Todaro v. Orbit Intern. Travel, Ltd.
| Decision Date | 31 January 1991 |
| Docket Number | No. 85 Civ. 9953 (PKL).,85 Civ. 9953 (PKL). |
| Citation | 755 F. Supp. 1229 |
| Parties | Jane TODARO, M.D., as Secretary and Treasurer of the North American Society for Pediatric Gastroenterology, formerly, an unincorporated association, presently, a corporation organized under the laws of Washington, D.C., Charlene Spiegelman, as President and Treasurer of the First International Conference for Jewish Singles, an unincorporated association, George Jensen, Kim Radcliffe and Gordon Butler, Plaintiffs, v. ORBIT INTERNATIONAL TRAVEL, LTD., Joe L. Mayes, Sr., Joe D. Mayes, Jr. and Mayes International, Inc., Defendants. |
| Court | U.S. District Court — Southern District of New York |
Carole S. Powell, Nutley, N.J., for plaintiffs.
Sargent & Sargent, New York City (Hale C. Sargent, of counsel), for defendants Joe L. Mayes, Sr., Joe D. Mayes, Jr., and Mayes Intern., Inc.
This is an action for compensatory, punitive and treble damages, and other relief, arising from alleged violations of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. §§ 1961, et. seq., as well as numerous pendent state law claims. Defendants Joe L. Mayes, Sr. ("Mayes Sr."), Joe D. Mayes, Jr. ("Mayes Jr."), and Mayes International, Inc. ("Mayes International") (collectively "defendants"), have now moved for an order (a) dismissing the first and second counts of the amended complaint (the "RICO counts"), pursuant to Fed.R.Civ.P. 12(b)(6), for failure to state a claim, and Fed.R. Civ.P. 9(b), for lack of particularity; (b) dismissing the pendent state law claims, pursuant to Fed.R.Civ.P. 12(b)(1), for lack of subject matter jurisdiction; and (c) in the alternative, pursuant to Fed.R.Civ.P. 12(c), for judgment on the pleadings. For the reasons set forth below, defendants' motion is denied in its entirety.
This action arises from the alleged activities of defendants Mayes Sr. and Mayes Jr., (collectively, the "individual defendants"), both in their individual capacities and as principal stockholders, directors and chief executive officers of defendants Mayes International and Orbit International Travel, Ltd. ("Orbit"), over which they are alleged to have had "total control." Amended Complaint ¶ 8. Orbit was a travel agency and "meeting planning organization," with its principal place of business in Dallas, Texas. Amended Complaint ¶ 9.
The amended complaint alleges that in early 1983, Mayes Sr. represented to plaintiff George Jensen ("Jensen") that Mayes Sr. had an opportunity to purchase 80% of Orbit for $70,000. It was agreed that each would contribute $35,000, and thus each would own 40% of Orbit. Mayes Sr. thereafter stated that he had paid the full $70,000, and asked Jensen for his share, plus additional funds to be lent to Orbit by Jensen. Jensen then gave Mayes Sr. $35,000, representing his share of the alleged purchase price, and lent Orbit $10,000. Amended Complaint ¶ 23. The actual total purchase price for the entire 80% share of Orbit did not, however, exceed $35,000. Amended Complaint ¶ 24.
Toward the end of 1983, Mayes Sr. and Jensen agreed that Mayes Sr. would repurchase the Orbit shares from Jensen for $50,000. The payment was to be made by Mayes Sr. after a company in which both men were involved "went public." Although the company went public in November 1984, and Jensen thereafter transferred his shares of Orbit to Mayes Sr., Mayes Sr. never paid Jensen the $50,000 purchase price. Amended Complaint ¶ 25.
The amended complaint further alleges that in or about mid-1983, Orbit opened an office in New York City, employing approximately five persons, to which the individual defendants traveled on numerous occasions to conduct business on behalf of Orbit. Amended Complaint ¶ 10. In or about September 1984, plaintiff North American Society for Pediatric Gastroenterology ("NASPG") approached Orbit for the purpose of having Orbit organize and run a large medical conference (the "NASPG conference") in May 1985. Amended Complaint ¶ 11. Prior to the NASPG conference, Orbit received from NASPG in excess of $101,000, to be used solely for certain expenses related to the NASPG conference. The funds were deposited in a designated account at Marine Midland Bank. Amended Complaint ¶ 12. NASPG gave Orbit these funds allegedly in reliance upon false statements made by Orbit that the funds would only be applied to NASPG conference expenses. Amended Complaint ¶ 12.
In late 1984, Orbit approached plaintiff International Conference for Jewish Singles ("ICJS") with a proposal to organize and run a conference in August 1985 (the "ICJS conference"). Amended Complaint ¶ 17. Orbit subsequently received approximately $13,000 from ICJS to cover certain expenses related to the ICJS conference, after allegedly falsely stating that the funds would be used only for such expenses. Amended Complaint ¶ 18.
The NASPG conference took place as scheduled; however, Orbit allegedly applied only $36,000 of the $101,000 received toward NASPG conference expenses, failing to pay various expenses, and refusing to refund the $65,000 difference. Amended Complaint ¶ 13. The ICJS conference also took place as scheduled; however, the majority of the funds were not applied for the purposes for which they were deposited. Amended Complaint ¶ 21. On July 22, 1985, Mayes Jr. allegedly traveled to New York City, summarily closed the Orbit office and dismissed Orbit's employees. In the months preceding the closing of the Orbit New York office, the individual defendants had allegedly removed the funds deposited by NASPG and ICJS with Orbit through a scheme involving mail and wire transfers, numerous telephone conferences, and travel between Texas and New York. Amended Complaint ¶ 15.
The amended complaint also alleges that, during the period from 1983 through early 1985, Orbit was a profitable business. Amended Complaint ¶ 29. However, the individual defendants allegedly conducted a fraudulent scheme to convert for their own use substantial funds of Orbit, by which they substantially "pillaged" Orbit. Amended Complaint ¶¶ 29, 30. In January 1986, Orbit filed a petition for bankruptcy, which plaintiffs allege was in numerous respects false and fraudulent, in violation of 18 U.S.C. § 152. Amended Complaint ¶ 36. Thereafter, in May 1986, Mayes Sr., allegedly in an attempt to hide assets and defraud creditors, including plaintiffs, transferred his principal asset, a promissory note, to the "Mayes Charitable Trust." The note (referred to in the amended complaint and herein as the "Strange Note," it having originally been given to Mayes Sr. by a Mr. and Mrs. Strange), was worth approximately $300,000 at the time Mayes Sr. transferred it to the Mayes Charitable Trust. Plaintiffs allege that this transfer violated 18 U.S.C. § 152. Amended Complaint ¶ 38.
The complaint in this action was originally filed December 23, 1985. The complaint was amended June 15, 1987, to add plaintiffs Jensen, Kim Radcliffe, and George Butler, all former stockholders of Orbit, and to add the allegations regarding conversion of corporate funds and bankruptcy fraud. Defendants filed an answer to the amended complaint on June 29, 1987. The instant motion seeks dismissal of the amended complaint on a number of grounds. In particular, the motion seeks an order (a) dismissing the first and second counts of the amended complaint (the "RICO counts"), pursuant to Fed.R.Civ.P. 12(b)(6), for failure to state a claim, and Fed.R.Civ.P. 9(b), for lack of particularity; (b) dismissing the pendent state claims, pursuant to Fed.R.Civ.P. 12(b)(1), for lack of subject matter jurisdiction; and (c) in the alternative, pursuant to Fed.R.Civ.P. 12(c), for judgment on the pleadings.1
Defendants first argue that plaintiffs' fraud claims, which are alleged to be predicate acts under the RICO statute, are insufficient as a matter of law and thus must be dismissed, pursuant to Fed.R.Civ.P. 12(b)(6).
"The court's function on a Rule 12(b)(6) motion is not to weigh the evidence that might be presented at a trial but merely to determine whether the complaint itself is legally sufficient." Festa v. Local 3 International Brotherhood of Electrical Workers, 905 F.2d 35, 37 (2d Cir.1990); see also Ryder Energy Distribution Corp. v. Merrill Lynch Commodities, Inc., 748 F.2d 774, 779 (2d Cir.1984) .
Thus, a motion to dismiss must be denied "unless it appears beyond a doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 1686, 40 L.Ed.2d 90 (1974) (citing Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 101-02, 2 L.Ed.2d 80 (1957)); see also Morales v. New York State Dep't of Corrections, 842 F.2d 27, 30 (2d Cir.1988). In deciding a motion to dismiss, the Court must limit its analysis to the four corners of the complaint, see Kopec v. Coughlin, 922 F.2d 152, 155 (2d Cir.1991), and must accept the plaintiff's allegations of fact as true, together with such reasonable inferences as may be drawn in his favor. Papasan v. Allain, 478 U.S. 265, 283, 106 S.Ct. 2932, 2943, 92 L.Ed.2d 209 (1986); Murray v. Milford, 380 F.2d 468, 470 (2d Cir.1967); Hill v. Sullivan, 125 F.R.D. 86, 90 (S.D.N. Y.1989) (); see also Scheuer, supra, 416 U.S. at 236, 94 S.Ct. at 1686. Federal Rule of Civil Procedure 8(a) requires only a "`short and plain statement of the claim' that will give the defendant fair notice of what plaintiff's claim is and the ground upon which it rests." Conley, supra, 355 U.S. at 47, 78 S.Ct. at 103 (q...
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