GICC Capital Corp. v. Technology Finance Group, Inc.
| Decision Date | 06 October 1995 |
| Docket Number | No. 1925,D,1925 |
| Citation | 67 F.3d 463 |
| Parties | RICO Bus.Disp.Guide 8953 GICC CAPITAL CORP., Plaintiff-Appellant, v. TECHNOLOGY FINANCE GROUP, INC., Andrew Graham, Dennis Williamson, Graham & Williamson, Creative Resources, Inc., TFF, Inc., Apple Leasing, Inc., James T. Pierce, Walter H. Prime, Gordon Locke, TFG Acquisition Corp., and Arthur Kronenberg, Defendants-Appellees. ocket 95-7102. |
| Court | U.S. Court of Appeals — Second Circuit |
Richard P. Swanson, Reid & Priest, New York City (Pamela C. Tames, of counsel), for plaintiff-appellant.
Eugene R. Scheiman, Baer, Marks & Upham, New York City (David P. Atkins, Zeldes, Needle & Cooper, Bridgeport, Connecticut, Anthony De Toro, New York City, of counsel) for defendants-appellees Andrew Graham, Dennis Williamson, Graham & Williamson, Gordon Locke, Creative Resources, Inc., TFF, Inc., Apple Leasing, Inc., James T. Pierce, Walter H. Prime.
Frederic S. Ury, Ury & Moskow, Westport, Connecticut, for defendants-appellees Technology Finance Group, Inc., TFG Acquisition Corp., Arthur Kronenberg.
Before: VAN GRAAFEILAND, MESKILL, and CABRANES, Circuit Judges.
Plaintiff GICC Capital Corp. ("GICC") brought this action against two groups of defendants that allegedly participated in the looting of assets from defendant Technology Finance Group, Inc. ("TFG"). TFG defaulted on a promissory note issued to GICC in settlement of unrelated litigation. GICC claims that the defendants engaged in a series of schemes designed to defraud GICC by permitting TFG to escape its obligation under the note. GICC alleges violations of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. Secs. 1961-1968 (1988), and various state law fraud claims. The district court, adopting a ruling of Magistrate Judge Arthur H. Latimer, granted defendants' motions to dismiss for failure to state a claim on August 26, 1993, finding that GICC lacked standing under RICO. 1 We reversed and remanded. GICC Capital Corp. v. Technology Fin. Group, Inc., 30 F.3d 289 (2d Cir.1994). On remand, the district court granted defendants' renewed motions to dismiss plaintiff's RICO claim. The court concluded that plaintiff had failed to demonstrate that defendants' conduct amounted to continuous criminal activity or a threat thereof, and that plaintiff had therefore not alleged a "pattern of racketeering activity" under RICO. The district court also dismissed plaintiff's state law claims, finding no basis for the exercise of supplemental jurisdiction. On appeal, GICC contends that the district court erred in adopting an overly narrow view of RICO's "continuity" requirement.
For purposes of this decision, we take the facts alleged in plaintiff's amended complaint to be true. Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 1686, 40 L.Ed.2d 90 (1974). GICC holds a $500,000 promissory note issued by defendant TFG as part of a March 1990 settlement of unrelated litigation involving TFG and a principal of GICC. TFG defaulted on the note in December 1992. The amount due on the note stands at $407,021.07, with per diem interest of $110.66 since December 28, 1992.
Defendant Creative Resources, Inc. ("CRI") is a holding company that conducts its business through a group of subsidiaries. CRI was controlled, during the times relevant, by defendants Andrew Graham, Gordon Locke, James T. Pierce, Walter H. Prime, Dennis Williamson, and Graham & Williamson (a partnership of defendants Graham and Williamson). Until February 1991, defendant TFG was owned by TFF, Inc., a CRI subsidiary. TFG was in the business of leasing computer equipment. TFG would borrow funds, purchase equipment, lease the equipment to an initial end-user, and direct the rental payments to the lender. At the same time, it would "sell" the equipment to an investor, who would reap certain tax benefits from formal ownership. The investor, in turn, would lease the equipment back to TFG for a term longer than the term of TFG's lease with the initial end-user. For the remainder of the longer term, TFG would re-lease the equipment to a second end-user. Because TFG's loan would already be paid off, the second end-user rental payments would be available as profits, which TFG would share with the investor. TFG and the investor would thus each hold a "residual" interest--that is, rights to a portion of the second end-user rental income. TFG apparently held some of these residual interests, while others were held by its subsidiary, Apple Leasing Co.
GICC's complaint alleges that CRI and those who controlled it (1) at some time between June 1989 and March 1990, caused Apple Leasing to be transferred from TFG to CRI for no consideration, permitting CRI rather than TFG to benefit as Apple's parent from the income to which Apple was entitled under residual interests; (2) in March 1990, fraudulently induced GICC to accept a $500,000 note from TFG as part of a settlement agreement; (3) caused money to funnel out of TFG and into CRI by permitting Apple, rather than TFG, to repurchase investors' residual interests at a profit; (4) in February 1991, caused the transfer of TFG to defendant Arthur Kronenberg and his company, defendant TFG Acquisition Corp., for nominal consideration; and (5) at an unspecified time, shifted assets from CRI to an overseas subsidiary of CRI. GICC alleges that these transfers were designed to defraud TFG's creditors, including GICC.
Section 1962 of RICO outlaws (a) the use of income "derived ... from a pattern of racketeering activity" to acquire an interest in, establish, or operate an enterprise engaged in or affecting interstate commerce; (b) the acquisition of any interest in or control of such an enterprise "through a pattern of racketeering activity"; (c) the conduct or participation in the conduct of such an enterprise's affairs "through a pattern of racketeering activity"; and (d) conspiring to do any of the above. GICC alleges that all of the defendants violated Sec. 1962(c), and that all of the defendants except TFG and TFG Acquisition violated Sec. 1962(a) and Sec. 1962(b). Under any prong of Sec. 1962, a plaintiff in a civil RICO suit must establish a "pattern of racketeering activity." The plaintiff must plead at least two predicate acts, see Sec. 1961(5), and must show that the predicate acts are related and that they amount to, or pose a threat of, continuing criminal activity, H.J. Inc. v. Northwestern Bell Tel. Co., 492 U.S. 229, 239, 109 S.Ct. 2893, 2900, 106 L.Ed.2d 195 (1989). The district court concluded that the plaintiff had failed to satisfy the so-called "continuity" requirement.
In H.J. Inc., the Supreme Court outlined the basic contours of the continuity requirement as follows:
"Continuity" is both a closed- and open-ended concept, referring either to a closed period of repeated conduct, or to past conduct that by its nature projects into the future with a threat of repetition.... A party alleging a RICO violation may demonstrate continuity over a closed period by proving a series of related predicates extending over a substantial period of time. Predicate acts extending over a few weeks or months and threatening no future criminal conduct do not satisfy this requirement: Congress was concerned in RICO with long-term criminal conduct. Often a RICO action will be brought before continuity can be established in this way. In such cases, liability depends on whether the threat of continuity is demonstrated.
492 U.S. at 241-42, 109 S.Ct. at 2902 (emphasis in original) (citation omitted). Thus, a plaintiff in a RICO action must allege either an "open-ended" pattern of racketeering activity (i.e., past criminal conduct coupled with a threat of future criminal conduct) or a "closed-ended" pattern of racketeering activity (i.e., past criminal conduct "extending over a substantial period of time"). The district court concluded that GICC failed to allege either closed- or open-ended continuity here. We agree.
Our cases assessing whether a threat of continuity exists have looked first to the nature of the predicate acts alleged or to the nature of the enterprise at whose behest the predicate acts were performed. See, e.g., United States v. Aulicino, 44 F.3d 1102, 1111 (2d Cir.1995); United States v. Kaplan, 886 F.2d 536, 542 (2d Cir.1989), cert. denied, 493 U.S. 1076, 110 S.Ct. 1127, 107 L.Ed.2d 1033 (1990); United States v. Indelicato, 865 F.2d 1370, 1383-84 (2d Cir.) (en banc), cert. denied, 493 U.S. 811, 110 S.Ct. 56, 107 L.Ed.2d 24 (1989); Beauford v. Helmsley, 865 F.2d 1386, 1391 (2d Cir.) (en banc), vacated and remanded, 492 U.S. 914, 109 S.Ct. 3236, 106 L.Ed.2d 584, adhered to on remand, 893 F.2d 1433, cert. denied, 493 U.S. 992, 110 S.Ct. 539, 107 L.Ed.2d 537 (1989). Thus, an inherently unlawful act performed at the behest of an enterprise whose business is racketeering activity would automatically give rise to the requisite threat of continuity. Aulicino, 44 F.3d at 1111. Where the nature of conduct or the enterprise does not by itself suggest that the racketeering acts will continue, courts must look to other external factors. Kaplan, 886 F.2d at 542-43. Thus, in Beauford, we found allegations that defendants had engaged in a one-time mailing of 8,000 copies of fraudulent documents in connection with a condominium conversion plan sufficient to plead a pattern of racketeering activity, where there was a basis to infer that similar mailings would occur in the future. Beauford, 865 F.2d at 1392. Similarly, in Azrielli v. Cohen Law Offices, 21 F.3d 512 (2d Cir.1994), we concluded that a series of fraudulent sales of securities over at least one year, coupled with fact that the defendants "apparently ha[d] been trying to continue to sell" securities, permitted a jury to find a RICO pattern. Id. at 521.
GICC does not allege that the nature of the defendants' conduct itself gives rise to a...
To continue reading
Request your trial
-
Faryniarz v. Jose E. Ramirez, JR Chem, LLC
...Inc., 492 U.S. at 241; DeFalco v. Bernas, 244 F.3d 286, 305 (2d Cir. 2011); Cofacredit, 187 F.3d at 242; GICC Capital Corp. v. Tech. Fin. Corp., 67 F.3d 463, 465 (2d Cir. 1995)). Neither a close-ended or an open-ended pattern is discernable in the SAC. i. Closed-Ended Pattern A close ended ......
-
Rajaratnam v. Motley Rice, LLC
...specific litigation, and therefore, were not the "multi-faceted scheme" required to establish continuity. GICC Capital Corp. v. Tech. Fin. Grp., Inc. , 67 F.3d 463, 467 (2d Cir. 1995) ("[A] plaintiff must provide some basis for a court to conclude that defendants' activities were ‘neither i......
-
Andrea Doreen Ltd. v. Building Mat. Loc. Union 282
...Id. at 237, 109 S.Ct. 2893 ("Congress was concerned in RICO with long-term criminal conduct."); GICC Capital Corp. v. Tech. Finance Group, Inc., 67 F.3d 463, 466 (2d Cir.1995) (explaining that plaintiff must allege "either an `open-ended' pattern (i.e., past criminal conduct coupled with a ......
-
Ritchie v. N. Leasing Sys., Inc.
...Put otherwise, a single completed act that is unlikely to recur cannot support a RICO claim. See GICC Capital Corp. v. Tech. Fin. Grp., Inc., 67 F.3d 463, 466 (2d Cir. 1995). Thus, for plaintiff to survive summary judgment, she must (1) raise a triable issue as to more than a single claim o......