Jordan v. Berman, Civ. A. No. 89-8172.

• Citation: 758 F. Supp. 269
• Decision Date: 22 February 1991
• Docket Number: Civ. A. No. 89-8172.
• Parties: Joe J. JORDAN, James E. Mitchell and Jordan, Mitchell, Inc., on their own behalf and on behalf of all others similarly situated, v. Arnold T. BERMAN, Myron J. Berman and John J. Pettit, Jr., Prothonotary of the Court of Common Pleas of Philadelphia County.
• Court: U.S. District Court — Eastern District of Pennsylvania

758 F. Supp. 269

Joe J. JORDAN, James E. Mitchell and Jordan, Mitchell, Inc., on their own behalf and on behalf of all others similarly situated, v. Arnold T. BERMAN, Myron J. Berman and John J. Pettit, Jr., Prothonotary of the Court of Common Pleas of Philadelphia County.

Civ. A. No. 89-8172.

United States District Court, E.D. Pennsylvania.

February 22, 1991.

COPYRIGHT MATERIAL OMITTED

Sharon K. Wallis, Philadelphia, Pa., for plaintiffs.

Kathy J. Langley, Steven R. Waxman, Philadelphia, Pa., for Bermans.

Maria L. Petrillo, Philadelphia, Pa., for Pettit.

MEMORANDUM

WALDMAN, District Judge.

Presently before the court are defendants' motions to Dismiss for Failure to state a Claim Upon Which Relief can be Granted or in the Alternative for Summary Judgment. Because virtually no discovery has been conducted and the motions clearly are premised upon plaintiffs' failure to state a cognizable claim in their complaint, the court treated them as Fed.R.Civ.P. 12(b)(6) motions and applied the standard appropriate thereto. Oral argument was held and proceeded on this basis.

Plaintiffs assert six claims in their complaint. In the first count, plaintiffs seek declaratory and injunctive relief against defendant Pettit, the Prothonotary of the Court of Common Pleas of Philadelphia, for alleged due process violations in issuing writs of execution permitting the garnishment of bank accounts pursuant to confessed judgments, under Pa.R.Civ.P. 2950 et seq. The remaining counts, all against defendants Arnold and Myron Berman, assert a violation of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961 et seq., violation of plaintiffs' civil rights under 42 U.S.C. § 1983, and state law claims of fraud and malicious use and abuse of process.

I. Legal Standard

In deciding a motion to dismiss for failure to state a claim, the court must "accept as true all allegations in the complaint and all reasonable inferences that can be drawn therefrom, and view them in a light most favorable to the non-moving party." Rocks v. City of Philadelphia, 868 F.2d 644, 645 (3d Cir.1989). A complaint should not be dismissed unless it appears beyond doubt that plaintiff can prove no set of facts in support of his claim that would entitle him to relief. Hishon v. King & Spalding, 467 U.S. 69, 73, 104 S.Ct. 2229, 2232, 81 L.Ed.2d 59 (1984).

A complaint may be dismissed when the facts pled and the reasonable inferences therefrom are legally insufficient to support the relief sought. Commonwealth ex rel. Zimmerman v. PepsiCo, 836 F.2d 173, 179 (3d Cir.1988). A motion to dismiss may be granted as to some portions of a complaint while denied as to others. Decker v. Massey-Ferguson, Ltd., 681 F.2d 111, 115 (2d Cir.1982); Fielding v. Brebbia, 399 F.2d 1003, 1006 (D.C.Cir.1968). Claims brought under RICO are subject to the same pleading standards as other claims under Rule 12(b)(6). See H.J., Inc. v. Northwestern Bell, 492 U.S. 229, 109 S.Ct. 2893, 2906, 106 L.Ed.2d 195 (1989); Rose v. Bartle, 871 F.2d 331, 355-56 (3d Cir.1989).

II. Factual Allegations

The pertinent allegations in the complaint, viewed in a light most favorable to the plaintiffs, are as follows. On July 8, 1981, plaintiff Jordan, on behalf of Joe J. Jordan, FAIA, Inc., a Pennsylvania corporation, executed a lease to rent the fifth floor of an office building at 1920 Chestnut Street in Philadelphia from defendant Arnold T. Berman, trading as H.P. Realty, for a term commencing September 1, 1981 and ending August 1, 1986. On or about October 1, 1981, plaintiffs Jordan and Mitchell formed Jordan, Mitchell, Inc., an architectural firm that operated out of said premises.

On May 2, 1986, by its terms, this lease automatically renewed for a one-year period commencing August 1, 1986. On May 16, 1986, H.P. delivered a lease termination notice to Jordan, Mitchell, Inc. dated April 30, 1986. When the plaintiffs' attorney advised H.P. that in their view the lease had been renewed automatically, defendant Myron Berman told plaintiff Jordan that he would "retaliate" if plaintiffs continued to occupy the premises pursuant to the purported renewal. Acting on instructions from Myron Berman, unnamed individuals disconnected electrical wiring in plaintiffs' offices on May 22, 1986 and obstructed the entrance thereto on May 23, 1986 by placing trash nearby. As a result, plaintiffs allegedly had to expend sums of money to rectify this situation.

Through counsel, the parties to the lease thereafter negotiated an extension, substituting Jordan, Mitchell, Inc. as lessee and extending the lease for a term of three years, commencing August 1, 1986. The extension agreement was executed by plaintiffs on October 29, 1986 and by H.P. on December 8, 1986, and contained a mutual release of all claims arising under the initial lease.

The lease provided to lessor the option of charging lessee additional rent in an amount equal to their proportionate share of any increases in taxes or operating expenses. Such rent increases would be predicated upon notice by the lessor. H.P. never increased the rent pursuant to this clause during the term of the original lease. The parties never specifically discussed this provision of the lease during the course of their negotiations over the lease extension.

On February 10, 1988, H.P. billed plaintiffs for $1,416.20, a proportional amount of real estate tax increases for the years 1982 to 1988. Plaintiffs paid this amount to the lessor before "realizing" what it was for. Plaintiffs refused to pay the lessor additional rent adjustments that were claimed on October 13, 1988 as a result of increased operating expenses. Defendant Myron Berman then requested Philadelphia Gas Works to terminate gas service to the leased premises. Plaintiffs avoided a termination of service by having PGW bill them directly.

Plaintiffs allege that defendants engaged in similar conduct with respect to other tenants. When Diversified Community Services ("DCS"), another tenant in another building under defendants' control, refused to pay a retroactive rent increase billed on December 7, 1987 and attempted to move, defendants "refused" them permission to utilize the service elevators for this purpose until they had paid the rent demanded. DCS was permitted to move from the building after it settled a suit they filed against defendants as a result of that dispute.

The standard preprinted "Form 60" lease contained a cognovit clause entitling H.P. to confess judgment upon a default in rental payments. The warrant of attorney authorizing the confession of judgment appears on the reverse side of the page with the parties' signatures. This clause also was not specifically discussed during the lease extension negotiation.

Plaintiffs rejected an offer of March 7, 1989 from H.P. to waive its October 13, 1988 claim for additional rent if plaintiff corporation would execute a new three-year lease. On May 16, 1989, counsel filed with the Prothonotary of the Court of Common Pleas of Philadelphia a Complaint in Confession of Judgment against plaintiffs on behalf of Arnold Berman and H.P. Realty, claiming $41,082.62 in overdue rent plus related charges, minus plaintiffs' security deposit. The required verification and affidavit were executed by Myron Berman as "managing agent." Later that day, the Prothonotary issued a Writ of Execution which was served by the Sheriff on Fidelity Bank, effectively freezing plaintiffs' corporate checking account in the amount of the judgment. As a result, the account became overdrawn and six items were returned unpaid.

On May 19, 1989, plaintiffs received from the garnishee notification of the Writ and copies of the documents filed in the Common Pleas Court. On May 24, 1989, plaintiffs filed a petition in the Court of Common Pleas of Philadelphia to open and/or strike the confessed judgment. The state court immediately issued a Rule to Show Cause why the judgment should not be opened or stricken and vacated the garnishment of plaintiffs' account upon the posting of $10,000. On July 21, 1989, the state court ordered that the judgment be opened, and plaintiffs' $10,000 was returned to them.

The underlying case is currently pending in state court. Plaintiffs have filed a counterclaim in that case for return of the $1,416.20 paid in February 1988 and a $1,350 security deposit, as well as $419 allegedly paid by plaintiffs during the course of the lease for cleaning which should have been done by the landlord.

III. Plaintiffs' RICO Claim

Plaintiffs claim that the Bermans violated RICO. They do not specify which section of the statute may have been violated, citing only 18 U.S.C. § 1961. Construing the complaint most liberally, plaintiffs' allegations at most support claims for violations of § 1962(a) and (c). The alleged enterprise is said to be the association in fact of defendants Arnold and Myron Berman in the acquisition, management and leasing of commercial property. Plaintiffs appear to allege that being associated with such an enterprise, the defendants conducted its affairs through a pattern of racketeering activity and invested income in the enterprise that they derived from this pattern of activity.

Because plaintiffs have failed to allege any facts from which one could infer that the $11,591.20 loss they claim or any other damages were causally related to defendants' investment of funds in the alleged enterprise, they have failed to state a cognizable claim under § 1962(a).¹ 18 U.S.C. § 1964(c); Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 496, 105 S.Ct. 3275, 3285, 87 L.Ed.2d 346 (1985); Banks v. Wolk, 918 F.2d 418, 421 (3d Cir.1990); Rose v. Bartle, 871 F.2d 331, 357 (3d Cir.1989); Gilbert v. Prudential-Bache Securities, Inc., 643 F.Supp. 107, 109 (E.D.Pa.1986); Rich Maid Kitchens v. Pennsylvania Lumbermens Mutual Ins. Co., 641 F.Supp. 297, 311 (E.D.Pa.1986).

Defendants contend that plaintiffs have failed adequately to allege a pattern of...