888 F.2d 957 (2nd Cir. 1989), 1141, Seward v. Devine

Docket Nº:1141, Docket 88-7834.
Citation:888 F.2d 957
Party Name:RICO Bus.Disp.Guide 7350 Aaron R. SEWARD and Connie G. Seward, Plaintiffs-Appellants, v. Philip J. DEVINE, James Devine, Jr., Daniel Horan, John F. Keating, Jr., Kenneth R. Fitzsimmons, Estate of Frank L. Imparato, Jr., and Wilber National Bank, Defendants-Appellees.
Case Date:November 01, 1989
Court:United States Courts of Appeals, Court of Appeals for the Second Circuit
 
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Page 957

888 F.2d 957 (2nd Cir. 1989)

RICO Bus.Disp.Guide 7350

Aaron R. SEWARD and Connie G. Seward, Plaintiffs-Appellants,

v.

Philip J. DEVINE, James Devine, Jr., Daniel Horan, John F.

Keating, Jr., Kenneth R. Fitzsimmons, Estate of

Frank L. Imparato, Jr., and Wilber

National Bank, Defendants-Appellees.

No. 1141, Docket 88-7834.

United States Court of Appeals, Second Circuit

November 1, 1989

Argued Aug. 14, 1989.

Page 958

Donald D. Oliver, Rochester, N.Y. (Arthur L. Stern III, Jules L. Smith, Blitman & King, Rochester, N.Y.), for plaintiffs-appellants.

David E. Peebles, Syracuse, N.Y. (Renee L. James, Hancock & Estabrook, Syracuse, N.Y.), for Wilber Nat. Bank.

Nancy L. Pontius, Syracuse, N.Y. (Mackenzie Smith Lewis Michell & Hughes, Syracuse, N.Y.), for James Devine, Jr., Daniel Horan, John F. Keating, Jr., Kenneth R. Fitzsimmons, and Estate of Frank L. Imparato, Jr.

Philip J. Devine, Oneonta, N.Y., pro se.

Before MINER and ALTIMARI, Circuit Judges, and KELLEHER, District Judge. [*]

MINER, Circuit Judge:

Plaintiffs-appellants Aaron R. Seward and Connie G. Seward (the "Sewards") appeal from a judgment entered on September 20, 1988, in the United States District Court for the Northern District of New York (McCurn, Ch.J.) dismissing their amended complaint on various grounds. The action arose principally in connection with the activities of defendant-appellee Philip J. Devine, the Sewards' attorney and a director of defendant-appellee Wilber National Bank ("WNB" or the "bank"). Essentially, the Sewards alleged that Devine, with the knowledge and consent of the named defendants, was responsible for devising a joint venture and limited partnership to acquire control over the Sewards' farm for the sole purpose of obtaining tax shelter benefits for the investor defendants. The Sewards asserted eight claims in their amended complaint--three RICO claims, two claims based on breach of written contracts, one claim based on breach of

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an oral agreement, a fraud claim, and a malpractice claim--all arising from a purported scheme designed to wrest control of the farm from them.

The district court dismissed the action in two stages. First, the court dismissed the contract claims for lack of jurisdiction, Fed.R.Civ.P. 12(b)(1), in accordance with forum selection clauses providing for venue in the New York State Supreme Court, Delaware County. Next, the court dismissed the RICO claims as legally insufficient, Fed.R.Civ.P. 12(b)(6), for failure to plead adequately RICO's "continuity plus relationship" requirement. In the absence of an independent basis for federal jurisdiction, the court then dismissed the fraud and malpractice claims and the claim that the bank breached its oral agreement not to foreclose on the farm, pursuant to Fed.R.Civ.P. 12(b)(1), declining to exercise pendent jurisdiction. The court thereafter entered an order dismissing the amended complaint, and on September 20, 1988, judgment was entered.

On appeal, the Sewards contend that the district court erred in dismissing their RICO claims, arguing that the predicate acts pleaded were neither isolated nor sporadic, and thus satisfied RICO's pattern of racketeering activity requirement; that because the fraud and malpractice claims, as well as the breach of oral agreement claim asserted against the bank only, arose out of the same nucleus of operative facts, the court should have entertained those claims under its pendent jurisdiction; and that because the forum selection clauses contained in the relevant agreements did not bestow exclusive jurisdiction upon the state court, the contract claims were within the district court's subject matter jurisdiction. For the reasons that follow, we affirm the judgment of the district court insofar as it dismissed the contract claims pursuant to the forum selection clauses, but reverse and remand on the remaining claims for proceedings consistent with this opinion.

BACKGROUND

According to the complaint, the Sewards, husband and wife, were joint owners of two farm properties (hereafter the "farm") located in Franklin, New York. The farm was encumbered by a mortgage, in the amount of $340,000, held by the bank.

Pursuant to a Purchase Agreement, the Sewards sold 99% of the equity in their farm for $120,000 to Rocky Top Vu Farms, a joint venture created under a Joint Venture Agreement and comprised of the individual defendants named in this action. Philip Devine, acting as attorney for both the Sewards and the joint venture, in addition to his roles as a director of the bank and a participant in the joint venture, informed the Sewards that in addition to the $120,000 purchase price, the mortgage debt would be assumed or paid off by the joint venture. Devine also represented that the $120,000 would be paid immediately, in one lump sum, and used to pay off unsecured debts incurred by the Sewards in connection with the affairs of the farm. Prior to entering into the agreement for sale of the farm, Devine had returned, without the knowledge or consent of the Sewards, a down payment that another party had made in connection with an offer to purchase the farm.

The Sewards and the joint venture subsequently executed a Limited Partnership Agreement, pursuant to which each party contributed its interest in the farm to a limited partnership, also named Rocky Top Vu Farms. Under this agreement, the Sewards were to be general partners of the partnership with management authority. This agreement never was filed with the State of New York, and thus the partnership never was duly formed under New York law. See N.Y. Partnership Law Sec. 91 (McKinney 1988).

According to the Sewards, the...

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