TRUSTEES OF PLUMBER & PIPEFITTERS NATL. PENSION v. De-Con Mechanical Contractors, Inc.

• Decision Date: 29 August 1995
• Docket Number: No. 94 Civ. 5276 (CBM).,94 Civ. 5276 (CBM).
• Citation: 896 F. Supp. 342
• Parties: TRUSTEES OF THE PLUMBERS and, PIPEFITTERS NATIONAL PENSION FUND, et al., Plaintiffs, v. DE-CON MECHANICAL CONTRACTORS, INC., et al., Defendants.
• Court: U.S. District Court — Southern District of New York

896 F. Supp. 342

TRUSTEES OF THE PLUMBERS and, PIPEFITTERS NATIONAL PENSION FUND, et al., Plaintiffs, v. DE-CON MECHANICAL CONTRACTORS, INC., et al., Defendants.

No. 94 Civ. 5276 (CBM).

United States District Court, S.D. New York.

August 29, 1995.

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MEMORANDUM OPINION ON DEFENDANTS' MOTION TO DISMISS

MOTLEY, District Judge.

I. Background

This action has been brought by several employee benefit trust funds ("the funds") seeking contributions owed to the funds for work performed by the employees of the corporate defendants. Plaintiff labor organization seeks unpaid wages under the collective bargaining agreements. (¶ 1)¹ The principal claim alleges violations of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), 29 U.S.C. § 1001 et seq. (¶ 11) Defendant De-Con Mechanical Contractors, ("Mechanical") was required by the terms of the collective bargaining agreement to contribute funds for each hour worked by an employee to the Funds. (¶ 12). Plaintiffs claim that Mechanical has not made these required contributions to the Funds since 1988 and has failed to file accurate reports pertaining to these contributions. (¶ 14). Therefore, plaintiffs are seeking the owed contributions to the Funds, interest, liquidated damages, and attorneys fees, audit fees and costs. (¶ 17).

Secondly, plaintiffs lodge this claim against De-Con Plumbing Inc., ("Plumbing") because plaintiffs allege that Plumbing is the alter ego of Mechanical. (¶ 19). Due to its being the alter ego, Plumbing was also under an obligation to make contributions to the Funds which it failed to do. (¶ 21).

Plaintiffs have also made claims for unpaid contractual wages under the collective bargaining agreement, (¶ 26), a claim for union dues which should have been deducted from employee wages (¶ 34), for an audit and accounting of defendants' books and records (¶ 38), and to enjoin future violations of the collective bargaining agreement (¶ 56).

Defendants Mechanical, Plumbing, Joseph Deglomini and Michael Contillo ("defendants") have moved to dismiss plaintiffs' fourth, seventh and eighth counts of the complaint pursuant to Rules 12(b)(6) and Rule 9(b). In the fourth count of the complaint plaintiffs plead fraud against Plumbing and Mechanical, in the seventh count plaintiffs allege a violation of the Racketeer Influenced Corrupt Organizations Act, 18 U.S.C. § 1961 et seq., ("RICO"), and the eighth count alleges fraud under ERISA perpetrated by the individual defendants, Contillo and Deglomini. Defendants assert these claims should be dismissed because plaintiffs have failed to: (1) state a claim under RICO, and; (2) failed to plead a predicate criminal act of fraud with the requisite particularity required by Rule 9(b). As discussed below, defendants are correct that plaintiffs have failed to adequately plead the RICO claim and fraud claims against them. Therefore, this court grants defendants' motion dismissing plaintiffs' fourth, seventh, and eighth claims of the complaint.

II. The Standard For Dismissal Under Rule 12(b)(6)

A motion to dismiss pursuant to Rule 12(b)(6) should be granted only if it appears beyond doubt that plaintiffs can prove no set of facts in support of their claims which would entitle them to relief. Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 102, 2 L.Ed.2d 80 (1957); Mills v. Polar Molecular Corp., 12 F.3d 1170, 1174 (2d Cir. 1993); Goldman v. Belden, 754 F.2d 1059, 1065 (2d Cir.1985); Seagoing Uniform Corp. v. Texaco, Inc., 705 F.Supp. 918, 927 (S.D.N.Y.1989). Therefore, on a motion to dismiss, all factual allegations of the complaint must be accepted as true, Hishon v. King & Spalding, 467 U.S. 69, 73, 104 S.Ct. 2229, 2232-33, 81 L.Ed.2d 59 (1984); Hernandez v. Coughlin, 18 F.3d 133, 136 (2d Cir.) cert. denied, ___ U.S. ___, 115 S.Ct. 117, 130 L.Ed.2d 63 (1994); Frasier v. General Elec. Co., 930 F.2d 1004, 1007 (2d Cir. 1991), and all reasonable inferences must be made in plaintiffs' favor. Cosmas v. Hassett, 886 F.2d 8, 11 (2d Cir.1989); D'Orange v. Feely, 877 F.Supp. 152, 157 (S.D.N.Y.1995); Meilke v. Constellation Bancorp, No. 90-3915, 1992 WL 47342, at *1 (S.D.N.Y. Mar. 4, 1992). "The court's function on a Rule 12(b)(6) motion is not to weigh the evidence that might be presented at a trial but merely to determine whether the complaint itself is legally sufficient." Goldman v. Belden, 754 F.2d at 1067 (citation omitted).

III. Plaintiffs Have Failed to State a Valid Fraud Causes of Action Against the Defendants

Plaintiffs' fourth claim for relief alleges common law fraud by all four defendants. Plaintiffs claim that the defendants had a duty prescribed by the collective bargaining agreement to report each month to the Industry Board on each employee, the amount of hours worked, and what payments were made. Plaintiffs assert that defendants' failure to fulfill these requirements was willful and intentional and that this amounted to misrepresentations which plaintiffs relied upon to their detriment. However, plaintiffs do not specify which reports were inaccurate or any employees which were left off the list in the reports. (¶¶ 31-32). The complaint is also silent as to why defendants Deglomini and Contillo are "responsible" for the reports and how the claimed inaccuracies are "knowing" and "with the intent to defraud". (¶¶ 49-54)

Fraud must be pled with particularity under Rule 9(b) of the Federal Rules of Civil Procedure. Wexner v. First Manhattan Co., 902 F.2d 169, 172 (2d Cir.1990); Kuczynski v. Ragen Corp., 732 F.Supp. 378, 383 (S.D.N.Y.1989). Rule 9(b) must be construed in light of Rule 8, which requires a short, plain statement of the facts upon which a claim is based. Ouaknine v. MacFarlane, 897 F.2d 75, 79 (2d Cir.1990); Grunwald v. Bornfreund, 668 F.Supp. 128 (E.D.N.Y.1987). In ruling on a motion to dismiss under Rule 9(b), "the court must read the complaint generously, and draw all inferences in favor of the pleader." Cosmas v. Hassett, 886 F.2d 8, 11 (2d Cir.1989). The court must deny a motion to dismiss under Rule 9(b) as long as some of the allegations of fraud are adequate. Norstar Bank v. Pepitone, 742 F.Supp. 1209, 1213 (E.D.N.Y. 1990); Morrow v. Black, 742 F.Supp. 1199, 1205 n. 16 (E.D.N.Y.1990).

Rule 9(b) is satisfied if the complaint gives enough information to enable defendants to frame a responsive pleading and assures that a sufficient basis exists for the allegations made. Epstein v. Haas Secur. Corp., 731 F.Supp. 1166, 1180 (S.D.N.Y. 1990); Rich-Taubman Assocs. v. Stamford Restaurant Operating Co., 587 F.Supp. 875, 880 (S.D.N.Y.1984). Allegations of fraud based on information and belief are insufficient unless they include a statement of facts on which the belief is founded. DiVittorio v. Equidyne Extractive Industries, Inc., 822 F.2d 1242, 1248 (2d Cir.1987); Luce v. Edelstein, 802 F.2d 49, 54 n. 1 (2d Cir.1986); Segal v. Gordon, 467 F.2d 602, 608 (2d Cir. 1972). A claim for mail or wire fraud must specify the content, date, and place of any alleged misrepresentations, and the identity of the persons making them. Wexner v. First Manhattan Co., 902 F.2d 169, 172 (2d Cir.1990); DiVittorio, 822 F.2d at 1247; Kuczynski, 732 F.Supp. at 383. However, the complaint need not specify the time, place and content of each mail communication where the nature and mechanics of the underlying scheme is sufficiently detailed, and it is enough to plead the general content of the misrepresentation without stating the exact words used. Landy v. Mitchell Petroleum Technology Corp., 734 F.Supp. 608 (S.D.N.Y.1990); Connors v. Lexington Ins. Co., 666 F.Supp. 434 (E.D.N.Y.1987); Beth Israel Medical Center v. Smith, 576 F.Supp. 1061 (S.D.N.Y.1983). Plaintiffs must also specifically allege the manner in which they relied on the fraud to their detriment. Morin v. Trupin, 711 F.Supp. 97, 111 (S.D.N.Y. 1989).

While the circumstances of fraud must be pled specifically, fraudulent intent may be averred generally, as long as the complaint provides a factual basis that gives rise to a strong inference of intent to defraud, knowledge of the falsity, or a reckless disregard for the truth. Ouaknine v. MacFarlane, 897 F.2d 75, 80 (2d Cir.1990); Cosmas v. Hassett, 886 F.2d 8, 12-13 (2d Cir.1989); Beck v. Manufacturers Hanover Trust Co., 820 F.2d 46, 50 (2d Cir.1987), cert. denied, 484 U.S. 1005, 108 S.Ct. 698, 98 L.Ed.2d 650 (1988). Fraudulent intent is commonly pled by alleging facts showing a motive for committing fraud and a clear opportunity for doing so. Morrow v. Black, 742 F.Supp. 1199 (E.D.N.Y.1990); Connors v. Lexington Ins. Co., 666 F.Supp. 434, 451 (E.D.N.Y.1987) (citing Beck, 820 F.2d at 50). Where no motive is apparent, fraudulent intent may be shown by identifying factual circumstances that indicate conscious behavior by the defendant. Atlantic Gypsum Co. v. Lloyds Int'l Corp., 753 F.Supp. 505 (S.D.N.Y.1990). However, where factual allegations of motive are lacking, the burden of pleading circumstantial allegations of conscious misconduct is greater. Grunwald v. Bornfreund, 668 F.Supp. 128, 133 (E.D.N.Y. 1987).

Plaintiffs are also required under Rule 9(b) to connect the allegations of fraud to each individual defendant. Luce, 802 F.2d at 54; Landy, 734 F.Supp. at 620. A complaint sounding in fraud may not rely on sweeping references to acts by all or some of the defendants because each named defendant is entitled to be apprised of the facts surrounding the alleged fraud. Brew v. Philips, Appel & Walden, Inc., 1981 Transfer Binder Fed.Sec.L.Rep. (CCH) ¶ 97,865 at 90,362, 1981 WL 1598 (S.D.N.Y.1981). Plaintiffs must demonstrate that each Defendant had a specific intent to defraud either by devising, participating in, or aiding and abetting the scheme. Morrow v. Black, 742 F.Supp. 1199, 1205 (E.D.N.Y.1990); Connors v. Lexington Insurance Co., 666 F.Supp. 434 (E.D.N.Y.1987). General allegations that the defendants "conspired" in the...