Broccoli v. Ashworth

Background

Domenico Broccoli, GLD3 LLC, and Snook-9 Realty Inc. sued Lance Ashworth, Mara Farrell, Greenhouse Consultants Inc., Douglas Mackey, William Sandy, Stephen Thomson, and unnamed defendants. The plaintiffs alleged that the defendants participated in a scheme connected to the Friends of the Fishkill Supply Depot to misrepresent the historical and archaeological significance of the plaintiffs’ property, delay or block development, reduce the property’s value, and harm the plaintiffs’ business interests.

The Second Amended Complaint asserted three types of claims: a civil claim under the Racketeer Influenced and Corrupt Organizations Act (RICO), a RICO conspiracy claim, and a state-law claim for tortious interference with business relations. The defendants filed four motions to dismiss under Federal Rule of Civil Procedure 12(b), including three motions under Rule 12(b)(6), which tests whether a complaint states a legally sufficient claim.

Court’s analysis

The court first ruled that it could consider an affidavit filed by Mackey in a related state-court case because the complaint incorporated it by reference. The court declined to consider a separate letter attached to Mackey’s motion because the complaint did not rely on that letter and treating it as part of the motion would risk converting the dismissal motion into a summary-judgment proceeding.

The court held that the plaintiffs had not adequately pleaded the RICO claims. RICO required the plaintiffs to allege, among other things, a pattern of racketeering activity by each relevant defendant. The alleged racketeering acts were primarily mail fraud and wire fraud, which required particular allegations about the communications, including their contents, participants, timing, location, fraudulent nature, and facts supporting an inference that the defendant knew the statements were false or acted recklessly.

As to Greenhouse, the court found that the complaint did not define Greenhouse’s role in the alleged RICO enterprise or identify whether Greenhouse was itself a RICO defendant or a member of the alleged enterprise. As to Mackey, the court found that the allegations about a letter and a social-media page did not identify the communications or Mackey’s involvement with enough detail and did not establish the required inference of fraudulent intent. The court reached similar conclusions for Thomson, Farrell, and Sandy, finding that the allegations did not adequately show that they committed the required predicate acts.

As to Ashworth, the court found that the complaint identified several possible acts but did not adequately plead two qualifying predicate acts. For example, the complaint did not allege the date of a fundraising letter, treated news articles as efforts to cause reputational harm rather than qualifying fraud, and did not describe with enough particularity the contents of a letter to an IHOP executive. The court therefore granted the motions to dismiss the RICO claims under 18 U.S.C. § 1962(c) against all defendants.

The court also dismissed the RICO conspiracy claim under 18 U.S.C. § 1962(d), because the plaintiffs had not adequately stated an underlying substantive RICO claim. After dismissing the federal claims, the court declined to exercise supplemental jurisdiction—the power to hear related state-law claims—over the tortious-interference claim.

Disposition

Judge Kenneth M. Karas granted the Thomson motion, the Ashworth defendants’ motion, the Greenhouse motion, and the Mackey motion. The court dismissed the plaintiffs’ claims without prejudice because this was the first adjudication of the claims on the merits. The plaintiffs were permitted to file a third amended complaint within 30 days that addressed the deficiencies identified by the court. The court stated that failure to amend on time might result in dismissal of the action with prejudice.