Ferri v. Berkowitz

• Decision Date: 25 August 2009
• Docket Number: No. CV 09-182.,CV 09-182.
• Citation: 678 F. Supp.2d 66
• Parties: Antonio FERRI, Plaintiff, v. Jan M. BERKOWITZ, Edward Grieco, Edward Wilson, and JMB Group, LLC., Defendants. Jan M. Berkowitz and JMB Group, LLC, Third Party Plaintiffs, v. Matteo Patisso, Liquid Brick, Inc., and National Fraud Constable, Third Party Defendants.
• Court: U.S. District Court — Eastern District of New York

678 F.Supp.2d 66

Antonio FERRI, Plaintiff, v. Jan M. BERKOWITZ, Edward Grieco, Edward Wilson, and JMB Group, LLC., Defendants.

Jan M. Berkowitz and JMB Group, LLC, Third Party Plaintiffs, v. Matteo Patisso, Liquid Brick, Inc., and National Fraud Constable, Third Party Defendants.

No. CV 09-182.

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

August 25, 2009.

Bruce H. Kaplan, Esq., Melville, NY, for Plaintiff and Third Party Defendants.

Law Offices of Bruce E. Baldinger, LLC, by: Bruce Baldinger, Esq., for Defendants Jan Berkowitz and JMB Group, LLC.

Edward Grieco, Lawrenceville, GA, pro se.

Wilson, Elser, Moskowitz, Edelman & Dicker, LLP, by: Brett Sher, Esq., New York, NY, for Defendant Edgar Wilson.

MEMORANDUM AND ORDER

WEXLER, District Judge.

This is an action setting forth state law claims for fraud and breach of agreement as well as federal claims brought pursuant to the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1962 ("RICO"). Federal jurisdiction is based upon the RICO claim as well as diversity of citizenship. The factual allegations underlying all claims are the same.

Presently before the court is the motion of Defendant Edward Wilson, pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, to dismiss the all claims for failure to state a claim, and pursuant to Rule 12(b)(2) of the Federal Rules of Civil Procedure, to dismiss for lack of personal jurisdiction. All other Defendants join in the rule 12(b)(6) motion to dismiss the claims on the merits.

BACKGROUND

I. Factual Background: The Complaint

In light of the fact that this case is presented, at this juncture, as a motion to dismiss, the court will outline here those facts relevant to the motion that are not in dispute and in the light most favorable to Plaintiff, the non-moving party.

A. The Parties and their Business Relationship

Plaintiff Antonio Ferri ("Plaintiff" or "Ferri") is an individual who resides in the State of New York, within this District. Third Party Defendant Matteo Patisso is Ferri's business agent. Defendant Jan Berkowitz ("Berkowitz") is an individual residing in the State of North Carolina. Berkowitz is alleged to be a principal of Defendant JMB Group, LLC, a West Virginia limited liability corporation with its principal place of business in North Carolina. Defendant Edward Grieco ("Grieco") is an individual who resides in the State of Georgia, and Defendant Wilson is an individual residing in the State of Virginia.

The factual basis tying the parties together centers around a single $250,000 loan made by Ferri to Berkowitz (the "Loan"). The Loan was secured by a piece of real estate located in the State of West Virginia (the "Property"). According to the complaint, Defendant Grieco was the individual who introduced Ferri to Berkowitz, and acted on Berkowitz's behalf in his dealing with Ferri with respect to securing the Loan. Defendant Wilson, the individual who is moving to dismiss, is a real estate appraiser who is alleged to have provided Ferri with an appraisal for the Property. That appraisal is alleged to have valued the Property at $1,545,000.

The Loan, secured by the Property, was made to Ferri on December 14, 2007. On that date, Berkowitz executed a promissory note (the "Note") on behalf of JMB Group, as borrower, to the order of Ferri, in the amount of $250,000, with interest at the annual rate of 16%. The Note was payable in monthly (interest only) installment payments of $3,333.33, and was to be payable in full on December 14, 2008. As security for the Note, Berkowitz executed a Real Estate Deed of Trust dated December 14, 2007, on behalf of JMB Group, as grantor, conveying the Property to a trustee, who would have the power to sell the Property in the event of a default. Berkowitz also executed an Assignment of Leases and Rents for the Property. Finally, Berkowitz executed a personal guaranty of payment under which he guaranteed the performance and prompt payment of all of JMB's obligations to re-pay the loan.

B. The Allegations of Wrongdoing and the Default on the Loan

The complaint sets forth certain facts with respect to Berkowitz in connection with the Loan. First, Berkowitz is alleged to have lied as to the representation that the Property was occupied by a tenant with a ten year lease. In fact, Ferri alleges, the property was vacant. Berkowitz is alleged to have been aware that the value of $1.45 million, assigned to the Property in Wilson's appraisal, was highly inflated. This is because Berkowitz, himself is alleged to have purchased the Property for only $160,000 in 2006. Ferri states that Berkowitz lied to him about this purchase price when Berkowitz stated to Patisso that he purchased the Property for "around $500,000."

Ferri alleges that Berkowitz never made any interest payment under the Loan. He is stated to have used the Loan to purchase "luxury vehicles, and to have never had any intention of repaying" the Loan. As a consequence of Berkowitz's non-payment, the obligation to re-pay the loan was accelerated, and the trustee had the right to sell the Property. The Property was sold at auction to Ferri for $150,000. Ferri states that the Property is currently unmarketable. As a consequence, Ferri states that he has sustained a loss of at least $300,000, which amount includes the loss of principal, interest, legal fees, court costs and expenses.

With respect to the alleged wrongdoing of the other Defendants, the complaint states that Grieco fraudulently represented to Patisso (Ferri's agent), that Berkowitz had a net worth exceeding $300 million. As to Wilson, the complaint alleges that the appraisal he rendered was fraudulent in its statement of value. The complaint also contains a factual allegations as to Edward Fortin ("Fortin"), an individual named as a Defendant who is no longer a party to this action. Fortin is alleged to have received $10,000 of the $250,000 loan made to Berkowitz.

C. RICO Allegations

In support of the RICO claim, the complaint contains the following allegations, aimed at stating a claim pursuant to Section 1962(c). After a general statement that all "defendants" engaged in predicate acts constituting racketeering activity, the complaint attempts to amplify the allegations with facts in support of alleged predicate acts of bankruptcy fraud, mortgage fraud, tax fraud and wire fraud as follows.

The alleged predicate acts of bankruptcy fraud and mortgage fraud relate to filings and mortgages with respect to real property owned by Berkowitz, located in Nags Head, North Carolina (the "Nags Head Property"). With respect to the predicate act of bankruptcy fraud, the complaint states that, in connection with his filing for bankruptcy protection, Berkowitz failed to list his ownership of the Nags Head Property in his bankruptcy court "Statement of Financial Affairs." The alleged predicate act of mortgage fraud also refers to the Nags Head Property, stating that Berkowitz obtained two separate mortgages on this property, totaling in excess of $1.3 million, while reporting an annual income of only $21,730 with respect to the first mortgage, and $23,733 with respect to the second mortgage.

The alleged predicate acts of tax fraud and wire fraud are the only acts with any connection to the Loan. The predicate act of tax fraud, like the alleged acts of bankruptcy and mortgage fraud, refers only to conduct of Berkowitz, and not to any other Defendant. Specifically, Berkowitz is alleged to have engaged in tax fraud when he failed to report 2007 capital gains in connection with the proceeds of the Loan. Wire fraud is the single predicate act that attempts to implicate other Defendants in alleged predicate acts by asserting fraud in connection with the sending of the appraisal report and related documents regarding the Loan and the Property, via e-mail, to Patisso's computer, located in the State of New York.

With respect to the RICO elements of enterprise (the "Enterprise"), and a pattern of racketeering activity, the complaint alleges that Berkowitz runs the Enterprise. The remaining Defendants are alleged to have had, and continue to have, "significant business dealings with Berkowitz and the Enterprise." The predicate acts are alleged to have been "neither isolated nor sporadic," but to have involved a "regular and repeated violation of law to accomplish the Defendants' desired ends in the course of the continuing business of the Enterprise." Plaintiff alleges that the predicate acts were related to each other by virtue of common participants, common methods of commission, and the common purpose and result of defrauding plaintiff and others.

II. The Motion to Dismiss

As noted, Wilson moves to dismiss pursuant to Rule 12(b)(6) and 12(b)(2) of the Federal Rules of Civil Procedure. The 12(b)(6) motion seeks dismissal of all claims on the merits, and the Rule 12(b)(2) motion seeks dismissal on the ground of lack of personal jurisdiction. All Defendants join in the motion to dismiss this matter on the merits and Plaintiffs opposes all aspects of the motion. After outlining the applicable law, the court will consider the merits of the motion.

DISCUSSION

I. Legal Principles

A. Standard for Motions to Dismiss Pursuant to Rule 12(b)(6)

In Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007), the Supreme Court rejected the "oft-quoted" standard set forth in Conley v. Gibson, 355 U.S. 41, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957), that a complaint should not be dismissed, "unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley, 355 U.S. at 45-46, 78 S.Ct. 99. The court discarded the "no set of facts" language in favor of the requirement that plaintiff plead enough facts "to state a claim for relief that is plausible on its face." Bell Atlantic Corp., 550 U.S. at 570, 127 S.Ct. 1995.

Bell Atlantic holds that a "formulaic...