enterprise. Paragraph 15 sets forth the actual structure of the alleged enterprise as consisting of EP-I, EP-II, EP-III together with their respective constituents and Defendant as the selling broker-dealer of each limited partnership. The various general partners of EP-I, EP-II, and EP-III are all alleged to be either subsidiaries, siblings, or affiliates of Defendant. Paragraph 16 reiterates the averment that "PaineWebber Incorporated is directly related and affiliated to the other persons or entities set forth above [and] the Enterprise set forth above." FAC P 16(a).
The sum and substance of these allegations is that the Defendant either was the enterprise or acted as an association-in-fact enterprise along with its subsidiaries, relatives, agents and affiliates. Furthermore, the pleadings and briefs before the Court suggest that the enterprise was acting solely in furtherance of Defendant's own business interests.
Brittingham makes clear that these allegations are insufficient to state a violation of § 1962(c).
This case is not unlike the factual scenario involved in Gilbert v. Prudential-Bache Securities, Inc., 643 F. Supp. 107 (E.D. Pa. 1986), wherein various investors brought a class action against a brokerage house alleging, among other things, that defendant had violated 18 U.S.C. § 1962(c) by engaging in various racketeering activities in connection with the sale of securities. The alleged "enterprise" consisted of various branch offices of the defendant corporation. In Gilbert, the court entered summary judgment for the defendant on the basis that plaintiffs had failed to demonstrate the existence of an enterprise sufficiently distinct from the defendant itself. The court found that, even given the flexible definitions of RICO, "the various branch offices of [defendant Prudential Bache Securities, Inc.] must be regarded as simply a part of the defendant Bache, and not as separate entities." 643 F. Supp. at 109. In addition, the court found that "it was plainly the business of the defendant Bache which was being conducted through the alleged pattern of racketeering activities, and not any separately identifiable business of the various branches." Id.
In contrast to both Gilbert and the instant case is Gurfein v. Sovereign Group, 826 F. Supp. 890 (E.D. Pa. 1993), which involving a RICO action arising from investments in certain real estate limited partnerships. The court in Gurfein allowed the plaintiffs to proceed under § 1962(c) on an alleged enterprise of "all those involved in the supposedly unlawful real estate scheme, including, this court assumes, defendants and others." Id. at 913. In Gurfein, the court determined that the Enright test was met because the partnership's general partners were persons distinct from the defendants. Id. at 915. In fact, the court noted, the general partners had eventually been removed due to disagreements concerning how the partnership was to be managed. Id.
Although policy disagreements are by no means a prerequisite to satisfy the enterprise requirement, a complaint must include an allegation that the enterprise included some person or entity operating outside of the defendant's or defendants' normal scope of business. Here, all members of the alleged enterprise, from the brokers to the general partners of EP-I, were acting in furtherance of Defendant's business. Thus, these entities were not an "enterprise" within the meaning of § 1962(c).
In Plaintiff's Proposed Second Amended Complaint, she has expended considerable effort in describing the structure of the alleged enterprise. See Plaintiff's Proposed Second Amended Complaint at P 15. However, she again fails to identify an enterprise distinct from Defendant. Although Plaintiff describes a large number of corporations and partnerships in her proposed Second Amended Complaint, all of these organizations are under the exclusive control of either Defendant or its parent, PaineWebber Group, Inc. Id. In Exhibit A to the proposed Second Amended Complaint, Plaintiff has provided a large schematic representation of the alleged enterprise. In this chart, Defendant is placed at the top of the pyramid that represents the alleged enterprise. All lines of control flow from Defendant or PaineWebber Group, Inc. The portions of the First Amended Complaint that most strongly suggest an identity between Defendant and the enterprise, notably PP 9, 10 and 14, are not altered in any meaningful way.
Paragraph 16(f) of the proposed Second Amended Complaint retains the allegation that "PaineWebber Incorporated is directly related and affiliated to the other persons set forth above, the Enterprise set forth above." Nothing in Plaintiff's proposed Second Amended Complaint suggests that these owned subsidiaries were acting in some way other than in furtherance of Defendant's business. Thus, even if this Court were to grant Plaintiff leave to amend, she would still not have pleaded a cause of action under § 1962(c).
Plaintiff notes cases in which courts construing § 1962(c) have found enterprises among groups of corporations, United States v. Thevis, 665 F.2d 616, 625 (5th Cir. Unit B) ,cert. denied, 459 U.S. 825, 74 L. Ed. 2d 61, 103 S. Ct. 57 (1982), or unincorporated groups, United States v. Computer Sciences Corp., 689 F.2d 1181, 1190 (4th Cir. 1981), cert. denied, 459 U.S. 1105, 74 L. Ed. 2d 953, 103 S. Ct. 729 (1982). Plaintiff appears to misperceive the problem. It may well be that, under the proper circumstances, the "enterprise" alleged here is of a nature that could support a claim under § 1962 (c). In the instant case, however, Plaintiff does not allege that the enterprise is sufficiently distinct from the "person" that she is suing. Indeed, as the Computer Sciences court held, "'enterprise' was meant to refer to a being different from, not the same as or part of, the person whose behavior the act was designed to prohibit and, failing that, to punish." 689 F.2d at 1190. For the foregoing reasons, Plaintiff's allegations, both in her First Amended Complaint and in her Proposed Second Amended Complaint, fail to allege an "enterprise" sufficiently distinct from PaineWebber. Accordingly, the § 1962(c) claim against PaineWebber must be dismissed.
D. Plaintiff's Claim under § 1962(d)
Defendant moves for dismissal of Plaintiff's § 1962(d) claim on the ground that, having failed to state a viable cause of action under § 1962(a)-(c), Plaintiff's claim under this provision cannot survive. It is well established in this circuit that, in order to successfully plead a cause of action for a RICO conspiracy under § 1962(d), a plaintiff must first establish a violation of at least one of the three other subsections. Jaguar Cars, Inc. v. Royal Oaks Motor Car Co., 46 F.3d 258, 262 (3d Cir. 1995); Lightning Lube, 4 F.3d at 1191 (citing Leonard v. Shearson Lehman/American Express, Inc., 687 F. Supp. 177, 182 (E.D. Pa. 1988)); Kehr Packages, Inc., 926 F.2d at 1411 n.1; Jiffy Lube International, Inc. v. Jiffy Lube of Pennsylvania, 848 F. Supp. 569, 583 & n.20 (E.D. Pa. 1994) (citing Lightning Lube); Rolo v. City Investing Co. Liquidating Trust, 845 F. Supp. 182, 224 (D.N.J. 1993), aff'd, 43 F.3d 1462 (3d Cir. Nov. 9, 1994) (table); Pagnotti Enterprises, Inc. v. Beltrami, 787 F. Supp. 440, 447-48 (M.D. Pa. 1992). In light of the Court's determination that Plaintiff's other RICO claims fail to state a cause of action, this claim must be dismissed as well.
Because Plaintiff's Amended Complaint does not state a cause of action, Defendant's Motion to Dismiss will be granted. Because Plaintiff's proposed Second Amended Complaint does not remedy the fatal flaws of the Amended Complaint, Plaintiff's Motion for Leave to Amend will be denied. An appropriate order follows.
AND NOW, this 11th day of May, 1995, for the reasons stated in the accompanying Memorandum, IT IS HEREBY ORDERED
1) that Plaintiff's Motion for Leave to File a Second Amended Complaint [Doc. 36] is DENIED;
2) that Defendant's Motion to Dismiss [Doc. 13] is GRANTED; and Plaintiff's First Amended Complaint is DISMISSED with prejudice; and
3) that Plaintiff's Motion for Certification of Class Action [Doc. 10] is DENIED as moot.
Sean J. McLaughlin
United States District Judge