Starnes, defendants had argued that RICO cannot apply to a conspiracy to commit a single arson; the predicate acts were mail fraud and interstate travel with the intent to commit arson. The court held that although there was a single objective, the arson, several acts of racketeering were necessary to meet the single objective. Similarly, while there may have been only one transaction intended or one objective, defendants allegedly committed several racketeering acts to entice plaintiffs to enter that transaction. Therefore, defendants' motion to dismiss on the grounds of failure to plead a pattern of racketeering activity will be denied.
Defendants also contend that plaintiffs have failed to plead an enterprise separate from the defendants. In B.F. Hirsch v. Enright Refining Co., Inc., 751 F.2d 628, 633-34 (3d Cir. 1984), the court held that the "person" charged with the RICO violation cannot be the same entity as the "enterprise" under section 1962(c). The court concluded that this holding was mandated by the Congressional intent to punish infiltrating racketeers rather than the legitimate corporation which might be an innocent victim of the racketeering activity.
Plaintiffs have alleged two counts in their RICO complaint; these will be examined in seriatim. In count one of their complaint, plaintiffs allege that each of the following is an enterprise within the meaning of 18 U.S.C. § 1962(c): (1) Dumas, (2) Mega Corp., and (3) "the association Defendants entered into with McElroy, Dumas, and Mega for the purposes of providing mortgage financing for commercial projects in general, and for the purpose of providing mortgage financing for Plaintiffs in particular." Defendants contend first that plaintiffs have not pleaded sufficient facts to establish that Mega and Dumas are RICO enterprises. Again, I believe that defendants have confused what must be pleaded with what must be proved. As the court in Seville Indus. Machinery v. Southmost Machinery, 742 F.2d 786 (3d Cir. 1984) noted, United States v. Riccobene, 709 F.2d 214 (3d Cir.), cert. denied sub nom. Ciancaglini v. United States, 464 U.S. 849, 104 S. Ct. 157, 78 L. Ed. 2d 145 (1983) and United States v. Turkette, 452 U.S. 576, 69 L. Ed. 2d 246, 101 S. Ct. 2524 (1981) upon which defendants rely, do not address what must be pleaded in order to state a cause of action. The Seville court held that the rules of pleading require nothing more than that the plaintiff identify the four entities it believed were the enterprises that had been marshalled against it. 742 F.2d at 790. I thing that plaintiffs' allegations in count one are more than sufficient to satisfy the pleading rule under the reading of Seville. Moreover, I believe that plaintiffs have sufficiently alleged the background facts pertaining to Dumas and Mega to establish that they are enterprises.
Similarly, I cannot accept defendant's argument that the association of Mega, Dumas, and Lomas & Nettleton cannot constitute a RICO enterprise in this case because Lomas & Nettleton is a RICO person. The error in defendants' reasoning is the assumption that a RICO "person" can never be a member of the enterprise. The enterprise plaintiffs allege is the association of which Lomas & Nettleton is a member and which Lomas & Nettleton allegedly used to defraud plaintiffs. Therefore, this case can be distinguished from Hirsch where the enterprise and the person were the same corporate entity.
In count two plaintiffs state a RICO claim against James J. Gormley and allege that defendant Lomas & Nettleton is an enterprise within the meaning of 18 U.S.C. § 1962(c). Gormley was employed by and associated with Lomas & Nettleton at the time of the alleged incidents. Defendant contends that defendant Gormley cannot be a RICO "person" associated with Lomas & Nettleton as a RICO "enterprise" because Gormley's acts were performed in the course and scope of his employment with Lomas & Nettleton. Again, I believe that defendants raise issues which go beyond the scope of a motion to dismiss. Moreover, I do not find the court's decision in Tarasi v. Dravo Corporation, 613 F. Supp. 1235 (W.D. Pa. 1985) dispositive. In Tarasi, the enterprise was alleged to be the corporation and the defendant or the RICO person was the corporation. The Judge concluded that the fact that the action giving rise to the RICO claim were performed by agents of the corporation were irrelevant because the corporation could only act through its agents. In this case, the RICO person is Gormley who was an employee of the alleged enterprise, the corporation.
Section 1962(c) only applies to a person "employed by or associated with" the enterprise. Therefore, § 1962(c) presupposes that the RICO person may be using his employment position to perform the alleged racketeering acts, and plaintiffs' allegations are sufficient. It is premature for me to determine that Gormley and Lomas & Nettleton were one and the same; as alleged, the employee"RICO" person and the corporate employer/RICO "enterprise" are two separate entities.
Defendants' final argument is that plaintiffs have failed to allege fraud with sufficient specificity pursuant to Fed.R.Civ.P. 9(b). The court in Seville Indus. Machinery v. Southmost Machinery, 742 F.2d 786 (3d Cir. 1984), addressed the precise issue of what plaintiffs must plead in a RICO action to satisfy the requirements of Rule 9(b). The court specifically noted that allegations of date, time, and place are not required. Rather, fraud allegations are sufficient if they place the defendant on notice of the precise misconduct with which they are charged and are sufficient to safeguard defendants against spurious charges of immoral and fraudulent behavior. I am satisfied that plaintiffs' allegations satisfy the requirements of Rule 9(b). Plaintiffs have described the scheme to defraud and the statements or omissions made to effect that scheme. It is not necessary that they set forth the time or date for each statement, letter or telephone call. Therefore, I conclude that defendants' contentions must be rejected.
An appropriate order follows.
O R D E R
NOW, February, 1986, upon consideration of defendants' motion to dismiss, plaintiffs' response, the memoranda of law submitted by the parties, and for the reasons stated in the accompanying memorandum opinion, IT IS ORDERED that defendants' motion to dismiss is DENIED.