Marini v. Adamo
812 F. Supp. 2d 243
E.D.N.Y2011Background
- Plaintiffs Marini, his wife Josephine, and T & R Knitting purchased 144 coins from Adamo, Bolton Group, and H. Edward between 2002 and 2007, totaling about $14.5 million in alleged losses.
- Marini learned of coin investments via representations by Adamo that the coins were top-tier, highly rare, and would not decrease in value, with 24–48 hour liquidity and buyback assurances.
- Marini and Adamo were close friends; Marini handled payments through T&R (not owning the coins) and received the coins in person, not by mail.
- Starting May 2008, Marini began to suspect fraud, tape-recorded conversations, and eventually retained counsel; by June 2008 he sought refunds, leading to this suit.
- Plaintiffs allege Adamo frequently reassured, misrepresented coin values, and engaged in failures to honor buybacks, contributing to a multi-year scheme.
- Defendants moved for partial summary judgment on securities fraud, RICO, and various state-law claims; the court denied or granted in part, with a GB L §349 claim dismissed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the coin transactions constitute a security under Howey | Marini contends strict vertical commonality links fortunes with Adamo. | Adamo argues no common enterprise; portfolios were not interdependent. | Disputed facts preclude summary judgment on investment contract issue. |
| Whether strict vertical commonality exists to satisfy Howey | Plaintiffs rely on commission structure and shared assets to link fortunes. | Record shows separate portfolios and no one-to-one interdependence. | Issues of material fact remain; summary judgment denied on securities claim. |
| Whether plaintiffs prove a RICO pattern via continuity and causation | Defendants engaged in a six-year, repeated scheme with numerous predicate acts. | Continuity and causation not established; intrastate mail/wire claims invalid for RICO. | Court finds closed-ended continuity present and causation material facts remain; RICO claim survives summary judgment. |
| Whether The Bolton Group and Adamo form a valid RICO enterprise distinct from any member | Bolton and Adamo together constitute a RICO enterprise with distinct existence. | Bolton not sufficiently distinct from Adamo to form enterprise. | Cedric Kushner distinctness doctrine supports enterprise finding; not dismissing on summary judgment. |
| Whether NY General Business Law § 349 claim can proceed | Deceptive acts directed at consumers violated § 349. | No consumer-oriented conduct; lack of public impact. | § 349 claim dismissed. |
Key Cases Cited
- Howey, 328 U.S. 293 (1946) (defined 'investment contract' prongs for securities tests)
- H.J. Inc. v. Northwestern Bell Tel. Co., 492 U.S. 229 (1989) (continuity concept for RICO patterns)
- Cedric Kushner Promotions, Ltd. v. King, 533 U.S. 158 (2001) (distinctness of corporate employee and enterprise under RICO)
- Glen-Arden Commodities v. Costantino, 493 F.2d 1027 (2d Cir. 1974) (promoter's efforts and RICO considerations)
- Revak v. SEC Realty Corp., 18 F.3d 81 (2d Cir. 1994) (rejects broad vertical commonality in Howey context)
- Fresh Meadow Food Servs., LLC v. RB 175 Corp., 282 Fed.Appx. 94 (2d Cir. 2008) (continuity assessed by time span and related acts)
- State Wide Photocopy Corp. v. Tokai Fin. Servs., Inc., 909 F. Supp. 137 (S.D.N.Y. 1995) (continuity factors in RICO analysis)
- Copeland v. Hill, 680 F. Supp. 466 (D. Mass. 1988) (investment contracts in coin transactions context)
- Zion v. Standard Fin. Mgmt. Corp., 1988 WL 82043 (D. Mass. 1988) (no strict vertical commonality in certain investment setups)