2 F. Supp. 3d 525
S.D.N.Y.2014Background
- Plaintiffs sue for RICO, NY GBL §§ 349 and 350, and tortious interference against Concierge Auctions and related entities for alleged fraudulent conduct to attract luxury-home auction customers.
- Allegations include false promises, misrepresentations about sales results, shill/unregistered bidders, late-added reserves, and use of Realogy/SIR to promote Concierge.
- Concierge, its officers, and related entities are alleged to form a RICO enterprise with two distinct entities, with plaintiffs alleging certain defendants as RICO 'persons'.
- RICO predicate acts alleged mainly as wire fraud spanning roughly 2009–2012; some marketing materials and specific misrepresentations are identified.
- Plaintiffs claim injury to Grand Estates (a competitor) and to individual sellers (Jarols), with Grand Estates asserting indirect injury and the Jarols asserting direct injury.
- Court conducts proximate-cause analysis under Holmes and Anza; ultimately grants most dismissals, preserving only Jarols’ §1962(c) claim against Brady and Russo.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does §1962(c) plead distinct enterprise? | Plaintiffs say Concierge is the enterprise; defendants are the persons. | Distinctness not satisfied; enterprise indistinct from alleged persons. | Distinct enterprise satisfied for Jarols against Brady and Russo; Grand Estates dismissed. |
| Have two or more predicate acts been pled for a pattern? | Alleged multiple wire-fraud acts meet pattern requirement against Russo and Brady. | Predicates lack specificity; some acts insufficient under Rule 9(b). | Sufficient for Russo and Brady; insufficient for Graham and CA Partners. |
| Proximate causation and standing under §1962(c) for plaintiff | Grand Estates injured as competitor; Jarols injured directly. | Injuries too indirect or speculative for Grand Estates; Jarols direct claims remain. | Grand Estates lacks proximate standing; Jarols may proceed against Brady and Russo. |
| Do §1962(a) and (b) claims survive? | Racketeering income investments caused enterprise injuries; real-estate referrals cause harm. | Injuries flow from predicate acts, not separate investments or acquisitions. | Counts I and II dismissed; injuries not shown as separate from predicate acts. |
| Are NY GBL §§ 349 and 350 claims viable? | Territorial scope and consumer-oriented harms alleged via New York-based conduct. | Transaction not in New York; conduct not consumer-oriented; lack of public-interest harm. | Jarols’ and Grand Estates' GBL claims dismissed; territoriality and consumer-orientation lacking. |
Key Cases Cited
- Cedric Kushner Promotions, Ltd. v. King, 533 U.S. 158 (2001) (distinctness between RICO person and enterprise required)
- Riverwoods Chappaqua Corp. v. Marine Midland Bank, N.A., 30 F.3d 339 (2d Cir. 1994) (corporation cannot be both RICO 'person' and 'enterprise')
- Cruz v. FXDirectDealer, LLC, 720 F.3d 115 (2d Cir. 2013) (distinctness requirement; narrow enterprise construction)
- Cedric Kushner Promotions, Ltd. v. King, 533 U.S. 158 (2001) (see above (duplicate for emphasis))
- Anza v. Ideal Steel Supply Corp., 547 U.S. 451 (2006) (proximate causation; direct injury requirement for certain harms)
- Commercial Cleaning Servs., L.L.C. v. Colin Serv. Sys., Inc., 271 F.3d 374 (2d Cir. 2001) (Holmes proximate-cause framework for RICO)
- Holmes v. Sec. Investor Prot. Corp., 503 U.S. 258 (1992) (proximate causation framework for RICO damages)
- United States v. Autuori, 212 F.3d 105 (2d Cir. 2000) (fraud predicate acts and RICO standards)