Antitrust Law Daily Wrap Up, RICO—S.D.N.Y.: Municipalities’ racketeering claims time-barred in residential development suit, (Sep 17, 2015)

By Greg Hammond, J.D.

Allegations that various individuals and commercial entities engaged in fraud, bribery, intimidation, voter fraud, and corrupt influence of public officials in order to take control of local institutions and erect a high density residential development project, in violation of the Racketeer Influenced and Corrupt Organizations Act (RICO), were dismissed as time-barred. The federal district court in New York City determined that the municipal plaintiffs knew or should have known of their injury more than four years before the complaint was filed (Town of Mamakating, New York v. Lamm, September 11, 2015, Forrest, K.).

The Town of Mamakating and Village of Bloomingburg, New York, filed suit against various individuals and commercial entities, claiming that the defendants formed an association-in-fact enterprise for the purpose of fraudulently inducing the Village to annex and re-zone land, obtaining favorable environmental impact reviews and governmental approvals for a residential development project, and gaining a monopoly on waste-water treatment capacity in the area. The two municipalities also alleged that the enterprise engaged in a five-phase plan to covertly seize control of the public institutions of both the Town and Village and erect a 396 unit high density housing project that would transform the character of the community. Mamakating and Bloomingburg claim that the defendants falsely represented that the development would consist of a 125 unit luxury townhouse second home community with a golf course and swimming complex. The defendants moved to dismiss the RICO claims.

Time-barred claims. The court first concluded that the municipalities’ RICO claims were time-barred under the applicable four-year statute of limitations. Specifically, the court determined that the municipalities knew or should have known of their alleged injury in January 2009, when a subdivision and site plan was filed with the Village Planning Board. Alternatively, the municipalities knew or should have known of their injury in May 2010, when the Village entered into a development agreement that explicitly stated the development would include 396 residential townhouses and made no mention of a golf course, or in June 2010, when the Village Planning Board granted conditional final approval of the site plan and subdivision. Since the complaint was filed more than four years after the plaintiffs knew or should have known of their injuries, the motion to dismiss was granted.

RICO enterprise, injury. Alternatively, the court dismissed the complaint for failure to allege a RICO enterprise and injury. The municipalities failed to detail any hierarchy, organization, or unity among the alleged conspirators in any non-conclusory way, the court determined. Instead, the complaint strung together the defendants and labeled them an enterprise, the court concluded, finding that there was no basis for inferring that the defendants formed an ongoing organization or that the defendants formed a coherent entity that was separate and apart from the predicate acts that comprised the alleged fraudulent scheme.

Allegations that the Town and Village were induced to rezone and transfer territory, that invalid voters have cast and will cast votes in the municipalities’ elections, that Village officials were corrupted through bribery which deprived citizens of the right to honest services, that the municipalities’ ability to promote future development is inhibited by the defendants’ control of waste water treatment capacity, and that the plaintiffs were defamed by false claims of anti-Semitism, were not cognizable injuries under RICO, the court found. Further, the two remaining allegations of injuries—that the Town was deprived of a $1,000 per unit fee that it charges for all new developments to fund public parks, and that the Village was induced to accept a 50 percent reduction for defendants’ permit and filing fees—failed to pass muster, the court decided. The injuries were deemed speculative and at odds with other allegations in the municipalities’ complaint.

Finally, after dismissing the RICO claims with prejudice, the court declined to exercise supplemental jurisdiction over the remaining state law claims.

The case number is 15-cv-2865 (KBF).

Attorneys: David Clifford Holland (The Law Offices of Michael Kennedy P.C.) and Philip Thomas Simpson (Robinson Brog Leinwand Greene Genovese & Gluck PC ) for The Town of Mamakating, New York and The Village of Bloomingburg, New York. Steven A. Engel (Dechert, LLP) for Shalom Lamm, Sullivan Farms II, Inc., Raymond Farms, LLC, and Bloomingburg Rentals, LLC.

Companies: Sullivan Farms II, Inc.; Raymond Farms, LLC; Bloomingburg Rentals, LLC; The Town of Mamakating, New York; The Village of Bloomingburg, New York

Cases: RICO NewYorkNews