Spool v. World Child Intern. Adoption Agency

Decision Date18 March 2008
Docket NumberDocket No. 06-5698-cv.
Citation520 F.3d 178
PartiesRoger SPOOL, Child & Family Adoption, Bruce Ferguson, Charlene Ferguson, Plaintiffs-Appellants, v. WORLD CHILD INTERNATIONAL ADOPTION AGENCY, Jenkins & Povtak, Susan Dibble, Doreen Whitaker,<SMALL><SUP>*</SUP></SMALL> Sharrell J. Goolsby, Carl A. Jenkins, Yaroslav Panasov, Foundation of World Child, Inc., Defendants-Appellees.
CourtU.S. Court of Appeals — Second Circuit

Mitchell I. Weingarden, Marsh Menken & Weingarden PLLC, White Plains, NY, for Plaintiffs-Appellants.

David Henry Sculnick, Gordon & Silber P.C., New York, NY, for Defendants-Appellees World Child International Adoption Agency, Jenkins & Povtak, Susan Dibble, Doreen Whitaker, Sharrell J. Goolsby, Carl A. Jenkins, and Foundation of World Child, Inc.

Before: SACK, HALL, and LIVINGSTON, Circuit Judges.

LIVINGSTON, Circuit Judge:

Plaintiffs-Appellants appeal from a judgment of the United States District Court for the Southern District of New York (Charles L. Brieant, J.) dismissing their claims for substantive violations of the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. §§ 1961-1968, RICO conspiracy, and violation of the Computer Fraud and Abuse Act (CFAA), id. § 1030, for failure to state a claim on which relief can be granted, and declining to exercise supplemental jurisdiction over their related state law claims. Because we agree with the district court that the facts alleged do not establish the continuity required to prove a pattern of racketeering activity, and because the plaintiffs do not challenge the district court's dismissal of their CFAA claims, we affirm.

BACKGROUND

We are reviewing a motion to dismiss and therefore accept the facts alleged in the amended complaint as true. GICC Capital Corp. v. Tech. Fin. Corp., 67 F.3d 463, 465 (2d Cir.1995).

I. The Joint Venture

Child and Family Adoption ("CFA") is an authorized adoption agency in New York that was founded and managed by Roger Spool. In August 1994, CFA entered into a joint venture with the World Child International Adoption Agency ("World Child"), an international adoption agency based in Maryland and managed by Sharrell Goolsby. As part of this joint venture, World Child located children in foreign countries and processed international dossiers. CFA marketed adoptions in the New York area, helped New York-area clients to complete their international dossiers, and performed various social work services for adoptive parents in New York.

CFA, Spool, World Child, and Goolsby worked together closely for many years to build and expand international adoption services throughout New York. Pursuant to their relationship, when clients of the joint venture wanted to adopt a foreign-born child, they paid two fees directly to World Child: an agency fee and a foreign program fee. CFA was paid a fixed amount of the agency fee — an amount that remained essentially unchanged throughout its relationship with World Child — but received no part of the foreign program fee. CFA and World Child operated harmoniously under this arrangement for ten years, handling over a thousand international adoptions, including the adoption of a Russian child by plaintiffs Bruce and Charlene Ferguson. World Child grew into the fourth or fifth largest international adoption agency in the United States.

Relations between CFA and World Child began to sour in 2002 or 2003 when World Child, although receiving more services from CFA for no additional money began to demand a greater portion of the fees that the joint venture generated, to refuse to pay invoices, and to contest the legitimacy of CFA's charges. In the fall of 2003, World Child's payments to CFA grew increasingly delinquent. Spool and Goolsby attempted to settle the dispute over several months, with Spool requesting payment of outstanding invoices and Goolsby proposing a change to the joint venture's payment structure that would reduce CFA's per-case payments by almost 40%. During this period, Goolsby also proposed that World Child hire Susan Dibble, a longtime CFA employee.

On April 2, 2004, at the conclusion of these unsuccessful efforts at conciliation, Carl Jenkins, a partner in the Jenkins & Povtak law firm that represented World Child, sent Spool a letter accusing CFA of terminating the joint venture and revoking CFA's authority to act on World Child's behalf. The day after he received Jenkins's letter, Spool left for a one-week vacation, leaving the management of CFA in the hands of Dibble and Dorene Whitaker, another longtime CFA employee. As it turned out, Spool chose an inopportune time to leave.

On April 7, 2004, in the middle of Spool's vacation, Jenkins faxed a letter to CFA confirming a threatened "shut-off" of World Child's New York operations and offering to transfer business matters, including the costs of telephones, mail handling, and other incidentals, from CFA to World Child. According to the amended complaint, another fax had been sent shortly before from CFA's office to its telecommunications provider instructing the latter to forward calls placed to CFA's toll-free number to a different phone number. Spool's and Goolsby's names were affixed to this fax, but Spool did not authorize the instruction. The next day, Jenkins wrote the telecommunications provider on World Child letterhead that World Child was no longer sharing office space with CFA and requesting that all billing for the toll-free number be redirected. Dibble wrote to Spool, resigning from CFA.

The amended complaint alleges that on April 8, 2004, Dibble and Whitaker took various client files, agency licenses, office supplies, and marketing materials, including agency letterhead, from CFA's office. They used these materials to open their own branch office of World Child from Dibble's residence. World Child sent letters to its New York clients announcing that World Child's New York office was relocating and that the enterprise operated by Dibble and Whitaker would continue to provide client representation. Over the next several weeks, this enterprise engaged in various forgeries with respect to client documents, signing Spool's name without authorization, improperly notarizing signatures, and falsely affixing CFA's agency license on client documents that were submitted to the INS and foreign governments in connection with pending adoptions. Dibble and Whitaker were eventually arrested for theft and forgery; Dibble pled guilty in 2005 to forgery charges involving several CFA clients. The amended complaint alleges that even after their arrests, Dibble and Whitaker continued to operate the New York branch office of World Child in substantially the same manner until at least April 19, 2005, on which date Dibble and Goolsby issued some sort of "joint communiqué" to World Child's employees and affiliates.

II. The Fergusons' Adoption

The Fergusons were among the clients swept up in the fracas between CFA and World Child. Having successfully adopted a child through the joint venture in its happier days, the Fergusons began the process of applying to adopt a second child in January 2003. Along with World Child's other clients in the New York area, they received a letter in April 2004 informing them that World Child's New York office had relocated, but failing to indicate that this new office was no longer affiliated with CFA. In May 2004, the Fergusons paid World Child $12,200 in foreign program fees in connection with their application to adopt a Russian child.

As the Fergusons prepared to travel to Russia to finalize their adoption, they received instructions from the office now operated by Dibble and Whitaker to bring large amounts of cash to use as gifts for Russian officials. When they arrived in Russia in early August 2004, the Fergusons were met by defendant Yaroslav Panasov, World Child's Moscow-based representative who assisted the Fergusons before the local court. The Fergusons were required to entertain and feed Panasov, and several of the gifts they were instructed to provide went to him and to World Child's Moscow office, even though the Fergusons had already paid over $12,000 in foreign program fees. On August 10, 2004, the Russian court denied the Fergusons' adoption application because it found irregularities in their documentation. Panasov filed a handwritten appeal, which was denied on August 27, 2004. The Fergusons later learned that several of their documents, including the required update of a home study originally done by CFA in 2003, had been falsified and forged by Dibble.

The amended complaint contains additional allegations about World Child's billing of foreign program fees allegedly based upon information to which Spool was privy in his capacity as the head of CFA. In 2002, according to the amended complaint, Spool was told by Goolsby and Jenkins that World Child was increasing the foreign program fee that it charged to clients and that it was using the extra payments to cover general expenses while informing clients that the entire fee was necessary to pay foreign affiliates to process adoptions. The plaintiffs allege that World Child deposited at least some of these extra fees into the Foundation of World Child, Inc. (the "Foundation"), a purportedly not-for-profit entity affiliated with World Child that was managed by Jenkins and allegedly used to shelter World Child's assets in order to avoid legal judgments. The amended complaint does not allege that this activity caused damage to Spool or CFA, nor that CFA objected to it.

III. District Court Proceedings

The plaintiffs commenced an action in the district court, alleging substantive violations of RICO, RICO conspiracy, violations of the CFAA, and various state law torts. Specifically, the plaintiffs allege the following RICO violations. First, they allege that each defendant violated 18 U.S.C. § 1962(b) by maintaining control of alleged RICO enterprises consisting of the Foundation and Dibble...

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    ...v. Nw. Bell Tel. Co., 492 U.S. 229, 242 (1989) (defining close- ended continuity); see also Spool v. World Child Int'l Adoption Agency, 520 F.3d 178, 184 (2d Cir. 2008) ("Although we have not viewed two years as a bright-line requirement, it will be rare that conduct persisting for a shorte......
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