Antitrust Law Daily Wrap Up, RICO—E.D.N.Y.: Allegations of fraudulent deprivation of rental property profits failed to plead RICO violations, (Aug 16, 2016)

By Edward L. Puzzo, J.D.

A pro se plaintiff who claimed that she had been fraudulently deprived of profits from her rental properties could not maintain RICO actions against various individuals and corporations because her pleadings were vague, conclusory, and failed to show a pattern of racketeering activity, the federal district court in Central Islip, New York has ruled (Tooker v. Guerrera, August 15, 2016, Seybert, J.).

Plaintiff Marie Guerrera Tooker's pro se complaint alleged that Quest Ventures, its president Salvatore Guerrera, its appointed receiver David Reilly, its partner Directional Lending, and Directional's employee David DeRosa engaged in a conspiracy to fraudulently deprive her of profits from the operation of her rental properties, in violation of the Racketeer Influenced and Corrupt Organizations Act (RICO). Defendants moved to dismiss.

As an initial matter, the court noted that the pleading must state a claim for relief that is plausible on its face, with mere conclusory statements being insufficient. In addition, the heightened pleading standard required by Federal Rule of Civil Procedure 9(b) applied to RICO claims for which fraud was the predicate illegal act. On the other hand, Marie Guerrera Tooker was a pro se plaintiff, and as such her pleadings were to be construed liberally and held to less stringent standards than pleadings drafted by attorneys.

Sections 1962 (a) and (b) claims. The court construed part of Tooker's complaint as RICO claims under Sections 1962 (a) and (b). The court stated that her allegation that "defendants received income from a pattern of racketeering activity and used such income in connection with investments and purchases from the plaintiff in interstate commerce," was vague, conclusory, and did not suffice to plausibly plead the existence of a separate entity purchased with funds raised through racketeering. The court ruled that the allegations failed to state a claim.

Section 1962(c) claim. The court construed another part of Tooker's complaint as a RICO claim under Section 1962 (c). Such a claim, the court explained, requires that a defendant, through the commission of two or more acts constituting a pattern of racketeering activity, directly or indirectly participated in an enterprise, the activities of which affected interstate or foreign commerce.

Tooker alleged that defendants Quest, Guerrera, and Directional were organizers and beneficiaries forming an association-in-fact enterprise. While the complaint broadly alleged that Guerrera sought to defraud her by misrepresenting the profitability of certain rental properties, she failed to allege how the other defendants were involved in any way with Gerbera’s alleged conduct. Thus, the court ruled, Tooker failed to establish that the defendants comprised an association-in-fact enterprise.

Tooker further alleged that Quest was a RICO enterprise based on its corporate status. The court found that the complaint failed to sufficiently plead that defendants, with the exception of Guerrera, exercised some degree of control over Quest. The other defendants were alleged to be agents of Quest, but the complaint failed to allege how those defendants participated in Quest's operation or management or how they had any role in directing Quest's affairs. Further, the court noted that, based on RICO's distinctness requirement, Quest, as a corporate entity, could not function as both a RICO person and a RICO enterprise.

The court found that the complaint plausibly alleged that Guerrera had engaged in bankruptcy fraud by placing her name on a bank account without her knowledge, misrepresenting that there were no profits from certain rental activities, and filing a claim in plaintiff's bankruptcy proceeding seeking monies for himself that were actually jointly owned by both he and plaintiff. However, the complaint failed to plead with particularity any fraudulent statements made by Guerrera, the time and place of such statements, and why they were fraudulent. Thus, the pleading failed to approach the level of specificity required under Rule 9(b) for allegations sounding in fraud. The pleading also failed to allege a pattern of racketeering activity, which required at least two racketeering acts.

Consequently, the court dismissed without prejudice the RICO and RICO conspiracy claims against the defendants.

The case is No. 2:15-cv-02430-JS-ARL.

Attorneys: Marie Guerrera Tooker, pro se. Raymond R. Grasing (Grasing and Associates, PC) for Salvatore Guerrera and Quest Ventures. Christopher H. Thompson for David DeRosa and Directional Lending LLC. Daniel K. Cahn for David Reilly.

Companies: Quest Ventures; Directional Lending LLC

Cases: RICO NewYorkNews