Davila Uviles v. Rys Intern. Corp., Civil No. 05-2163(JAG).

• Citation: 443 F.Supp.2d 233
• Decision Date: 10 August 2006
• Docket Number: Civil No. 05-2163(JAG).
• Parties: Carlos DAVILA UVILES, et at., Plaintiffs v. RYS INTERNATIONAL CORPORATION, et al., Defendants.
• Court: U.S. District Court — District of Puerto Rico

443 F.Supp.2d 233

Carlos DAVILA UVILES, et at., Plaintiffs v. RYS INTERNATIONAL CORPORATION, et al., Defendants.

Civil No. 05-2163(JAG).

United States District Court, D. Puerto Rico.

August 10, 2006.

COPYRIGHT MATERIAL OMITTED

Lydia M. Ramos-Cruz, Lausell & Carlo, PSC, San Juan, PR, for Plaintiffs.

Alfredo Castellanos-Bayouth, Castellanos & Castellanos PSC, Janice L. Richardson-Zamora, Lugo Miranda Law Office, Luis A. Guzman-Dupont, Luis A. Guzman Dupont Law Office, San Juan, PR, for Defendants.

Noel Alicea, Carolina, PR, pro se.

OPINION AND ORDER

GARCIA-GREGORY, District Judge.

On November 11, 2005, a group of individuals (collectively "plaintiffs") filed a Complaint against RYS International Corporation ("RYS") and others (collectively "defendants"), seeking treble damages, costs, and attorneys fees for alleged violations of the Racketeering Influenced and Corrupt Organizations Act ("RICO"), breach of contract, negligence, and unjust enrichment (Docket No. 1). The Court's jurisdiction is premised upon the existence of a federal question pursuant to 28 U.S.C. § 1331. Plaintiffs also invoke this Court's supplemental jurisdiction over their state law claims pursuant to 28 U.S.C. § 1367. On February 2, 2006, co-defendants Alejandro Lopez Deynes ("Lopez") and Edna Rodriguez Colon ("Rodriguez") moved to dismiss pursuant to Fed.R.Civ.P. 12(b)(2) and 12(b)(6), arguing that the RICO allegations asserted against them either fail as a matter law or are not pled with the particularity required by Fed.R.Civ.P. (9)(b) (Docket No. 25). Lopez and Rodriguez further urge that, with dismissal of the federal RICO claim, this Court should decline to exercise supplemental jurisdiction over the remaining state law claims (Id.). On March 8, 2006, plaintiffs filed an opposition (Docket No. 33). For the reasons discussed below, this Court DENIES defendants' motion.

STATEMENT OF FACTS

RYS is a corporation under the laws of the Commonwealth of Puerto Rico where it maintains its principal place of business. All of the individuals named as defendants in this suit are alleged to be officers, representatives, and/or agents of RYS which, since around 2001, has offered investment opportunities to private investors.¹ All of the plaintiffs to this suit have invested with RYS by entering into investment contracts which promised a guaranteed interest return payable either periodically or in a lump sum at the end of the contract term. Whether because of default on the periodic interest payments or because the contract term had ended, plaintiffs eventually began demanding return of their principal investments along with the accrued interest. Defendants failed to return these monies and so plaintiffs filed this action claiming that defendants have fraudulently obtained millions of dollars from them through an investment plan which never existed. In addition to several garden-variety state law claims, plaintiffs allege generally that defendants have violated RICO § 1962(c) through predicate acts of mail fraud, wire fraud, racketeering, money laundering, and securities fraud as well as RICO § 1962(d) by conspiring to violate RICO § 1962(c).

STANDARD OF REVIEW

A. Motion to Dismiss Standard

Pursuant to Fed.R.Civ.P. Rule 12(b)(6), a complaint may not be dismissed unless it appears beyond doubt that plaintiff can prove no set of facts in support of his claim which would entitle him to relief. See Brown v. Hot, Sexy, and Safer Prods., Inc., 68 F.3d 525, 530 (1st Cir.1995). The Court accepts all well-pleaded factual allegations as true, and draws all reasonable inferences in plaintiff's favor. See Correa-Martinez v. Arrillaga-Belendez, 903 F.2d 49, 51 (1st Cir.1990). The Court need not credit, however, "bald assertions, unsupportable conclusions, periphrastic circumlocutions, and the like" when evaluating the complaint's allegations. Aulson v. Blanchard, 83 F.3d 1, 3 (1st Cir.1996). When opposing a Rule 12(b)(6) motion, "a plaintiff cannot expect a trial court to do his homework for him." McCoy v. Massachusetts Institute of Tech., 950 F.2d 13, 22 (1st Cir.1991). Plaintiffs are responsible for putting their best foot forward in an effort to present a legal theory that will support their claim. Id. at 23 (citing Correa-Martinez, 903 F.2d at 52). Plaintiffs must set forth "factual allegations, either direct or inferential, respecting each material element necessary to sustain recovery under some actionable legal theory." Gooley v. Mobil Oil Corp., 851 F.2d 513, 515 (1st Cir.1988).

DISCUSSION

A. RICO § 1962(c) Allegations

RICO § 1962(c) states that "[i]t shall be unlawful for any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise's affairs through a pattern of racketeering activity...." 18 U.S.C. § 1962(c). In order to state a claim under § 1962(c), a plaintiff must allege "(1) conduct, (2) of an enterprise, (3) through a pattern, (4) of racketeering activity." Sedima, S.P.R.L v. Imrex Co., 473 U.S. 479, 496, 105 S.Ct. 3275, 87 L.Ed.2d 346 (1985). The issue now before this Court is whether plaintiffs' complaint sufficiently alleges that defendants Lopez and Rodriguez engaged in the predicate acts necessary to constitute a pattern of racketeering activity.

Plaintiffs' complaint alleges that defendants have engaged in a pattern of racketeering activity involving predicate acts of mail fraud, wire fraud, securities fraud, racketeering, money laundering, and conspiracy to defraud. With respect to Lopez and Rodriguez, however, the Court finds that several of these alleged predicate acts fail as a matter of law. Specifically, plaintiffs' RICO § 1962(c) claim against Lopez and Rodriguez cannot be premised on alleged predicate acts of securities fraud, racketeering, or conspiracy to defraud.

First, 18 U.S.C. § 1964(c) states that "no person may rely upon any conduct that would have been actionable as fraud in the purchase or sale of securities to establish a violation of section 1962" unless the individual charged with that conduct has been "criminally convicted in connection with the fraud . . .." Since the complaint does not allege that either Lopez or Rodriguez has ever been convicted of securities fraud, plaintiffs' RICO claim cannot rest on such an alleged predicate act. See Fleet Credit Corp. v. Sion, 893 F.2d 441, 444 (1st Cir.1990) (Court "has no duty to conjure up unpled allegation in order to bolster the plaintiff's chances of surviving a 12(b)(6) motion to dismiss") (internal quotations omitted). Second, the Court finds plaintiffs' assertion that defendants engaged in "racketeering activity involving the predicate act[] of ... racketeering," (Docket No. 1, ¶¶ 125 and 128), to be nothing more than tautology and, accordingly, disregards the allegation. Third, conspiracy does not constitute racketeering activity as defined by 18 U.S.C. § 1961(1) and thus cannot be asserted as a predicate act. Conspiracy, however, is listed as a separate RICO offense under 18 U.S.C. § 1962(d) and, thus, the Court will examine such allegation separately from the predicate act analysis. Having now reduced plaintiffs' complaint to alleged predicate acts of mail fraud, wire fraud, and money laundering, the Court will proceed to examine each allegation to determine whether it was pled with the requisite particularity.

1. Mail Fraud and Wire Fraud

Although the Federal Rules of Civil Procedure are relatively liberal in requiring only general allegations in a complaint, see Fed.R.Civ.P. 8, plaintiffs are held to a higher standard of pleading when alleging fraud. Specifically, Fed.R.Civ.P. 9(b) states that "[i]n all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity." Both this Court and the First Circuit Court of Appeals have held that in civil RICO claims alleging mail or wire fraud, Fed.R.Civ.P. 9(b) applies such that plaintiffs must plead those acts with specificity. Hernandez v. Ballesteros, 333 F.Supp.2d 6, 11 (D.P.R.2004) (citing New England Data Servs. Inc. v. Becher, 829 F.2d 286, 290 (1st Cir.1987)). In particular, plaintiffs are required "to go beyond a showing of fraud and state the time, place and content of the alleged mail and wire communications perpetrating that fraud." Feinstein v. Resolution Trust Corp., 942 F.2d 34, 42 (1st Cir.1991) (emphasis added). After examining the complaint, the Court finds that, with respect to Lopez and Rodriguez, plaintiffs' allegations of mail and wire fraud are not pled with the requisite particularity and thus cannot be relied on to maintain their RICO § 1962(c) action.

First, with respect to Rodriguez, the complaint fails to specifically allege a single instance in which she used the mail or interstate wire, let alone the time, place, and content of such communication. Furthermore, plaintiffs' general allegation that defendants engaged in "a pattern of racketeering activity involving the predicate acts or mail fraud [and] wire fraud," (Docket No. 1, ¶¶ 125 and 128), also lacks the necessary specificity and amounts, in all reality to nothing more than mantra-chanting. See Feinstein, 942 F.2d at 42 ("It is not enough for a plaintiff to file a RICO claim, chant the statutory mantra, and leave the identification of predicate acts to the time of trial"). Consequently, with respect to Rodriguez, the alleged predicate acts of mail fraud and wire fraud fail for lack of particularity.

In contrast to the paucity with which Rodriguez is mentioned in the complaint, the frequency with which Lopez is referred to makes him a relative celebrity. Most of these references, however, contain nothing more than allegations that certain plaintiffs learned about the RYS investment plan through Lopez and subsequently invested in it based on his representations. While these allegations may amount to some form of...