Nichols v. Mahoney

• Decision Date: 02 April 2009
• Docket Number: No. 08 Civ. 3306(CM)(DCF).,08 Civ. 3306(CM)(DCF).
• Citation: 608 F.Supp.2d 526
• Parties: Andre NICHOLS and Daniel Moraes, Plaintiff v. Michael T. MAHONEY, EMC Contracting Inc., EMC New York Contracting, and EMC of New York, Inc., Defendants.
• Court: U.S. District Court — Southern District of New York

608 F.Supp.2d 526

Andre NICHOLS and Daniel Moraes, Plaintiff v. Michael T. MAHONEY, EMC Contracting Inc., EMC New York Contracting, and EMC of New York, Inc., Defendants.

No. 08 Civ. 3306(CM)(DCF).

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

April 2, 2009.

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Gary Silverman, Joy Kim Mele, O'Dwyer And Bernstein, L.L.P., New York, NY, for plaintiffs.

George L. Santangelo, New York, NY, for defendants.

DECISION GRANTING IN PART AND DENYING IN PART DEFEDANTS' MOTION TO DISMISS THE COMPLAINT AND GRANING PLAINTIFFS' CROSS MTION FOR LEAVE TO AMEND

McMAHON, District Judge.

Defendants move to dismiss plaintiffs' complaint. Plaintiffs oppose the motion, and cross-move for leave to amend, attaching a proposed amended complaint.

An order disposing of these motions issued on March 31. Plaintiffs' motion for leave to amend was granted. However, because both their original and amended pleadings failed to state claims under the civil RICO statute or antitrust laws, defendants' motion to dismiss Counts I, II and III (RICO Claims), IV (violation of the Sherman Act, 15 U.S.C. § 1) and V (violation of the Donnelly Act, N.Y. Gen. Law. § 340 et seq.) of the plaintiffs' complaint was granted and the claims were dismissed with prejudice. Defendants' motion to dismiss Counts VI (violation of the Fair Labor Standards Act) and Count VII (violation of New York Labor Law) was denied.

This opinion explains the reasons for the court's ruling.

The Gravamen of this Action

This is the latest in a series of civil RICO actions that have been filed in various federal courts across the nation, capitalizing on the popular outcry against undocumented aliens who are working openly in the United States. Plaintiffs, Andrew Nichols and Daniel Moraes, are construction workers who were formerly employed by the defendant corporations and their owner, Michael T. Mahoney. They allege that their wages were depressed because the defendants knowingly hired undocumented aliens, in violation of Section 274 of the Immigration and Nationality Act, 8 U.S.C. § 1324(a). Plaintiffs also contend that defendants' actions constituted an illegal "scheme" to restrain free competition within the construction industry, by giving defendants an unfair advantage over employers who do not employ illegal workers.

Plaintiffs also allege that they were not properly compensated for overtime hours worked or paid minimum wage, in violation of the Fair Labor Standards Act, 29 U.S.C. § 201 et seq. and New York Labor Law §§ 190 et seq., 650 et seq.

Discussion

I. Standard of Review

A. Motion to Dismiss

Rule 12(b) (6) of the Federal Rules of Civil Procedure provides for dismissal of a complaint that fails to state a claim upon which relief can be granted. The standard of review on a motion to dismiss is heavily weighted in favor of the plaintiff. "In ruling on a motion to dismiss for failure to state a claim upon which relief may be granted, the court is required to accept the material facts alleged in the complaint as true." Frasier v. Gen. Elec. Co., 930 F.2d 1004, 1007 (2d Cir.1991). The court is also required to read a complaint generously, drawing all reasonable inferences from its allegations in favor of the plaintiff. California Motor Transp. Co. v. Trucking Unlimited, 404 U.S. 508, 515, 92 S.Ct. 609, 30 L.Ed.2d 642 (1972).

"While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, ___, 127 S.Ct. 1955, 1964, 167 L.Ed.2d 929 (2007) (quotations, citations and alterations omitted). Indeed, a plaintiff must assert "enough facts to state a claim to relief that is plausible on its face." Id. at 1974. This "plausibility standard" is a flexible one, "oblig[ing] a pleader to amplify a claim with some factual allegations in those contexts where such amplification is needed to render the claim plausible." Iqbal v. Hasty, 490 F.3d 143, 157-58 (2d Cir.2007). cert. granted, ___ U.S. ___, 128 S.Ct. 2931, 171 L.Ed.2d 863 (2008).

B. Leave to Amend

In assessing whether a proposed amendment to a complaint is futile, a court uses the standard for a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6). Esposito v. Deutsche Bank AG, 07 civ. 6722, 2008 WL 5233590 at *3 (S.D.N.Y. Dec.16, 2008) (citing Dougherty v. Town of N. Hempstead Bd. of Zoning Appeals, 282 F.3d 83, 88 (2d. Cir.2002)). The court has granted plaintiffs' leave to amend and will evaluate both the original and the proposed amended complaints in this decision.

II. Plaintiff Fails to State Any Viable Civil RICO Claim

Pursuant to 18 U.S.C. § 1964(c), the plaintiffs allege violations under sections 1962(c) and (d) (RICO conspiracy) of the RICO statute.

To establish a RICO violation under section 1962(c), a plaintiff must allege and prove four elements: "`(1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity.' These requirements apply whether the RICO claim is civil or criminal in nature." City of New York v. Smokes-Spirits.Com, Inc., 541 F.3d 425, 439 (2d Cir.2008) (quoting Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 496, 105 S.Ct. 3275, 87 L.Ed.2d 346 (1985)).

In addition, a civil RICO claimant must show: "(1) a violation of the RICO statute, 18 U.S.C. § 1962; (2) an injury to business or property; and (3) that the injury was caused by the violation of Section 1962." Spool v. World Child Int'l Adoption Agency, 520 F.3d 178, 183 (2d Cir.2008) (quotation and citation omitted).

Defendants contend that the plaintiffs fail to plead sufficiently (1) the existence of an enterprise; (2) a substantive violation of section 1962; and (3) proximate cause. Plaintiffs' original complaint does not adequately plead a substantive violation (predicate act). They try to cure that defect in two different ways in their amended complaint; one way works, and one does not. However, the amended pleading fails to plead proximate cause between the predicate acts and plaintiffs' injury. Therefore, the RICO claims must be dismissed.

A. Both the Original Complaint and The Proposed Amended Complaint Adequately Plead Conduct of An "Enterprise"

Section 1962(c) of the RICO statute makes it "unlawful for any person employed by or associated with any enterprise ... to conduct or participate, directly or indirectly, in the conduct of such enterprise's affairs through a pattern of racketeering activity...." 18 U.S.C. § 1962(c). To plead a RICO violation, a plaintiff "must allege....the existence of two distinct entities: (1) a `person'; and (2) an `enterprise' that is not, simply the same `person' referred to by a different name." Cedric Kushner Promotions, Ltd. v. King, 533 U.S. 158, 161-62, 121 S.Ct. 2087, 150 L.Ed.2d 198 (2001): Smokes-Spirits, 541 F.3d at 446. Section 1961(3) defines a person as "any individual or entity capable of holding a legal or beneficial interest in property." 18 U.S.C. § 1961(3). An "enterprise" is defined as "any individual, partnership, corporation, association, or other legal entity, and any union or group of individuals associated in fact although not a legal entity." 18 U.S.C. § 1961(4); Smokes-Spirits, 541 F.3d at 447; Kottler v. Deutsche Bank AG, 607 F.Supp. 2d 447, 458, 2009 WL 55885, at *5 (S.D.N.Y.2009).

The enterprise requirement is most easily satisfied "when the enterprise is a formal legal entity." First Capital Asset Mgmt, Inc. v. Satinwood, Inc., 385 F.3d 159, 173 (2d Cir.2004). However, an association-in-fact may also be a RICO enterprise. Id.

In this case, the plaintiffs allege the existence of both a formal legal entity enterprise (Count I) and an association-infact enterprise (Count II). The defendants contend that neither enterprise pleading satisfies the requirements of RICO. They are wrong on both accounts.

In Count I, the plaintiffs allege that Mahoney, the principal of the EMC entities, is the "person," and that the EMC entities are the enterprise. These allegations are sufficient to plead the existence of two distinct entities. Cedric Kushner, 533 U.S. at 166, 121 S.Ct. 2087. In Cedric Kushner, the Supreme Court reversed and remanded the Second Circuit's decision affirming the dismissal of the plaintiff's complaint. The plaintiff sued Don King, the president and sole shareholder of Don King Productions, alleging violations of the RICO statute. The district court dismissed the complaint because it found that King was not a "person" who was distinct from "the enterprise," but rather was part of the enterprise. For many years, it was the law in this Circuit that a corporation and its employees could not constitute an "enterprise." However, in an unanimous decision, the Supreme Court undid that precedent, holding, "The corporate owner/employee, a natural person, is distinct from the corporation itself, a legally different entity with different rights and responsibilities due to its different legal status. And we can find nothing in the statute that requires more `separateness' than that." Id. at 163, 121 S.Ct. 2087.

The allegations of Count I meet the distinctness requirement, because Mahoney—a natural person—is distinct from EMC—the enterprise—even though he is also the principal of the EMC entities. The defendants' argument otherwise is based on a misreading of the plaintiffs' complaint. Defendants mistakenly assert that the plaintiffs' complaint alleged, "EMC is the enterprise and the corporate entity conducting the affairs of the enterprise" (i.e., the person). (Def. Mem. at 14.) However, the complaint actually says, "At all times relevant to this action, defendant Mahoney was a `person' as defined in 18 U.S.C. § 1961(3). Defendants EMC constitute the enterprise as defined in 18 U.S.C. § 1961(4)." (Compl. ¶¶...