecution and civil RICO suits. Ultimately, I need not resolve this question here.
By way of background, as indicated above, New York State's liquor licensing [*29] scheme requires a liquor wholesaler to obtain a New York State license for sales of liquor to New York retailers. N.Y. Alco. Bev. Cont. Law § 62. That scheme does not, however, prohibit state licensure of more than one liquor wholesaler to sell liquor in the same territory. Nor does the licensing scheme in any way limit the brands of liquor that a licensed retailer may sell. It is only through private exclusive distribution contracts that suppliers and wholesalers of liquor may limit the number of wholesalers authorized to sell a supplier's brands. See Am. Compl. ¶ 73. Empire entered into such private contractual agreements with liquor suppliers, which granted Empire exclusive rights to distribute certain brands of liquor in the New York City area. See id. ¶ 79.
It is well settled that "a predicate act cannot be deemed to have proximately caused a plaintiff's injury ... unless the plaintiff's . . . loss could not have occurred without the commission of the predicate act." Leung v. Law, 387 F. Supp. 2d 105, 122 (E.D.N.Y. 2005); accord Picard v. Kohn, 907 F. Supp. 2d 392, 397 (S.D.N.Y. 2012); Red Ball Interior Demolition Corp. v. Palmadessa, 874 F. Supp. 576, 587 (S.D.N.Y. 1995) ("An act which proximately caused an injury is analytically distinct from one which . . . could have happened independently of the act."). Here, plaintiff's alleged injury could have occurred without defendants' licensure violation, [*30] so defendants' licensure violation cannot be deemed to have proximately caused plaintiff's injury.
Empire alleges that it was injured by virtue of "stolen sales" -- sales of liquor made by defendants in violation of Empire's exclusive distribution rights. According to Empire, "[e]very time a case of liquor that Empire had the exclusive right to sell was illegally sold by the Maryland Defendants to the New York retailers, Empire lost a sale to which it was entitled." See Am. Compl. ¶ 194. That injury bears no causal relationship to any violation of the New York State liquor licensure scheme. Had a wholesaler who was properly licensed under New York State law made sales of liquor that violated Empire's private contractual relationships, Empire would have sustained an identical injury of which it now complaints. The licensed wholesaler would have interfered with Empire's exclusive distribution arrangements, resulting in the same lost sales constituting its claimed injury in this case. Given that Empire would have suffered the identical injury at the hands of a licensed wholesaler as the one it sustained at the hands of the unlicensed defendants, it is plain that its injury was proximately caused [*31] not by defendants' violation of New York's licensing scheme, but by defendants' interference with Empire's private contractual agreements. Thus, even were it cognizable and properly pled, a wire fraud claim based on defendants' sales of liquor that violated New York State's licensing scheme did not proximately cause plaintiff's alleged RICO injury.
In sum, Empire has offered no cognizable wire fraud violation that proximately caused its injury. It specifically disclaimed any reliance on defendants' tax evasion, which did not proximately cause its injury in any event. Nor was defendants' alleged violation of New York's licensure scheme the proximate cause of its injury. The thrust of Empire's proximate cause argument is that it was injured by defendants' violation of its exclusive distribution agreements. But because the violation of these agreements was not in any way deceptive, it does not give rise to a cognizable wire fraud claim. Accordingly, plaintiff has not alleged that its RICO injury was proximately caused by any wire fraud committed by defendants.14
14 Empire makes one additional wire fraud claim, but has failed to plead this claim with particularity as required by Federal Rule of Civil Procedure 9(b). Empire alleges that Reliable "committed predicate acts of wire fraud when its representative, Arlyn Miller, deceived Empire about the government's ongoing investigation of Reliable Churchill." Pl.'s Opp'n at 86 (citing Am. Compl. ¶¶ 100-01). Specifically, Miller allegedly stated on behalf of Reliable that "[t]here was no criminal misconduct by Reliable," "that Reliable Churchill and its employees had no knowledge of any shipments being smuggled by the Cecil County Retailers into New York," that she expected that Reliable "would be able to resolve the issue through a modest civil settlement," and that "the Assistant United States Attorney overseeing the [Maryland] investigation specialized in civil forfeitures, not criminal prosecutions." Am. Compl. ¶ 100.
Miller's statements cannot support a wire fraud claim because Empire has not plausibly alleged that Miller's statements were false, nor has it plausibly alleged that Miller made these statements with the requisite fraudulent intent. See Nakahata v. New York-Presbyterian Healthcare Sys., 723 F.3d 192, 197-98 (2d Cir. 2013) (listing pleading requirements of wire fraud claim based on affirmative misrepresentation). To demonstrate that these statements were false and made with fraudulent intent, Empire asserts that "[o]n information and belief, at the time, a criminal prosecutor was overseeing the investigation of Reliable Churchill" and "on information and belief, the government at one point demanded $20 million from Reliable Churchill for participation in this criminal bootlegging scheme." Id. ¶ 100 & n.110. Such allegations do not plausibly suggest that Miller's statements were false when made, or that she had fraudulent intent. Further, Empire acknowledges that Reliable has never been criminally indicted for this activity. Id. ¶ 21. Accordingly, Empire has not pled its wire fraud allegation based on Miller's statements with the particularity required by Rule 9(b).
Moreover, even if Empire had pled a wire fraud claim based on Miller's statements with the particularity required under Rule 9(b), these statements did not proximately cause plaintiff's injury. Plaintiff alleges only that these statements concealed the defendants' underlying illegal scheme that caused its injury. As explained in greater detail below, see infra pp. 27-30, concealment does not on its own suffice for proximate cause under RICO.
D. The Other Alleged Predicate Acts Did Not Cause Empire's Injury.
In addition to the wire and mail fraud allegations [*32] discussed above, Empire also alleges that defendants committed RICO predicate acts of financial institution fraud, Am. Compl. ¶¶ 251-62, money laundering, id. ¶¶ 263-69, and violation of the Travel Act, id. ¶¶ 270-78. As explained below, I find that, even assuming that Empire has adequately pled these predicate acts, none of them proximately caused plaintiff's injury. See Anza, 547 U.S. at 457 ("[T]he compensable injury flowing from a violation of [RICO] 'necessarily is the harm caused by predicate acts . . . .'" (quoting Sedima, 473 U.S. at 497)).
i. Financial Institution Fraud
Empire alleges that defendants committed financial institution fraud, in violation of 18 U.S.C. § 1344. See Am. Compl. ¶¶ 251-62. Empire asserts violations of both subparts of the financial institution fraud statute: that defendants schemed to defraud a financial institution, in violation of § 1344(1), and that defendants schemed to obtain money under the custody or control of a financial institution by false pretenses, in violation of § 1344(2). Specifically, Empire alleges that "Defendants deposited and withdrew Funds between and among accounts . . . for the purpose of executing fraudulent, illegal transactions, and [financial institutions], at Defendants' direction, transferred Funds between [*33] and among Defendants." Id. ¶ 255. Empire further alleges that the defendants "deceive[d]" financial institutions "into releasing [f]unds" to them, "with the intent to expose the [financial institutions] to actual or potential loss." Id. ¶ 253. According to Empire, this scheme was "directly targeted at 'Wells Fargo Bank and other unknown banks.'" Pl.'s Opp'n at 89 (quoting id.).
Defendants argue that Empire has failed to plead its financial institution fraud claims with particularity, as required by Rule 9(b). See, e.g., Reliable Mem. at 62-63. Even assuming that Empire has stated a plausible bank fraud claim, however, that fraud did not proximately cause Empire's injury.
The crux of a bank fraud claim is a "scheme to defraud, or scheme to obtain the money of, a financial institution." United States v. Bouchard, 828 F.3d 116, 123 (2d Cir. 2016) (quotation marks omitted). The financial institution, therefore, is usually the entity injured by the scheme. As a result, in most circumstances "a RICO plaintiff who is not a financial institution . . . lacks . . . injury to bring a RICO claim based on bank fraud as the predicate act." Edmonds v. Seavey, No. 08 Civ. 5646, 2009 U.S. Dist. LEXIS 84397, 2009 WL 2949757, at *6 n.8 (S.D.N.Y. Sept. 15, 2009), aff'd, 379 F. App'x 62 (2d Cir. 2010); accord Yesko v. Fell, No. Civ. 13-3927, 2014 U.S. Dist. LEXIS 123768, 2014 WL 4406849, at *11 (D. Md. Sept. 5, 2014) ("[A]s a general matter, 'courts have consistently found that only financial institutions may claim bank fraud under 18 U.S.C. § 1344 as a predicate [*34] act for RICO purposes.'" (quoting Soto v. Vanderbilt Mort. & Fin., Inc., No. C-10-66, 2010 U.S. Dist. LEXIS 87951, 2010 WL 3363657, at *12 (S.D. Tex. Aug. 23, 2010) (collecting cases))).
Empire has offered no plausible allegations that it was injured as a result of defendants' alleged fraud on the banks. Empire's conclusory allegation that "defendants' [bank fraud] caused Empire substantial damages," Am. Compl. ¶ 262, and its assertion in its opposition brief that "the FAC directly links Defendants' predicate crime . . . [of] bank fraud . . . to Empire's stolen sales," see Pl.'s Opp'n at 30, are wholly without support. To the contrary, Empire alleges that financial institutions were the target of the scheme and were consequently injured by it: the intent of the scheme was to "expose the [financial institutions] to actual or potential loss," "[t]he targets of Defendants' scheme . . . included the Wells Fargo Bank and other unknown banks," and "Defendants obtained for themselves Funds under the custody or control of the [financial institutions]." Am. Compl. ¶¶ 253, 258. Empire has not alleged facts showing that any entity other than a financial institution was injured by defendants' alleged bank fraud, and so it has not shown that it can bring an actionable RICO claim [*35] based on its asserted bank fraud predicate. In sum, where, as here, "a civil RICO action [is] predicated on bank fraud . . . [and] the plaintiff-victim cannot establish that the defendants' actions caused [its] losses, no recovery is appropriate or warranted." Bank of China, N.Y. Branch v. NBM LLC, 359 F.3d 171, 178 (2d Cir. 2004) (emphasis omitted).
ii. Money Laundering
Empire alleges that defendants committed money laundering, in violation of 18 U.S.C. § 1956. See Am. Compl. ¶¶ 263-69. Specifically, Empire alleges as follows:
Defendants engaged in numerous financial transactions over the course of operating and managing their scheme to defraud Empire . . . . Specifically, Defendants engaged in financial transactions whereby they sold products secretly and illegally, from Maryland Wholesalers to Cecil County Retailers to New York Retailers. . . . Defendants conducted these financial transactions with the intent to promote the carrying on of the specified unlawful activity, and knowing that the financial transactions were designed in whole or in part to conceal or disguise the nature, the location, the source, the ownership, or the control of the proceeds of specified unlawful activity and to prevent recovery of the proceeds by Empire.
Id. ¶¶ 263, 264, 268. Empire further [*36] explains that "money that New York dealers should have paid to Empire for liquor sales was instead paid to Defendants, who laundered it and then deposited and withdrew it from financial institutions, making it harder to trace the funds to their source." Pl.'s Opp'n at 30. Defendants argue that Empire has failed to adequately plead this predicate act. See., e.g., Reliable Mem. at 63-65. Again, I find that even if Empire has adequately pled a money laundering RICO predicate, this predicate act did not proximately cause Empire's injury.
The crux of Empire's argument that it was directly injured by defendants' money laundering is that defendants' money laundering allowed defendants to conceal their illegal scheme, which allowed the scheme to continue without detection. See Pl.'s Opp'n at 30; see also Pl.'s Sur-Reply at 16. Most courts in this Circuit have held that concealment of underlying illegal activity cannot be the proximate cause of a plaintiff's injury, because the plaintiff would have suffered the same injury from the underlying illegal activity regardless of whether the concealment occurred. For example, in DeSilva v. North Shore-Long Island Jewish Health System, Inc., 770 F. Supp. 2d 497 (E.D.N.Y. 2011), the court considered a RICO claim by employees who alleged that they [*37] were injured by their employers' failure to pay wages due under federal and state law. Id. at 505. Plaintiffs alleged that their employers committed predicate acts of mail fraud by "mail[ing] payroll checks to plaintiffs that were 'false and deceptive because they misled [employees] about the amount of wages to which they were entitled'" and that these checks "conceal[ed] that defendants were willfully and systematically withholding from plaintiffs their regular or statutorily required rate of pay for all hours worked." Id. at 511 (citations omitted). The court held that the mail fraud allegedly committed by defendants did not proximately cause plaintiff's injury because the mail fraud merely concealed the defendants' underlying illegal activity from the plaintiffs, which would have caused the same injury regardless of whether the mailings were made:
[T]he "original" injury forming the basis of plaintiffs' RICO cause of action is, simply, the retention of plaintiffs' wages. With this background in mind, it is clear that the predicate acts alleged by plaintiffs (i.e., mail fraud) . . . were not the acts from which this injury directly flowed. . . . [P]laintiffs state that defendants' fraudulent mailings "perpetuated" defendants' already on-going [*38] scheme, thus making it possible for defendants to "continue" defrauding plaintiffs . . . . [P]laintiffs could have been harmed (and allegedly were harmed) irrespective of the alleged misrepresentations in defendants' mailings. Stated otherwise, defendants' misrepresentations . . . [are] not the proximate cause of the ultimate harm to plaintiffs . . . .").
Id. at 524-25.15
15 See also, e.g., City of Almaty, Kazakhstan v. Ablyazov, 226 F. Supp. 3d 272, 2016 WL 7756629, at * 10 (S.D.N.Y. 2016) (Defendants' acts were "not alleged to have been 'an indispensable part of the theft itself' and thus at most they 'may have concealed, but did not cause' the [plaintiff's] losses." (quoting Leung, 387 F. Supp. 2d at 122)); Leung, 387 F. Supp. 2d at 122 ("[T]he defendants' alleged failure to report cash transactions, the omission underlying Leung's money laundering claims, may have concealed, but did not cause, Leung's losses. This failure to allege sufficiently the proximate cause requirement of the RICO civil cause of action requires the dismissal of Leung's RICO claims."); Red Ball, 874 F. Supp. at 587 ("An act which proximately caused an injury is analytically distinct from one which . . . concealed an injury which happened or could have happened independently of the act"); Zavala v. Wal-Mart Stores, Inc., 447 F. Supp. 2d 379, 388 (D.N.J. 2006) (Plaintiff "alleges only that money laundering allowed an injurious process to continue; its effect is, at most, an indirect one."), aff'd, 691 F.3d 527 (3d Cir. 2012).
Here, as in DeSilva, plaintiff alleges that defendants' concealment of illegal activity was a RICO violation that proximately caused its injury even though the activity defendants concealed (defendants' sales of liquor in violation of its exclusive distribution agreements) is not itself a RICO predicate. This argument fails not only because, as described above, the weight of authority holds that concealment alone cannot consitute proximate cause under RICO, but also, independently, under governing Supreme Court precedent.
Following Anza, the Supreme Court has been clear that there is no proximate cause where independent, intervening actions of third parties form part of the asserted causal chain. See, e.g., Hemi, 559 U.S. at 15 (finding, under Anza, that plaintiff had not demonstrated proximate cause because plaintiff's "theory of liability rests [*39] on the independent actions of third and even fourth parties"); see also Pl.'s Opp'n at 36 (acknowledging that "independent actions" of third parties in Anza "made the court unwilling to bridge the speculative gap between unlawful activity and harm to the plaintiff'). Empire's asserted causal chain relating to money laundering requires such intervening acts of third parties. Empire was hurt by defendants' money laundering only if the money laundering prevented someone from intervening to stop defendants' underlying illegal conduct. But Empire could not itself have stopped defendants' illegal sales. Instead, a third party government regulator would have had to learn about the defendants' illegal sales and stop them. Thus, Empire's causation theory requires government intervention to stop the illegal activity harming Empire. Under Anza, any causal chain that relies upon this sort of third party action is simply too attenuated.
In this regard, the few cases in this Circuit that have found that defendants' concealment proximately caused a plaintiffs injury are distinguishable. In those cases, defendants concealed the illegal scheme from the plaintiff who, but for the concealment, would have [*40] been able to stop his own losses from continuing to accrue without requiring any third party intervention. For example, in Levine v. Torino Jewelers, Ltd., No. 05 Civ. 3159, 2006 U.S. Dist. LEXIS 11932, 2006 WL 709098 (S.D.N.Y. Mar. 22, 2006), plaintiff alleged that his employee embezzled funds from his business, and that her co-conspirators laundered the funds to conceal her illegal behavior. The court found that the plaintiff's injury was proximately caused by defendants' laundering, explaining that "[i]t is at least conceivable that defendants' [money laundering] assisted [the employee] in covering her tracks and thereby helped her steal more from plaintiff than she otherwise would have." 2006 U.S. Dist. LEXIS 11932, [WL] at *4. In that case, the laundering concealed the underlying embezzlement from the plaintiff-employer, who would have been able to stop the embezzlement without the aid of third parties. See also Mezzonen S.A. v. Wright, No. 97 CIV. 9380, 1999 U.S. Dist. LEXIS 17625, 1999 WL 1037866, at *2, *6 (S.D.N.Y. Nov. 16, 1999) (plaintiff, an investment fund, alleged that defendants provided the fund and its board of directors with fraudulent earnings and activities reports to conceal their illegal activity).16
16 Cf. Eastman Kodak Co. v. Camarata, No. 05 CV 6384, 2006 U.S. Dist. LEXIS 88206, 2006 WL 3538944, at *11 (W.D.N.Y. Dec. 6, 2006) (relying heavily on Levine to find proximate cause); see also City of New York v. Venkataram, 396 F. App'x 722, 724 (2d Cir. 2010) (unpublished opinion) (Second Circuit declining to impose an "absolute rule" that "only a crime that creates illegal proceeds . . . , not a crime to conceal those proceeds (i.e., money laundering)," can proximately cause a plaintiff's injury).
Moreover, the few cases in this Circuit that have found that defendants' money laundering proximately caused a plaintiff's injury are distinguishable in a second way: in those cases, the "concealment of stolen funds was so critical [*41] to facilitating an ongoing theft . . . that money laundering may be recognized as having proximately caused some portion of the original injury." City of Almaty, 226 F. Supp. 3d 272, 2016 WL 7756629, at *9. In Levine, for example, defendants' money laundering was "essential to [ ] the overall scheme to embezzle plaintiff's funds." 2006 U.S. Dist. LEXIS 11932, 2006 WL 709098, at *4 (alteration in original); see also City of New York v. Venkataram, 396 F. App'x 722, 725 (2d Cir. 2010) (unpublished opinion) (concealment was "essential to the overall scheme"). Here, by contrast, defendants' alleged money laundering was not an indispensable part of the conduct that injured plaintiff: selling alcohol in violation of Empire's exclusive distribution agreements.17 The connection between defendants' money laundering and Empire's injury is attenuated, which does not suffice for proximate cause.
17 Indeed, defendants' sales of alcohol in violation of plaintiff's agreements could not be the basis of defendants' money laundering claim. The money laundering statute proscribes only those financial transactions that "involve the proceeds of specified unlawful activity." 18 U.S.C. § 1956(a)(1). Specified unlawful activity is defined by the statute to include certain crimes, including wire fraud. See id. §§ 1956(c)(7)(A), 1961(1). As explained in detail above, the conduct that injured plaintiff amounted to tortious interference with contract, but does not constitute cognizable wire fraud. See supra pp. 15-19. Thus, defendants' sales of alcohol in violation of plaintiff's private contracts are not a "specified unlawful activity" under the money laundering statute, and cannot form the basis of a money laundering claim.
iii. Travel Act
Empire alleges a related violation of the Travel Act, 18 U.S.C. § 1952. See Am. Compl. ¶¶ 270-78. As relevant here, the Travel Act prohibits a person from traveling interstate to "promote, manage, establish, carry on, or facilitate the promotion, management, establishment, or carrying on, of money laundering, and thereafter performing or attempting to perform an act in furtherance of money laundering. 18 U.S.C. § 1952(a).18 Defendants' alleged Travel Act violation is wholly derivative [*42] of their money laundering allegations, and therefore is not the proximate cause of plaintiffs injury for the reasons stated above.
18 The Travel Act also prohibits interstate travel or use of the mails to "distribute the proceeds of or "otherwise promote, manage, establish, carry on, or facilitate the promotion, management, establishment, or carrying on, of . . . any business enterprise involving . . . liquor on which the Federal excise tax has not been paid." 18 U.S.C. § 1952. However, Empire alleges neither that defendants violated this portion of the Travel Act nor that defendants failed to pay federal liquor excise tax.
E. Empire's Contrary Argument Is Unpersuasive.
Empire goes to great lengths to confound its allegations in an effort to manufacture proximate cause. Empire consistently argues that it has established proximate cause because defendants' conduct caused its injury. For example, it asserts that its "injuries [were] caused by Defendants' unlawful racketeering," Pl.'s Opp'n at 26, that "[t]he FAC alleges an integrated racketeering operation and conspiracy to supply liquor for illegal sale in a market in which [defendants] could not lawfully operate," id. at 27, that "Empire . . . was . . . a direct and immediate victim of [defendants'] illegal bootlegging scheme," id. at 30, that "Reliable Churchill was not only a participant in the smuggling, but was a ringleader . . . making it directly responsible for Empire's stolen sales," id. at 34-35, and that "[it] was . . . a direct result and a foreseeable and natural consequence of Defendants' scheme to sell illegally bootlegged liquor in New York that Empire . . . would lose sales," id. at 38 (quotations omitted).
Empire's focus on defendants' conduct as [*43] the cause of its injury is misguided. The Supreme Court has repeatedly stated that proximate cause depends on the relationship between defendants' RICO predicate acts and plaintiff's injury. See Anza, 547 U.S. at 457 ("[T]he compensable injury flowing from a violation of [RICO] 'necessarily is the harm caused by predicate acts . . . .'" (quoting Sedima, 473 U.S. at 497)); Hemi, 559 U.S. at 9 ("[T]o state a claim under civil RICO, the plaintiff is required to show that a RICO predicate offense 'not only was a but for cause of his injury, but was the proximate cause as well.'" (quoting Holmes, 503 U.S. at 268)). Accordingly, the question before me is not whether defendants' conduct as a whole directly caused plaintiff's injury, but whether the specific RICO predicate acts alleged to have been committed by defendants directly caused plaintiff's injury.
Unless defendants' conduct constitutes a RICO predicate, the causal connection between that conduct and a plaintiff's injury is simply irrelevant to RICO's proximate cause analysis -- even if that conduct is otherwise unlawful. See Baisch, 346 F.3d at 373 ("[A] plaintiff [cannot sue under RICO] if he suffered an injury that was . . . not proximately caused by the . . . RICO predicate acts, even though the injury was proximately caused by some non-RICO [*44] violations committed by the defendants."). Here, Empire argues that it was injured by defendants' sales made in violation of its exclusive distribution agreements. See, e.g., Pl.'s Opp'n at 29 ("Defendants' illegal sales of the bootlegged liquor directly stole sales from Empire because of its exclusive right to distribute the subject brands."); see also supra n.11. As explained above, those sales were not deceptive and therefore do not constitute a scheme to defraud under the wire fraud statute. At most, they constituted a tortious interference with Empire's private distributorship agreements. See supra pp. 18-19. The asserted cause of Empire's injury thus is not a RICO predicate act -- which is fatal to Empire's RICO claim.
The remainder of the predicate acts alleged to have been committed by defendants pose the opposite problem: even assuming that such acts constitute adequately pled RICO predicates, they did not proximately cause Empire's injury. Empire disclaims any argument that its injury was caused by defendants' tax evasion and, in any event, Anza clearly forecloses such an argument. Empire has also failed to show that its remaining wire fraud allegations, or its bank fraud, money laundering, [*45] or Travel Act allegations, proximately caused its injury.
In short, the cause of Empire's asserted injury is a set of actions (defendants' selling alcohol in violation of Empire's private contractual agreements) entirely distinct from the alleged RICO violations. Cf. Anza, 547 U.S. at 458 ("The cause of [plaintiffs] asserted harms . . . is a set of actions (offering lower prices) entirely distinct from the alleged RICO violation . . .").
F. Empire's RICO Claims Are Dismissed with Prejudice.
The court need not grant plaintiff leave to amend where amendment would be futile. Roth v. CitiMortgage Inc., 756 F.3d 178, 183 (2d Cir. 2014). Plaintiff has not -- and could not -- demonstrate that its injury was proximately caused by defendants' predicate acts. See In re Am. Express Co. S'holder Litig, 39 F.3d 395, 402 (2d Cir. 1994) (denying leave to amend because plaintiffs "have not indicated how they could satisfy RICO's proximate cause requirement, and it is hardly self-evident that they could transform the facts pleaded into a sufficient allegation of proximate injury"); Chera v. Chera, No. 99-cv-7101, 2000 U.S. Dist. LEXIS 13749, 2000 WL 1375271, at * 13 (E.D.N.Y. Sept. 20, 2000) (same). Further, as discussed above, defendants' sales in violation of Empire's private contractual agreements do not constitute cognizable wire fraud. Amendment of this allegation would thus also be futile. Lucas v. Brooklyn Acad. of Music, 129 F.3d 113, [published in full-text format at 1997 U.S. App. LEXIS 32223] 1997 WL 716102, at *1 (2d Cir. 1997) (unpublished opinion) ("Leave [*46] to amend should be denied when there is no cognizable claim even with the proposed changes." (citing Am. Express Co., 39 F.3d at 402)).
In its most recent filings, Empire requests leave to amend its RICO claims because it has located "additional evidence corroborating the allegations of the FAC, including newly obtained declarations from co-conspirators." See Pl.'s Opp'n at 23 n.14; see also Pl.'s Sur-Reply at 16 n.16 (seeking leave to replead to "incorporate details learned from . . . four new co-conspirator declarants"). However, these newly obtained declarations of Maryland retailers, attached to Empire's brief in opposition to this motion, do not provide a basis for granting Empire leave to amend. See Maryland Retailer Decls., ECF Nos. 144-1, 144-2, 144-3, 144-4. These declarations largely duplicate the declarations of other Maryland retailers that were attached to the FAC. Compare id., with Maryland Retailer Decls., ECF Nos. 46-26, 46-27. Moreover, nothing in these declarations bears on the causal relationship between defendants' predicate acts and Empire's injury or whether defendants' sales of liquor in violation of plaintiffs agreements constitutes cognizable wire fraud, the grounds upon which Empire's RICO [*47] claim is dismissed. Accordingly, I deny plaintiff leave to amend and dismiss plaintiff's claims with prejudice.19
19 At a telephone conference held on December 7, 2016 regarding defendants' proposed motions to dismiss plaintiff's original complaint, I granted plaintiff Empire Merchants leave to re-plead its complaint, and in so doing I requested assurance that the amended pleading would constitute plaintiff's last and best complaint. See Tr. of Tel. Conference (Dec. 7, 2016) at 5:14-18, ECF No. 166. I explained my concern animating this request:
My main concern is that before we proceed to this very time-consuming and expensive briefing process and before I devote lots of judicial resources to resolving the issues, I had like [sic] to make sure that the process will, in fact, be complete with this briefing and decision and that we are not going to have any further issue at this stage of the proceeding of leave to replead the complaint. I just do not want to engage in repetitive attacks at the 12(6)(6) stage, so I want to make sure that defendants' motions, when they are brought, address plaintiff's last and best pleading . . . .
Id. at 4:9-18. Plaintiff raised the concern that new factual developments could yield new information that would prompt it to seek to further amend its pleadings. Id. at 5:19-24. I explained that "I'm not in any way preventing something . . . that arises in litigation from affecting the contours of the complaint . . . ." Id. at 6:18-19.
In a subsequent order, I echoed this sentiment, explaining that if new unexpected issues arise during litigation that the plaintiff believes warrant repleading, "plaintiff is directed to immediately advise defendants and the court that it seeks to amend the complaint, thus permitting the court to determine whether a stay of the ongoing briefing is warranted." Order at 2 (Dec. 15, 2016). Plaintiff has never so notified the court of its intention to re-plead.
II. Empire's Claim Under 42 U.S.C. § 1985(2) Is Dismissed with Prejudice.
Empire also brings a claim under the first clause of 42 U.S.C. § 1985(2), which creates a cause of action against individuals who conspire to deter a party or witness from attending and testifying in federal court. Empire asserts its 42 U.S.C. § 1985(2) claim against Breakthru and Reliable, alleging that they conspired with each other and with three Breakthru employees (defendants Charles Merinoff and Gregory Baird and non-party Lloyd Sobel) to retaliate against Empire [*48] after it filed the original complaint.
Advancing arguments that Empire has failed to adequately plead its § 1985(2) claim, defendants Reliable and Breakthru have moved to dismiss it. See Reliable Mem. at 69-79. Empire chose not respond to those arguments. Instead, it writes that it "anticipates voluntarily dismissing" this claim due to ongoing settlement negotiations. See Pl.'s Opp'n at 4 n.1; id. at 98 (Empire "contemplates voluntarily dismissing its federal civil rights claim."). Notwithstanding this anticipated voluntary dismissal, Empire also purports to "incorporate by reference its prior briefing" relating to this claim. Id. at 98. This apparently refers to the papers submitted by Empire's former co-plaintiff, Empire Merchants North ("EMN"), in support of EMN's argument that this court had subject matter jurisdiction over EMN's motion for a preliminary injunction. See Reply Mem. of Law in Supp. of Pl. EMN's Application for TRO and Prelim. Inj., ECF No. 112; Op. & Order, ECF No. 131 (denying EMN's motion and dismissing EMN as a party to this action).
Empire's failure to respond to defendants' motion to dismiss its § 1985(2) claim constitutes abandonment of this claim, warranting its dismissal. See Kamanou v. Exec. Sec'y of Comm'n of Econ. Cmty. of W. African States, No. 10 Civ. 7286, 2012 U.S. Dist. LEXIS 34495, 2012 WL 868700, at *3 (S.D.N.Y. Mar. 14, 2012) ("Plaintiff was [*49] obligated, in her response to defendant's motion, to present arguments as to each of her causes of action. Plaintiff's failure to do so constitutes abandonment of those claims."); Lipton v. Cty. of Orange, 315 F. Supp. 2d 434, 446 (S.D.N.Y. 2004) ("[The] Court may, and generally will, deem a claim abandoned when a plaintiff fails to respond to a defendant's arguments that the claim should be dismissed.").
Even if Empire had not abandoned this claim, it would be dismissed with prejudice for failure to state a plausible claim. "In order to maintain an action under Section 1985, a plaintiff `must provide some factual basis supporting a meeting of the minds, such that defendants entered into an agreement, express or tacit, to achieve the unlawful end.'" Webb, 340 F.3d at 110 (quoting Romer v. Morgenthau, 119 F. Supp. 2d 346, 363 (S.D.N.Y. 2000)). Empire has failed to plead any facts supporting an inference of an agreement between the alleged co-conspirators. "[A]lthough the complaint alleges a number of instances in which [Breakthru] purportedly . . . harmed [Empire], [plaintiff] has not pleaded a non-conclusory basis for finding that these events were the result of a common agreement." Traylor v. Steward, 486 F. App'x 948, 949 (2d Cir. 2012) (unpublished opinion).
Lacking any facts to support an inference of an agreement between the alleged co-conspirators, Empire's § 1985(2) claim cannot withstand defendants' motion [*50] to dismiss. See, e.g., Twombly, 550 U.S. at 557 ("[A] naked assertion of conspiracy . . . gets the complaint close to stating a claim, but without some further factual enhancement it stops short of the line between possibility and plausibility . ."); Robinson v. Allstate Ins. Co., 508 F. App'x 7, 9 (2d Cir. 2013) (unpublished opinion) (dismissing claim where "[p]laintiff has failed to provide any factual basis supporting a meeting of the minds, merely making conclusory statements that there was a conspiracy"); Kiryas Joel All. v. Vill. of Kiryas Joel, 495 F. App'x 183, 190 (2d Cir. 2012) (unpublished opinion) ("Plaintiffs here have provided only vague and conclusory allegations that defendants entered into an unlawful agreement. These do not suffice."); Webb v. Goord, 340 F.3d 105, 111 (2d Cir. 2003) ("The plaintiffs have not alleged, except in the most conclusory fashion, that any such meeting of the minds occurred among any or all of the defendants. Their conspiracy allegation must therefore fail."); Gyadu v. Hartford Ins. Co., 197 F.3d 590, 591 (2d Cir. 1999) ("[A] 'complaint containing only conclusory, vague, or general allegations of conspiracy to deprive a person of constitutional rights cannot withstand a motion to dismiss.' (quoting Sommer v. Dixon, 709 F.2d 173, 175 (2d Cir. 1983))).
Defendants' motions to dismiss plaintiff's federal claims are granted. Plaintiff's RICO, RICO conspiracy, and § 1985(2) claims are dismissed with prejudice.20 Because I have dismissed all of plaintiff's federal claims, which [*51] serve as the basis for federal jurisdiction, I decline to exercise supplemental jurisdiction over plaintiff's state law claims. See Cave v. E. Meadow Union Free Sch. Dist., 514 F.3d 240, 250 (2d Cir. 2008) ("[I]f [plaintiffs] federal claims are dismissed before trial . . . the state claims should be dismissed as well." (quoting United Mine Workers of Am. v. Gibbs, 383 U.S. 715, 726, 86 S. Ct. 1130, 16 L. Ed. 2d 218 (1966))). Accordingly, plaintiff's state law claims are dismissed without prejudice to plaintiff's pursuing them in state court.
20 Reliable has suggested that plaintiff's claims were so "utter[ly] inadequa[te]" as to be sanctionable under Federal Rule of Civil Procedure 11. See Reliable Mem. at 29 n.24 (quoting Kochisarli v. Tenoso, No. 02-CV-4320, 2006 U.S. Dist. LEXIS 95862, 2006 WL 721509, at *9 (E.D.N.Y. Mar. 21, 2006)). "[A] particular legal argument forms the basis for sanctions only if it is 'patently contrary to existing law.'" Ipcon Collections LLC v. Costco Wholesale Corp., 698 F.3d 58, 63 (2d Cir. 2012) (quoting Storey v. Cello Holdings, L.L.C., 347 F.3d 370, 391 (2d Cir. 2003)). "With respect to legal contentions, '[t]he operative question is v. Koon Chun Hing Kee Soy & Sauce Factory, Ltd., 682 F.3d 170, 177 (2d Cir. 2012) (quoting Fishoff v. Coty Inc., 634 F.3d 647, 654 (2d Cir. 2011)).
I wish to caution defendants that the expenditure of resources on such a motion at this time might be unwise. I do not anticipate that defendants will be able to demonstrate that plaintiff's legal arguments meet this extraordinarily high standard, particularly given that I ultimately dismissed plaintiffs’ arguments on grounds substantially different from those advanced by defendants.
The clerk of court is directed to enter judgment dismissing plaintiffs RICO, RICO conspiracy, and § 1985(2) claims with prejudice and dismissing plaintiff's state law claims without prejudice.
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