Greenview Trading Co., Inc. v. Hershman & Leicher, P.C.

• Decision Date: 28 May 1985
• Citation: 489 N.Y.S.2d 502,108 A.D.2d 468
• Court: New York Supreme Court — Appellate Division
• Parties: , 53 USLW 2608 GREENVIEW TRADING CO., INC., Plaintiff-Respondent, v. HERSHMAN & LEICHER, P.C., Harold M. Hershman, Indu Craft, Inc., Defendants-Appellants, and PLC of New York, Inc. and Richard Rottman, Defendants.

Page 502

489 N.Y.S.2d 502

108 A.D.2d 468, 53 USLW 2608

GREENVIEW TRADING CO., INC., Plaintiff-Respondent, v. HERSHMAN & LEICHER, P.C., Harold M. Hershman, Indu Craft, Inc., Defendants-Appellants, and PLC of New York, Inc. and Richard Rottman, Defendants.

Supreme Court, Appellate Division,

First Department.

May 28, 1985.

Harold M. Hershman, New York City, of counsel (Hershman & Leicher, P.C., New York City, attorneys), for defendants-appellants.

S. Robert Schrager, New York City, of counsel (Sidney S. Goldstein, New York City, with him on the brief; Kreindler & Relkin, P.C., New York City, attorneys), for plaintiff-respondent.

Before SANDLER, J.P., and SULLIVAN, BLOOM and MILONAS, JJ.

SANDLER, Justice.

The most important question presented on this appeal is whether the State courts have concurrent jurisdiction with Federal courts to adjudicate private civil actions for treble damages under the Racketeer Influenced and Corrupt Organizations ("RICO") Act (U.S.Code, tit. 18, §§ 1961-1968; in particular § 1964, subd. ). We hold that they do not.

The question comes to us on a motion to dismiss a complaint purporting to set forth causes of action for breach of contract, conversion, fraud, prima facie tort, punitive damages and a RICO claim under 18 USC § 1964(c). The facts alleged in the complaint, which we treat as true on a motion to dismiss under CPLR 3211(a)(7), arise out of plaintiff's August 30, 1983 contract with defendant Indu Craft Inc. to assign plaintiff's lease of commercial premises, and convey furniture and fixtures located at the premises, to Indu Craft for $15,000, of which $500 had been paid as a down payment. Performance was conditioned upon the landlord's execution of a three-year lease with Indu Craft. Indu Craft deposited a certified check representing the balance of $14,500 with its attorneys, defendant Hershman & Leicher, P.C., to be held in an escrow account. The agreement provided that if the landlord executed a lease with a person, firm or corporation other than Indu Craft, the $14,500 held in escrow and the $500 down payment were to be returned to Indu Craft.

The complaint further alleges that three weeks prior to the execution of the agreement the defendants formed a corporation named PLC of New York ("PLC") for the purpose of defrauding plaintiff. Defendant Richard Rottman, a principal of Indu Craft, told the landlord that Indu Craft and PLC were the same entity, and that for internal purposes he preferred the lease to be executed by PLC. The landlord complied with this request on August 16, 1983 (two weeks before execution of the agreement between plaintiff and Indu Craft). On September 8, 1983 Indu Craft sent a letter to Hershman & Leicher stating: "We have found out that landlord of the said building 1407 Broadway has signed the lease with another company other than Indu Craft Inc. So please return our money $14,500.00 which we had given to you to be put up in the escrow account." The next day, Hershman & Leicher returned the $14,500 to Indu Craft. Pertinently, PLC's certificate of incorporation lists its mailing address as "c/o Indu Craft Inc., 1 East 28th St., 7th Floor, New York, NY 10016", the same address listed on Indu Craft's letterhead.

Although defendant Harold Hershman has submitted an affidavit denying any knowledge on the part of himself or his law firm regarding the formation or existence of PLC prior to the commencement of this action, Special Term did not treat the motion to dismiss as a motion for summary judgment, and we are therefore bound to treat the allegations contained in the complaint as true, and also to give the plaintiff the benefit of all favorable inferences and implications that may be drawn from the complaint, without expressing any opinion as to the plaintiff's ability ultimately to establish the truth of these averments before the trier of facts. Underpinning & Foundation Constructors, Inc. v. Chase Manhattan Bank, 46 N.Y.2d 459, 462, 414 N.Y.S.2d 298, 386 N.E.2d 1319; 219 Broadway Corp. v. Alexanders, Inc., 46 N.Y.2d 506, 509, 414 N.Y.S.2d 889, 387 N.E.2d 1205. So viewed, we find no issue warranting discussion as to the complaint's sufficiency regarding the causes of action for breach of contract, fraud and conversion. However, the eighth cause of action for prima facie tort must be dismissed because the acts alleged fall clearly within the categories of the traditional torts (Belsky v. Lowenthal, 62 A.D.2d 319, 322, 405 N.Y.S.2d 62, affd for reasons stated by Justice Evans, 47 NY2d 820), and the tenth cause of action for punitive damages must be dismissed as a separate cause of action because punitive damages are merely an element of the total claim for damages on the underlying causes of action. APS Food Systems, Inc. v. Ward Foods, Inc., 70 A.D.2d 483, 488, 421 N.Y.S.2d 223.

Turning to the central issue presented on this appeal, which is whether the State courts have concurrent jurisdiction with Federal courts to adjudicate private civil actions for treble damages under 18 USC § 1964(c), that section provides:

Any person injured in his business or property by reason of a violation of section 1962 of this chapter may sue therefor in any appropriate United States district court and shall recover threefold the damages he sustains and the cost of the suit, including a reasonable attorney's fee.

In its published opinion addressing this issue (123 Misc.2d 152, 473 N.Y.S.2d 722) Special Term concluded that concurrent jurisdiction exists by applying the presumption that State courts enjoy concurrent jurisdiction over a Federal cause of action, as set forth by the Supreme Court in Gulf Offshore Co. v. Mobil Oil Corp., 453 U.S. 473 at 477-478, 101 S.Ct. 2870 at 2874-2875. While the issue is not free from doubt, we disagree with this aspect of Special Term's determination on the basis of the analysis undertaken in County of Cook v. Midcon Corp. (USDC, ND Ill 1983), 574 F.Supp. 902. In that opinion it was noted that 18 USC § 1964(c) was drawn almost verbatim from Section 4 of the Clayton Act, 15 USC § 15, the statute conferring jurisdiction over Federal antitrust laws. ^* After observing that it has long been recognized that 15 USC § 15 gives Federal courts exclusive jurisdiction over Federal antitrust claims, and citing numerous cases to support that principle, the court stated (at p. 912):

Moreover, it is well established that the identity in language between 18 U.S.C. § 1964(c) and 15 U.S.C. § 15 is not a mere happenstance; Congress consciously patterned the RICO section after the antitrust prototype. See, e.g., 115 Cong.Rec. 6992, 6993 (1969) (statement of Sen. Hruska). Legislators must have known that courts have construed virtually identical language as giving federal courts exclusive jurisdiction over antitrust claims. It would be anomalous for this court to hold that the jurisdictional grant in the RICO statute did anything other than create exclusive federal jurisdiction over civil claims by persons injured by violations of 18 U.S.C. § 1962. But see Luebke v. Marine National Bank of Neenah, 567 F.Supp. 1460 (E.D.Wis.1983) (holding RICO claim could have been raised in state court because of presumption of concurrent jurisdiction, but not addressing whether statute's language and legislative history rebuts the presumption.)

Further buttressing this conclusion is the brief summary of the legislative history of § 1964(c) in Bankers Trust Co. v. Rhoades, (2d Cir.1984) 741 F.2d 511, 517, wherein the court stated that:

terms of § 1964(c) were not discussed at all in the Senate, whose final RICO bill did not contain a provision for a private right of action, and that the discussions in the House of Representatives centered almost entirely on the provision of civil remedies to be enforced by the government rather than by private parties. See at 490 & n. 24. As Sedima notes, the provision for a private treble damage action was added by a subcommittee of the House Judiciary Committee; when the Judiciary Committee reported the amended bill to the House, it did not mention the addition of this right of action. Id. at 489-490. In the House discussion of the bill, there was but one brief remark explaining the substance of the proposed amendment, as Congressman Poff, a member of the Judiciary Committee, noted that "at the suggestion of the gentleman from Arizona ...