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FIORENTINO v. CONVERSE

January 31, 1989

ROCCO J. FIORENTINO
v.
JOHN D. CONVERSE, KATHLEEN CONVERSE, JOHN T. CONVERSE MAUREEN CONVERSE, RICH FARGO, a/k/a DONALD FARGO, CINDY DiFAZIO, ICE SYSTEMS OF NEW JERSEY, INC., FOOD SERVICE EQUIPMENT CONTRACTORS, INC., FRANK RAPOPORT, ALAN GORDON and SAUL, EWING, REMICK & SAUL



The opinion of the court was delivered by: REED

 LOWELL A. REED, JR., UNITED STATES DISTRICT JUDGE

 Before the court is the motion of the defendants John D. Converse, Kathleen Converse, John T. Converse, Maureen Converse, Rick Fargo a/k/a Donald Fargo, Cindy DiFazio, Ice Systems of New Jersey, Inc. and Food Service Equipment Contractors, Inc. to dismiss plaintiff's complaint for failure to state a claim under the RICO statute. *fn1"

 I

 FACTUAL BACKGROUND

 The facts, as alleged in plaintiff's complaint, are as follows: Plaintiff Rocco Fiorentino and John D. Converse were equal shareholders in J&R Equipment Service, Inc. (J&R), with each owning 2,500 shares of the 5,000 shares of outstanding capital stock. At the time of the alleged events, J&R was engaged in the sale, service and distribution of restaurant equipment and owned all of the outstanding capital stock of Leasomatic, Inc. (Leasomatic), a corporation which leased medical, capital and transportation equipment.

 On January 1, 1986, plaintiff and defendant John Converse entered into a stock purchase agreement, promissory note and guaranty. J&R agreed to purchase plaintiff's 2,500 shares of capital stock in exchange for $ 1,100,000.00 in cash, plus all the outstanding capital stock of Leasomatic to be payed in 120 equal monthly installments of $ 9,166.67 personally guaranteed by John D. Converse. The agreement documents required the plaintiff to deliver to John D. Converse the certificates representing his ownership of the 2,500 shares of the capital stock in J&R, giving Converse the right to vote those shares as well as appointing Converse agent, attorney and proxy. Plaintiff performed all of these contractual provisions and from January 1, 1986 through January 1, 1987 received 13 monthly installments totalling $ 119,166.71 paid on account. On February 1, 1987, plaintiff and defendant John D. Converse agreed to reduce the monthly installments to $ 5,500.00 and agreed that all other previously agreed upon provisions would remain in effect. From February 1, 1987 through January 1, 1988, plaintiff received $ 66,000.00 in 12 monthly installments at the agreed upon reduction, bringing the total amount paid thus far to $ 185,166.71. Plaintiff alleges that despite his demands, since February 1, 1988, John D. Converse and J&R failed to render the remainder of the payments to the plaintiff.

 I

 DISCUSSION

 For purposes of a motion to dismiss, I must of course accept as true all of plaintiff's well pleaded allegations, Jenkins v. McKeithen, 395 U.S. 411, 421-22, 23 L. Ed. 2d 404, 89 S. Ct. 1843 (1969), and construe them in a light most favorable to the plaintiff. Scheuer v. Rhodes, 416 U.S. 232, 237, 40 L. Ed. 2d 90, 94 S. Ct. 1683 (1974); Conley v. Gibson, 355 U.S. 41, 45-46, 2 L. Ed. 2d 80, 78 S. Ct. 99 (1957). However, in order for a civil RICO claim to survive a Rule 12(b)(6) motion, plaintiff must allege (1) the conducting of, (2) an enterprise, (3) through a pattern, (4) of racketeering activity. Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 496, 87 L. Ed. 2d 346, 105 S. Ct. 3275 (1985). "The plaintiff must, of course, allege each of these elements to state a claim." Id. Because I find that the conduct alleged in plaintiff's complaint does not constitute a pattern of racketeering activity under the RICO statute, I will dismiss plaintiff's RICO claims.

 Interpreting what constitutes a "pattern of racketeering activity" under the RICO statute is an issue which the federal courts have grappled with often in recent years. In Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 496, 87 L. Ed. 2d 346, 105 S. Ct. 3275 (1985), the Supreme Court addressed the concept of a pattern of racketeering activity and cautioned that "while two acts are necessary, they may not be sufficient." Id. at 496 n.14. The Court, however, failed to define that term further, leaving the lower federal courts and Congress to clarify what constitutes a pattern of racketeering activity under the statute. Id. Since the Supreme Court's decision in Sedima, the Third Circuit has confronted this issue on a number of occasions. See Environmental Tectonics v. W.S. Kirkpatrick, 847 F.2d 1052 (3d Cir. 1988); Saporito v. Combustion Engineering Inc., 843 F.2d 666 (3d Cir. 1988); Marshall-Silver Construction Company, Inc. v. Mendel, 835 F.2d 63 (3d Cir. 1987); Barticheck v. Fidelity Union Bank/First National State, 832 F.2d 36 (3d Cir. 1987). *fn2" In what has become the seminal case in this circuit on the issue of what constitutes a pattern of racketeering activity, the court of appeals, in Barticheck v. Fidelity Union Bank/First National State, 832 F.2d 36 (3d Cir. 1987), articulated six factors to be used on a case-by-case basis in evaluating whether, under the facts of a particular case, the plaintiff has stated a claim under RICO. The factors relevant to the analysis include: the number of unlawful acts, the length of time over which the acts were committed, the similarity of the acts, the number of victims, the number of perpetrators, and the character of the unlawful activity. Id. at 39. The Barticheck court, applying these factors to the facts of that case, *fn3" found that plaintiff had indeed enunciated a pattern of racketeering activity and therefore found that the district court erred in dismissing the complaint.

 The Third Circuit had occasion to once again confront this issue shortly after Barticheck was decided. In Marshall-Silver Construction Company, Inc. v. Mendel, 835 F.2d 63 (3d Cir. 1987) a general contractor brought suit against an engineering firm, its officers, and a law firm of which the officers were members, alleging that over the course of a year, the defendant fraudulently forced the general contractor into bankruptcy. According to Marshall-Silver, the defendants' company did not perform adequately on its contracts, and plaintiff thereafter withheld payment. One of the defendants subsequently confronted the plaintiff regarding the withheld payment and wrote two strongly-worded letters threatening to destroy the plaintiff unless he paid defendants for the work. Defendants then filed a petition in the bankruptcy court requesting that plaintiff be put into involuntary bankruptcy and contacted the press in order to publicize the filing of the bankruptcy petition. Plaintiff alleged that the defendants were aware that the petition was false, and that the publicity surrounding the petition essentially destroyed its ...


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