Vild v. Visconsi
| Citation | 956 F.2d 560 |
| Decision Date | 27 March 1992 |
| Docket Number | Nos. 90-4048,90-4088,s. 90-4048 |
| Parties | , RICO Bus.Disp.Guide 7928 John VILD, Plaintiff-Appellant, Cross-Appellee, v. Dominic A. VISCONSI; Patricia Sattenfield; Sea/Mountain Resorts, Inc.; C. W. Sattenfield; Gerald Plonski; John Does; Defendants-Appellees, Cross-Appellants. |
| Court | United States Courts of Appeals. United States Court of Appeals (6th Circuit) |
Gregory T. Stralka (argued and briefed), Cleveland, Ohio, for John Vild.
Mark I. Wachter (argued and briefed), Paul A. Caimi, Mays, Karberg & Wachter, Cleveland, Ohio, for Dominic A. Visconsi, Patricia Sattenfield, Sea/Mountain Resorts, Inc., C. W. Sattenfield, Gerald Plonski, John Does (Nos. 1-10).
Before GUY, Circuit Judge, WELLFORD, Senior Circuit Judge, and CHURCHILL *, Senior District Judge.
John Vild, the plaintiff, appeals from the district court's denial of his Fed.R.Civ.P. 59(e) motion to alter or amend an earlier judgment dismissing his RICO 1 complaint and Fed.R.Civ.P. 15(a) motion to amend his RICO complaint. The defendants, various persons involved in a series of real estate enterprises, cross-appeal from the district court's denial of their Fed.R.Civ.P. 11 motion for sanctions against the plaintiff. Put simply, Vild tries to convince us that he has properly stated a RICO claim in his complaint or proposed amended complaint, while the defendants maintain that he failed to state a claim, and that his failure should bring about sanctions. We find that the district court did not err when it denied the plaintiff's motions under Rules 15(a) and 59(e), and therefore, we AFFIRM that portion of the decision. Although we do not rule on the merits of the sanctions issue, we find it appropriate to REMAND this issue for clarification as to the basis for the district court's denial of sanctions.
Plaintiff, an Ohio citizen, sued Dominic Visconsi of Ohio, C.W. and Patricia Sattenfield of Florida, Gerald Plonski of Ohio, and ten other unnamed individuals and several business entities, for alleged violations of RICO, common law fraud, intentional interference with business relationships, conversion, negligence and breach of contract. Vild's allegations arose from a failed scheme in which he was to market interests in the Longboat Bay Club (Club), a real estate resort venture.
In addition to the original complaint, the plaintiff filed, or attempted to file, three amended complaints, the details of which are necessary for a complete understanding of the controversy before us. The plaintiff alleged throughout subject matter jurisdiction under RICO and under 28 U.S.C. § 1332 (diversity of citizenship).
The original complaint alleges that in late January, 1989, defendant C.W. Sattenfield, on behalf of the other named defendants, Dominic Visconsi, Patricia Sattenfield, and Gerald Plonski, contacted the plaintiff by telephone to induce him to sign a marketing agreement to sell real estate interests in the Club. Vild contends that the defendants made material misrepresentations regarding the marketing agreement. He maintains in particular that the defendants represented that there was sufficient start-up capital to begin business operations. Allegedly due to these material misrepresentations, Vild complained that he entered into an exclusive marketing agreement and shortly thereafter signed a note for money advanced to him by defendants to initiate the venture. Vild asserts that the defendants encouraged him to establish the business so that they could later force him out and acquire the enterprise for themselves.
From the outset, the arrangement was a failure. Once the plaintiff entered into the business relationship, C.W. Sattenfield telephoned him seeking to change the terms of the marketing agreement and proposing that the defendants receive "kickbacks" on any interests sold to the public. According to Vild, C.W. Sattenfield made threats to him, his family and to ruin his reputation. When Vild did not comply with the proposed changes, the defendants allegedly refused to provide additional inventory and start-up money. 2 The original complaint also alleges that the defendants refused to compensate Vild for sales made by him under the marketing agreement. Plaintiff maintains that these threats, phone calls, and material misrepresentations all constitute predicate acts under RICO because they are violations of mail fraud, wire fraud and extortion statutes as well as the Hobbs Act.
The original complaint also alleges other predicate acts which are separate and distinct from the previously described scheme to defraud and extort the plaintiff. Vild contends that the defendants used, and continue to use, telephones and facsimile machines to solicit customers in Ohio to purchase interests in the Club. According to Vild, these solicitations constitute wire fraud because the defendants' salespersons are not licensed and registered to do business in Ohio. The plaintiff also alleges that the defendants engaged in, and continue to engage in, mail fraud because they used, and continue to use, letters which technically violate several laws and regulations governing direct mail solicitation in Ohio. For instance, the letters do not contain, as required by law, the odds of winning prizes. They also improperly use the word "sweepstake." Vild further complains that the defendants sent similar letters to potential consumers in Indiana in violation of that state's laws. Plaintiff maintains also that the defendants violated Florida law by fraudulently using real estate contracts which did not contain a mandatory ten-day cancellation provision.
Vild amended his original complaint by introducing several additional defendants, Gerald Plonski and ten unnamed individuals, who allegedly also violated the RICO statute. The plaintiff contends that Plonski, his sales agent, refused to pay him money earned from Club sales because of "kickbacks" to the other defendants. The ten unnamed defendants were alleged officers, directors and shareholders of Sea/Mountain Resorts Inc. (Sea Mountain) established by defendants to market real estate interests in Ohio. These added individual defendants also allegedly engaged in the same type of racketeering, wire and mail fraud activities as the other defendants.
The plaintiff also attempted to file a second amended complaint, but the court denied his motion to amend. The second amended complaint alleges several new predicate acts and introduces a host of additional defendants. The new predicate acts center on the allegedly illegal status of another business entity controlled by the defendants. Vild maintains that Longboat Venture Ltd. (Longboat), the owner of the Club, was prohibited from doing business in Ohio and Florida because its general partner, DVB, Inc. (DVB), failed to maintain its legal corporate status and also failed properly to register to do business. The plaintiff maintains that any solicitations by Longboat accordingly constitute wire and mail fraud.
The second amended complaint also alleges that several new RICO defendants were a part of the illegal enterprise. Vild contends that the defendants' law firm and three lawyers representing defendants fraudulently represented DVB's corporate status and its capacity to do business. One defendant lawyer allegedly sent a letter to the state of Ohio which indicated incorrectly that DVB had good standing in Ohio. Another defendant lawyer allegedly made a similar misrepresentation to the Court of Common Pleas of Cuyahoga County stating that Longboat was a valid limited partnership. Plaintiff's contention is that Longboat was not a valid limited partnership because of DVB's status. These misrepresentations were allegedly intentionally made with knowledge that they were false.
Vild moved to file still another amended complaint, but this motion was denied. The third amended complaint adds very little to the earlier versions. Defendants further committed mail fraud by misrepresenting DVB's status to the State of Florida in order to validate its certificate to do business. The plaintiff also alleges that the defendants committed another RICO predicate act by misrepresenting DVB's status to the State of Ohio during the course of settlement negotiations.
After Vild filed his first amended complaint, the defendants moved to dismiss the action under Fed.R.Civ.P. 12(b)(6) for failure to state a claim and under Fed.R.Civ.P. 9(b) for failure to allege fraud with particularity. While these motions were pending, the plaintiff requested leave to file his second amended complaint which the court denied.
The next day, the district court granted defendants' motion to dismiss for failure to state a RICO claim because Vild did not allege "a pattern of racketeering activity," as defined by H.J. Inc. v. Northwestern Bell Telephone Co., 492 U.S. 229, 109 S.Ct. 2893, 106 L.Ed.2d 195 (1989). The Supreme Court in H.J., Inc. held that a plaintiff must allege facts which prove that the predicate acts are related and pose a genuine threat of continuity. Id. 109 S.Ct. at 2900. Applying these requirements to Vild's case, the district court concluded that "there exist[ed] no set of facts to show 'continuity.' " The district court stated, "[a]t best, the predicate acts alleged occurred over [sic] period of only a few months, and therefore, cannot be considered to have extended over a 'substantial' period of time." Continuity was also lacking because the plaintiff failed to show that the defendants "threat[ened] ... long-term racketeering activity" or that the predicate acts constituted a "regular way of doing business." In sum, the district court found that "the acts alleged amount[ed] at best to a breach of contract with a single customer."
Without a valid RICO claim, the district court concluded that there was no subject matter jurisdiction. The plaintiff...
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