Hernandez v. Ballesteros, No. CIV. 01-2194(SEC).

• Decision Date: 31 August 2004
• Docket Number: No. CIV. 01-2194(SEC).
• Citation: 333 F.Supp.2d 6
• Parties: Ana Cordero HERNANDEZ, et al. Plaintiffs v. Maria Teresa Hernandez BALLESTEROS, et als. Defendants
• Court: U.S. District Court — District of Puerto Rico

333 F.Supp.2d 6

Ana Cordero HERNANDEZ, et al. Plaintiffs v. Maria Teresa Hernandez BALLESTEROS, et als. Defendants

No. CIV. 01-2194(SEC).

United States District Court, D. Puerto Rico.

August 31, 2004.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Alexander Zeno, San Juan, PR, for Ana M. Cordero-Hernandez, Paris Paris Boutique, Inc., Plaintiffs.

Jose R. Cancio-Bigas, Jose Raul Cancio Rigas Law Office, Manuel E. Andreu-Garcia, Wilfredo Segarra-Miranda, William Santiago-Sastre, Melendez Perez, Moran & Santiago, San Juan, PR, for Maria Teresa Maria Teresa Hernandez-Ballesteros, George Moll, Arnaldo Penalvert-Vazquez, Elba Maria Martinez, First Bank of Puerto Rico, Inc., Defendants.

OPINION AND ORDER

CASELLAS, District Judge.

Before the Court is Co-defendants Maria Teresa Hernández Ballesteros ("Hernández") and George Moll's ("Moll") motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(6) (Docket # 71). Plaintiffs Ana Cordero Hernández ("Cordero") and Paris-Paris Boutique, Inc.'s ("Paris-Paris Boutique") have filed an opposition thereto (Docket # 75). Defendants seek dismissal of all claims brought against them under the Racketeering Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1964(c). Having considered Defendants' motion, Plaintiffs' opposition, and the applicable law, Defendants' motion to dismiss will be GRANTED.

Factual Background

On February 14, 2001, Plaintiff Cordero purchased 100% of the stock of Paris-Paris Boutique from Co-defendant Hernández. In exchange for this stock, Cordero assumed $156,000.00 in debt owed by Hernández to First Bank of Puerto Rico and paid Hernández $69,000.00 in cash. In purchasing said stock, Cordero assumed control of all the assets of Paris-Paris Boutique, including the boutique's merchandise. Sometime after the sale, Hernández opened a shop named El Sol de Puerto Rico. El Sol de Puerto Rico is located in the same building and sells merchandise similar to that of Paris-Paris Boutique. Soon after, on May 24, 2001, Plaintiffs filed a voluntary Chapter 11 petition in the United States Bankruptcy Court.

Procedural History

Plaintiffs are currently involved in a Chapter 11 bankruptcy proceeding. In addition to their bankruptcy proceedings, Plaintiffs moved to bring suit in the District Court against the Defendants in a non-core proceeding pursuant to 28 U.S.C. § 157(c)(1) seeking injunctive, declaratory, and monetary relief for fraud and breach of contract (Docket # 1) since they did not consent to the entry of final judgment by a bankruptcy judge, pursuant to Rule 7008 of the Federal Rules of Bankruptcy Procedure. Under the recommendation of Bankruptcy Judge Enrique M. Lamoutte, the case was removed from Bankruptcy Court to the District Court. The case was then referred to Senior Judge Jaime Pieras. In their claim, Plaintiffs allege that Defendants Hernández and Moll misrepresented the value and profitability of Paris-Paris Boutique. Plaintiffs furthermore alleged that Defendant Hernández breached her contract with Plaintiff Cordero in engaging in unfair competition by opening El Sol de Puerto Rico next to Paris-Paris Boutique. On October 7, 2001, Judge Pieras denied Plaintiffs' motion for preliminary injunction due to Plaintiffs' failure to demonstrate their likelihood of success on the merits (Docket # 19).

On April 30, 2002, Plaintiffs amended their complaint to include a cause of action against Defendants under the RICO Act, 18 U.S.C. § 1964(c) (Docket # 57). Plaintiffs alleged that Defendants Hernández and Moll violated Section 1964(c) by injuring Plaintiffs' business through association with an enterprise engaging in a pattern of racketeering, specifically wire fraud. Defendants subsequently moved to dismiss all RICO claims against them for failure to meet the pleading standard for claims brought under the RICO Act (Docket # 71). In turn, Plaintiffs filed an opposition to Defendants' motion to dismiss (Docket # 75). Thereafter, the case was transferred to the undersigned.

Standard of Review

In assessing whether dismissal for failure to state a claim is appropriate, "the trial court, must accept as true the well-pleaded factual allegations of the complaint, draw all reasonable inferences therefrom in the plaintiff's favor, and determine whether the complaint, so read, limns facts sufficient to justify recovery on any cognizable theory." LaChapelle v. Berkshire Life Ins. Co., 142 F.3d 507, 508 (1st Cir.1998) (citations omitted). "[A] complaint should not be dismissed for failure to state a claim 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 v. Gibson, 355 U.S. 41, 45-6, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957), quoted in Davis v. Monroe County Bd. of Education, 526 U.S. 629, 119 S.Ct. 1661, 1676, 143 L.Ed.2d 839 (1999). See also Correa-Martínez, 903 F.2d at 52 (stating dismissal for failure to state a claim is warranted "only if it clearly appears, according to the facts alleged, that the plaintiff cannot recover on any viable theory.").

But "[a]lthough this standard is diaphanous, it is not a virtual mirage." Berner v. Delahanty, 129 F.3d 20, 25 (1st Cir.1997) (quoting Gooley v. Mobil Oil Corp., 851 F.2d 513, 515 (1st Cir.1988)). In order to survive a motion to dismiss, "a complaint must set forth `factual allegations, either direct or inferential, respecting each material element necessary to sustain recovery under some actionable legal theory.'" Id.

In judging the sufficiency of a complaint, courts must "differentiate between well-pleaded facts, on the one hand, and `bald assertions, unsupportable conclusions, periphrastic circumlocution, and the like,' on the other hand; the former must be credited, but the latter can safely be ignored." LaChapelle, 142 F.3d at 508 (quoting Aulson v. Blanchard, 83 F.3d 1, 3 (1st Cir.1996)). See also Rogan v. Menino, 175 F.3d 75, 77 (1st Cir.1999). Moreover, Courts "will not accept a complainant's unsupported conclusions or interpretations of law." Wash. Legal Foundation v. Mass. Bar Foundation, 993 F.2d 962, 971 (1st Cir.1993).

Applicable Law and Analysis

In their motion to dismiss, Defendants allege that Plaintiffs have failed to state a claim on which relief can be granted because Plaintiffs have not alleged the minimum statutory requirements for an action under Section 1964(c) of the RICO Act. See Docket # 71. Specifically, Defendants aver that Plaintiffs have failed to plead with sufficient specificity the predicate acts required under Section 1961 and, as such, Plaintiffs have failed sufficiently plead a pattern of racketeering activity as required under Sections 1961, 1962, and 1964(c). In their opposition, Plaintiffs argue that they sufficiently pled the required predicate acts to established a pattern of racketeering activity under Section 1961(1), (5) by averring that Defendants engaged in several acts of wire fraud in advancement of their fraudulent enterprise. See Docket # 75.

The RICO Act provides for a private right of action for "any person injured in his business or property by reason of a violation of § 1962 ..." 18 U.S.C.1964(c). In this case, Plaintiff bases her RICO claims on § 1962(c), which makes it unlawful for any person to conduct the affairs of an enterprise affecting interstate commerce through "a pattern of racketeering activity." 18 U.S.C. § 1962(c). The Act provides a list of what activities constitute "racketeering activity" and states that a "pattern" of such activity requires at least two predicate acts of racketeering. 18 U.S.C. §§ 1961(1), (5). Therefore, in order to state a claim under the RICO Act, a plaintiff must show that the injuries of which the plaintiff complains were caused by one or more of the specified acts of racketeering. Miranda v. Ponce Fed. Bank, 948 F.2d 41, 48 (1st Cir.1991).

In the case at bar, Plaintiffs allege that they have suffered injuries as result of several acts of wire fraud committed by Defendants Hernández and Moll, all in violation of 18 U.S.C. § 1343. See Docket 71. The First Circuit has held that in civil RICO claims alleging mail or wire fraud, Fed.R.Civ.P. 9(b) applies and, thus, a plaintiff must plead those acts with specificity. New England Data Servs. Inc. v. Becher, 829 F.2d 286, 290 (1st Cir.1987)(emphasis ours). To plead with specificity in RICO, "the plaintiff must go beyond a showing of fraud and state the time, place and content of the alleged mail and wire communication perpetrating that fraud." Id. at 291.

In their Amended Complaint, Plaintiffs stated that Cordero had several personal and telephone conversations with the Defendants and others. Plaintiffs then proceeded to list the numerous fraudulent claims the Defendants and others made to Cordero in those personal and telephone conversations. See Docket 57. However, these allegations do not meet the pleading requirements under Rule 9(b) in order to constitute a claim for wire fraud. Even though Plaintiff does state the content of the communications, she does not state the time or place of the wire communications.

Moreover, Plaintiff fails to indicate which fraudulent statements were made by which Co-defendant, when such statements were made, and whether those statements were made on the telephone or in person. Other sister districts have found that similarly pleaded allegations do not meet the standard for a RICO Act claim under Rule 9(b). See Foley v. Plumbers & Steamfitters Local 149, 109 F.Supp.2d 963, 970 (C.D.Ill.2000); Marshall v. AFGE, 996 F.Supp. 1334, 1338 (W.D.Okla.1998). Specifically, the Northern District of Illinois has held that a complaint that alleges numerous instances of wire fraud without specifying which defendant made use of the wires on those particular occasions, the dates of use, as well as the exact frequency of such use did not sufficiently plead predicate acts under RICO. Ahmed v. Rosenblatt, 118 F.3d 886, 889 (1st Cir.1997) (holding that plaintif...