Pagnotti Enterprises, Inc. v. Beltrami

• Decision Date: 04 March 1992
• Docket Number: No. 3:CV-91-609.,3:CV-91-609.
• Citation: 787 F. Supp. 440
• Parties: PAGNOTTI ENTERPRISES, INC., and Pagnotti Coal Company, Plaintiffs, v. Louis J. BELTRAMI, Elaine C. Beltrami, and Beltrami Enterprises, Incorporated, Defendants and Counterclaim Plaintiffs. and LUCKY STRIKE COAL CORPORATION, Third-Party Plaintiffs, v. Robert FIDATI, Joseph Pagnotti, Sr., Louis Pagnotti, Jr., and James Tedesco, Third-Party Defendants, and Pagnotti Enterprises, Inc., and Pagnotti Coal Company, Third-Party Defendants and Counterclaim Defendants.
• Court: U.S. District Court — Middle District of Pennsylvania

787 F. Supp. 440

PAGNOTTI ENTERPRISES, INC., and Pagnotti Coal Company, Plaintiffs, v. Louis J. BELTRAMI, Elaine C. Beltrami, and Beltrami Enterprises, Incorporated, Defendants and Counterclaim Plaintiffs. and LUCKY STRIKE COAL CORPORATION, Third-Party Plaintiffs, v. Robert FIDATI, Joseph Pagnotti, Sr., Louis Pagnotti, Jr., and James Tedesco, Third-Party Defendants, and Pagnotti Enterprises, Inc., and Pagnotti Coal Company, Third-Party Defendants and Counterclaim Defendants.

No. 3:CV-91-609.

United States District Court, M.D. Pennsylvania.

March 4, 1992.

COPYRIGHT MATERIAL OMITTED

Joseph G. Ferguson, Rosenn, Jenkins & Greenwald, Wilkes-Barre, Pa., for plaintiffs/counterclaim defendants.

Ronald V. Santora, Arthur L. Piccone, Hourigan, Kluger, Spohrer & Quinn, Wilkes-Barre, Pa., for original defendants/counterclaim plaintiffs and third-party plaintiffs.

MEMORANDUM

McCLURE, District Judge.

BACKGROUND

This action was commenced by plaintiffs on May 6, 1991. On September 3, 1991, the defendants filed a counterclaim and third party complaint. In response to the plaintiffs' and third party defendants' motions to dismiss the counterclaim and third-party complaint, the defendants filed an amended counterclaim and third-party complaint on October 22, 1991. Once again, the plaintiffs and third-party plaintiffs have filed motions to dismiss the counterclaim and third-party complaint.

This action arises from the attempted acquisition of Beltrami Enterprises Incorporated ("BEI") and its wholly-owned subsidiary, Lucky Strike Coal Company ("Lucky Strike"), by Pagnotti Enterprise, Inc. ("PEI"). Although PEI took control of the day to day operations and finances of BEI and Lucky Strike on March 17, 1982, the transaction was never closed, thereby denying PEI any ownership rights in the companies. This action was initiated by plaintiffs PEI and Pagnotti Coal Company ("PCC"), a wholly-owned subsidiary of PEI, to obtain relief from BEI, its president and sole shareholder, Louis J. Beltrami, and his wife, Elaine C. Beltrami, based on alleged violations of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), breach of contract, fraud, negligent misrepresentation, fraudulent conveyance, unjust enrichment, breach of guaranty and breach of fiduciary duty. Louis Beltrami and BEI responded with a counterclaim and third-party complaint asserting similar theories of liability against the original plaintiffs, along with the officers, directors and shareholders of PEI, namely Robert Fidati, Joseph Pagnotti, Sr., Louis Pagnotti, Jr., and James Tedesco as third-party defendants (individual third-party defendants collectively referred to as "Pagnotti defendants"). Louis Beltrami, BEI and Lucky Strike (collectively "Beltrami group") have since filed an amended counterclaim and third-party complaint presumptuously adding Luck Strike as third-party plaintiff without following the procedures required for adding such a party to this lawsuit.

RELEVANT FACTS

The facts as alleged in the amended counterclaim and third-party complaint may be summarized as follows:

PEI, PCC, BEI and Lucky Strike are companies engaged in the business of surface mining. In the early months of 1982 extensive negotiations were conducted between Louis Beltrami and the Pagnotti defendants concerning the possible sale of BEI and Lucky Strike to PEI. On March 17, 1982, an oral agreement was reached whereby PEI would 1) take immediate possession and control of BEI and Lucky Strike, 2) purchase the stock of BEI and Lucky Strike for the sum of three million five hundred thousand dollars ($3,500,000.00), 3) be responsible for the day to day operations of BEI and Lucky Strike, 4) allow Louis Beltrami and Joseph Beltrami to remain on the payroll of BEI, 5) allow Louis Beltrami to retain the title of president of BEI and Lucky Strike, but not the decision-making powers associated therewith, 6) transfer certain specified assets of BEI and Lucky Strike to Louis Beltrami free of all liens and encumbrances, 7) advance any and all monies necessary to operate BEI and Lucky Strike, and 8) assume any and all liabilities of BEI and Lucky Strike.

With the exception of the transfer of stock, all of the requirements of this oral agreement have been met by the parties. Louis Beltrami claims that he has been ready, willing and able to transfer his stock since March 17, 1982. He maintains that despite taking possession and control of BEI and Lucky Strike since March 17, 1982, the Pagnotti defendants refuse to acknowledge the existence of the oral agreement and have refused to close the deal. It is interesting to note that PEI and PCC filed this lawsuit based on the alleged refusal of Louis Beltrami to turn over his stock in BEI and Lucky Strike.

LUCKY STRIKE

The first issue the court must address is the presence of Lucky Strike in this lawsuit. Lucky Strike is not an original defendant, and its only role in this case is that of a third-party plaintiff. In the amended counterclaim and third-party complaint, counsel for the Beltrami group attempted to add Lucky Strike as a party under the rules governing joinder of an additional party pursuant to a counterclaim. See Fed.R.Civ.P. 13(h), 19 and 20. However, Lucky Strike's claims are not in the form of a counterclaim. Lucky Strike is not being sued by any of the parties to this litigation, therefore it is impossible for it to file a claim to counter a non-existing claim.

Lucky Strike's sole role in this lawsuit is that of a third-party plaintiff asserting a claim against the original plaintiffs, PEI and PCC, and new third-party defendants, the Pagnotti defendants. Although counsel for the Beltrami group indicated in the amended counterclaim and third-party complaint that Lucky Strike is being brought into this action pursuant to the joinder rules, Fed.R.Civ.P. 13(h), 19 and 20, this is not the appropriate method for enlisting Lucky Strike's presence in this lawsuit. Based on their language, the joinder rules are reserved for situations in which the existing claims reveal that an outside party has an interest in the action and is needed for just adjudication.

In the instant matter, Lucky Strike is affirmatively asserting a claim along with the original named defendants. It is not being brought into the case because it has an interest in the claims which already exist.¹ Therefore, Lucky Strike is attempting to intervene in this action. Fed. R.Civ.P. 24(c) states "a person desiring to intervene shall serve a motion to intervene upon the parties as provided in Rule 5." If Lucky Strike wishes to intervene it must first comply with Rule 5.

Since, in all likelihood, Lucky Strike will comply with Rule 5 and be permitted to intervene in this action, see Fed.R.Civ.P. 24(a) and (b), in the interest of expedience, the court will address the motion to dismiss the counterclaim and third-party complaint as if Lucky Strike were currently a party to this action.

12(b)6) STANDARD

A motion to dismiss under Fed. R.Civ.P. 12(b)(6) admits the well pleaded allegations of the complaint, but denies their legal sufficiency. Hospital Building Co. v. Trustees of the Rex Hospital, 425 U.S. 738, 740, 96 S.Ct. 1848, 1850, 48 L.Ed.2d 338, 341 (1976). "It is the settled rule that `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.'" Leone v. Aetna Cas. & Sur. Co., 599 F.2d 566, 567 (3rd Cir.1979), quoting Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 102, 2 L.Ed.2d 80 (1957).

The complaint must be read in a light most favorable to the plaintiff with every doubt resolved in plaintiff's favor. In re Arthur Treacher's Franchisee Litigation, 92 F.R.D. 398, 422 (E.D.Pa.1981).

RICO

Count I of the amended counterclaim and third-party complaint asserts a RICO claim against PEI, PCC and the Pagnotti defendants (collectively "Pagnotti group"). It asserts RICO claims based upon violations of 18 U.S.C. § 1962(a), (b), (c) and (d). The predicate acts of racketeering committed by the Pagnotti group alleged to constitute a pattern of racketeering activity within the meaning of 18 U.S.C. § 1961(5) are the following: (1) assuming possession and control of BEI and Lucky Strike; (2) inducing Louis Beltrami to surrender possession and control of BEI and Lucky Strike by fraudulently misrepresenting their intention to fulfill the terms and conditions of the oral agreement reached on March 17, 1982; (3) operating and controlling all aspects of BEI and Lucky Strike since March 17, 1982, as a result of the aforementioned fraudulent misrepresentation; (4) utilizing and converting to their own use, benefit and financial gain all of the assets of BEI and Lucky Strike since March 17, 1982; (5) misappropriating the assets of BEI and Lucky Strike for their own use, benefit and financial gain since March 17, 1982; (6) assuming exclusive supervision and control of the mining and reclamation operations of BEI and Lucky Strike since March 17, 1982, which has led to the assessment of civil penalties and the suspension of various permits by the Pennsylvania Department of Environmental Resources ("DER"); (7) refusing to honor the agreement of March 17, 1982, by failing to fulfill all of its terms and conditions; and (8) the denial of the existence of the agreement of March 17, 1982 to the DER and other parties.

A. Pattern of Racketeering Activity

A "`pattern of racketeering activity' requires at least two acts of racketeering activity." 18 U.S.C. § 1961(5). Racketeering activity is defined as (A) certain acts chargeable under state law, (B) acts indictable under specific provisions of Title 18 of the United States Code, (C) acts indictable under specific provisions of Title 29 of the United States Code, (D) any offense involving fraud in connection with a case under title 11, fraud in the sale of securities, or the felonious...