against the finding of continuity") (Greenberg, J., dissenting).
Central Asia can constitute an "enterprise" within 18 U.S.C.A. § 1962(a). While under 18 U.S.C.A. § 1962(c), "a claim simply against one corporation as both 'person' and 'enterprise' is not sufficient," Jaguar Cars, Inc. v. Royal Oaks Motor Car Co., Inc., 46 F.3d 258, 268 (3d Cir. 1995), this distinctiveness requirement does not apply to cases, like this one, where violations of 18 U.S.C.A. § 1962(a) are alleged. See Kehr Packages, 926 F.2d at 1411 (noting "while an entity can be both an enterprise and a defendant for purposes of § 1962(a), such a dual role is impermissible in actions based on § 1962(c)") (citing Banks v. Wolk, 918 F.2d 418, 421 (3d Cir. 1990)).
The record contains genuine issues of material fact with respect to whether Central Asia received the red clause money from a pattern of racketeering activity -- involving mail and wire fraud -- and used those funds in its operations. Central Asia denies these allegations and Feinberg's case rests on such a theory. (Compare Def.'s Supp. Mem. Ex. 5 (deposition of Alan Tang denying that "Central Asia ever [made] a proposal to Fashion Will or Products Union that they obtain an increase in a Letter of Credit that would be available so the amount outstanding could be reduced"), with Pl.'s Mem., Arndt Dep. at 225-26 (averring Central Asia "used the [red clause advances] to pay off call loans, to use additional call loans to pay off trust receipts, and to recycle their type of facility into self-liquidating types of transactions to make their credit position easier")).
"Under § 1962(a), a plaintiff must allege injury specifically from the use or investment of income in the named enterprise." Kehr Packages, 926 F.2d at 1411 (citation omitted). Feinberg's submissions could convince a jury that red clause advances were used by Central Asia to pay off debt owed by Fashion Will and Products Union to Central Asia. Use of the allegedly misappropriated advances in this manner could constitute an investment by Central Asia in its own operations. See Crowe v. Henry, 43 F.3d 198, 203 (5th Cir. 1995) (finding sufficient allegations of injury where Crowe claimed "funds that he owned that were allegedly fraudulently taken . . . were invested into the enterprise and used to reduce the indebtedness on land that Crowe alleges was taken from him through a pattern of racketeering activity"). A jury could also find that this supposed misapplication of the funds prevented Fashion Will from purchasing raw materials and therefore filling Feinberg's order. Feinberg purportedly lost his investment.
Moreover, Feinberg contends, with substantiating submissions, that "Central Asia attempted to convert what were unsecured or under secured loans into loans secured by the credit of Meridian and ultimately Feinberg. As a consequence . . . Central Asia materially reduced its own exposure to Fashion Will and [Products Union] during a year when it was assigning more and more debt to the uncollectible or doubtful category." (Pl.'s Mem. at 64 (referring to Exs. 146-47; Ex. 174)).
Central Asia's arguments with respect to Feinberg's inability to prove mail fraud -- specifically lack of duty, statement only of a future promise, and no reliance -- fail for the same reasons articulated supra in the analysis of the common law fraud claim. See also Tabas, 47 F.3d at 1290 n.15, 1294 n.18 (remarking that 18 U.S.C.A. § 1341 reaches "beyond the common law definition of false pretenses to encompass everything designed to defraud by representations as to past or present, or suggestions and promises as to the future . . . . Completely innocent mailings can satisfy the mailing element") (citation omitted).
Finally, regarding conspiracy, the record contains evidence that could support a jury's finding that a conspiracy existed between Central Asia and Fashion Will lasting from June, 1994 through September, 1995 to misapply fraudulently obtained advances to Fashion Will's accounts in an effort to reduce debts owed by both Fashion Will and Products Union. See Shearin v. E.F. Hutton Group, Inc., 885 F.2d 1162, 1166 (3d Cir. 1989) (requiring adequately pled conspiracy claim to present allegations delineating "the period of the conspiracy, the object of the conspiracy . . . the certain actions of the alleged conspirators taken to achieve that purpose . . . . agreement to commit predicate acts[,] and knowledge that the acts were part of a pattern of racketeering activity") (citation omitted). Central Asia's denial of such a conspiracy creates genuine issues of material fact as to whether it existed. (See Def.'s Supp. Mem. Ex. 6 at 98 (deposition of Alan Tang denying these allegations)). According to Feinberg, at the same time that Central Asia grew concerned about the economic viability of Fashion Will and Products Union, Fashion Will told Feinberg it needed the red clause advances to combat the higher prices of cotton. Exactly who suggested the red clause advances as a way to obtain money remains an open question. (Compare Def.'s Supp. Mem. Ex. 6 at 23-24 (alleging "it was Fashion Will . . . who requested [and made the decision] that the funds . . . went to the Loans Department"), and Ex. 7 at 14-15 (referring to "oral instructions from Fashion Will"), and (Pl.'s Mem. Ex. 14) (facsimile from Fashion Will to Feinberg asking "could u help to ask Debbie to rush out the amendment of Red Clause L/C to us"), with Pl.'s Mem. Ex. 112; Exs. 116-17; Exs. 125-29 (documents from Fashion Will requesting the red clause advance that left blank the "Other Instructions" provision)).
Accordingly, Feinberg's RICO claim will proceed.
Article 5 does not include a definition of the functions performed by Central Asia and is completely silent as to the red clauses. Neither Article 5 nor "letter of credit" law apply, and the displacement provisions of Article 5 grant Feinberg license to pursue his common law claims. All of those claims, with the exception of conversion and negligent misrepresentation, will proceed to trial. The same can be said for Feinberg's RICO claim. The Court notes that Feinberg has filed a cross-motion for summary judgment. The same genuine issues of material fact that defeated Central Asia's Motion, however, preclude the Court from granting Feinberg's Motion.
An appropriate Order follows.
AND NOW, this 1st day of May, 1997, upon consideration of Defendants' Motion for Summary Judgment (Doc. No. 33), Defendants' Supplemental Motion for Summary Judgment (Doc. No. 51), Plaintiff's Cross-Motion for Summary Judgment (Doc. No. 53), Defendants' Reply (Doc. No. 55), Plaintiff's Supplemental Memorandum (Doc. No. 56), and a hearing held on April 8, 1997 (Doc. Nos. 57, 58), IT IS HEREBY ORDERED THAT:
1. Defendants' Motions will be GRANTED IN PART and DENIED IN PART.
(a). Defendants' Motions are GRANTED with respect to Count II ("conversion"); Count III ("fraud in the transaction"); and Count VI ("negligent misrepresentation").