Antitrust Law Daily Wrap Up, RICO—SDNY: Antiquorum Auction House Founder Could Not Pursue RICO Claims Against His Former Company, (Oct 15, 2012)

By William Zale, J.D.

Osvaldo Patrizzi, founder and former president of the luxury-timepiece auctioneer Antiquorum, failed to state RICO claims against the auction house, a subsidiary (Bourne in Time, Inc.), and the principals of both companies, the federal district court in New York City has ruled (Patrizzi v. Bourne in Time, Inc., October 11, 2012, 2012, Engelmayer, P.). Patrizzi’s RICO claims failed because his allegations did not satisfy the continuity requirement for a pattern of racketeering activity and the alleged predicate acts of wire fraud amounted to garden variety trademark infringement claims, according to the court.

Patrizzi alleged that Bourne is a RICO enterprise, in connection with which Antiquorum and the individual defendants engaged in a pattern of racketeering activity. Patrizzi defined the pattern of racketeering as a fraudulent scheme in which defendants registered infringing domain names, which brought users to a site that then linked to Antiquorum’s website. Patrizzi alleged that the defendants applied for and paid for such domain name registration via the Internet, which defendants employed across state lines and national boundaries.

The aim of this allegedly fraudulent scheme was to defraud users who were attempting to participate in the purchase or sale of a timepiece through a venture which Patrizzi participated in or endorsed, and to “obtain, through material misrepresentation, business” for Antiquorum by “depriv[ing] Patrizzi of the benefit of his reputation and goodwill.” Patrizzi characterized this conduct as wire fraud. Patrizzi alleged that the conduct spanned a period of 2 years and 11 months—between April 2008, when the allegedly infringing domain names were registered, and March 2011, when they were taken down.

Pattern of Racketeering Activity

To constitute a pattern of racketeering activity, predicate acts must be related and continuous, the court observed. “Continuity” is both a closed- and open-ended concept, referring either to a closed period of repeated conduct, or to past conduct that by its nature projects into the future with a threat of repetition. A complaint that properly alleges either a closed- or open-ended pattern satisfies the continuity requirement of the pattern element.

Patrizzi’s alleged RICO injuries are dilution of his mark, the loss of actual and potential commissions and goodwill, and the deprivation of income he could have received from licensing his trademarks. Each of the wrongful actions from which these alleged injuries arose ceased on March 31, 2011, when use of the allegedly infringing domain names ceased. There was no basis for Patrizzi’s claim that defendants engaged in an open-ended pattern of racketeering activity, the court determined.

Whether the asserted pattern of racketeering activity was analyzed as a closed or open-ended scheme, Patrizzi failed to satisfy the required continuity element of a RICO claim, because the scheme he alleged was too narrow, and the victims too few, to constitute a continuous pattern, according to the court. There was only one narrow purpose alleged: to “rip off” Patrizzi, by trading, allegedly improperly, on the goodwill his name carries in the field of horology, the court said. Patrizzi alleged that only three entities (and closely related ones, at that) were involved in the scheme, and he offered no specific allegations of the roles of the specific perpetrators. The circle of involvement and the purported goal of the alleged scheme are simply too narrow to satisfy the RICO requirement of a continuous pattern, the court concluded.

Wire Fraud

Patrizzi’s RICO claims were held deficient for a separate reason. He alleged that his business suffered—both in dilution of his brand name and in reduced income—because his potential customers were directed to Antiquorum’s website, in reliance on defendants’ false claims (made via the allegedly infringing domain names) of association with Patrizzi. This allegation boiled down to a claim of willful trademark infringement—not racketeering acts of wire fraud, and Patrizzi brought discrete trademark claims (which the court declined to dismiss).

Conspiracy

Because Patrizzi did not sufficiently allege substantive RICO claims, his RICO conspiracy claim pursuant to § 1962(d) necessarily failed, the court added.

The case number is 11 Civ. 2386 (PAE).

Michael A. Haskel (Law Office of Michael A. Haskel) for Osvaldo Patrizzi. Robert S. Wolf (Gerstsen, Savage, Kaplowitz, Wolf, & Marcus, LLP) for Bourne in Time, Inc.

Cases: RICO NewYorkNews