Frederick Foster v. David Denenberg ( 2015 )

CLD-191 NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
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No. 14-2674
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FREDERICK FOSTER,
Appellant
v.
DAVID H. DENENBERG; ABRAMSON &
DENENBERG; ANTOINE GARDINER
__________________________________
On Appeal from the United States District Court
for the Eastern District of Pennsylvania
(D.C. Civ. No. 2-13-cv-04478)
District Judge: Michael M. Baylson
__________________________________
Submitted on a Motion for Summary Affirmance
Pursuant to Third Circuit LAR 27.4 and I.O.P. 10.6
May 7, 2015
Before: FUENTES, GREENAWAY, JR., and VANASKIE, Circuit Judges
(Opinion filed: June 10, 2015)
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OPINION*
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PER CURIAM
Frederick Foster appeals from an order of the District Court dismissing his
complaint. For the reasons that follow, we will summarily affirm.
*
This disposition is not an opinion of the full Court and pursuant to I.O.P. 5.7 does not
constitute binding precedent
Foster filed suit in 2010 in the United States District Court for the Eastern District
of Pennsylvania against David Denenberg, Esquire, Abraham and Denenberg, P.C., and
Antoine Gardiner. He alleged a violation of the Racketeer Influenced and Corrupt
Organizations statute (“RICO”), and alleged fraud, conversion, breach of contract, and
breach of fiduciary duty, among other allegations, in connection with a 2007 real estate
transaction. That transaction involved properties that Foster owned at 5049-75 Lancaster
Avenue and 5042-5048 Merion Avenue in Philadelphia, Foster v. Denenberg, et al., E.D.
Pa. Civ. No. 10-cv-02470. At the time, there was a parallel, ongoing proceeding in the
Philadelphia Court of Common Pleas involving the same property and transaction, Foster
v. Gardiner, et al., May Term 2007, No. 1248. The issue of contention in both actions
was whether Foster’s sale of the property to Gardiner required partitioning of the
property into two separate properties, so as to allow Foster to retain title to and
possession of the house located at 5049 Lancaster Avenue and the warehouses located at
5042-44 Merion Avenue.
The District Court, after vacating an entry of default against Gardiner, dismissed
the 2010 federal complaint pursuant to Federal Rule of Civil Procedure 12(b)(6) as to all
defendants on the ground that Foster failed to sufficiently plead his RICO claim. The
Court reasoned that the allegations involved only a single transaction and failed to
establish that the defendants posed a threat of continued criminal activity, as necessary
under RICO’s pattern requirement. Foster appealed, and we summarily affirmed, Foster
v. Denenberg, et al., C.A. No. 12-1873. In the meantime, Foster’s state court case went
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to trial and the jury found in favor of Gardiner on Foster’s breach of contract claim but
found in favor of Foster on Gardiner’s counterclaim for ejectment.
At issue in this appeal, in 2013, Foster filed another civil action in federal court
alleging a RICO violation against these same defendants, again in connection with the
same 2007 real estate transaction. Foster alleged an “ongoing criminal enterprise whose
modus operandi is real estate theft through misrepresentation and fraud.” Complaint, at ¶
6. He specifically alleged that, in 2012, Gardiner, in attempting to secure the rear portion
of the property located at 5049-75 Lancaster Avenue, broke a hole in the wall that
enclosed Foster’s backyard. Complaint, at ¶¶ 20-23. Foster’s allegation of a RICO
violation appears to have been premised on his belief that he, and not Gardiner, owned
the wall pursuant to the state jury’s verdict.1 Foster further alleged that, on October 22,
2012, Gardiner and his crew completely knocked down an entire section of the wall. Id.
at ¶ 28.
The defendants moved to dismiss Foster’s second action pursuant to Rule
12(b)(6), arguing, in pertinent part, that the doctrine of res judicata barred Foster from
relitigating what was essentially the same cause of action. The defendants argued in the
alternative that Foster had once again failed to state sufficient allegations to establish a
plausible RICO claim. Foster opposed the motion. In an order entered on April 8, 2014,
the District Court granted the defendants’ motion and dismissed the complaint, holding
1
In his opposition to the appellees’ motion for summary affirmance, Foster states that, as
a result of the state jury’s verdict, he owns the house at 5049 Lancaster Avenue and the
warehouses located at 5042-44 Merion Avenue, and Gardiner owns the property located
at 5051-75 Lancaster Avenue and 5046-68 Merion Avenue.
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that Foster’s second civil action was barred by the doctrine of res judicata. The Court
found that the dismissal of Foster’s 2010 action was with prejudice and thus on the
merits; that the parties were the same in each action; and that the two actions were based
on the same facts. The Court noted Foster’s argument that he had alleged new predicate
acts in support of his RICO claim, but held that the new allegations all related back to the
same 2007 transaction at issue in the prior lawsuit. In the alternative, the District Court
held that Foster’s allegations did not show sufficiently for purposes of Rule 12(b)(6) that
the defendants had engaged in a pattern of racketeering, as required to make out a RICO
violation.
Foster appeals. We have jurisdiction under 28 U.S.C. § 1291. The appellees have
moved for summary affirmance under Third Cir. LAR 27.4 and I.O.P. 10.6. Foster has
submitted a response in opposition to summary affirmance.
We will grant the motion for summary affirmance and summarily affirm the order
of the District Court because no substantial question is presented by this appeal, Third
Circuit LAR 27.4 and I.O.P. 10.6. We exercise plenary review over res judicata, or claim
preclusion, dismissals. See Elkadrawy v. Vanguard Group, Inc., 584 F.3d 169, 172 (3d
Cir. 2009). We also exercise plenary review over a dismissal with prejudice under Rule
12(b)(6). See Heffernan v. Hunter, 189 F.3d 405, 408 (3d Cir. 1999).
Res judicata, also known as claim preclusion, applies when there has been (1) a
final judgment on the merits in a prior lawsuit involving (2) the same parties or their
privies and (3) a subsequent suit based on the same cause of action. See Lubrizol Corp.
v. Exxon Corp., 929 F.2d 960, 963 (3d Cir. 1991). Precluding “parties from contesting
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matters that they have had a full and fair opportunity to litigate protects their adversaries
from the expense and vexation attending multiple lawsuits, conserves judicial resources,
and fosters reliance on judicial action by minimizing the possibility of inconsistent
decisions.” Montana v. United States, 440 U.S. 147, 153-54 (1979). Here, the District
Court correctly concluded that Foster’s 2010 action resulted in a final judgment on the
merits; that the parties in both the 2010 and 2013 actions are the same, and that the 2010
and 2013 suits are based on the same cause of action. In determining whether a
subsequent case is based on the same cause of action as a prior case, we will look to
whether there is an “essential similarity of the underlying events giving rise to the various
legal claims.” Elkadrawy, 584 F.3d at 173. Here, as held by the District Court, in both
the first and second actions, Foster alleged fraud in connection with a 2007 real estate
transaction. The focal point of the “same cause of action” analysis is not whether there
are new facts occurring after the final judgment, but whether the material facts alleged in
each suit are the same, and whether the witnesses and documentation required to prove
the allegations are the same. See United States v. Athlone Industries, Inc., 746 F.2d 977,
984 (3d Cir. 1984). Here, the right to knock that wall down depends on who owns it, and
the issue of ownership is determined by reference to the parties’ intentions when they
negotiated the 2007 transaction. Accordingly, the District Court properly held that
allegations of a continuation of the same fraudulent activity at issue in the prior action do
not raise a new or independent RICO cause of action. Foster’s second action is thus
barred by res judicata.
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We further agree with the District Court that Foster’s claims, in any event, do not
state a RICO claim for relief. When considering a motion to dismiss pursuant to Rule
12(b)(6) for failure to state a claim upon which relief may be granted, a court must accept
as true all material allegations, read the complaint in the light most favorable to the
plaintiff, and decide whether, under any reasonable understanding of the complaint, the
plaintiff may be entitled to relief. See Fleisher v. Standard Ins. Co., 679 F.3d 116, 120
(3d Cir. 2012). To constitute a RICO violation, there must be a “pattern of racketeering
activity,” 18 U.S.C. § 1962(a), and to show a pattern of racketeering activity, a plaintiff
must allege that predicate acts of racketeering pose a threat of continued criminal activity.
H.J. Inc. v. Northwest Bell Telephone Co., 492 U.S. 229, 239 (1989) (emphasis added).
Foster’s allegation of a single fraudulent real estate transaction occurring in 2007 does
not satisfy RICO’s continuity requirement. We note that he has asserted in his opposition
to summary affirmance that the defendants have engaged in numerous other real estate
transactions throughout Philadelphia, and that those transactions must necessarily have
involved fraud, but these assertions are speculative and thus insufficient to survive a Rule
12(b)(6) motion. See Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) (To
avoid dismissal, a complaint’s “[f]actual allegations must be enough to raise a right to
relief above the speculative level.”).
For the foregoing reasons, we grant the appellees’ motion and will summarily
affirm the order of the District Court dismissing the complaint with prejudice.
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