Antitrust Law Daily Wrap Up, RICO—S.D. N.Y.: Retail pharmacy’s theft of customer data claims against former employees fail, (Apr 21, 2015)

By Linda O’Brien, J.D., LL.M.

An operator of a retail pharmacy failed to allege sufficient facts to pursue Racketeer Influenced and Corrupt Organizations Act (RICO) claims against two former employees and a competing pharmacy for theft of customer data for the purpose of enticing customers to switch to the competing pharmacy, the federal district court in New York City has decided (Aronov v. Mersini, April 20, 2015, Castel, P.).

Oleg Aronov operated Stat Rx, a retail pharmacy. Stat Rx established a customer/patient database, which included the names, addresses, contact information, medical conditions, and prescription history of all its customers. The database was only accessible by Stat Rx employees and was to be used only for Stat Rx purposes.

In December 2007, Aronov hired Roland Mersini and Roman Ilyaev to work as pharmacy technicians. In April 2010, Ilyaev resigned and began working for a competitor, RJ Pharmacy. Mersini and Ilyaev began contacting Stat Rx customers and stated that Stat Rx had changed its name and moved to the location of RJ Pharmacy. Mersini and Ilyaev also obtained Stat Rx’s vendor list, altered Stat Rx’s contact information in its database, and appropriated over $500,000 in prescription medications from Stat Rx. After discharging Mersini, Aronov filed suit against Mersini, Ilyaev, and RJ Pharmacy, alleging, in part, violations of RICO. Specifically, Aronov asserted that the defendants’ theft of data concerning Stat Rx’s retail pharmacy customers was for the fraudulent purpose of enticing those customers to use a competing pharmacy. The defendants moved to dismiss the complaint.

Racketeering activity. The court determined that the plaintiff failed to allege predicate acts of racketeering activity with the particularity required by Federal Rule of Civil Procedure 9(b). In order to state a RICO claim, a plaintiff must adequately allege that the defendant, through the commission of two or more acts constituting a pattern of racketeering activity, directly or indirectly participated in an enterprise that affected interstate commerce. In this case, the plaintiff’s allegations that Mersini and Ilyaev placed dozens of telephone calls to perpetrate fraud were based upon information and belief but not peculiarly within the defendants’ knowledge. The identity of the speaker, location from which the calls were place, dates on which the calls were placed, and content of the misrepresentations were known only to the customers who received those calls. The plaintiffs did not submit a statement of facts upon which their belief was based.

Moreover, the complaint which specifies an eight month period during which the statements were made lacked particularity with respect to the timeframe of the alleged misrepresentations. The complaint did not name of contacted Stat Rx customers, and failed to allege which defendant made fraudulent communications to which customers.

Pattern of activity. Additionally, the plaintiffs failed to adequately demonstrate that the predicate acts constituted a pattern of racketeering activity. According to the court, the eight month timeframe identified by the plaintiff falls short of the two-year benchmark set forth by the Second Circuit in Cofacredit, S.A. v. Wndsor Plumbing Supply Co., 187 F.3rd 229 (1999) to show closed-end continuity. Furthermore, the plaintiff failed to establish open-ended continuity because the allegedly fraudulent scheme was "inherently terminable" once each customer on the list was contacted. The last alleged predicate act occurred in October 2010, which suggested that the scheme had come to a close and there was no threat of continued criminal activity.

Conspiracy. Finally, since the plaintiff failed to state a substantive RICO claim and made no additional allegations in pleading a conspiracy, his RICO conspiracy claim also must fail, the court concluded.

The case is No. 14-cv-7998.

Attorneys: James Matthew Branden (James Matthew Branden Law Firm) for Oleg Aronov, and Stat Rx Pharmacy, Inc. Gregory J. Ryan (Tesser, Ryan & Rochman) for Roland Mersini, Roman Ilyaev, Jasmina Incekara, and RJ Pharmacy, Inc.

Companies: Stat Rx Pharmacy, Inc.; RJ Pharmacy, Inc.

Cases: RICO NewYorkNews