Grace Int'l Assembly of God v. Gennaro Festa, Falcon Gen. Constr. Servs.

19‐1101‐cv
Grace Int’l Assembly of God v. Gennaro Festa, Falcon Gen. Constr. Servs., Inc.
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
SUMMARY ORDER
RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION
TO A SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND
IS GOVERNED BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS
COURT=S LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER IN A DOCUMENT
FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR
AN ELECTRONIC DATABASE (WITH THE NOTATION ASUMMARY ORDER@). A PARTY
CITING TO A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT
REPRESENTED BY COUNSEL.
At a stated term of the United States Court of Appeals for the Second Circuit,
held at the Thurgood Marshall United States Courthouse, 40 Foley Square, in the
City of New York, on the 30th day of December, two thousand nineteen.
PRESENT: AMALYA L. KEARSE,
CHRISTOPHER F. DRONEY,
RICHARD J. SULLIVAN,
Circuit Judges.
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GRACE INTERNATIONAL
ASSEMBLY OF GOD,
Plaintiff‐Appellant,
v. No. 19‐1101‐cv
GENNARO FESTA, FALCON GENERAL
CONSTRUCTION SERVICES, INC.,
Defendants‐Appellees.
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FOR APPELLANT: MICHAEL A. HASKEL, Haskel &
Wright PLLC, Mineola, NY.
FOR APPELLEES: GREGORY PANDOLFO, Goodman
Jurist & Pandolfo, LLP, Garden City,
NY.
Appeal from a judgment of the United States District Court for the Eastern
District of New York (Sandra J. Feuerstein, Judge).
UPON DUE CONSIDERATION, IT IS HEREBY ORDERED,
ADJUDGED, AND DECREED that the judgment of the district court is
AFFIRMED.
Plaintiff‐Appellant Grace International Assembly of God (“Grace”) appeals
from a decision of the district court (Feuerstein, J.) dismissing its claims against
Defendants‐Appellees Gennaro Festa and Falcon General Construction Services,
Inc. under the Racketeer Influenced and Corrupt Organization Act (“RICO”), 18
U.S.C. § 1962(c), and state law. On appeal, Grace argues that the district court
erred in finding that Grace failed to adequately plead a pattern of predicate acts
sufficient to state a claim under RICO. We assume the parties’ familiarity with the
underlying facts and the record of prior proceedings, to which we refer only as
necessary to explain our decision to affirm.
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We review a district court’s dismissal of a complaint under Federal Rule of
Civil Procedure 12(b)(6) de novo. See Commercial Cleaning Servs., L.L.C. v. Colin Serv.
Sys., Inc., 271 F.3d 374, 380 (2d Cir. 2001). “To survive a motion to dismiss, a
complaint must contain sufficient factual matter, accepted as true, to ʹstate a claim
to relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)
(quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). “A claim has facial
plausibility when the plaintiff pleads factual content that allows the court to draw
the reasonable inference that the defendant is liable for the misconduct alleged.”
Iqbal, 556 U.S. at 678. In addressing the sufficiency of a complaint we accept as
true all factual allegations and draw from them all reasonable inferences; but we
are not required to credit allegations that are speculative or conclusory.” See, e.g.,
Twombly, 550 U.S. at 555, 557.
I. RICO
“To state a claim for damages under RICO a plaintiff . . . must allege . . . (1)
that the defendant (2) through the commission of two or more acts (3) constituting
a ‘pattern’ (4) of ‘racketeering activity’ (5) directly or indirectly invest[ed] in, or
maintain[ed] an interest in, or participate[d] in (6) an ‘enterprise’ (7) the activities
of which affect[ed] interstate or foreign commerce.’” Moss v. Morgan Stanley Inc.,
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719 F.2d 5, 17 (2d Cir. 1983) (quoting 18 U.S.C. § 1962(a)‐(c) (1976)), cert. denied Moss
v. Newman, 465 U.S. 1025 (1984).
As the primary basis for its racketeering claim, Grace alleges that
Defendants committed numerous counts of wire fraud, in violation of 18 U.S.C. §
1343, during the course of a construction project commissioned by Grace. Grace
also alleges that Defendants committed money laundering, in violation of 18
U.S.C. § 1956, although it disclaims any specific harm resulting from those
offenses. Instead, Grace merely argues that the money laundering counts support
its claim of a RICO pattern. We assume for the purposes of this Order that Grace
has adequately pleaded both wire fraud and money laundering, but find
nonetheless that Grace has not alleged a pattern of racketeering activity as
required under RICO.
II. RICO Pattern
A “pattern of racketeering activity” must consist of at least two predicate
acts, “the last of which occurred within ten years . . . after the commission of a
prior act of racketeering activity.” 18 U.S.C. § 1961(5). Racketeering activities must
“amount to or pose a threat of continued criminal activity.” Cofacredit, S.A. v.
Windsor Plumbing Supply Co., 187 F.3d 229, 242 (2d Cir. 1999) (quoting H.J. Inc. v.
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Nw. Bell Tel. Co., 492 U.S. 229, 239 (1989)). To meet this so‐called “continuity”
requirement, a “plaintiff in a RICO action must allege either an open‐ended
pattern of racketeering activity (i.e., past criminal conduct coupled with a threat of
future criminal conduct) or a closed‐ended pattern of racketeering activity (i.e.,
past criminal conduct extending over a substantial period of time).” First Capital
Asset Mgmt., Inc. v. Satinwood, Inc., 385 F.3d 159, 180 (2d Cir. 2004) (quoting GICC
Capital Corp. v. Tech. Fin. Grp., Inc., 67 F.3d 463, 466 (2d Cir. 1995)). “Given the
routine use of mail and wire communications in business operations, . . . ‘RICO
claims premised on mail or wire fraud must be particularly scrutinized because of
the relative ease with which a plaintiff may mold a RICO pattern from allegations
that, upon closer scrutiny, do not support it.’” Crawford v. Franklin Credit Mgmt.
Corp., 758 F.3d 473, 489 (2d Cir. 2014) (quoting Efron v. Embassy Suites (Puerto Rico),
Inc., 223 F.3d 12, 20 (1st Cir. 2000), cert. denied, 532 U.S. 905 (2001)).
A. Closed‐ended Continuity
Like the district court, we find that Grace has failed to allege closed‐ended
continuity. As noted above, “[t]o satisfy closed‐ended continuity, the plaintiff
must prove ‘a series of related predicates extending over a substantial period of
time.’” Cofacredit, 187 F.3d at 242 (quoting H.J. Inc., 492 U.S. at 242). Since the
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Supreme Court decided H.J. Inc., we have never found predicate acts spanning less
than two years to be sufficient to constitute closed‐ended continuity. “[W]hile two
years may be the minimum duration necessary to find closed‐ended continuity, the
mere fact that predicate acts span two years is insufficient, without more, to
support a finding of a closed‐ended pattern.” First Capital, 385 F.3d at 181. The
court must also consider the number and variety of predicate acts, the presence or
absence of multiple schemes, and the number of participants and victims. See
Spool v. World Child Int’l Adoption Agency, 520 F.3d 178, 184 (2d Cir. 2008); First
Capital, 385 F.3d at 181.
Grace argues it has adequately alleged the requirements of closed‐ended
continuity because “the acts took place for a period extending longer than two (2)
years,” Plaintiff’s Amended Complaint (“AC”) ¶ 240, since the scheme allegedly
lasted a total of twenty‐nine months. However, the scheme involved few victims
– most generously Grace, its principal investor, and a handful of subcontractors
who were left unpaid – and fewer perpetrators – just Festa, acting through his
construction company, Falcon. At bottom, the RICO scheme alleged in the
complaint had the limited goal of defrauding Grace. We therefore agree with the
district court that such a scheme does not support a finding of closed‐ended
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continuity. See First Capital, 385 F.3d at 182 (holding that predicate acts over two‐
and‐a‐half years did not constitute closed‐ended continuity because the complaint
“alleged that [defendant] engaged in a single scheme to defraud two creditors by
quickly moving his assets to his relatives and then concealing the existence of those
assets during his bankruptcy proceeding”).
B. Open‐ended Continuity
Grace also fails to allege open‐ended continuity. There are two ways to
show open‐ended continuity – (1) “where the acts of the defendant or the
enterprise [are] inherently unlawful, such as murder or obstruction of justice, and
[are] in pursuit of inherently unlawful goals, such as narcotics trafficking or
embezzlement,” United States v. Aulicino, 44 F.3d 1102, 1111 (2d Cir. 1995), or
(2) “where the enterprise primarily conducts a legitimate business” but there is
“some evidence from which it may be inferred that the predicate acts were the
regular way of operating that business, or that the nature of the predicate acts
themselves implies a threat of continued criminal activity,” Cofacredit, 187 F.3d at
243 (citing H.J. Inc., 492 U.S. at 243). The allegation of a scheme that was inherently
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terminable does not plausibly imply a threat of continued racketeering activity.
Id. at 244
Grace has failed to allege the first type of open‐ended continuity, which
primarily targets organized crime. See Reich v. Lopez, 858 F.3d 55, 60 (2d Cir. 2017),
cert. denied, 138 S. Ct. 282 (2017) (“Even if [the defendant] pays bribes, it is primarily
in the energy business; it is not a narcotics ring or an organized crime family.”).
And Grace fares no better in establishing open‐ended continuity under the second
method. Although Grace conclusorily alleges that the predicate acts were the
means by which Falcon, a construction company, “regularly operated,” AC ¶ 241,
it points only to its own limited interactions with Festa in support of that
contention, AC ¶ 241. At best, Grace alleges conclusorily and speculatively that
the “nature of the predicate acts implied a threat of continuing activity” because
“[t]he Project remained incomplete and similar predicate acts could continue to
occur,” AC ¶ 242, since the contract was only “38.5% complete,” AC ¶ 243. But
Grace’s speculative claims regarding how long the fraud would continue do not,
on their own, support a showing of open‐ended continuity. See GICC Capital Corp.,
67 F.3d at 466 (rejecting claim that defendant would have continued scheme had
plaintiff not commenced litigation on the grounds it was “entirely speculative”).
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Even accepting that the project remained unfinished, Grace’s construction project
was ultimately terminable, and Grace has offered no other facts to suggest the
activities would continue in the future.
While Grace attempts to magnify the racketeering scheme by expanding the
number of victims and predicate acts, in reality this is one scheme with one clear
victim. That is clearly insufficient to establish a pattern for the purposes of RICO.
See Crawford, 758 F.3d at 489 (“[M]ultiple acts of mail fraud in furtherance of a
single episode of fraud involving one victim and relating to one basic transaction
cannot constitute the necessary pattern.”) (quoting Tellis v. U.S. Fid. & Guar. Co.,
826 F.2d 477, 478 (7th Cir. 1986)).
We have considered Grace’s remaining arguments and conclude that they
are without merit. For the foregoing reasons, the judgment of the district court is
AFFIRMED.
FOR THE COURT:
Catherine O=Hagan Wolfe, Clerk of Court
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