Khaimi v. Schonberger

• Citation: 664 F. Supp. 54
• Decision Date: 10 July 1987
• Docket Number: No. 85 CV 4212.,85 CV 4212.
• Parties: Mazal KHAIMI, Plaintiff, v. Gloria SCHONBERGER, Jacob Schonberger, the New Homestead, Dr. Mangubhai Patel, Helen Glass, Barbara "Doe" (last name unknown), Cindy "Doe" (last name unknown), and Jenny "Doe" (last name unknown), Defendants.
• Court: U.S. District Court — Eastern District of New York

664 F. Supp. 54

Mazal KHAIMI, Plaintiff, v. Gloria SCHONBERGER, Jacob Schonberger, the New Homestead, Dr. Mangubhai Patel, Helen Glass, Barbara "Doe" (last name unknown), Cindy "Doe" (last name unknown), and Jenny "Doe" (last name unknown), Defendants.

No. 85 CV 4212.

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

July 10, 1987.

Bruce Brickman, New York City, for plaintiff.

Dwyer, Peltz & Walker, New York City, for Patel.

Gabarini, Scher & DeCicco, New York City, for all other defendants.

ORDER

McLAUGHLIN, District Judge.

This lawsuit arises from defendants' alleged efforts to evict plaintiff from a home for the aged. The complaint asserts a violation of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. §§ 1961 et seq., and various pendent state claims. Defendants' motion to dismiss were referred to United States Magistrate A. Simon Chrein, who recommended that the RICO claim be dismissed. I agree with his conclusion, although for slightly different reasons. I believe the fatal defect in the RICO claim lies not so much in its description of the pattern of racketeering, but rather in its failure to plead the continuing nature of the enterprise. Except to that extent, I adopt his Report and Recommendation, which is annexed, as the Opinion of the Court.

Nowhere in the complaint does plaintiff identify the alleged enterprise, describe its structure, or state its purpose. The omissions alone justify dismissal. Magistrate Chrein, interpreting the RICO claim most charitably, assumed the New Homestead residence to be the enterprise and the other defendants to be the persons conducting the affairs of that enterprise through a pattern of racketeering activity. See 18 U.S.C. § 1962(c). He believed, however, that the complaint did not sufficiently state a pattern because it failed to allege two or more acts of racketeering activity as "a regular part of the way the defendants do business" (Report & Recommendation at 22).

I do not read Sedima S.P.R.L. v. Imrex Co., Inc., 473 U.S. 479, 105 S.Ct. 3275, 87 L.Ed.2d 346 (1985), and specifically its footnote fourteen, see id. at 496 n. 14, 105 S.Ct. at 3285 n. 14, as narrowly as does the Magistrate. Two acts of racketeering, related in the sense that they are both done in furtherance of the affairs of an enterprise, are sufficient to constitute a pattern. See United States v. Ianniello, 808 F.2d 184, 190 (2d Cir.1986).

After Sedima, which noted the requirement of "continuity plus relationship," see 473 U.S. at 496 n. 14, 105 S.Ct. at 3285 n. 14, the Second Circuit suggested that this issue was "best addressed in the context of `enterprise,'" Ianniello, supra, 808 F.2d at 191. It has since stated that "whether one looks for the requisite continuity and relatedness by examining the pattern or the enterprise is really a matter of form, not substance." See Beck v. Manufacturers Hanover Trust Co., 820 F.2d 46, 51 (2d Cir.1987). It has never, however, retreated from its emphasis on the continuing, ongoing nature of a RICO violation.

An enterprise is "a group of persons associated together for a common purpose of engaging in a course of conduct" and "is proved by evidence of an ongoing organization, formal or informal, and by evidence that the various associates function as a continuing unit." United States v. Turkette, 452 U.S. 576, 583, 101 S.Ct. 2524, 2528, 69 L.Ed.2d 246 (1981). This circuit requires that, under section 1962(c), the enterprise be a continuing operation and that the acts be related to the common purpose. See Moss v. Morgan Stanley, Inc., 719 F.2d 5, 21-22 (2d Cir.1983), cert. denied, 465 U.S. 1025, 104 S.Ct. 1280, 79 L.Ed.2d 684 (1984); United States v. Mazzei, 700 F.2d 85, 89 (2d Cir.), cert. denied, 461 U.S. 945, 103 S.Ct. 2124, 77 L.Ed.2d 1304 (1983).

Ianniello, supra, 808 F.2d at 191. Where the object of the enterprise is to conduct a scheme intended to continue indefinitely, with "no obvious terminating goal or date," the enterprise requirement is established. Id. at 192. An enterprise with "but one straightforward, short-lived goal ... is not sufficiently continuing to constitute an `enterprise.'" Beck, supra, at 51.

In this case the alleged enterprise had but one illicit goal: to evict plaintiff from the residence. Such an enterprise with its discrete, short-term object, is not sufficiently "continuing" under Beck.¹

This case does differ from Beck, in that there the enterprise "ceased functioning" upon the achievement of its single, short-lived goal. See 820 F.2d at 51. Here the New Homestead obviously did not cease to exist once it ejected plaintiff. This highlights a gap in the Second Circuit's recent analyses. The claim in Ianniello was sufficient because, although the enterprise had only one object, it was one that continued indefinitely. The claim in Beck was insufficient because the enterprise's only object was discrete and short-term. This leaves unaddressed the situation where the enterprise has more than one purpose, but its only criminal goal is discrete and short-lived, and the enterprise does not cease to exist after its accomplishment. Neither Beck nor Ianniello involved the case where, as here, the enterprise survives the achievement of its discrete, short-term criminal object.

Given the Circuit Court's consistent position that RICO requires a "continuing criminal enterprise," Ianniello, supra, 808 F.2d at 192, I conclude that the Second Circuit would not regard an entity that functions legitimately upon the termination of its single criminal episode as an enterprise the conduct of which violates RICO. Illegal conduct undertaken by a lawful enterprise during the course of one "project of finite duration and scope," Procter & Gamble Co. v. Big Apple Indus. Bldgs., Inc., 655 F.Supp. 1179, 1182 (S.D.N.Y. 1987), is "sporadic activity," Sedima, supra, 473 U.S. at 496 n. 14, 105 S.Ct. at 3285 n. 14 (quoting S.Rep. No. 91-617, at 168 (1969)), and is not sufficiently open-ended to fall within the Second Circuit's view of the scope of the statute, see Procter & Gamble, supra, 655 F.Supp. at 1182-83.

Thus, although the New Homestead did not cease to exist upon the eviction of plaintiff, its functioning as a criminal enterprise ended upon the occurrence of that discrete, definite event. Because the New Homestead is accordingly "not sufficiently continuing to constitute an `enterprise'" under the statute, Beck, at 51, the RICO claim cannot withstand the motion to dismiss. The exercise of pendent jurisdiction over the remaining state claims is inappropriate. See United Mine Workers v. Gibbs, 383 U.S. 715, 726, 86 S.Ct. 1130, 1139, 16 L.Ed.2d 218 (1966). The complaint is therefore dismissed in its entirety.

SO ORDERED.

REPORT AND RECOMMENDATION OF U.S. MAGISTRATE

April 1, 1987.

A. SIMON CHREIN, United States Magistrate.

The plaintiff, Mazal Khaimi, brought this lawsuit in November 1985, alleging injuries caused by defendant The New Homestead, its proprietors, agents, servants, and/or employees, due to their violations of the Racketeer Influenced and Corrupt Organizations Act (RICO) and pendant state law claims for breach of contract, fraud, intentional infliction of emotional distress, negligence and wrongful eviction. This case was referred to the undersigned for a Report and Recommendation on defendants' motions for dismissal for failure to state a claim pursuant to Federal Rule 12(b)(6), judgment on the pleadings pursuant to Federal Rule 12(c), or for summary judgment pursuant to Federal Rule 56, and on the defendants' motions for sanctions pursuant to Rule 11 of the Federal Rules of Civil Procedure.

FACTUAL BACKGROUND

In July, 1983, the plaintiff, Mazal Khaimi, a seventy year old woman, entered into a written contract¹ with defendant, The New Homestead (hereinafter "Homestead"), for the provision of residential facilities, as well as medical and other forms of care. Complaint at ¶ 10.

On May 9, 1985, plaintiff was hospitalized for pneumonia under the supervision of the defendant Dr. Patel. Complaint at ¶ 11. See also Affidavit of Mangubhai Patel (Patel Affidavit) dated April 17, 1986 at ¶ 7. Dr. Patel subsequently arranged the transfer of the plaintiff to a psychiatric hospital on May 20, 1985. Patel Affidavit at ¶¶ 10-11. Dr. Patel alleges that he made these arrangements due to the plaintiff's depression and after a consultation with the plaintiff's psychiatrist, Dr. Shinbach, who allegedly instructed him to refer the plaintiff to the psychiatric hospital. Id. The plaintiff, however, contends that Dr. Patel on May 19 and 20, 1985, led her to believe that she would be returning to the Homestead on May 20, 1985. Affidavit of Mazal Khaimi (Khaimi Affidavit) dated May 9, 1986 at ¶¶ 18, 19, 22. Furthermore, the plaintiff states that she was taken to the psychiatric hospital as a result of Dr. Patel's trickery and false representations and that the first time she was informed of the transfer was by the ambulance attendants after she had checked out of her hospital room. Id. at ¶¶ 23, 31. Moreover, she claims that upon arrival to the psychiatric hospital, where she was taken without her consent, she called the Homestead and was told by defendant Gloria Schonberger that she had to stay at the psychiatric hospital and could not return to her room. Id. at ¶ 26. Subsequently, at the plaintiff's demand, her psychiatrist arrived at the psychiatric hospital and informed her that contrary to Dr. Patel's allegations, he did not instruct, authorize or direct the transfer and that Dr. Patel was the responsible party. Id. at ¶ 28. Additionally, Dr. Shinbach agreed that although she was not depressed or in need of psychiatric hospitalization, in view of the fact that she was told that she could not return to her room at the Homestead, suggested that she remain at the psychiatric hospital. Id. at ¶ 29. Following a discussion with her daughter and son-in-law, the plaintiff agreed to remain. Id. at ¶ 30. The plaintiff's...