Antitrust Law Daily Wrap Up, RICO—D.V.I.: Convenience store owners dodge “woefully deficient” fraud-based claims, (Sep 17, 2014)

By Greg Hammond, J.D.

The owners of a gas station in St. Thomas were unable to move forward with their Racketeer Influenced Corrupt Organizations Act (RICO) claims against the owners of a convenience store for unlawfully taking over their gas station. In dismissing the RICO claims, the federal district court in St. Thomas determined that the gas station owner failed to plead predicate acts with sufficient specificity (Abdel-Rahman v. Abdallah, September 11, 2014, Gómez, C.).

Background. Falaheen Enterprises, Inc. opened “Giant Gas” in June 2009, a gas station located on the Virgin Island of St. Thomas. Pursuant to a lease, Falaheen was required to open a convenience store in the same area, but its owners could not agree on the “specifics.” Instead, Dockside, LLC was organized, and Hassan Abdallah agreed to oversee the construction of the convenience store for all of the parties. The convenience store—“Giant Market”—opened in September 2012. Although Abdallah was warned not to, he allegedly commingled funds between Giant Market and Giant Gas. The parties eventually proposed a merger between Falaheen and Dockside, and Falaheen’s attorney told Falaheen that the merger would occur whether they agreed to the proposed terms or not. After being replaced by another attorney, Alger informed Falaheen that the merger already took place, and that he intended to file the appropriate paperwork. Abdallah filed Articles of merger for Dockside Convenience, LLC in March 2013—the supposedly formed company after the merger of Falaheen and Dockside.

Falaheen and its members brought suit against Abdallah and Dockside, arguing that they unlawfully “took over” Giant Gas and alleging violations of RICO and the Virgin Islands Criminally Corrupt Influenced Organizations Act. Dockside moved to dismiss the complaint for failure to state a RICO claim, arguing that Falaheen failed to adequately allege predicate acts with sufficient particularity.

Pattern of racketeering activity. To state a claim under RICO, Falaheen was required to allege (1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity. Further, to demonstrate a pattern of racketeering activity, Falaheen needed to show that Dockside and Abdallah engaged in at least two predicate acts within ten years of each other.

Falaheen alleged that Dockside engaged in multiple instances of mail fraud and wire fraud. Because its claims were based in fraud, it was required to plead all facts amounting to fraud with particularity. However, because the company failed to allege the dates for the alleged statements, the speakers, and the means by which those statements were communicated, the court determined that the complaint was “woefully deficient.” Specifically, it found that it was not clear whether wire or mail was used in communicating any of the statements allegedly amounting to fraud. The RICO claim was therefore dismissed, but Falaheen was granted leave to amend.

The case number is 2013-102.

Attorneys: Scot F. McChain (McChain Nissman Law Group) for the plaintiffs. Mark Wilczynski (Law Office of Wilczynski & Garten, P.C.) for the defendants.

Companies: Falaheen Enterprises, Inc.; Dockside Convenience LLC

Cases: RICO