Acklin v. Eichner

Background

The plaintiffs are 222 individuals and trusts who purchased timeshare interests in The Manhattan Club Association, Inc. The defendants included individuals and companies involved in sponsoring, marketing, managing, or operating the timeshares, as well as BlueGreen Vacations Unlimited, Inc., which became a sponsor for a period.

The plaintiffs alleged that they had been told the timeshares would have relatively low and controlled annual fees, readily available reservations, and the ability to sell their interests back at the original purchase price. They alleged that, after purchasing, they encountered substantially higher fees, difficulty making reservations, and buy-back offers of $100 plus forgiveness of overdue fees.

The plaintiffs asserted 12 causes of action. The federal claims were a substantive Racketeer Influenced and Corrupt Organizations Act claim and a RICO conspiracy claim, based on alleged mail and wire fraud. The remaining claims arose under New York and Pennsylvania law and included contract, fraud, tort, fiduciary-duty, consumer-protection, and securities-related theories.

RICO Claims

The court evaluated the complaint under Federal Rule of Civil Procedure 12(b)(6), which permits dismissal when a complaint does not state a legally sufficient claim. Because the RICO claims relied on alleged mail and wire fraud, the plaintiffs also had to satisfy Rule 9(b), which requires fraud to be pleaded with particularity.

The court held that the plaintiffs did not adequately plead a scheme to defraud. Their allegations concerned three categories of conduct: maintenance-fee statements, the reservation system, and buy-back offers. The court concluded that the allegations did not sufficiently identify deception, a material misrepresentation, or a duty to disclose information to the plaintiffs. Alleged violations of agreements or other legal requirements, without deception, did not themselves establish mail or wire fraud.

The court also found that the plaintiffs did not adequately plead proximate injury from the alleged maintenance-fee practices. In addition, the complaint generally attributed conduct to groups of defendants without clearly identifying what each defendant did. The court held that this lack of specificity failed to adequately plead a RICO enterprise. The RICO conspiracy claim failed because the plaintiffs had not adequately pleaded an underlying RICO violation.

State-Law Claims and Amendment

After dismissing all federal claims, the court declined to exercise supplemental jurisdiction, meaning authority to hear related state-law claims in the same case, over the remaining claims. The court dismissed those state-law claims without prejudice.

The court denied the plaintiffs leave to amend. It concluded that further amendment of the RICO claims would be futile because the plaintiffs had already amended their complaint several times, including after receiving the court’s earlier explanation of pleading deficiencies. The court also noted that the plaintiffs had not identified additional facts that would cure those problems.

Disposition

Judge Gregory H. Woods granted the defendants’ motions to dismiss as to the plaintiffs’ First and Second Counts, the RICO claims. Those claims were dismissed with prejudice. The remaining state-law claims were dismissed without prejudice. The Clerk was directed to enter judgment for the defendants, terminate the pending motions, and close the case.