Case Information
*1 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA ______________________________
)
FELD ENTERTAINMENT, INC. )
)
Plaintiff, )
) v. ) Civ. Action No. 07-1532 (EGS) )
AMERICAN SOCIETY FOR THE )
PREVENTION OF CRUELTY )
TO ANIMALS, et al. , )
)
Defendants. )
______________________________)
MEMORANDUM OPINION
This case arises out of a prior, long running litigation in
this Court over whether Feld Entertainment Inc. (“FEI”) violated
the Endangered Species Act by its use of Asian elephants in FEI’s
Ringling Brothers and Barnum & Bailey Circus (“Circus”). That
litigation (hereinafter the “ESA Action”) was brought by several
non-profit organizations and one individual plaintiff, Thomas
Rider (“Rider”), who had worked with several of FEI’s elephants
in the Circus. After nine years of litigation and a six week
non-jury trial, the Court concluded that Rider failed to prove
that he had Article III standing.
ASPCA v. Feld Entm’t, Inc.
,
FEI has now sued the plaintiffs in the ESA Action as well as their counsel of record, arguing that the ESA plaintiffs’ payments to Rider during that litigation violated the Racketeer Influence and Corrupt Organizations Act (“RICO”) and the Virginia Conspiracy Act. FEI has also asserted claims of common law abuse of process, malicious prosecution, maintenance, and champerty. Defendants move to dismiss FEI’s Amended Complaint in its entirety. Upon consideration of the motions to dismiss, the oppositions and replies thereto, the arguments of counsel during the hearing held on June 23, 2011, the supplemental submissions of the parties, the applicable law and the record as a whole, the motions to dismiss are hereby GRANTED IN PART AND DENIED IN PART . *3 I. FACTUAL AND PROCEDURAL BACKGROUND
A. The ESA Case and the Alleged Racketeering Activity [2] The original complaint in the ESA Action was filed in July, 2000 on behalf of, among others, the American Society for the Prevention of Cruelty to Animals (“ASPCA”), Animal Welfare Institute (“AWI”), Fund For Animals (“FFA”), and Rider. ASPCA et al. v. Ringling Bros., et al. , Case No. 00-1641. That complaint, and the others that were filed in the original case as well as its successor case, ASPCA et al. v. Feld Entertainment Inc. , Case No. 03-2006, alleged that Asian elephants are an endangered species and that the circus mistreats its elephants in violation of the ESA, 16 U.S.C. § 1531, et. seq. The cases were filed under the citizen-suit provision of the ESA, which permits private individuals or organizations to sue to enjoin violations of the statute.
*4 Tom Rider was a former elephant “barn helper” and “barn man” for FEI from June 1997 until November 1999. First Amended Complaint (“FAC”) ¶¶ 4, 37. He alleged that he had suffered aesthetic and emotional injury based on his exposure to mistreated elephants while working for FEI. Specifically, Rider alleged that he “has a personal and emotional attachment to these elephants,” Complaint, ASPCA v. Feld Entm’t , Case 03-2006, ECF No. 1 at ¶ 20, that he “stopped working in the circus community because he could no longer tolerate the way the elephants were treated by defendants,” id. ¶ 21, and that he “continues to visit” the elephants he knows, even though “each time he does so, he suffers more aesthetic injury,” id. ¶ 23.
This Court dismissed the original case on the ground that Rider as well as the organizational plaintiffs lacked standing to sue. ASPCA v. Ringling Bros. & Barnum & Bailey Circus , No. 00- 1641, 2001 U.S. Dist. Lexis 12203 (D.D.C. June 29, 2001). In February 2003, the D.C. Circuit reversed, ruling that, assuming the truth of the allegations in the complaint, Rider had standing. ASPCA v. Ringling Bros. & Barnum & Bailey Circus , 317 F.3d 334 (D.C. Cir. 2003). [3] The ESA Action continued for another six years, culminating in a six week bench trial in *5 February and March 2009. Following the trial, on December 30, 2009, this Court dismissed the case on the grounds that neither Rider nor the other then-remaining plaintiff in the case, the non-profit organization Animal Protection Institute (“API”), satisfied the constitutional standing requirements.
The bulk of the Court’s December 2009 decision is devoted to
Rider. The Court found that Rider “failed to prove either a
strong and personal attachment to the seven elephants at issue or
that FEI’s treatment of those elephants caused and continues to
cause [him] to suffer aesthetic or emotional injury.”
ASPCA v.
Feld Entm’t
,
The Court found serious problems with the substance of Rider’s allegations. It noted that Rider had never complained to management, veterinarian, or government officials about the treatment of the elephants during the two and a half years he worked at Ringling Brothers Id. at 68. The Court also found incredible Rider’s claim that he left Ringling Brothers because he could not bear to witness further mistreatment of the elephants, noting that after he left FEI’s employment he went to work for another circus which allegedly mistreated its elephants *6 in the same way. Id. 70. The Court also found that since his employment with FEI ceased, Rider continued to see the elephants who were allegedly still suffering mistreatment, thus undermining his claim that “he would like to again visit or observe” these elephants but “was refraining from doing so in order to avoid subjecting himself to further aesthetic injury.” Id. at 83. At the same time, Rider made little to no effort to see the elephants who were no longer performing in the circus and therefore no longer allegedly mistreated, thus undermining his claim that he “had formed a personal attachment” to the elephants and, if “they were no longer allegedly mistreated, he would visit these animals as often as possible and would seek a position to work with them again.” Id. Indeed, the Court found that when presented with videotapes of the elephants practicing for the circus, Rider could not identify the elephants to whom he was allegedly personally and emotionally attached. Id. at 84.
As to the payments themselves, the Court found that Rider had received at least $190,000 from the ESA plaintiffs since the lawsuit began. Id. at 78. The Court further found that the ESA plaintiffs had been “less than forthcoming about the extent of the payments to Mr. Rider.” Id. at 82. Finally, the Court found that the primary purpose of the payments to Rider was to keep him involved in the litigation, and not, as the ESA plaintiffs asserted, to support his “media and educational outreach program *7 about the treatment of FEI’s elephants.” Id. at 79. The Court found that Rider did engage in such activity, and the plaintiff organizations “willingly supported those efforts.” Id. The Court concluded, however, that “while the organizational plaintiffs may see Mr. Rider’s media and outreach activities as a benefit, this is not the primary purpose for the payments to Mr. Rider.” Id. Rather, the Court found that:
[T]he primary purpose of the funding provided by the organizational plaintiffs . . . was to secure Mr. Rider’s initial and continuing participation as a plaintiff in this litigation. This is not a case in which the financial support began years--or even months--after Mr. Rider’s advocacy efforts, which might suggest that the organizations were simply providing financial support so that Mr. Rider could continue advocating for an issue or cause to which he had long since demonstrated a commitment. To the contrary, the financial support in this case began before the advocacy efforts and suggests that absent the financial incentive, Mr. Rider may not have begun or continued his advocacy efforts or his participation as a plaintiff in this case. In May 2001, at the time that the organizational plaintiffs commenced providing financial support to Mr. Rider . . . Mr. Rider was the only plaintiff in the case alleging that he had a personal and emotional attachment to FEI’s elephants and the only plaintiff alleging that FEI’s treatment of its elephants caused him aesthetic and emotional injury. . . . [I]t was . . . crucial to the organizational plaintiffs that Mr. Rider remain a plaintiff. The Court finds that ensuring Mr. Rider’s continued participation as a plaintiff was a motivating factor behind the payments to him, and that these payments were a motivating factor for his continued involvement in the case.
Id. at 81.
B. This Action.
FEI’s Amended Complaint here is based on the initiation and prosecution of the ESA Action. FEI alleges that through that *8 litigation, the ESA plaintiffs and their attorneys perpetrated “multiple schemes to permanently ban Asian elephants in circuses, to defraud FEI of money and property, and/or to unjustly enrich themselves.” FAC ¶ 16.
First, FEI alleges that the ESA plaintiffs and their counsel of record knew that the factual assertions underlying Rider’s claims of emotional and aesthetic standing were false. Id. ¶ 51- 53. FEI claims that they paid Rider for this false testimony in order to prosecute the ESA lawsuit, which amounts to bribery and illegal witness payments. Id. ¶¶ 2-3, 60-65, 78-79.
Second, FEI alleges that the payments to Rider were deliberately concealed. All of the organizational plaintiffs in the ESA Action paid Rider during the course of the litigation, beginning as early as May 2001. Id. ¶ 60. These payments were, for the most part, coordinated through counsel of record in the ESA case, Meyer, Glitzenstein & Crystal (“MGC”). Id. ¶ 61. In some cases, “the funds that MGC paid to Rider were charged back to the existing organizational plaintiffs . . . on MGC’s legal bills for the ESA Action.” Id. ¶ 62. At other times, the organizational plaintiffs gave money to the Wildlife Advocacy Project (“WAP”), a non-profit advocacy group founded by attorneys at MGC. Id. ¶ 43. WAP, in turn, made “regular and systematic payments of . . . $1000.00 every two weeks” to Rider. Id. ¶ 112. FEI alleges that defendants tried “deliberately [to] conceal,” *9 id. ¶ 62, and “cover-up the improper payment scheme,” id. ¶ 104, by routing payments through MGC and/or WAP and by characterizing them as legal expenses, “grants” for “media and public education efforts” or “PR efforts.” Id. ¶¶ 62, 104. FEI alleges that each payment to Rider, and each invoice from MGC to the organizational ESA plaintiffs constitutes wire fraud as well as money laundering. Id. ¶¶ 77, 80.
FEI alleges the ESA plaintiffs further sought to conceal the payments to Rider through “responses to discovery in the ESA Action.” Id. ¶ 196. FEI alleges that Rider and some of the organizational plaintiffs failed to disclose that they had paid money to Rider by providing false or incomplete answers in interrogatories and depositions in 2004 and 2005. Id. ¶¶ 199- 230. FEI alleges that this conduct amounts to obstruction of justice. Id. ¶¶ 205, 216, 222, 230.
Third, FEI alleges that the ESA plaintiffs violated mail and wire fraud statutes when, in July 2005, they jointly hosted a fundraiser to raise money from donors to fund the ESA litigation. Id. ¶ 179. FEI alleges the invitation to the fundraiser is “false and or misleading” because, inter alia , it portrays Rider as someone genuinely injured by FEI, and it claims to raise money for a legitimate litigation rather than one characterized by fraud. Id. ¶ 180. FEI claims the mailings defrauded the non- profit organizations’ donors, who gave money on the basis of *10 false information, and defrauded FEI, because money from the fundraiser was used to pay Rider to participate in the ESA Action. Id. ¶¶ 180-82.
Fourth, FEI alleges that Rider testified falsely in proceedings other than the ESA Action. Specifically, FEI alleges that Rider gave false information about FEI and about his own attachment to the elephants he worked with on five occasions: a sworn statement to Congress in 2000, an affidavit to the U.S. Department of Agriculture also in 2000, testimony to a committee of the Connecticut legislature in 2005, testimony to a committee of the Nebraska legislature in 2006, and a statement to the Chicago City Council in 2006. Id. ¶¶ 236-243. Plaintiff alleges this false testimony to the state legislatures, procured through payments to Rider since the inception of the ESA litigation, violates the bribery laws of Connecticut, Nebraska and Illinois. Id. [4]
*11 FEI alleges that it suffered financially from the defendants’ fraud “resulting from the substantial costs incurred by FEI to defend the ESA Action.” Id. ¶ 273. FEI alleges that the ESA Action continued, after May 2001, “only due to the racketeering and tortious activity” of the ESA plaintiffs, WAP and MGC. Id.
FEI initially sought to bring its claims underlying this
lawsuit as permissive counterclaims in the ESA Action.
See
ESA
Action, Case No. 03-2006, Docket No. 121. The Court denied the
motion in August 2007, finding,
inter alia
, that the claims were
made with a dilatory motive--namely, to indefinitely delay and
dramatically change the nature of the ESA Action.
See ASPCA v.
Feld
,
FEI filed this action (hereinafter the “RICO Action”) four days after the Court’s ruling. See RICO Action, Doc. No. 1, Aug. 28, 2007. The original complaint named ASPCA, FFA, AWI, WAP, and Rider, and alleged violations under RICO and the Virginia *12 Conspiracy Act. The defendants in the RICO Action immediately moved to stay the proceedings pending a final judgment in the ESA Action, and the Court granted the motion. Specifically, the Court found that pursuit of the RICO Action while the ESA Action was pending would delay resolution of the ESA Action, thereby prejudicing the ESA plaintiffs, and would not serve judicial economy and efficiency. Feld Entm’t, Inc. v. ASPCA , 523 F. Supp. 2d 1 (D.D.C. 2007). On December 30, 2009, the Court issued its opinion and judgment in the ESA Action. [5] On January 15, 2010, the Court lifted the stay in this action, and on February 16, 2010, FEI filed its First Amended Complaint (hereinafter “FAC”). In addition to the original defendants, the FAC adds attorney defendants MGC, Katherine Meyer, Eric Glitzenstein, Howard Crystal, Jonathan Lovvorn and Kimberly Ockene, as well as organizational defendant Humane Society of the United States (“HSUS”). It alleges violations of RICO (Counts I and II) and the Virginia Conspiracy Act (Count III), as well as common law claims of Abuse of Process (Count IV), Malicious Prosecution (Count V), Champerty (Count VI) and Maintenance (Count VII). After the parties’ unsuccessful attempt at settlement, the *13 defendants filed three motions to dismiss the FAC. [6] The motions to dismiss are now ripe for resolution by the Court.
II. STANDARD OF REVIEW
A motion to dismiss under Rule 12(b)(6) “tests the legal
sufficiency of a complaint.”
Browning v. Clinton
,
III. ANALYSIS
Defendants raise two arguments that the case must be dismissed before reaching the RICO allegations: compulsory counterclaim and Noerr-Pennington immunity. The Court finds that the counterclaim defense must be rejected, and further concludes that although Noerr-Pennington narrows FEI’s claims slightly, it does not dispose of most of the case.
A. Compulsory Counterclaim
The defendants argue that FEI’s RICO claims must be dismissed pursuant to Rule 13(a) of the Federal Rules of Civil Procedure because they should have been raised as compulsory counterclaims in the ESA Action. Federal Rule of Civil Procedure 13(a)(1) provides:
A pleading must state as a counterclaim any claim that--at the time of its service--the pleader has against the opposing party if the claim: (A) arises out of the transaction or occurrence that is the subject matter of the opposing party’s claims; and (B) does not require adding another party over whom the court cannot acquire jurisdiction.
The parties agree that the RICO action does not require adding another party over whom the Court cannot acquire *15 jurisdiction. FEI maintains, however, that the other requirements for a compulsory counterclaim are not met: the RICO action does not arise out of the same subject matter as the claims in the ESA Action, and FEI did not know enough to trigger the filing of a compulsory counterclaim when it answered the Complaints in the ESA Action. The Court concludes that the ESA claims and the RICO claims do not arise out of the same transaction or occurrence, and for that reason finds FEI’s RICO claims were not compulsory counterclaims in the ESA Action. Accordingly, the Court need not determine whether FEI knew enough to file its RICO claims when it filed its Answers in the ESA Action.
The Supreme Court has stated that “‘[t]ransaction’ is a word
of flexible meaning. It may comprehend a series of many
occurrences, depending not so much upon the immediateness of
their connection as upon their logical relationship.”
Moore v.
N.Y. Cotton Exch.
,
(1) Are the issues of fact and law raised by the claim or counterclaim largely the same?
(2) Would res judicata . . . bar a subsequent suit on defendant’s claim absent the compulsory counterclaim? (3) Will substantially the same evidence support or refute plaintiff’s claim as well as defendant’s counterclaim?
(4) Is there any logical relationship between the claim and the counterclaim?
6 C. Wright & A. Miller, Federal Practice and Procedure § 1410 (3d ed. 2011) (collecting cases). Applying these factors to FEI’s RICO claims, the Court finds that they were not compulsory counterclaims.
The Court begins with the first and third factors. The
issues of fact and law raised in the ESA claim, and the evidence
required to sustain it, concerned whether FEI’s treatment of
elephants constituted a taking under the Endangered Species Act.
These are entirely distinct from the issues of fact and law
raised in the RICO case, which has nothing to do with the law of
endangered species or FEI’s treatment of elephants; rather, it
concerns whether the prosecution of the ESA Action was a
racketeering scheme. In order to prove its RICO claim, FEI must
prove that the ESA plaintiffs and their attorneys bribed Rider to
testify falsely about his aesthetic and emotional injury.
Although the Court’s decision in the ESA case that Rider lacked
standing may be helpful to FEI, it is hardly conclusive of a RICO
scheme.
[7]
See, e.g.
,
Majik Mkt. v. Best
,
Turning to the fourth factor, the Court does not find there
is a “logical relationship” between the ESA claim and RICO claim
of the type contemplated by Rule 13(a). “The general purpose of
. . . Rule 13(a) is to have all related actions heard at one
time.”
Chelsea House N. Apts. v. Blonder
,
be dismissed because FEI failed to plead them as compulsory counterclaims in the ESA Action. [8]
B.
Noerr-Pennington
The
Noerr-Pennington
[9]
doctrine is rooted in the Petition
Clause of the First Amendment, which provides that “those who
petition any department of the government for redress are
generally immune from statutory liability for their petitioning
conduct.”
Sosa v. DIRECTV, Inc.
,
In this case, defendants have been involved in both legislative/executive advocacy as well as litigation. The parties spend significant time in their briefs arguing whether the alleged legislative and executive advocacy is immunized pursuant to Noerr-Pennington . However, as explained below, the Court finds that FEI does not have standing to assert claims based on the legislative and executive advocacy; accordingly, the *20 Court need not determine whether such conduct is protected under Noerr-Pennington . See infra Section III.C.5. [10]
Turning to the ESA lawsuit, FEI argues that
Noerr-Pennington
does not apply to bribery or to deliberate misrepresentations to
the Court. Opp’n at 57. The Court agrees. As set forth above,
Noerr-Pennington
does not apply, first and foremost, to bribes,
“in any context.”
Whelan,
However, the FAC alleges defendants engaged in other
activities to garner publicity and urge legislative action, which
*21
involved neither bribery to petition a legislature nor bribery or
deliberately false statements in adjudicative proceedings.
Specifically, it is alleged that Rider and others made false or
misleading statements, and in some cases were compensated to do
so, when they participated in press conferences, made other
statements to news outlets, and posted letters on organizational
websites.
See, e.g.
, FAC ¶¶ 159, 161, 245, 252, 269-71. These
statements were not made during any governmental proceeding.
Rather, the statements were part of “publicity campaign[s] to
influence governmental action,” and therefore are entitled to
Noerr-Pennington
immunity.
Noerr
,
C. RICO
FEI alleges violations under RICO sections 1962(c) and (d).
“A violation of § 1962(c) . . . consists of four elements: (1)
conduct (2) of an enterprise (3) through a pattern (4) of
racketeering.”
Western Assocs. Ltd. P’ship v. Market Square
Assocs.
,
1.
Statute of Limitations
Statute of limitations is an affirmative defense which need
not be asserted in a pre-answer motion. Fed. R. Civ. P. 8(c)(1).
“A defendant may raise the affirmative defense of statute of
limitations via a Rule 12(b)(6) motion when the facts that give
rise to the defense are clear from the face of the complaint.”
DePippo v. Chertoff
,
Civil RICO actions face a four year statute of limitations,
which begins to run from the date of discovery of the injury.
Under the discovery rule, “a cause of action accrues when the
plaintiff has knowledge of (or by the exercise of reasonable
diligence should have knowledge of) (1) the existence of the
injury, (2) its cause in fact, and (3)
some
evidence of
wrongdoing.”
Chalabi v. Hashemite Kingdom of Jordan
, 503 F.
Supp. 2d 267, 274 (D.D.C. 2007) (citations omitted)(internal
quotation marks omitted),
aff’d
,
FEI filed its original Complaint on September 26, 2007. Defendants base their argument that the four year statute of limitations had expired before then on two facts they allege FEI knew before September 2003: first, Rider had been employed by PAWS as a security guard in 2000 (PAWS is another not-for-profit organization dedicated to animal welfare, which was then the lead plaintiff in the ESA case), and second, ASPCA paid Rider’s traveling expenses to testify before various state legislatures. *24 Defs.’ Mem at 22-23. The Court agrees with FEI that these two pieces of evidence, without more, are insufficient to trigger the statute of limitations. See FEI Opp’n at 33-34, 35 (“[A] job with PAWS as a security guard, for which Rider was paid bona fide wages to perform, would not lead to the conclusion that he was being bribed to anchor a lawsuit,” nor does payment of traveling expenses to testify before state legislatures. “The bribery statute expressly excludes from its prohibitions paying a witness the reasonable cost of traveling and subsistence incurred.” (citing 18 U.S.C. § 201(d))). Accordingly, defendants have not conclusively shown that the statute of limitations began to accrue before September 26, 2003, four years before FEI filed its RICO claim.
Defendants argue that even if FEI’s original complaint was timely, the FAC, which added new defendants MGC, Katherine Meyer, Eric Glitzenstein, Howard Crystal, HSUS, Jonathan Lovvorn, and Kimberley Ockene when it was filed in February 2010, is not timely as to the new defendants. Defendants argue that the statute of limitations for the RICO claims against these defendants began running prior to February 2006; accordingly, the new defendants must be dismissed. Defs.’ Mem. at 30 n.20.
In support of their argument, defendants rely on several pieces of information FEI knew in 2005. Specifically, defendants reference (1) a 2001 email (provided to FEI in 2004), stating *25 that three ESA plaintiffs were contributing to Rider’s living and traveling expenses; (ESA Action, Doc. No. 457, Att. 8); (2) a statement by ESA plaintiffs’ counsel in open court in 2005 that plaintiff organizations provided grants to Rider to “speak out about what really happened when he worked” at the circus. (Defs.’ Mem at 9, 23-24; see also September 16, 2005 hearing transcript, ESA Action, Doc. No. 169-13 at 29-30); and (3) FEI’s own statement, in the FAC, that it “did not begin to uncover the payment scheme [to Rider] until the Rule 30(b)(6) deposition of ASPCA, taken in the ESA Action on July 19, 2005.” (Defs.’ Mem at 9, n.5, citing FAC ¶ 32.) [11] Defendants also maintain that in June 2004, Rider responded to an interrogatory from FEI asking him to, inter alia , “[i]dentify all income, funds, compensation, *26 other money or items, including, without limitation, food, clothing, shelter, or transportation, you have ever received from any animal advocate or animal advocacy organization.” ESA Action, Doc. No. 476, Att. 14 at 39. Rider offered to provide FEI with the information requested, subject to a confidentiality agreement; FEI rejected this offer. Id. ; see also Defs.’ Mem. at 9 n.4; Defs.’ Reply at 48 n.43.
FEI responds that again, these statements did not place it on notice that Rider was being paid to be a plaintiff and to testify falsely about his standing. It argues that the 2001 email showed no more than that “organizational plaintiffs may have shared defraying some traveling expenses for Rider in 2001.” Opp’n at 37. And it points out that defendants’ account of the September 16, 2005 hearing is incomplete: counsel’s full statement at the hearing was that Rider is “going around the country in his own van, he gets grant money from some of the clients and some other organizations to speak out and say what really happened when he worked there.” Id. at 38, citing ESA Action, Doc. No. 169-13 at 29-30. FEI argues that this statement is in fact misleading: “it says nothing about the true purpose of the payments, which was to secure Rider’s participation in the ESA case . . . his ‘own van’ was actually bought by [ESA organizational plaintiffs] . . . ‘grant money’ actually meant Rider’s sole livelihood . . . [and] payments had come not from *27 ‘some of the clients’ but from all organizational plaintiffs in the ESA case.” Id. (internal citations omitted).
With respect to the June 2004 interrogatory, FEI points out that in June 2004, FFA, ASPCA and AWI also responded to interrogatories and each of them failed to disclose any payment to Rider, or to WAP or MGC for remittance to Rider; moreover, in his June 2004 interrogatory Rider denied receiving any “compensation” from animal advocates. Opp’n at 37 (citing to ESA Docs. 476, 477, FAC ¶¶ 196, 223-30). With respect to its allegation that “FEI did not begin to uncover the payment scheme described herein until the Rule 30(b)(6) deposition of ASPCA, taken in the ESA Action on July 19, 2005,” FAC ¶ 32, FEI argues that this is “not synonymous with knowledge of the injury, its cause, and some evidence of wrongdoing.” Opp’n at 44. Rather, FEI claims, it is merely “the earliest point alleged in the FAC that even addresses FEI’s knowledge of any of the three requirements of the discovery rule.” Id. ; see also FAC ¶¶ 81, 219 (FEI was not fully aware of MGC’s involvement in the payments to Rider until August 2007; FEI was not aware of FFA/HSUS payments to Rider until August 2007). Finally, FEI responds that “the time in which a case is stayed by court order is excluded from the limitations period” as to all defendants, including those who have not been named when the case is stayed. Opp’n at 45.
The Court is troubled by the statute of limitations argument
with respect to the new defendants. As an initial matter, FEI’s
argument is not persuasive that the statute of limitations is
tolled as to new defendants when a case is stayed.
See Anbinder
v. Kelleher
, No. 92 Civ 7315,
Moreover, as discussed above, defendants point to not- insignificant information at FEI’s disposal before February 16, *29 2006 that, defendants may be able to show, may well have triggered the statute of limitations for RICO against the new defendants. However, FEI asserts it did not discover the alleged RICO violation as to the new defendants until later in 2006, or even until 2007. Opp’n at 30, 32, 33-39, see also FAC ¶¶ 81, 219. The face of the FAC does not clearly provide otherwise. Accordingly, and given the stringent standard defendants must meet to warrant dismissal on statute of limitations grounds on a 12(b)(6) motion, FEI’s RICO claim will not be dismissed as time barred at this stage of the litigation.
2.
Pattern
A “pattern of racketeering activity” requires commission of
at least two predicate offenses on a specified list. 18 U.S.C. §
1961(1), (5). In this case, FEI has alleged the defendants
committed the predicate acts of bribery, illegal witness
payments, money laundering, mail and wire fraud, and obstruction
of justice. FAC at pps. 103-112. “The Supreme Court, however,
has made it clear that in addition to the requisite number of
predicate acts, the plaintiff must show ‘that the racketeering
predicates are related,
and
that they amount to or pose a threat
of continued criminal activity.’”
Edmondson & Gallagher v. Alban
Towers Tenants Ass’n
,
The D.C. Circuit has identified six factors the Court should
consider in deciding whether closed-ended continuity has been
established.
Western Assocs.
,
FEI claims defendants engaged in “multiple schemes to permanently ban Asian elephants in circuses, to defraud FEI of money and property and to unjustly enrich themselves.” FAC ¶ 16. FEI claims it was the primary victim of these schemes, but alleges that third party donors to the organizational defendants were also victimized. [12] Specifically, FEI alleges that the defendants held a fundraiser in 2005 and committed mail and wire fraud by soliciting funds based on “materially false and/or misleading statements about Rider, the ESA Action, and FEI.” Id. ¶ 179. FEI claims that the defendants “unjustly enrich[ed]” themselves “through donations obtained from third parties on the basis of false or otherwise misleading information.” Id. ¶¶ 181-82. Defendants, by contrast, argue that the FAC must be read to boil down to a single scheme: the lawsuit, a single victim: FEI, and a single injury to FEI: the costs of defending the lawsuit. Defs.’ Mem. 47. Defendants claim that the remaining activity is either immunized by Noerr-Pennington (in the case of the legislative and administrative activity) or did not generate *32 additional victims or result in any injury besides the cost of defending against the lawsuit. Id. at 48-49.
The Court agrees with defendants that the ESA Action is,
overwhelmingly, the basis for this lawsuit. However, at this
stage of the proceedings, the Court accepts all facts alleged in
the FAC as true and thus cannot ignore the other allegations in
the Amended Complaint: specifically, the allegedly unlawful
fundraising activity.
[13]
The FAC alleges victims and injuries in
*33
addition to FEI and its lawsuit related costs: the donors who
were allegedly defrauded and lost money as a result. FEI may
ultimately be unable to demonstrate that the fundraising
materials were unlawful or that anyone other than FEI was injured
by them. However, reading the FAC in the light most favorable to
FEI, the Court finds it has alleged more than one victim, and
more than one injury, associated with defendants’ alleged RICO
activity. Accordingly, because FEI has alleged more than a
single victim and a single injury, this case is distinguishable
from
Edmondson
and
Western Associates
.
See Edmondson
,
The remaining factors in the pattern analysis--which, notably, the defendants do not acknowledge or address--also support a finding that FEI has adequately pled closed-ended continuity. The FAC pleads over 1000 predicate acts which varied in nature: bribery, illegal gratuity, mail fraud, wire fraud, claims related to the alleged legislative and administrative advocacy as support for demonstrating a pattern of racketeering activity.
money laundering, and obstruction of justice. It alleges these
acts occurred for eight years: from 2001 through the ESA trial in
2009. And it alleges the acts were committed by thirteen
perpetrators. These factors further distinguish this case from
Edmondson
and
Western Associates. See Edmondson
,
3. Enterprise The defendants make two arguments related to the “enterprise” element of RICO. First, they claim FEI has failed to allege an enterprise that is separate from the person[s] who participate in it. See 18 U.S.C. § 1962(c) (“It shall be *35 unlawful for any person employed by or associated with any enterprise . . . to conduct or participate, directly or indirectly, in the conduct of such enterprise's affairs through a pattern of racketeering activity.”). Second, defendants claim that even if FEI has sufficiently pled the existence of a distinct enterprise, it failed to plead that each and every defendant “participate[d] . . . in the conduct of such enterprise’s affairs.” Id. FEI responds that it has adequately pled both.
i. Distinct Enterprise
“[T]o establish liability under § 1962(c), one must allege
and prove the existence of two distinct entities: (1) a ‘person’;
and (2) an ‘enterprise’ that is not simply the same ‘person’
referred to by a different name.”
Cedric Kushner Promotions,
Ltd. v. King
,
Defendants allege that FEI has not shown a distinct
enterprise because FEI has not alleged how the defendants
conducted or participated in the enterprise’s affairs as opposed
to their own.
[15]
Defendants argue that “all that FEI has alleged
*37
is that the various animal advocates simply engaged in conduct to
further their own interests--the protection of elephants--which
cannot constitute a RICO enterprise.” Defs.’ Mem. at 59. FEI
responds that “the enterprise is plaintiffs’ side of the ESA
case. Defendants associated in fact to bring the ESA case as
plaintiffs, plaintiffs’ counsel and two other benefactors, WAP
and HSUS, supplying money to Rider.” Opp’n at 70. FEI further
argues that the FAC “clearly distinguishes the defendants and
their missions and activities from their involvement in the ESA
case.”
Id.
FEI admits there is “an overlap between the affairs
of the enterprise” and the individual defendants, but argues
“this does not mean that the enterprise is not sufficiently
distinct.”
Id.
at 71 (citing
In re Ins. Brokerage Antitrust
Litig.
,
The Court agrees with FEI. The FAC adequately pleads that
the individual defendants conducted the affairs of the enterprise
as opposed to their own individual affairs, and distinguishes the
parties and their missions and activities from their involvement
in the ESA case. FEI identifies the organizational defendants as
having longstanding missions dedicated to protecting a wide
variety of animals, not merely elephants or circus animals, and
makes clear that their identities are in no way limited to that
‘associated in fact’ RICO enterprise.” (quoting
Living Designs,
Inc. v. E.I. DuPont De Nemours & Co.
,
as plaintiffs in, or beneficiaries of, the ESA litigation. FAC ¶¶ 34-36, 38. It identifies lawyers, law firms, and plaintiff/witnesses, which are distinct entities from the litigation in which they participate or the clients they serve.
The cases defendants rely on do not prove otherwise. In
Yellow Bus
, this Circuit held that a union and its business agent
cannot, without more, form an enterprise -- “an organization
cannot join with its own members to do that which it normally
does and thereby form an enterprise separate and apart from
itself. Where . . . the organization is named as defendant, and
the organization associates with its member to form the
enterprise, the requisite distinctness does not obtain . . .
There is no difference between the union as an entity including
[the officer], and the union plus [the officer], since the whole
is no different than the sum of its parts.”
Reves
and
Cedric Kushner
likewise do not help defendants.
In
Reves
, the Supreme Court focused not on whether the enterprise
was distinct from individual defendants, but whether those
defendants participated in or conducted the affairs of the
enterprise. Finally, in
Cedric Kushner
, the Supreme Court held
*39
that plaintiff could name an employee (Don King) as a RICO person
and his employer (Don King Productions, a closely held
corporation) as an enterprise, because they were two distinct
entities.
ii. Conducted or Participated in the Enterprise’s Affairs
To be liable under RICO, a person must “participate, directly or indirectly, in the conduct of such enterprise’s affairs.” 18 U.S.C. § 1962(c). The Supreme Court has held that in order to meet this requirement, “one must participate in the operation or management of the enterprise itself.” Reves , 507 U.S. at 185. “Of course, the word ‘participate’ makes clear that RICO liability is not limited to those with primary responsibility for the enterprise’s affairs, just as the phrase ‘directly or indirectly’ makes clear that RICO liability is not limited to those with a formal position in the enterprise, but some part in directing the enterprise’s affairs is required.” Id. at 179. This does not mean, however, that “participants” must serve in leadership roles. “An enterprise is ‘operated’ not just by upper management but also by lower rung participants in the enterprise who are under the direction of upper management.” Id. at 184.
Defendants claim that FEI failed to specifically allege “how the animal protection organizations, their lawyers, or Mr. Rider *40 participated in the operation or management” of the enterprise. Defs.’ Mem. at 61. FEI responds with a three page chart detailing the specific paragraphs in the FAC which allege direct, hands-on, continuing involvement in the enterprise, namely the prosecution of the ESA case, by most of the defendants. Opp’n at 73-75.
Specifically, FEI alleges Rider (1) accepted more than $190,000 in cash, property and other benefits, FAC ¶¶ 5, 19-27, (2) provided false testimony in exchange for the money he was paid, FAC ¶¶ 184-91, (3) evaded paying federal income tax on the money, FAC ¶¶ 28-29, and (4) obstructed FEI’s inquiry into the alleged bribery by submitting false affidavits, spoliating evidence and absenting himself from the contempt hearing. FAC ¶¶ 192-93, 223-25.
FEI alleges organizational defendants ASPCA, AWI and FFA (1) were plaintiffs in the ESA lawsuit, and agreed with each other and other defendants in this case to fund Rider’s participation in the lawsuit with knowledge that he would testify falsely regarding his standing, FAC ¶¶ 50-51, 55, 98-129, 144-46, 157, (2) paid Rider for his participation in the fraudulent lawsuit, FAC ¶¶ 69, 132-33, 135-37, 147-49, 159, 161, (3) participated in the July 2005 fundraiser, FAC ¶¶ 179-83, and (4) obstructed FEI’s inquiry into the alleged bribery by submitting false interrogatories, providing false deposition testimony, spoliating *41 evidence and procuring Rider’s absence from contempt hearings. FAC ¶¶ 196-222, 231-35. FEI alleges organizational defendant API became a plaintiff in the ESA Action in 2006 and participated in the alleged bribery of Rider. Id. ¶¶ 169-70, 172-73.
FEI alleges MGC, Meyer and Glitzenstein (1) were counsel of record for the ESA plaintiffs throughout the litigation, FAC ¶¶ 98-129, (2) paid Rider directly and charged amounts on legal bills back to ASPCA, AWI and FAA, FAC ¶¶ 67-68, 72-75, and (3) concealed the payments to Rider, and obstructed FEI’s inquiry into the payments by participating in submission of knowingly false interrogatories and false deposition testimony, and by procuring Rider’s absence from contempt hearings. FAC ¶¶ 50-56, 196-234.
FEI alleges WAP was the alter ego of MGC, was controlled by Meyer and Glitzenstein, and collected over $155,000 from ASPCA, AWI, API, and FFA/HSUS to pay to Rider for his participation in the lawsuit. FAC ¶¶ 43, 82-97, 125-26. FEI further alleges that WAP concealed the nature of the payments to Rider by issuing falsely worded correspondence and making false ledger entries. FAC ¶¶ 113-124.
Based on the foregoing, the Court is persuaded that the FAC adequately pleads participation in the enterprise as to these *42 defendants. [16] Three of the four remaining defendants, Jonathan Lovvorn, Kimberly Ockene and HSUS, have filed separate motions to dismiss, which are considered in separate sections below . The Court therefore turns to the last remaining defendant, attorney Howard Crystal.
Crystal argues that he committed no acts of racketeering, that even if he did commit such acts, the acts do not comprise a pattern of racketeering, and he did not participate in the operation or management of the enterprise. Defs.’ Mem. at 61-62. FEI offers two arguments in response. First, it claims that as a partner or former partner in MGC, Crystal may be held jointly and severally liable for the acts of the partnership during the time he was a partner. Opp’n at 75-76. Second, FEI argues that the FAC properly pleads direct liability as to Crystal, namely that *43 he individually engaged in sufficient racketeering acts to constitute a pattern under RICO, and he participated in the operation or management of the enterprise. Id. at 76-77. The Court finds that FEI has pled only indirect liability as to Crystal .
A partnership, and its partners, may be held jointly and
severally liable for wrongful acts committed by other partners
acting in the ordinary course of business of the partnership.
See, e.g.
, D.C. Code § 29-603.01(1) (each partner is an agent of
other partners, whose acts in the ordinary course of business
bind the others); § 29-603.05(a) (partnership liable for third-
party loss due to partner’s wrongful acts); § 29-603.06(a) (all
partners jointly and severally liable for all partnership
obligations). The Court agrees with several others that have
found vicarious liability based on the racketeering acts of co-
partners is appropriate in RICO claims.
See, e.g.
,
Avianca, Inc.
v. Corriea
, No. 89-3277,
Here, FEI alleges that MGC is a law firm organized as a
general partnership, and alleges that Crystal was a partner in
MGC during at least a portion of the period during which MGC,
Meyer, and Glitzenstein allegedly committed hundreds of
racketeering acts. FAC ¶¶ 39, 40-42, 44-46. At the motion to
dismiss stage, the Court finds that plaintiff has sufficiently
pled joint and several liability.
BCCI Holdings (Luxembourg),
S.A. v. Clifford
,
By contrast, plaintiff does not plead direct liability as to
Crystal. The FAC alleges only one act of racketeering
specifically involving Crystal: the alleged refusal of “MCG and
the lawyer defendants,” to accept a subpoena for Rider, and “on
information and belief, one of more of [the ESA plaintiffs and/or
the lawyers] procured Rider’s absence from the hearing [to which
the subpoena pertained] and told him not to attend.” FAC ¶ 231.
Even assuming that this states a predicate act of racketeering
against Crystal, as opposed to group pleading, it is only a
single act, which is insufficient to meet RICO’s pattern element.
See H.J. Inc.
,
4. Pleading Predicate Offenses
i.
Mail and Wire Fraud
A plaintiff “alleging mail and wire fraud must establish two
essential elements: (1) a scheme to defraud; and (2) use of the
mails or wires for the purpose of executing the scheme.”
Bates
v. Nw. Human Servs., Inc.
,
First, defendants claim FEI did not meet the particularity
requirement of Rule 9(b) because it failed to specify “what . . .
statements were made and in which context, when they were made,
who made them, and the manner in which these statements were
misleading.”
Bates
,
Second, defendants argue that a finding of “specific intent”
to defraud requires the court to determine the state of mind of
the individual corporate officers or employees who made or
approved the fraud. Defs.’ Mem. at 64. Defendants, who cite
Philip Morris
for the state of mind requirement, omit the very
next sentence of the Circuit’s analysis: “[a] person’s state of
mind is rarely susceptible of proof by direct evidence, so
specific intent to defraud may be, and most often is, inferred
from the totality of the circumstances, including indirect and
circumstantial evidence.”
Philip Morris
,
Finally, defendants claim the mail and wire fraud claims
fail because defendants did not “obtain” for themselves the fees
*47
that FEI paid to its attorneys to defend the ESA case. This is
incorrect as a matter of law. Mail fraud lies whether or not the
perpetrator ends up with the victim’s property or money.
Schmuck
v. United States
,
ii. Obstruction of Justice, Money Laundering and Bribery
Defendants claim there are two deficiencies in how FEI has
pled obstruction of justice, money laundering and bribery.
First, defendants argue that plaintiff is attempting to
“bootstrap” into a RICO case a series of discovery disputes or
litigation activity that cannot form the basis for RICO predicate
acts. Defs.’ Mem. at 66; Defs.’ Reply at 29-32. Defendants are
correct that courts have refused to allow “litigation activities”
such as filing fraudulent documents or engaging in baseless
litigation to serve as predicate acts for RICO, but only in
circumstances where such acts constitute “the only allegedly
fraudulent conduct.”
Daddona v. Gaudio
,
Second, defendants allege that plaintiff’s allegations of money laundering, bribery and obstruction of justice should be dismissed because violations of these statutes depend on secrecy or concealment from public view. Defs.’ Mem. at 66-68.
Reprising the factual arguments asserted in support of their compulsory counterclaim and statute of limitations defenses, defendants argue that FEI knew the defendants were supporting Rider because Rider and the other defendants told FEI. Id. Therefore, according to defendants, FEI can satisfy neither the ‘secrecy’ nor the ‘specific intent’ elements of these predicate acts.
The Court finds FEI has adequately pled the elements of
money laundering, bribery and obstruction. “The money laundering
*49
statute criminalizes behavior that masks the relationship between
the individual and his illegally obtained proceeds.”
U.S. v.
Adefehinti
,
The bribery statute requires that payments be given or accepted “corruptly” to influence testimony under oath or affirmation. 18 U.S.C. § 201(b)(3), (4). FEI alleges that the defendants paid Rider approximately $200,000 in order to influence Rider to participate in the lawsuit and to fabricate his claim of standing, upon which the lawsuit was ultimately based. FEI further alleges that the defendants tried to hide the payments themselves, as well as their nature and purpose. FAC ¶¶ 20-32.
Finally, the obstruction of justice statute prohibits, in
relevant part, “corruptly . . . influenc[ing], obstruct[ing], or
imped[ing], or endeavor[ing] to influence, obstruct, or impede,
the due administration of justice.” 18 U.S.C. § 1503. “There
must be a nexus in time, causation or logic between the conduct
and its effect on the proceeding: A defendant must know that his
corrupt actions ‘are likely to affect the . . . proceeding.’”
*50
United States v. Jahedi
,
5. Standing
Defendants argue that FEI cannot establish proximate cause between the predicate acts alleged and its alleged RICO injury. First, they claim FEI cannot show a legally sufficient connection between its injuries and the predicate acts not directly related to the ESA Action, specifically, bribery, illegal gratuity payments, obstruction of justice, money laundering, mail fraud, and wire fraud in connection with defendants’ legislative and executive branch advocacy and fundraising efforts. Second, they argue that FEI cannot show that the lawsuit-related predicate acts proximately caused its injuries. The Court considers each in turn.
i. Causation for Predicate Acts Not Directly Related to Prosecution of the ESA Action.
In order to state a claim under civil RICO, the plaintiff is
required to show that a RICO predicate offense “not only was a
‘but for’ cause of his injury, but was the proximate cause as
well.”
Holmes v. SEC Investor Protection Corp.
,
Defendants note that the only injury FEI alleges is “the substantial costs incurred by FEI to defend the ESA Action.” FAC ¶ 273. Accordingly, they argue that FEI cannot claim injury related to defendants’ legislative and executive advocacy efforts or to their fundraising efforts because any connection between this conduct and FEI’s injury is far too remote to satisfy proximate cause. Turning first to their legislative and administrative advocacy efforts to ban elephants in circuses, defendants note that FEI has alleged no injury from these actions. Defs.’ Mem. at 52; see also Sedima v. Imrex , 473 U.S. 479, 496 (1985) (“[T]he plaintiff only has standing if, and can only recover to the extent that, he has been injured in his business or property by the conduct constituting the violation. . . . [A] defendant who violates section 1962 is not liable for treble damages to everyone he might have injured by other conduct, nor is the defendant liable to those who have not been injured.”). Even if FEI claimed that there is somehow a connection between defendants allegedly defrauding legislative or administrative bodies and FEI losing money by defending the ESA lawsuit, defendants argue that it is far too attenuated to satisfy RICO’s causation requirement. Id. at 53.
The Court agrees with defendants. Even assuming FEI was a
direct target of defendants’ administrative and legislative
efforts, it has not alleged that it suffered any injury from
these efforts. FEI makes a cursory attempt to tie the ESA
litigation to defendants’ legislative efforts, stating,
“defendants sought discovery in the ESA case for use in the
legislative arena; Rider’s stature as a legislative witness was
enhanced by being a plaintiff in” the ESA Action. Opp’n at 69.
Even assuming the truth of this assertion, the Court finds it
insufficient for the purpose of satisfying RICO’s standing
requirements. The FAC contains no allegations that would create
the plausible inference that the defendants’ legislative and
administrative activity “led directly to [FEI’s] injur[y]” of
spending money to defend the litigation.
See Anza v. Ideal Steel
Group
,
Turning to the fundraising activity, FEI alleges that, in July 2005, some of the organizational defendants violated mail and wire fraud statutes by using false and misleading statements in an invitation to a fundraiser to raise money to support the ESA litigation. FEI alleges that the false information enticed *54 defendants’ donors into giving money to support the ESA litigation. FAC ¶¶ 179-183. FEI further alleges that at least one of the defendants, API, “made two payments to WAP for Rider using proceeds from the fundraiser.” Id. ¶ 180. Finally, FEI alleges that it was the direct victim of the scheme because the sole purpose of the fundraiser was to raise money for the ESA Action. Id. ¶ 183.
Defendants argue that FEI has not established direct
causation between their fundraising activities and plaintiff’s
expenses litigating the ESA Action.
Id.
at 54-55. The Court
does not agree. The Supreme Court has held that “[a] scheme that
injures D by making false statements through the mail to E is
mail fraud, and actionable by D through RICO, if the injury is
not derivative of someone else’s.”
Bridge v. Phoenix Bond &
Indem. Co.
,
Defendants argue that FEI cannot show that the donors “would
have withheld their contributions had they received different
information regarding the ESA case[.]” Defs.’ Mem. at 54. The
Court agrees that “it may well be that a RICO plaintiff alleging
injury by reason of a pattern of mail fraud must establish at
least third-party reliance in order to prove causation.”
Bridge
,
ii. Causation for Predicate Acts Directly Related to Prosecution of ESA Action.
Defendants also argue that “FEI cannot establish that it
would not have had to expend resources defending the ESA Action
but for Mr. Rider’s assertion of legal standing . . . [b]ecause
*56
of the
independent
assertion of organizational standing arguments
that were vigorously advanced throughout the entire ESA
litigation.” Defs.’ Mem. at 56. Because none of the alleged
predicate acts relate to the claims of organizational standing,
defendants assert FEI cannot show a direct connection between its
expenses in the lawsuit and the alleged predicate acts: it might
have had to defend a long and costly lawsuit anyway. Plaintiff
responds that this Court found, in its 2009 Opinion deciding the
ESA case, that “the lawsuit could not have been maintained
without Mr. Rider’s participation as a plaintiff.” Opp’n at 68
(quoting
ASPCA v. Feld Entm’t
,
This Court has already decided that Rider’s standing was essential to the prosecution of the ESA lawsuit, from which FEI’s injuries directly flow. In its 2009 Opinion, this Court made a factual finding that:
On June 29, 2001, the Court dismissed this case on the basis that neither Mr. Rider nor the organizational plaintiffs had standing to sue. The [ESA Action] was reinstated by the Court of Appeals in 2003, but solely on the basis of what had been alleged by Mr. Rider with respect to his personal and emotional attachment to the elephants with whom he had worked and the aesthetic injury he claims that he suffered as a result of FEI’s treatment of those elephants. Indeed, *57 the Court of Appeals recognized that Mr. Rider presented the plaintiffs’ “strongest case for standing.” In order for this case to continue it was therefore crucial to the organizational plaintiffs that Mr. Rider remain a plaintiff.
ASPCA v. Feld
,
6. Humane Society of the United States (“HSUS”) Motion to Dismiss
Having addressed the RICO claims raised in the omnibus motion to dismiss, the Court turns to HSUS’s separate motion to dismiss. The FAC contains the following allegations with respect to HSUS. First, FEI claims that HSUS merged with FFA, a plaintiff in the ESA case, on January 1, 2005. [18] FAC ¶ 36. The *58 FAC further alleges that FFA made money available to Rider on several occasions before January 1, 2005, FAC ¶¶ 158-59, and that FFA/HSUS made money available to Rider on several occasions after January 1, 2005, as well. Id. ¶ 160. Second, FEI alleges that Michael Markarian, an officer of FFA/HSUS, gave false deposition testimony to conceal FFA/HSUS’s payments to Rider. FAC ¶¶ 36, 217-22. Finally, FEI claims that FFA/HSUS, operating under the name HSUS, participated in the July 2005 fundraiser which allegedly defrauded donors and FEI. Id. ¶ 179.
In its motion to dismiss, HSUS asserts that, although it “join[ed] forces in a corporate combination” with FFA via an asset purchase agreement, the two organizations did not merge; therefore, FFA’s RICO liabilities cannot be imputed to HSUS. HSUS Mot. To Dismiss (“HSUS Mem.”) at 2. In support of its motion to dismiss, HSUS filed the Asset Acquisition Agreement (“Agreement”) between HSUS and FFA. See HSUS Mem. Ex. A. It also filed excerpts of FFA’s tax returns from 2005, 2006 and 2007, as well as several excerpts of Markarian’s deposition testimony in which he asserts that HSUS never made any money available to Rider. Id. , Exs. B-E. In its opposition, FEI attached additional tax returns filed by FFA. Opp’n to HSUS Mot. to Dismiss, Exs. 1-4.
As a threshold matter, the Court must determine whether it
may consider the attachments to the motion to dismiss without
*59
converting it into a summary judgment motion. The Court
concludes it may consider the Agreement but not the remainder of
the exhibits. Where an attachment to a motion to dismiss is a
document “upon which the complaint necessarily relies, and
because plaintiff does not dispute its authenticity, the Court
may consider [it] without converting [the] motion to dismiss into
a motion for summary judgment.”
Navab-Safavi v. Broad. Bd. of
Governors
, 650 F. Supp
.
2d 40, 56 n.5 (D.D.C. 2009);
see also
Hinton v. Corrections Corp. Of Am.
,
FEI asserts two theories under which HSUS may be liable: merger and successor liability. “A corporate merger consists of a combination whereby one of the constituent corporations remains in being, absorbing in itself all the other constituent corporations, which cease to exist.” See, e.g. , 20 Am. Jur. Proof of Facts 2d 609; see also N.Y. Not-for-Profit Corp. Law § 905. [19] In its opposition, FEI does not seriously contest that FFA continues to exist following the asset purchase. Indeed, it has sued FFA separately as a co-defendant in these actions. Accordingly, no statutory merger occurred.
Under the doctrine of successor liability, a corporation
acquiring assets of another corporation takes on its liabilities
if,
inter alia
, there was a de facto merger of the companies, or
if there is an expressed or implied agreement.
R.C.M. Exec.
Gallery Corp. v. Rols Capital Co.
,
*61
“A de facto merger occurs when a transaction, although not
in form a merger, is in substance a consolidation or merger of
seller and purchaser.”
Cargo Partner AG v. Albatrans, Inc.
, 352
F.3d 41, 45 (2d Cir. 2003) (citations omitted). The hallmarks of
a de facto merger are “(1) continuity of ownership; (2) cessation
of ordinary business and dissolution of the acquired corporation
as soon as possible; (3) assumption of the purchaser of the
liabilities ordinarily necessary for the uninterrupted
continuation of the business of the acquired corporation; and (4)
continuity of management, personnel, physical location, assets,
and general business operation.”
New York v. Nat’l Serv. Indus.,
Inc.
,
HSUS does not dispute, at least for the purposes of its
motion to dismiss, that the transaction between it and FFA
satisfies the last two elements of the de facto merger test. The
first element, continuity of ownership, is not applicable to non-
profit corporations. HSUS’s argument therefore hinges on the
second factor: it argues that there can be no de facto merger as
a matter of law because FFA has not dissolved. However, New York
courts have not necessarily found this factor sufficient, without
more, to overcome a finding of de facto merger. “So long as the
acquired corporation is shorn of its assets and has become, in
essence, a shell, legal dissolution is not necessary before a
finding of a de facto merger will be made.”
AT&S Transp.
, 22
A.D.3d at 753;
see also Cargo Partner AG v. Albatrans, Inc.
, 207
F. Supp. 2d 86, 98 (S.D.N.Y. 2002);
Fitzgerald
,
In this case, although the Asset Purchase Agreement provides for FFA to retain ownership of three real properties, HSUS acquired substantially everything else. Among other things, HSUS acquired the good will, trademarks, logos, donor lists, creative materials and name of FFA. Asset Purchase Agreement § 1.1. It assumed the trade payables in the ordinary course of business, as well as the liabilities and obligations under FFA’s agreements, contracts, orders, leases, and other commitments. Id. § 1.1. HSUS offered employment to all of FFA’s employees, id . § 1.5(b), and automatically extended membership in HSUS to anyone donating $10 or more to FFA, id. § 1.5(e). Taken together, particularly given that the other factors in the de facto merger test weigh in favor of finding a merger, these facts raise a plausible inference that the corporate combination between FFA and HSUS satisfies the requirements of a de facto merger. It may be that FEI will not be able to show that the corporate combination of HSUS and FFA amounts to a de facto merger under New York law; however, for the reasons stated above, the allegation is sufficient to survive a motion to dismiss. [20]
*64
Having found that FEI adequately alleges a de facto merger
of HSUS and FFA, the Court concludes that FEI also alleges the
merged entity conducted or participated in the affairs of the
enterprise. According to the FAC, FFA/HSUS employed attorneys of
record in the litigation, knowingly paid Rider, on multiple
occasions, for his participation in the lawsuit, attempted to
obstruct FEI’s inquiry into the payments to Rider, and co-hosted
the July 2005 fundraiser. FAC ¶¶ 44-45, 60-70, 156-60, 179-83,
217-22. Based on the foregoing, the Court likewise concludes
that the FAC has adequately alleged the merged entity knowingly
agreed to the commission of a violation of § 1962(c), and
accordingly has pled the elements of a RICO conspiracy charge.
See, e.g.
,
Salinas v. United States
,
7. Lovvorn & Ockene Motion to Dismiss Jonathan Lovvorn and Kimberely Ockene, two attorneys of record in the ESA Action, move separately to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6). [21] Lovvorn and Ockene argue that they were merely members of a litigation team: they alternative theories of recovery, see Fed. R. Civ. P. 8(d)(3), FEI has pled no claims against HSUS as an entity independent of its merger with FFA.
[21] Lovvorn and Ockene also move to strike FEI’s notice of supplemental authority as to them. The Court finds FEI’s notice of supplemental authority complies with the Court’s June 24, 2011 minute order permitting such filings; accordingly, the Motion to Strike is DENIED .
committed no acts of racketeering; even if they did commit such acts, the acts do not comprise a pattern of racketeering; and they did not participate in the operation or management of the enterprise. FEI offers two arguments in response. First, it claims that as former partners in Meyer, Glitzenstein and Crystal, Lovvorn and Ockene may be held jointly and severally liable for the acts of the partnership during the time they were partners. Second, FEI argues that the complaint properly pleads direct liability as to Lovvorn and Ockene, alleging that each individually engaged in sufficient racketeering acts to constitute a pattern under RICO, and each participated in the operation or management of the enterprise.
With respect to joint and several liability, the Court
reaches the same conclusion as to Lovvorn and Ockene as it did as
to Crystal (see
supra
section III.C.3); namely, as alleged
partners in MGC, they may be held jointly and severally liable
for the wrongful acts of the partnership or other partners taken
in the course of ordinary partnership business during the time
they were partners. Lovvorn and Ockene respond that they were
“non-equity employees, not general partners,” and therefore
cannot be vicariously liable. Lovvorn & Ockene Reply at 4. FEI
will have the burden to show that these individuals were partners
to establish liability; however, at the motion to dismiss stage,
*66
the Court finds that plaintiff has sufficiently pled joint and
several liability.
BCCI Holdings
,
In addition to joint and several liability for his partners’ and law firm’s actions, the Court finds FEI has plead direct liability as to Lovvorn. The FAC alleges that Lovvorn had actual knowledge of the payments to Rider, that he participated in discussions with other defendants to plan and execute the payments to Rider, and he “directly participated in some or all of the payments that FFA/HSUS made to or on behalf of Rider.” FAC ¶ 44, see also id. ¶ 160 (detailing payments from FFA/HSUS to Rider); FEI Opp’n to Lovvorn & Okene Mot. to Dismiss at 5 (citing ESA Action, DE 166 Exs. 14, 19, 22, & 24; DE 459-12 (correspondence from Lovvorn, as representative of HSUS, to Glitzenstein, enclosing payments to Rider on four separate occasions). For the reasons explained in section III.C.4.ii supra , the Court finds that FEI has sufficiently pled the elements of bribery, and, for the reasons explained in section III.C.2 supra , finds that FEI has sufficiently alleged a closed- ended pattern of racketeering activity sufficient to survive a motion to dismiss.
The FAC also adequately pleads Lovvorn “participated in the
operation or management of the enterprise itself” and therefore
may be liable under § 1962(c).
Reves
,
Here, FEI has alleged that the enterprise was the
plaintiffs’ side of the ESA litigation, which was managed and
controlled by the lawyers in the case. FEI has alleged that
Lovvorn, among other attorneys, participated in the core
activities that constituted the affairs of the enterprise,
namely, litigating the ESA case and planning and executing the
payments to Rider. Moreover, FEI has alleged that he did so
through a pattern of illegal acts, including knowingly procuring
false testimony through bribery. Even if he did so at the
direction of others, Lovvorn may still be liable for
participation in the conduct of an enterprise as a lower-rung
participant “by knowingly implementing decisions, as well as by
making them.”
United States v. Oreto
,
By contrast, the FAC does not plead direct liability under §
1962(c) as to Ockene. The FAC pleads only one alleged act of
*69
racketeering specifically involving Ockene: the alleged refusal
of “MCG and the lawyer defendants,” to accept a subpoena for
Rider, and “on information and belief, one of more of [the ESA
plaintiffs and/or the lawyers] procured Rider’s absence from the
hearing [to which the subpoena pertained] and told him not to
attend.” FAC ¶ 231. Even assuming that this states a predicate
act of racketeering against Ockene, as opposed to group pleading,
it is only a single act, which is insufficient to meet RICO’s
pattern element.
See H.J. Inc.
,
circumstantial evidence.”
U.S. v. Mellon
,
Here, the FAC alleges that Ockene (1) was counsel of record
in the ESA Action both as an attorney at MGC and at FFA/HSUS, FAC
¶ 45, (2) “deliberately misrepresented Rider’s purported standing
in pleadings and other filings before this Court and the D.C.
Circuit in the ESA Action,”
id.
¶ 329, and, (3) “during some or
all of the time period material to this lawsuit . . . had actual
knowledge of the payments to Rider,”
id.
¶ 45. Taking all of
these allegations together and construing them in the light most
favorable to FEI, the Court finds that plaintiff has alleged
Ockene “knew about and agreed to facilitate the scheme” of her
co-defendants, and therefore has alleged RICO conspiracy.
Salinas
,
8. Conclusion as to RICO Claims (Counts I and II) For the reasons set forth above, FEI lacks standing to bring RICO claims regarding the defendants’ alleged legislative and administrative advocacy efforts, as set forth in the FAC, Factual Background, Sections VI and VII. In addition, the allegations that Rider and others made false or misleading statements, and were compensated to do so, when they participated in press conferences, made other statements to news outlets, and posted letters on organizational web-sites, are entitled to Noerr- Pennington immunity. See, e.g. , FAC ¶¶ 159, 161, 245, 252, 269- *72 71. Finally, the FAC fails to allege direct liability under section 1962(c) as to Howard Crystal or Kimberly Ockene. Accordingly, the defendants’ motions to dismiss the RICO claims are GRANTED IN PART as to these allegations. In all other respects, defendants’ motions to dismiss the RICO claims are DENIED.
E. State Law Claims (Counts III-VII)
In addition to their RICO claims, FEI has alleged violations of the Virginia Conspiracy Act, and the torts of abuse of process, malicious prosecution, champerty and maintenance. Defendants have moved to dismiss all of these claims. The Court will address each in turn.
1. Count III: Virginia Conspiracy Act The Virginia Conspiracy Act prohibits actors from conspiring to willfully and maliciously injure another in his reputation, trade, business or profession by any means whatsoever, and, like RICO, provides treble damages for violations. Va. Code. Ann. §§ 18.2-499; 18.2-500(A) (2010). The statute of limitations under the Virginia Conspiracy Act is five years. Id. § 8.01-243(B).
Defendants argue that this claim is barred by the statute of limitations because Virginia follows the occurrence of injury rule, rather than the discovery rule, for claims under the Virginia Conspiracy Act. See id. § 8.01.230 (“[T]he prescribed limitations period shall begin to run from the date the injury is *73 sustained . . . and not when the resulting damage is discovered.”) Defendants argue the sole injury claimed by FEI is the attorneys’ fees it expended in defending the ESA Action, and it began paying those fees on July 11, 2000, when the ESA Case was originally filed. Defs.’ Mot. To Dismiss at 81-82. FEI responds that under Virginia law, regardless of when the injury began, it may recover for the portion of injuries it sustained within the five years preceding the filing of its complaint. Opp’n at 52-53. FEI also argues that the defendants fraudulently concealed their payment scheme, thus tolling the statute of limitations “through at least July 19, 2005.” Id. 50-52. For the reasons explained below, the Court agrees with FEI that under Virginia law it may recover damages for the five years preceding suit, and accordingly the Virginia Conspiracy claim is timely as to at least that portion of FEI’s injury. Accordingly, the Court declines to reach the issue of fraudulent concealment at this stage of the litigation.
Under the Virginia Conspiracy Act, “every action for injury
to property . . . shall be brought within five years after the
cause of action accrues.” Va. Code. Ann. § 8.01-243(B). The
question before the Court is when the cause of action accrues.
“If the wrongful act is of a permanent nature and one that
produces all the damages that can ever result from it, [then] the
entire damages must be recovered in one action and the statute of
*74
limitations begins to run from the date of the wrongful act.
Conversely, when wrongful acts are not continuous but occur only
at intervals, each occurrence inflicts a new injury and gives
rise to a new and separate cause of action.”
Hampton Rds.
Sanitation Dist. v. McDonnell
,
In this case, FEI claims each time the defendants paid Rider constituted a new wrongful act which gave rise to a new injury to FEI’s business, namely, a separate payment of fees to defend the ESA Action. The Court agrees. According to the FAC, there was no one permanent wrongful act, or one that produced all the damages resulting to FEI. Rather, FEI has alleged that over the *75 course of several years, the defendants committed numerous wrongful acts--mainly paying Rider every two weeks or every month to continue to anchor the lawsuit and to testify falsely. Defendants allege each wrongful act resulted in a separate injury to FEI, namely, new legal bills. Accordingly, the statute of limitations does not bar FEI’s Virginia Conspiracy Act claim, at least for the wrongful acts and injuries occurring within five years before the filing of the Complaint, as to the original defendants, or the FAC, as to the newly added defendants. [23]
2. Count IV: Abuse of Process
Abuse of process “lies where the legal system has been used
to accomplish some end which is without the regular purview of
the process, or which compels the party against whom it is used
*76
to do some collateral thing which he could not legally and
regularly be paid to do.”
Bown v. Hamilton
,
FEI alleges that the defendants had several ulterior motives in prosecuting the ESA Action, including “to raise money for their organizations . . . to publicize their cause and pursue their legislative agendas . . . to drain FEI’s resources . . . [and] to attempt to extort FEI into taking elephants out of its circus.” Opp’n at 84-85. FEI also alleges a multitude of acts in the litigation process which were improper and wholly outside the “regular” prosecution of a civil action: namely, defendants filed a lawsuit based on a knowingly fraudulent claim of standing, and bribed their primary plaintiff to participate in *77 the lawsuit and to testify falsely about his standing in order to maintain the lawsuit. Id. And FEI has alleged that the defendants used discovery in the ESA Case to achieve an end not contemplated in the regular prosecution of the charge, namely, to pursue their legislative attempts to ban the use of elephants in circuses. Id. Taken together, these allegations are sufficient to survive a motion to dismiss. Accordingly, defendants’ motion to dismiss the abuse of process claim is DENIED .
3.
Count V: Malicious Prosecution
To succeed on a malicious prosecution claim under District
of Columbia law, a plaintiff “must plead and prove four things:
(1) the underlying suit terminated in plaintiff’s favor; (2)
malice on the part of defendant; (3) lack of probable cause for
the underlying suit; and (4) special injury occasioned by
plaintiff as the result of the original action.”
Morowitz v.
Marvel
,
It is apparent “favorable” termination does not occur merely because a party . . . has prevailed in an underlying action. While the fact he has prevailed is an ingredient of a favorable termination, such termination must further reflect on his innocence of the alleged wrongful conduct. If the termination does not relate to the merits–-reflecting on neither innocence of nor responsibility for the alleged *78 misconduct–-the termination is not favorable in the sense it would support a subsequent action for malicious prosecution.
Brown
,
By contrast, District of Columbia courts have found that
abandonment of an action, or voluntary dismissal for lack of
prosecution, can constitute a termination in plaintiff’s favor
for the purposes of malicious prosecution.
Lucas
, 505 F. Supp.
2d at 127 (when underlying case was dismissed for lack of
*79
prosecution, it may reflect on innocence of defendant);
Brown
,
The ESA Action implicates both standing and abandonment of claims/lack of prosecution. With respect to Tom Rider and API, the Court dismissed the ESA case based on lack of standing and did not reach the merits, namely, whether FEI’s treatment of elephants violated the “take” provision of the ESA. The Court explicitly acknowledged that it was not reaching the merits of the case:
Based on the [Court’s] findings of fact and conclusions of law, the Court concludes that plaintiffs have failed to prove the standing required by Article III . . . . This Court therefore lacks jurisdiction over plaintiffs’ claims. Because the Court concludes that plaintiffs lack standing, the Court does not--and indeed cannot--reach the merits of plaintiffs’ allegations that FEI “takes” its elephants in violation of Section 9 of the ESA.
ASPCA v. Feld Entm’t
,
However, the other ESA plaintiffs, namely ASPCA, AWI and
FFA, abandoned their claims for relief before the Court took the
case under advisement.
ASPCA v. Feld Entm’t
,
At this stage of the litigation, these defendants have provided no “facts of the case” arising from their decision to abandon their claims “from which the Court could find that the disposition did not reflect on the innocence” of FEI. Lucas , 505 F. Supp. 2d at 127. Accordingly, the Court will DENY the motion to dismiss the malicious prosecution claims with respect to the remaining defendants. [25]
*81 4. Count VI: Maintenance
Maintenance means “the act of one improperly, and for the
purpose of stirring up litigation and strife, encouraging others
either to bring actions or to make defense which they have no
right to make, and the term seems to be confined to the
intermeddling in a suit of a stranger or of one not having any
privity or concern in the subject matter, or standing in no
relation of duty to the suitor.”
Golden Commissary Corp. v.
Shipley
,
multiple unconscionable suits were filed or where the unconscionability of the lawsuit was particularly egregious, the courts have found that the costs of defending the suit may satisfy the special injury requirement. Id. at 1282-83. In this action, FEI has alleged that it was forced to defend a litigation which spanned nine years, was not only baseless, but fraudulent from its outset, and was premised on bribery and other alleged criminal activity. Accordingly, the Court cannot find that FEI suffered no special injury at this point in the litigation.
FEI claims that the organizational plaintiffs in the ESA Action, as well as WAP, engaged in maintenance by financing Rider’s participation in the ESA Action. The FAC claims that “WAP was never a party to the ESA Action. WAP was a stranger to any dispute between Rider and FEI concerning any aesthetic injury suffered by Rider as a result of how Rider handles its Asian elephants. Although ASPCA, AWI, FFA/HSUS and API were parties to the ESA Action, they also were in fact strangers to any dispute between Rider and FEI.” FAC ¶¶ 335-36. Defendants respond that maintenance is no longer a viable cause of action in the District of Columbia, and also that WAP and the animal rights organizations had a bona fide interest in the litigation because their mission is to protect animals. Defs.’ Mem. 79. [26] *83 It is unclear to the Court whether the District of Columbia still recognizes the tort of maintenance. Golden Commissary , 157 A.2d at 814 n.2. However, the defendants have not shown that the cause of action has been abandoned here. Moreover, at this stage of the proceedings, the Court cannot accept defendants’ representation that the organizations’ sincere passion for the subject matter of a lawsuit, without more, constitutes the type of “interest” in Rider’s particular claims sufficient to overcome an allegation of maintenance. Accordingly, defendants’ motion to dismiss Count VI is DENIED .
5. Count VII: Champerty
Champerty lies where there is “a bargain to divide the
proceeds of litigation between the owner of the litigated claim
and the party supporting or enforcing the litigation.”
Design
for Bus. Interiors, Inc. v. Hersons’s, Inc.
,
Bickel
,
FEI claims that the arrangement between the attorneys of record in the ESA case and Rider was champertous; the attorneys allegedly “pursued his claim in the ESA case at their own expense and at no expense to Rider. Rider has never paid any attorneys fees or costs to [the attorneys] with respect to their representation of him in the ESA Action. Upon information and belief . . . Rider is not obligated to pay them back[.]” FAC ¶ 347.
The defendants raise three arguments in support of their motion to dismiss the champerty claim. First, they argue the case was brought for injunctive, not monetary, relief; therefore, there are no proceeds at stake in the litigation. Defs.’ Mem. 77. Second, they argue that champerty is solely a contract claim in the District of Columbia; therefore, only parties to the contract and third party beneficiaries have standing to sue to challenge the terms of the retention agreement. Id. Finally, they argue the champerty claim is barred by the statute of limitations. Id. 78.
The Court agrees with defendants that the champerty claim
must be dismissed. First, as defendants point out, this was a
claim for injunctive, not monetary relief, therefore there are no
“proceeds” at stake to share and champerty does not lie. FEI
*85
responds that Rider sought recovery of a statutory reward under
Section 11 of the ESA, therefore, he “expected to get money out
of the case.” Opp’n at 86. This fact is unavailing in the
context of the champerty claim; the FAC explicitly states that
the parties agreed among themselves that “if the ESA Action were
successful for the plaintiffs in that case, Rider would claim a
statutory reward under the ESA, and the attorneys would claim
[statutory] attorneys’ fees under the . . . ESA.” FAC ¶ 348.
Therefore, the FAC does not allege that the parties agreed to
divide the proceeds of the claim between Rider and the attorneys.
And, contrary to FEI’s claim, the mere fact that the statute
under which the claim was brought allows for an award of
attorneys’ fees to the prevailing party does not convert the
claim into one for monetary relief.
See Kerner v. Cult Awareness
Network
,
*86 Even if FEI could show that the lawyers planned to take their fees from the “proceeds” of the ESA Action, which it has not, it has not shown that it may bring a cause of action for the tort of champerty in the District of Columbia. FEI has identified no authority indicating that the District recognizes champerty as a cause of action in tort, and the Court is aware of none. To the contrary, courts applying District of Columbia law in champerty claims have identified it solely as a defense to a contract claim. [28] FEI does not acknowledge any of this authority, citing instead two decisions from other jurisdictions applying North Carolina and again, solely injunctive relief.
[28]
See Marshall
,
Nevada law, both of which explicitly recognize the tort of champerty. High Voltage Beverages LLC v. Coca-Cola Co. , No. 08- 367, 2010 U.S. Dist. Lexis 63308, *8-*9 n.3 (W.D.N.C. June 8, 2010), Del Webb Communities, Inc. v. Partington , No. 08-571, 2009 U.S. Dist. Lexis 85616, *14-*16 (D. Nev. Sept. 18, 2009). FEI offers no reason why this court should ignore District of Columbia law, which it concedes controls its common law claims, and apply Nevada or North Carolina law in this action.
For the foregoing reasons, the Court finds that FEI has not met its burden to plead a plausible claim for relief in its champerty claim, and therefore will GRANT defendants’ motion to dismiss the champerty claim.
IV. CONCLUSION
For the foregoing reasons, defendants’ motions to dismiss Counts I and II and V are GRANTED IN PART and DENIED IN PART ; defendants’ motion to dismiss Counts III, IV, and VI is DENIED , defendants’ motion to dismiss Count VII is GRANTED . Defendants Lovvorn & Ockene’s Motion to Strike Plaintiff’s Notice of Supplemental Filing is DENIED . Defendants shall respond to the First Amended Complaint by no later than August 9, 2012. A separate Order accompanies this Memorandum Opinion.
Signed: Emmet G. Sullivan
United States District Judge
July 9, 2012
Notes
[1] The Court found that the one remaining organizational plaintiff asserting claims in the ESA Action, the Animal Protection Institute (“API”) also lacked standing to proceed. Id. at 95-101. The other organizational plaintiffs abandoned all of their claims for relief during the trial. Id. at 66 n.10.
[2] Inexplicably, during briefing on the Motions to Dismiss,
all of the parties constantly cited to the record in the ESA
Action, while at the same time insisting adverse parties should
not be able to rely on the same record. The Court therefore
addresses at the outset how it will make use of the record in the
ESA Action. Given the centrality of the ESA Action to the
Amended Complaint, the Court takes judicial notice of the record
in the ESA Action in considering the motion to dismiss. The
Court may do so without converting the motion to dismiss into one
for summary judgment.
Covad Commc’ns Co. v. Bell Atlantic Corp.
,
[3] The Circuit did not reach the organizational plaintiffs’
standing, asserted on separate grounds, “because each of them is
seeking relief identical to what Rider seeks.”
[4] FEI claims that other individuals, in addition to Rider, were paid to participate in the ESA Action and other forums. Specifically, FEI alleges that non-party People for the Ethical Treatment of Animals (“PETA”) paid a former FEI employee named Frank Hagan for a period of time in 2004, during which he participated in news conferences and other public events on behalf of PETA, swore a false affidavit to the USDA regarding FEI and was deposed for the ESA Action. Id. ¶¶ 248-257. FEI alleges PETA also paid former FEI employees Archele Hundley and Robert Tom, who attempted to join the ESA Action as plaintiffs in 2007, to testify falsely in the ESA Action and to speak against FEI in “participating in PETA’s legislative and public relations efforts.” Id. ¶ 270; see generally ¶¶ 262-272. The FAC does not, however, name PETA as a defendant.
[5] The decision was affirmed on appeal.
ASPCA v. Feld
Entm’t, Inc.
,
[6] The defendants filed one omnibus motion to dismiss. RICO Action, Doc. No. 54. In addition, defendant HSUS and defendants Jonathan Lovvorn and Kimberly Ockene filed separate motions. Id. , Doc. Nos. 53, 55.
[7] The fact that the Court ultimately resolved the ESA matter on standing grounds in 2009 does not render the RICO
[8] Defendants also argue that this Court’s refusal to allow FEI to add its RICO claims to the ESA litigation in 2007 because those claims were untimely supports their compulsory counterclaim argument . This is inaccurate. FEI’s attempt to add RICO claims to the ESA Action was based on Rule 15(a), regarding amended pleadings, and Rule 13(e), which provides that the Court may permit supplemental counterclaims acquired after a party has already filed a responsive pleading. Fed. R. Civ. P. 13(e). This Court’s concerns in 2007 regarding the lateness of permissive counterclaims are irrelevant to any analysis regarding the timeliness of compulsory counterclaims.
[9]
E. R.R. Presidents Conference v. Noerr Motor Freight,
Inc.
,
[10] Were the Court to consider defendants’ legislative and administrative activity, it would likely find it unprotected under Noerr-Pennington , at least at the motion to dismiss stage. In this case, plaintiff has alleged that Rider’s legislative branch advocacy efforts were “all tainted by bribes.” Opp’n at 55. Specifically, the FAC alleges that ASPCA, AWI, FFA/HSUS, and/or API paid Rider to testify falsely under oath before Congress, three state legislatures, and the USDA, that these payments violated state bribery laws in Connecticut, Nebraska and Illinois as well the federal bribery statutes. FAC ¶¶ 239-243. Under the law of this Circuit, such allegedly corrupt conduct is not protected under Noerr-Pennington . See, e.g. , Whelan , 48 F.3d at 1255.
[11] In the Reply in support of their Motion to Dismiss,
defendants attach excerpts of the deposition transcript; however,
neither plaintiff nor defendants have identified it as part of
the record in the ESA Action. Plaintiffs claim that “because FEI
specifically relies in its Amended Complaint on the deposition
testimony, the Court may consider other portions of those same
documents on a ruling in its motion to dismiss.” Reply at 38,
n.34. The Court declines to consider these excerpts here.
First, defendants improperly submitted this evidence for the
first time in their reply brief.
See, e.g., Holiday CVS Pharmacy
v. Holder
, -- F. Supp. 2d -–,
[12] FEI also claims that defendants “potentially victimized . . . any institution that uses the guide or tethers” on elephants because “the ESA case . . . was brought for the very reason of creating precedent.” Opp’n at 66. FEI fails to explain, however, how RICO is cognizable to protect “potential” victims, at whom the alleged racketeering was not directed and who never suffered any injury. Accordingly, this claim is rejected.
[13] As discussed in section III.C.5
infra
, FEI lacks
standing to pursue the claims related to the alleged legislative
and administrative advocacy. Following oral argument, the
parties submitted supplemental briefs addressing,
inter alia
,
whether FEI could rely on these acts to show a pattern of
racketeering activity even if it has no standing to sue for them.
Upon careful consideration, the Court concludes that FEI cannot,
because FEI has not adequately alleged
any other victims
of the
alleged legislative and administrative activity. See n.12,
supra
(no other institution using elephants injured); see also
Giuliano
v. Fulton
,
[14] These factors likewise distinguish this case from others
cited by defendants, where courts have dismissed RICO cases
focused on a single legal dispute or litigation. In
Jackson v.
Bellsouth Telecomm
.,
[15] As a threshold matter, they claim FEI has not pled “any
distinction between the RICO persons themselves (namely, the
animal protection organizations, their lawyers and Mr. Rider) and
the so called ‘enterprise’.” Defs.’ Mem. at 58. This claim is
unavailing. There are three structural features required to
plead an associated-in-fact enterprise: “a purpose, relationships
among those associated with the enterprise, and longevity
sufficient to permit these associates to pursue the enterprise’s
purpose.”
Boyle
,
[16] In a footnote to their Motion to Dismiss, defendants cite
a number of cases where lawyers or other professionals providing
traditional legal services have not been accorded “participant”
status in a RICO enterprise. Defs.’ Mem. 62 n.33. These cases
are inapplicable here because MGC, Meyer and Glitzenstein are
alleged to have gone far beyond providing traditional legal
services. See FAC ¶¶ 98-129 (alleging lawyers paid Rider to
fabricate his standing as a plaintiff and concealed nature of
payments). In circumstances more like the facts alleged here,
courts have found attorneys conducted or participated in the RICO
enterprise.
Handeen v. Lemaire
,
[17] Defendants argue that standing should not lie because it
would be hard for a court “to ascertain the amount of a
plaintiff’s damages attributable to the violation, as distinct
from other, independent factors” such as organizational standing
or, indeed, FEI’s own role in contributing to the delay and
expense of the litigation. Defs.’ Mem. At 56 (quoting
Anza
, 547
U.S. at 458). The Court does not agree.
Anza
does not stand
for the proposition that no RICO injury could ever be asserted
unless it was solely attributable to the alleged unlawful
activity. Rather, it simply notes that “[t]he less direct an
injury is, the more difficult it becomes” to ascertain the source
of the injury.
Anza
,
[18] HSUS was never a plaintiff in the ESA Action.
[19] The parties agree that New York law governs the Agreement. See Agreement, HSUS Mot. Ex. A., § 11.9.
[20] In its Opposition to HSUS’s motion to dismiss, FEI for the first time implies that even if HSUS and FFA did not merge, HSUS is still separately liable under RICO. If indeed FEI is making such an argument, the Court rejects it. While the Federal Rules permit parties to plead more than one claim in support of
[22] In its Opposition to her Motion to Dismiss, FEI cites to documents in the record of the ESA case which purport to show Ockene’s involvement in these events. In the absence of any allegations in the FAC naming her on these issues, this is simply insufficient to meet the requirements of notice pleading pursuant to Federal Rule of Civil Procedure 8(a). Even assuming FEI did plead Ockene’s involvement in these acts, the Court is skeptical that her involvement would comprise operation or management of the enterprise, either as an upper-rung manager or a lower-rung participant, as a matter of law. Unlike Lovvorn, Ockene is not alleged to have participated in bribery of a witness. Even if her name appeared on interrogatories which contained false information, or if she defended a deposition in which a witness testified falsely, this does not establish that Ockene knew the submissions or testimony were false, much less that she falsified
[23] The cases defendants cite are not to the contrary. In
the three principal cases cited by defendants, the damages all
arose from
one unlawful act
. The courts held that the statute of
limitations began to run from the time any injury was sustained
as a result of the unlawful act, even if the damages reverberated
from that one act for more than five years.
See, e.g.
,
Int’l
Surplus Lines Ins. Co. v. Marsh & McLennan Inc.
,
[24] The case cited by FEI is inapplicable in this
jurisdiction. In
Levy v. Ohl
, the court applied Missouri law,
which states that for the purposes of malicious prosecution,
“[t]ermination is effected by . . . a dismissal by the court with
prejudice[.]”
[25] Defendants also argue, in a footnote, that FEI cannot
plead the fourth element of malicious prosecution, namely, that
it suffered “special injury . . . as the result of the original
action.” Defs.’ Mem. 73, n.38. The Court rejects this argument
at this stage of the proceedings. While it is true that “loss of
income and substantial expense in defending have [] been held
outside the scope of the definition of special injury,”
Joekel v.
Disabled Am. Veterans
,
[26] Defendants also argue that the claim is barred by the
District of Columbia’s three year statute of limitations. FEI
responds that the statute of limitations has not run because (1)
the tort of maintenance is a continuing tort, and therefore FEI
can recover for at least three years’ worth of damages before it
filed the original RICO complaint or FAC; and (2) the defendants
fraudulently concealed their conduct, thus tolling the statute of
limitations. The Court agrees that the maintenance claim is not
barred under the continuing tort doctrine, accordingly, the Court
need not reach FEI’s fraudulent concealment argument. Under
D.C.’s continuing tort doctrine, FEI is entitled to recover
damages “attributable to the part of the continuing tort that was
committed within the limitations period immediately preceding the
date on which suit was brought.”
Jung v. Mundy, Holt & Mance,
P.C.
,
[27] FEI claims that the attorneys also stood to gain financially because “any FEI elephant that plaintiffs could have succeeded in having the Court in the ESA Action order forfeited and transferred to [The Elephant Sanctuary, a client of MGC], would have been beneficial to MGC and/or Meyer in their ongoing attorney-client or other relationship with” The Elephant Sanctuary. FAC ¶ 349. This claim in no way meets the elements of champerty: The Elephant Sanctuary was not a plaintiff in the litigation, and transfer of any elephants there would constitute,