The opinion of the court was delivered by: Mcclure, District Judge.
On June 17, 1994, plaintiffs, lot owners in a recreational
housing development called the Valley of Lakes, commenced this
action with the filing of a complaint pursuant to: the Racketeer
Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. § 1961-1968
(Count I); the Interstate Lands Sales Full Disclosure
Act, 15 U.S.C. § 1701 (Count II); 42 U.S.C. § 1983 (Count III);
the New Jersey Real Estate Full Disclosure Act, N.J.S.A. §
45:15-16.47 (Count IV); and the common law of New Jersey for
fraud and deceit (Count V). The complaint was filed in the United
States District Court for the District of New Jersey and was
transferred to this court by Order of Court dated March 15, 1995.
Succinctly stated, plaintiffs allege a long history of
mismanagement, broken promises, and fraud on the part of persons
in ownership and management positions at Valley of Lakes over the
years. Plaintiffs have been certified to proceed as a class
pursuant to Fed.R.Civ.P. 23. Default has been entered against
defendants Frank M. Cedrone, C.B.G., Ltd., Oneida Water Co., and
Valley Utilities Co., Inc. The remaining defendants are First
Eastern Bank, N.A., First Eastern Corp., MLA Management
Associates, Inc., Ralph Conte, and Arlene Rainess Conte.
Before the court are a number of motions by the parties. We
note at the outset that, due to the number of motions and the
prolixity of the arguments, every argument and issue cannot
possibly be addressed without production by the court of a
massive memorandum. We therefore will restrict ourselves to the
primary arguments raised, summarize as much as possible, and
attempt to limit ourselves to the issues the resolution of which
govern disposition of the motions.
I. PLAINTIFFS' MOTION TO SUPPLEMENT AND AMEND COMPLAINT
II. MOTION FOR EXTENSION OF DEADLINES
Plaintiffs move for an extension of the deadlines for
discovery, dispositive motions, and expert witness reports. The
motion also seeks an order compelling responses from certain
defendants to discovery requests from plaintiffs. The court's
computer docketing system shows the motion as still pending,
despite its having been addressed in an order dated June 19, 1998
(record document no. 261), and the substance of the motion having
been addressed in an order dated January 6, 1999 (record document
no. 373). The motion will be denied as moot.
III. MOTIONS FOR DECERTIFICATION
Defendants move for decertification of the classes and
sub-classes whose claims are asserted against the relevant moving
defendant. Common to these motions is the assertion of a problem
with the statute of limitations which renders the case
unmanageable as a class action. We agree.
In certifying the class and various sub-classes, we relied in
part on Keystone Insurance Co. v. Houghton, 863 F.2d 1125 (3d
Cir. 1988), in which the Third Circuit held that a cause of
action under RICO accrues for purposes of the statute of
limitations when the plaintiff knew or should have known that the
elements of a cause of action existed. However, if further
predicate acts which are part of the pattern of racketeering
activity occur, the statute began to run from the date the
plaintiff knew or should have known of the last such act.
In Klehr v. A.O. Smith Corp., 521 U.S. 179, 117 S.Ct. 1984,
138 L.Ed.2d 373 (1997), the Supreme Court held that the "last
predicate act" method of accrual under RICO was not a proper
interpretation of the statute. The Court declined, however, to
establish a particular method of accrual as being appropriate.
See generally Rolo v. City Investing Co. Liquidating Trust,
155 F.3d 644, 655-656 (3d Cir. 1998).
Since Klehr and Rolo, several courts in the Third Circuit
have concluded that, while the "last predicate act" rule no
longer applies, it continues to be the law of this circuit that
the limitations period for a RICO claim begins to run when the
plaintiff was aware of the elements of the RICO claim. That is,
the period begins when the plaintiff knew or should have known
that the defendant engaged in a pattern of racketeering activity
and that the plaintiff was injured by the pattern of racketeering
activity (the "injury plus pattern" rule). See, e.g., Perlberger
v. Perlberger, 1999 WL 79503, at *3 (E.D.Pa. Feb. 12, 1999)
(Padova, J.); Forbes v. Eagleson, 19 F. Supp.2d 352, 357-358
(E.D.Pa. 1998) (O'Neill, J.); Gunter v. Ridgewood Energy Corp.,
32 F. Supp.2d 166, 173 (D.N.J. 1998) (Walls, J.).
The named plaintiffs in this case allege predicate acts which
began in the 1970's and purportedly continue today. The times at
which members of the class and sub-classes bought plots in the
Valley of Lakes differ widely and the purchases were made with
widely varying degrees of knowledge and sophistication.
For example, Leon and Margaret Dongelowicz purchased their lot
in October of 1989, while George and Sharon DePersia bought two
lots in 1975 and 1976. Clearly, a different analysis would apply
to a person who buys based on a promise of a lake and golf course
which do not occur when there is an extra 13-14 years to realize
that these amenities have not appeared. Moreover, Francis Burns
is a licensed real estate salesman who actually worked for CBG
and sold lots in Valley of Lakes. Again, a different analysis
would apply, as such a person would be expected to recognize
false statements before an unsophisticated buyer.
Since the statute of limitations defense asserted by defendants
plainly has merit, and plainly requires consideration of widely
differing factual circumstances, we conclude that decertification
of the class and sub-classes is warranted.
IV. FIRST EASTERN'S MOTION FOR SUMMARY JUDGMENT
Summary judgment is appropriate if the "pleadings, depositions,
answers to interrogatories, and admissions on file, together with
the affidavits, if any, show that there is no genuine issue as
to any material fact and that the moving party is entitled to
judgment as a matter of law." Fed. R.Civ.P. 56(c) (emphasis
. . [T]he plain language of Rule 56(c) mandates
the entry of summary judgment, after adequate time
for discovery and upon motion, against a party who
fails to make a showing sufficient to establish the
existence of an element essential to that party's
case, and on which that party will bear the burden of
proof at trial. In such a situation, there can be `no
genuine issue as to any material fact,' since a
complete failure of proof concerning an essential
element of the nonmoving party's case necessarily
renders all other facts immaterial. The moving party
is `entitled to judgment as a matter of law' because
the nonmoving party has failed to make a sufficient
showing on an essential element of her case with
respect to which she has the burden of proof.
Celotex Corp. v. Catrett, 477 U.S. 317, 323-324, 106 S.Ct.
2548, 91 L.Ed.2d 265 (1986).
The moving party bears the initial responsibility of stating
the basis for its motions and identifying those portions of the
record which demonstrate the absence of a genuine issue of
material fact. Celotex at 323, 106 S.Ct. 2548. He or she can
discharge that burden by "showing . . . that there is an absence
of evidence to support the nonmoving party's case." Celotex at
325, 106 S.Ct. 2548.
Issues of fact are genuine "only if a reasonable jury,
considering the evidence presented, could find for the non-moving
party." Childers v. Joseph, 842 F.2d 689, 693-694 (3d Cir.
1988) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242,
249, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986)). Material facts are
those which will affect the outcome of the trial under governing
law. Anderson at 248, 106 S.Ct. 2505. The court may not weigh
the evidence or make credibility determinations. Boyle v. County
of Allegheny, 139 F.3d 386, 393 (3d Cir. 1998). In determining
whether an issue of material fact exists, the court must consider
all evidence and inferences drawn therefrom in the light most
favorable to the non-moving party. Boyle at 393; White v.
Westinghouse Electric Co., 862 F.2d 56, 59 (3d Cir. 1988).
If the moving party satisfies its burden of establishing a
prima facie case for summary judgment, the opposing party must do
more than raise some metaphysical doubt as to material facts, but
must show sufficient evidence to support a jury verdict in its
favor. Boyle at 393 (quoting, inter alia, Matsushita Electric
Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 106
S.Ct. 1348, 89 L.Ed.2d 538 (1986)).
Again due to the prolixity of the pleadings and other documents
filed in this case, it is impossible to set forth a thorough
recitation of the facts without defrosting a large portion of the
continent. We therefore will attempt a statement which is more a
summary of the facts, emphasizing those which are most pertinent
to our disposition of the motion.
The Valley of Lakes real estate development began in the 1970's
under the auspices of a company called High Vista, Inc.
High Vista went bankrupt, and CBG*fn1 eventually assumed the
role of developer. Throughout the time that Valley of Lakes has
been in existence, potential purchasers of lots have been told
that certain amenities would be built. These included "Lake
Algonquin," an 18-hole golf course, roads, and central water and
sewer systems. The amenities have not been completed, and
plaintiffs claim that neither High Vista nor CBG ever planned to
First Eastern was CBG's primary source of financing, eventually
loaning over $20,000,000.00 for Valley of Lakes. There were two
lines of credit involved. The first was a revolving development
loan secured by a first mortgage on the property owned by CBG.
The second was a receivable line of credit which operated with
the sale of a lot by CBG and issuance of a purchase money
mortgage which was collaterally assigned to First Eastern. CBG
financed up to 90% of the lot price, and First Eastern advanced
90% of the financed amount to CBG and then collected on the notes
through an agent.
In the early years (1987-1989) of CBG's management, Valley of
Lakes did well both in the construction of amenities and in the
sale of lots. With the downturn in the economy after 1990,
however, lot sales declined and CBG encountered financial
difficulties. CBG failed to meet its obligations to First
Eastern, and attempted to refinance or sell the development. At
the same time, First Eastern made cash infusions into the project
and took other actions to ensure that the development did not
collapse due to cash flow difficulties.
When neither a buyer nor a financier appeared, CBG filed a
petition in bankruptcy under Chapter 11. See In re C.B.G. Ltd.,
150 B.R. 570 (Bkrtcy.M.D.Pa. 1992).*fn2 CBG became
debtor-in-possession, and in that status entered into an
agreement with MLA Management Associates, Inc., to monitor CBG's
actions as debtor-in-possession. During the bankruptcy, First
Eastern made advances to CBG to preserve its collateral, an
action for which an order of the bankruptcy court dated October
22, 1992, provided. However, First Eastern took no action which
would cause it to undertake any obligation as the owner or
developer of the project.
In February, 1995, CBG was removed as debtor-in-possession and
a trustee was appointed. In 1996, a joint venture of Double
Diamond, Inc., and the Valley of Lakes Civic Association (VOLCA),
an association of lot owners, acquired CBG's ownership interest.
In the meantime, First Eastern merged with PNC Bank, which
released its, interests in Valley of Lakes for ...