Strother v. Harte

• Decision Date: 25 April 2001
• Docket Number: No. 00 Civ. 4460(DC).,00 Civ. 4460(DC).
• Citation: Strother v. Harte, 171 F.Supp.2d 203 (S.D. N.Y. 2001)
• Parties: Richard STROTHER, et al., Plaintiffs, v. William HARTE, et al., Defendants.
• Court: U.S. District Court — Southern District of New York

171 F.Supp.2d 203

Richard STROTHER, et al., Plaintiffs, v. William HARTE, et al., Defendants.

No. 00 Civ. 4460(DC).

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

April 25, 2001.

Richard Strother, Middletown, Rhode Island, Plaintiff, pro se.

Stern, Levy & Pellegrino, LLP, By: Joel S. Stern, New York, New York, for Defendants.

MEMORANDUM DECISION

CHIN, District Judge.

This case was transferred to this Court from the United States District Court for the District of Rhode Island. Defendants move to dismiss the complaint pursuant to Fed.R.Civ.P. 9 and 12(b)(1) and (6) or, alternatively, to strike scandalous matter pursuant to Fed.R.Civ.P. 12(f). For the reasons that follow, the motion to dismiss is granted and the complaint is dismissed.

1. Subject Matter Jurisdiction

The complaint purports to base subject matter jurisdiction both on diversity jurisdiction and federal question jurisdiction. (See Cmplt. ¶¶ 1(a), (b)). The complaint fails, however, to properly allege the existence of diversity jurisdiction.

The complaint names as plaintiffs Richard Strother; Strother Investment Co., Inc. ("SIC"), a Delaware corporation with its principal place of business in Rhode Island; and Strother Film Partners III ("SFP"), a California limited partnership.¹ The complaint names as defendants eight individuals, alleged to reside in Illinois, Michigan, and New York, as well as two law firms: Beigel and Sandler, Ltd. ("Beigel & Sandler"), and Stern and Levy, LLC ("Stern & Levy"). The complaint alleges that Beigel & Sandler and Stern & Levy are "either corporations or other forms of business duly formed under the laws of the State of New York or a State other than the State of Rhode Island." (Cmplt.¶¶ 8, 9, 10).

The complaint does not sufficiently allege diversity jurisdiction, for it fails to allege complete diversity. For purposes of diversity jurisdiction, a limited liability company has the citizenship of each of its members. Cabrini Dev. Council v. LCA-Vision, Inc., 197 F.R.D. 90, 93 (S.D.N.Y. 2000). Likewise, a limited partnership has the citizenship of each of its partners. Here, it is unclear from the complaint whether there is any overlap among plaintiffs and defendants or any of their partners or members. The complaint does not indicate where SFP's partners or Beigel & Sandler's partners or Stern & Levy's members "reside." Consequently, complete diversity has not been properly alleged.

Federal question jurisdiction is based on the purported civil rights claims as well as claims under the Right to Financial Privacy Act (the "Financial Privacy Act"), 12 U.S.C. § 3401 et seq., and the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961 et seq. As set forth below, however, plaintiffs fail to state a claim upon which relief can be granted under the civil rights laws or the Financial Privacy Act or RICO. Hence, federal question jurisdiction also does not exist.

2. Failure to State a Claim

a. Section 1983

Plaintiffs purport to bring this action pursuant to 42 U.S.C. § 1983, but § 1983 is clearly inapplicable. A plaintiff may invoke § 1983 for violations of his constitutional rights by a defendant acting "under color of any statute, ordinance, regulation, custom, or usage, of any State or Territory or the District of Columbia." 42 U.S.C. § 1983 (emphasis added). The complaint here does not allege any involvement by anyone acting under color of state law. Hence, plaintiffs fail to state a claim under § 1983.

b. Bivens

Plaintiffs apparently are seeking to assert claims against defendants pursuant to Bivens v. Six Unknown Named Agents of Fed. Bureau of Narcotics, 403 U.S. 388, 397, 91 S.Ct. 1999, 29 L.Ed.2d 619 (1971), but plaintiffs' Bivens claims fail as well.

Bivens claims may be brought against individuals acting under color of federal law — usually an officer, employee, or agent of the United States. Federal Deposit Ins. Corp. v. Meyer, 510 U.S. 471, 484-86, 114 S.Ct. 996, 127 L.Ed.2d 308 (1994). Here, plaintiffs have not named any federal officers, employees, or agents as defendants; instead, they have named only private individuals and business entities.

Private individuals and business entities may be sued under Bivens if they are acting under color of federal law. Malesko v. Correctional Servs. Corp., 229 F.3d 374, 380 (2d Cir.2000); Dorman v. Zavatsky, No. CV-94-2471 (DGT), 1995 WL 451018, at *4 (E.D.N.Y. July 21, 1995). To demonstrate that a private party was acting under color of federal law, "a plaintiff must establish that defendant's actions were commanded or encouraged by the federal government, or that the defendants were `so intertwined with the government as to become painted with color of [federal] action.'" Dorman, 1995 WL 451018, at *4 (quoting Mahoney v. Nat'l Org. for Women, 681 F.Supp. 129, 132 (D.Conn.1987)). A private party is not transformed into a "federal actor" merely because he or she invokes the judicial or administrative process. Id.; see also Ginsberg v. Healey Car & Truck Leasing, Inc., 189 F.3d 268, 272 (2d Cir.1999) (holding, in § 1983 case, that a private party did not become a state actor responsible for subsequent, independent actions of police officer simply by "legitimately" calling for official assistance or protection).

Here, the complaint fails to allege that any of the defendants was a federal actor for purposes of Bivens. Clearly, the complaint does not allege that the federal government encouraged or commanded the defendants to act, nor were the actions of the defendants so "intertwined" with federal government that these private individuals and entities — former limited partners of SFP and their lawyers — were transformed into federal actions.

The complaint alleges that an Assistant United States Attorney (the "AUSA") and an FBI agent in the District of Connecticut were "recruited" into defendants' "conspiracy" when certain defendants made false statements to the AUSA and FBI agent to induce them to "begin a malicious prosecution" of Strother. (Cmplt.¶¶ 74, 75, 76, 90-92). The complaint further alleges that the AUSA and/or FBI agent improperly disclosed certain grand jury materials to defendants in violation of Fed. R.Crim.P. 6(e). (Id. ¶¶ 78-82). The complaint also alleges that the FBI agent "fabricated" a report that was released to defendants and that was then purportedly used by defendants in a civil suit in New York state court. (Id. ¶¶ 98-100).

These allegations are insufficient for two reasons. First, plaintiffs are precluded from arguing that Strother was "maliciously prosecuted" because he was in fact convicted of bank fraud. He was convicted in 1994 of bank fraud following a jury trial in the United States District Court for the District of Connecticut. Although the conviction was reversed, United States v. Strother, 49 F.3d 869 (2d Cir.1995), Strother was convicted when he was re-tried (in 1996); the second conviction was affirmed. United States v. Strother, No. 97-1024, 1997 WL 643924 (2d Cir. Oct.17, 1997) (unpublished opinion). Hence, any suggestion that defendants were involved with the federal government in a conspiracy to maliciously prosecute Strother must be rejected as a matter of law, as the prosecution resulted in a final conviction. See O'Brien v. Alexander, 898 F.Supp. 162, 165-66 (S.D.N.Y.1995) (holding that to succeed on claim for malicious prosecution, plaintiff must show, inter alia, termination of prior proceeding in favor of plaintiff or under circumstances indicating innocence), aff'd, 101 F.3d 1479 (2d Cir.1996).

Second, even assuming the AUSA and FBI agent improperly released materials to defendants for use in their disputes with plaintiffs, defendants were not transformed into federal actors. Plaintiffs' disputes with defendants were private ones; they were the subject of a state court civil suit in New York that was eventually settled as well as subsequent litigation in New Jersey bankruptcy proceedings. That a federal prosecutor and agent might have leaked some information to defendants — assuming that actually happened — for use in a purely private dispute does not convert defendants' actions into federal actions that are properly the basis for a Bivens claim.

c. The Financial Privacy Act

Plaintiffs' reliance on the Financial Privacy Act, 12 U.S.C. § 3401 et seq., is misplaced. That statute governs the use of financial records obtained from financial institutions by government authorities. Plaintiffs contend that their rights under the Financial Privacy Act were violated by the purported improper release by the AUSA and FBI agent of financial records obtained during the grand jury investigation.

The Financial Privacy Act provides for the filing of civil suits by customers against financial institutions or agencies or departments of the United States for violations of the statute. 12 U.S.C. § 3417(a). The statute provides that "[t]he remedies and sanctions described in this chapter shall be the only authorized judicial remedies and sanctions for violations of this chapter." 12 U.S.C. § 3417(d). As no provision is made for the filing of suit against other individuals or entities, the claims that plaintiffs have purported to bring against defendants in this action for alleged violations of the Financial Privacy Act are barred.

d. RICO

In Counts XX and XXI of the complaint, plaintiffs purport to state claims under RICO. In particular, plaintiffs allege violations of § 1962(c), which prohibits "any person employed by or associated with any enterprise" from conducting or participating in the "enterprise's affairs through a pattern of racketeering activity." 18 U.S.C. § 1962(c). Plaintiffs also allege violations of § 1962(d), which makes it unlawful to conspire to violate §§ 1962(a)-(c).

To state a claim under § 1962(c), plaintiffs must establish that a "person" (1) conducted or participated in the conduct of (2) an enterprise's affairs (3) through a pattern (4) of racketeering activity (5) that...