that such use of proceeds can constitute maintaining one's interest in an enterprise. Therefore, we will deny Nardone's motion to dismiss Blue Cross's claims under § 1962(b).
D. Separate Entities Under § 1962(c)
Blue Cross, Nardone, and numerous federal judges all agree that § 1962(c) requires an enterprise that is a distinct entity from the person charged with the violation. See, e.g., B.F. Hirsch v. Enright Refining Co., Inc., 751 F.2d 628 (3d Cir. 1984); Wright v. Everett Cash Mut. Ins. Co., 637 F. Supp. 155 (W.D. Pa. 1986).
Nardone asserts that he and the Pharmacy are not two separate entities. Because he is the sole owner of the Pharmacy, Nardone argues, the two entities merge for purposes of the RICO statute. Nardone cites two cases in support of his merger argument. In B.F. Hirsch v. Enright Refining Co., Inc., 751 F.2d 628 (3d Cir. 1984), the plaintiff sued only a corporation. The Third Circuit court held that a corporation could not be both the defendant and the enterprise under § 1962(c). The court dismissed the § 1962(c) count for lack of a separate entity, but did not discuss the merger doctrine. In Wright v. Everett Cash Mut. Ins. Co., 637 F. Supp. 155 (W.D. Pa. 1986), the defendant argued that the court should consider an insurance agent and an insurer as one entity. The court refused. Thus, the authority Nardone cites does not support Nardone's assertion of the merger doctrine.
Blue Cross cites McCullough v. Suter, 757 F.2d 142 (7th Cir. 1985), in opposition to Nardone's contentions. In McCullough, the plaintiff sued the defendant under § 1962(c) naming the defendant's sole proprietorship as the enterprise. The court held that an individual and his sole proprietorship are separate entities unless the proprietorship is "strictly a one-man show" and has no employees other that the owner. Id. at 144.
If Nardone was, in fact, the sole employee of the Pharmacy during the time period at issue, then Blue Cross may not have a claim under § 1962(c). For purposes of this Motion to Dismiss, however, we must accept Blue Cross's factual assertion that the Pharmacy and Nardone are separate entities. Therefore, we find that Blue Cross's allegations of a separate enterprise are sufficient.
E. Pattern of Racketeering Under RICO
Nardone asks this court to dismiss all the RICO counts, averring that Blue Cross's allegations constitute a single scheme or artifice, not a pattern of racketeering. Nardone argues that RICO requires multiple schemes or episodes, citing several district court cases from Pennsylvania. See, e.g., Wright v. Everett Cash Mutual Insurance Company, 637 F. Supp. 155 (W.D. Pa. 1986); Teleprompter of Erie, Inc. v. City of Erie, 537 F. Supp. 6 (W.D. Pa. 1981).
The Third Circuit recently issued an opinion that resolves many of the ambiguities surrounding the pattern requirement. In Barticheck v. Fidelity Union Bank/First Nat. State, 832 F.2d 36 (3d Cir. 1987), individuals and a bank fraudulently induced the plaintiffs to invest funds in an oil and gas drilling partnership.
The circuit court concluded, and in fact the plaintiffs conceded, that all the fraudulent misrepresentations were part of a single scheme. The court noted that several individuals and a bank carried out the scheme, and that the scheme involved the repetition of similar misrepresentations to more than twenty investors. From these two circumstances, the court concluded that the conduct constituted a pattern: "to refer to such conduct as a 'pattern' of fraudulent activity certainly comports with the ordinary understanding of the term, and we believe that this conduct properly falls within the reach of the RICO statute." Id. at 39.
The instant facts are somewhat less compelling that the facts in Barticheck ; a single individual defrauded a single corporation. Nonetheless, we find that repeated submissions of false claims over a thirteen month period form a pattern as defined by the Third Circuit.
F. Open-ended Requirement Under RICO
Some courts have imposed an additional requirement that the pattern of activity be open-ended or ongoing. Nardone again cites some district court cases in Pennsylvania to support this proposition. However, the Third Circuit rejected the open-ended requirement in Barticheck v. Fidelity Union Bank/First Nat. State, 832 F.2d 36 (3d Cir. 1987). The court stated that, "we also reject the view that racketeering acts committed pursuant to a single scheme can constitute a RICO pattern only if the scheme is ongoing or open-ended. This requirement is ostensibly derived from the statement in RICO's legislative history . . . that a pattern must display "continuity" . . . . At the very least, such a requirement would produce anomalous results." Id. at 39.
Applying the Barticheck reasoning to the instant facts, we find that an open-ended requirement would produce the anomalous results forecast by the circuit court. Nardone allegedly stopped his fraud only when Blue Cross uncovered his misrepresentations. In effect, Nardone asks us to shelter him from the provisions of the RICO statute because he got caught. We decline to do so.
G. Pendant Jurisdiction
Finally, Nardone asks us to dismiss the state claims because Blue Cross failed to state a federal claim. Because we have concluded that Blue Cross did state a claim under the RICO statute, we also find that this court has pendant jurisdiction over Blue Cross's state claim. United Mine Workers v. Gibbs, 383 U.S. 715, 16 L. Ed. 2d 218, 86 S. Ct. 1130 (1966).
After examining the standards of the RICO statute and the instant facts, we conclude that Blue Cross has stated valid claims. Blue Cross has alleged that Nardone's use of funds to operate the Pharmacy injured them, that Nardone and the Pharmacy are separate entities, and that Nardone conducted a pattern of racketeering activity. We will, therefore, deny Nardone's motion to dismiss the RICO counts and the related state claims.
AND NOW, this 23rd day of February, 1988, for the reasons set forth in the accompanying Memorandum Opinion,
IT IS HEREBY ORDERED that:
(1) the Defendant's Motion to Dismiss is DENIED; (2) the Defendant shall file an answer or other responsive pleading on or before March 15, 1988.
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