UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA
RENE ARTURO LOPEZ et al., : : Plaintiffs, : Civil Action No.: 08-1989 (RMU) : v. : Re Document Nos.: 11, 16, 24 : COUNCIL ON AMERICAN-ISLAMIC : RELATIONS ACTION NETWORK, : INC. et al., : : Defendants. :
MEMORANDUM OPINION
GRANTING THE PLAINTIFFS’ MOTION TO FILE A SUR-REPLY; GRANTING THE CAIR DEFENDANTS’ MOTION TO DISMISS; GRANTING DEFENDANT GORAYA’S MOTION TO DISMISS
I. INTRODUCTION
This matter is before the court on the defendants’ motion to dismiss the plaintiffs’
complaint. The plaintiffs brought this action against the Council on American-Islamic Relations
Action Network, Inc. (“CAIR”); Zahara Investment Corporation (“Zahara”); Greater Washington
LLC of Delaware (“GW LLC”); Khalid Iqbal, the Managing Director of CAIR
Maryland/Virginia (“CAIR MD/VA”); Ibrahim Hooper, CAIR’s Director of Communications;
Amina Rubin, CAIR’s Coordinator of Communications; Nihad Awad, CAIR’s Executive
Director and an authorized signatory of GW LLC; Parvez Ahmed, CAIR’s Chairman of the
Board; Khadijah Athman, the Manager of the Civil Rights Division at CAIR; Nadhira Al-Khalili,
CAIR’s in-house legal counsel; 1 Tahra Goraya, CAIR’s National Director; and Morris Days, the
1 The parties refer to the aforementioned defendants as the “CAIR Defendants.” See generally Defs.’ Mot; Pls.’ Opp’n. Defendant Goraya was not served with process until after the CAIR Defendants filed their motion to dismiss. See Aff. of Return of Service oh Tahra Goraya (June 11, 2009). Resident Attorney of CAIR MD/VA. The plaintiffs allege that the defendants conspired to
violate the Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. § 1962(d),
violated the D.C. Consumer Protection Procedures Act (“DCCPPA”), D.C. Code § 28-3901 et
seq., and violated the Virginia Consumer Protection Act (“VCPA”), Va. Code Ann. § 59.1-196 et
seq. The plaintiffs also allege claims of common law fraud and aiding and abetting fraud, breach
of fiduciary duty, intentional infliction of emotional distress, conversion and unjust enrichment.
Because the court concludes that the plaintiffs do not have standing to bring a RICO claim, the
court dismisses that claim with prejudice. The court accordingly dismisses the seven other state
law claims without prejudice for want of jurisdiction.
II. BACKGROUND
A. Factual History 2
CAIR operates as a public interest law firm with various regional and local offices around
the country. Compl. ¶ 21. In or around December 2004, CAIR opened CAIR MD/VA, its local
office in based Herndon, Virginia. Id. ¶ 2. In or around June 2006, CAIR MD/VA hired Days as
its Resident Attorney and Manager of its Civil Rights Department. Id. Days’s job was to
provide legal representation to Muslims alleging of civil rights abuses. Id. Days, however, had
never been to law school and was not licensed to practice law. Id. ¶ 25. The plaintiffs allege that
Days, with the intent to defraud CAIR clients, represented that he was a competent attorney and
2 For the purposes of this opinion the court must treat the complaint’s factual allegations – including mixed questions of law and fact – as true and draw all reasonable inferences therefrom in the plaintiff’s favor. Macharia v. United States, 334 F.3d 61, 64, 67 (D.C. Cir. 2003); Holy Land Found. for Relief & Dev. v. Ashcroft, 333 F.3d 156, 165 (D.C. Cir. 2003); Browning, 292 F.3d 235, 242 (D.C. Cir. 2002).
2 charged over thirty clients for legal services despite the fact that he was not a lawyer and did not
perform any legal services. Id. ¶¶ 25-27, 35.
By November 2007, Iqbal, the managing director of CAIR MD/VA, had allegedly
learned that Days was collecting legal fees in violation of CAIR’s policy of representing its
clients pro bono. Id. ¶ 32. CAIR MD/VA had received numerous complaints about Days’s
handling of CAIR clients’ legal matters and terminated Days’s employment on February 10,
2008. Id. ¶¶ 34-35.
On or about February 8, 2008, Iqbal called and/or e-mailed Ahmed, Awad, Goraya and
other unnamed officials at CAIR informing them about Days’s actions. Id. ¶¶ 37, 82. Soon
thereafter, Ahmed, Awad, Goraya and other unnamed officials of CAIR informed Athman and
Khalili of Days’s actions. Id.
In or around February 2008, Iqbal, Ahmed, Awad, Goraya, Athman and Khalili allegedly
decided to take affirmative steps to conceal the scheme from the victims. Id. ¶ 38. These
defendants allegedly agreed to inform the victims of the scheme only that Days was no longer at
CAIR MD/VA and that any complainants must speak to Days directly to address their concerns.
Id. ¶ 39. Over time, as complaints mounted, the defendants purportedly agreed that they would
provide partial restitution to the most vocal victims. Id. ¶ 41. They also allegedly agreed that
they would not disclose the fraud to any law enforcement or other government agency. Id.
Before any restitution was paid, the defendants required that every person receiving
restitution sign a document entitled “Voluntary Agreement and Release of Claims.” Id. ¶ 42.
The document absolved CAIR of any civil liability arising out of its prior or future representation
of former or current clients, and stipulated to a $25,000 penalty for any person who disclosed the
3 events involving the scheme. Id. ¶¶ 42, 45, 48.
In response to a widely published report on the scheme, defendants Iqbal, Awad, Goraya,
Athman, Khalili, Hooper and Rubin (“RICO Defendants”) 3 published a press release on the
CAIR website. Id. ¶ 106. The press release stated that Days was terminated immediately after
the scheme was discovered and that the CAIR MD/VA offices reached out to defrauded CAIR
clients by offering them compensation and referring them to outside attorneys. Id. ¶ 107.
B. Procedural History
The plaintiffs filed a complaint on November 11, 2008, alleging conspiracy to violate
RICO, violation of the DCCPPA, violation of the VCPA, common law fraud and aiding and
abetting fraud, breach of fiduciary duty, intentional infliction of emotional distress, conversion
and unjust enrichment. See generally Compl. The CAIR Defendants filed a motion to dismiss
the complaint pursuant to Federal Rule of Civil Procedure 12(b)(6) on January 15, 2009, see
generally Defs.’ Mot. The plaintiffs filed an opposition on February 1, 2009, see generally Pls.’
Opp’n, to which the defendant replied to on February 18, 2009, see generally Defs.’ Reply. The
plaintiffs filed a motion seeking leave to file a sur-reply on February 25, 2009, see generally
Pls.’ Mot. to File a Sur-Reply, which the defendants opposed on March 11, 2009, see generally
Defs.’ Opp’n to Pls.’ Mot. to File a Sur-Reply. On June 25, 2009, defendant Goraya filed a
motion to dismiss, joining in the arguments made by the CAIR Defendants in their motion. Def.
Goraya’s Mot. to Dismiss at 1. The plaintiffs, likewise, incorporated by reference their
opposition to the CAIR Defendants’ motion in opposition to defendant Goraya’s motion. Pls.’
Opp’n to Def. Goraya’s Mot. to Dismiss at 1. The court now turns to the parties’ arguments.
3 The plaintiffs state that they mistakenly neglected to name Ahmed as a RICO Defendant but plan to file an amended complaint doing so. Pls.’ Opp’n at 2.
4 III. ANALYSIS
A. The Court Grants the Plaintiffs’ Motion to File a Sur-Reply
The plaintiffs argue that they should be granted leave to file a sur-reply because, in their
reply, the defendants brought up the novel legal argument that co-conspirators in a cover-up
cannot be liable for damages arising from the underlying crime. Pls.’ Mot. to File Sur-Reply at
2. The defendants counter that the plaintiffs’ sur-reply raises legal issues not previously
addressed and therefore the motion to file a sur-reply should be denied. Defs.’ Opp’n to Pls.’
Mot. to File Sur-Reply at 2.
It is within the court’s authority to grant leave to file a sur-reply when “the party making
the motion would be unable to contest matters presented to the court for the first time in the
opposing party’s reply.” Lewis v. Rumsfeld, 154 F. Supp. 2d 56, 61 (D.D.C. 2001). The court
may permit the filing of a sur-reply at its discretion. Am. Forest & Paper Ass’n v. Envtl. Prot.
Agency, 1996 WL 509601, at *3 (D.D.C. Sept. 4, 1996). Because the plaintiffs’ sur-reply is
“helpful to the adjudication” of the motion to dismiss and because it is not “unduly prejudicial to
the defendants,” the court grants the plaintiffs’ motion to file a sur-reply. Id. The court further
notes that it will not consider matters raised for the first time in the plaintiffs’ sur-reply. See
Tnaib v. Document Tech., LLC, 450 F. Supp. 2d 87, 89 n.3 (D.D.C. 2006) (observing that it is
inappropriate to raise new substantive issues in a sur-reply).
5 B. The Court Grants the Defendants’ Motions to Dismiss the Plaintiffs’ RICO Claim
1. Legal Standard for a Motion to Dismiss Pursuant to Rule 12(b)(1) 4
Federal courts are courts of limited jurisdiction and the law presumes that “a cause lies
outside this limited jurisdiction.” Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377
(1994); St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 288-89 (1938); see also Gen.
Motors Corp. v. Envtl. Prot. Agency, 363 F.3d 442, 448 (D.C. Cir. 2004) (noting that “[a]s a
court of limited jurisdiction, we begin, and end, with an examination of our jurisdiction”).
Because “subject-matter jurisdiction is an ‘Art[icle] III as well as a statutory
requirement[,] no action of the parties can confer subject-matter jurisdiction upon a federal
court.’” Akinseye v. District of Columbia, 339 F.3d 970, 971 (D.C. Cir. 2003) (quoting Ins.
Corp. of Ir., Ltd. v. Compagnie des Bauxite de Guinea, 456 U.S. 694, 702 (1982)). On a motion
to dismiss for lack of subject matter jurisdiction pursuant to Rule 12(b)(1), the plaintiff bears the
burden of establishing by a preponderance of the evidence that the court has subject matter
jurisdiction. Lujan v. Defenders of Wildlife, 504 U.S. 555, 561 (1992).
Because subject matter jurisdiction focuses on the court’s power to hear the claim,
however, the court must give the plaintiff’s factual allegations closer scrutiny when resolving a
Rule 12(b)(1) motion than would be required for a Rule 12(b)(6) motion for failure to state a
4 Although the defendants styled their motion as one to dismiss pursuant to Rule 12(b)(6), see Def.’s Mot. at 1., because, as discussed below, the court determines that the plaintiffs do not have standing to bring a RICO claim, the court dismisses that claim for lack of jurisdiction pursuant to Rule 12(b)(1). See Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 496 (1985) (holding that injury is a prerequisite to establishing standing); see also Holmes v. Sec. Investor Prot. Corp., 503 U.S. 258, 268 (1992) (noting that proximate cause between the predicate acts and the injury is required in a civil RICO claim); Anza v. Ideal Steel Supply Corp., 547 U.S. 451, 457 (2006) (reaffirming Holmes). 6 claim. Macharia v. United States, 334 F.3d 61, 64, 69 (D.C. Cir. 2003); Grand Lodge of
Fraternal Order of Police v. Ashcroft, 185 F. Supp. 2d 9, 13 (D.D.C. 2001). Thus, the court is
not limited to the allegations contained in the complaint. Hohri v. United States, 782 F.2d 227,
241 (D.C. Cir. 1986), vacated on other grounds, 482 U.S. 64 (1987). When necessary, the court
may consider the complaint supplemented by undisputed facts evidenced in the record, or the
complaint supplemented by undisputed facts plus the court’s resolution of disputed facts.
Herbert v. Nat’l Acad. of Scis., 974 F.2d 192, 197 (D.C. Cir. 1992).
2. Legal Standard for Conspiracy to Violate RICO
A person commits conspiracy to violate RICO if he or she “conspire[s] to violate any of
the provisions of subsection (a), (b), or (c) of [18 U.S.C. § 1962].” 18 U.S.C § 1962(d). “A
violation of § 1962(c) of the RICO Act consists of four elements: ‘(1) conduct (2) of an
enterprise (3) through a pattern (4) of racketeering activity.’” 5 W. Assocs. Ltd. P’ship v. Market
Square Assoc., 235 F.3d 629, 633 (D.C. Cir. 2001) (quoting Pyramid Sec. Ltd. v. IB Resolution,
Inc., 924 F.2d 1114, 1117 (D.C. Cir. 1991)). Racketeering activity, as defined by Congress,
includes the predicate acts of mail fraud (a violation of 18 U.S.C. § 1341) and wire fraud (a
violation of 18 U.S.C. § 1343). See 18 U.S.C. § 1961 (listing all offenses that qualify as
predicate acts which constitute racketeering activity).
RICO includes a civil enforcement provision “authoriz[ing] a private suit by ‘[a]ny
person injured in his business or property by reason of a violation of § 1962.’” Sedima, S.P.R.L.
5 Section 1962(c) reads:
It shall be unlawful for any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise’s affairs through a pattern of racketeering activity or collection of unlawful debts. 7 v. Imrex Co., 473 U.S. 479, 495 (1985) (citing 18 U.S.C. § 1964(c)). Injury to a person’s
business or property is required for a civil plaintiff to demonstrate standing. Id. at 496. “A
showing of standing is an essential and unchanging predicate to any exercise of a court’s
jurisdiction.” Fla. Audubon Soc’y v. Bentsen, 94 F.3d 658, 663 (D.C. Cir. 1996) (citing Lujan v.
Defenders of Wildlife, 504 U.S. 555, 560 (1992)). For a plaintiff to have standing, he must
demonstrate that a defendant’s predicate acts were the proximate cause of his injury. See Holmes
v. Sec. Investor Prot. Corp., 503 U.S. 258, 268 (1992) (noting that proximate cause between the
predicate acts and the injury is required in a civil RICO claim); see also Anza v. Ideal Steel
Supply Corp., 547 U.S. 451, 457 (2006) (reaffirming Holmes).
“The RICO pattern or acts proximately cause a plaintiff’s injury if they are a substantial
factor in the sequence of responsible causation, and if the injury is reasonably foreseeable or
anticipated as a natural consequence.” Elemary v. Philipp Holtzmann A.G., 533 F. Supp. 2d 116,
140 (D.D.C. 2008) (quoting Hecht v. Commerce Clearing House, Inc., 897 F.2d 21, 23-24 (2d
Cir. 1990)). “Any recoverable damages occurring by reason of a violation of § 1962(c) will flow
from the commission of the predicate acts.” Sedima, 473 U.S. at 497. The harm must be
concrete and actual or imminent, not conjectural or hypothetical. Byrd v. Envtl. Prot. Agency,
174 F.3d 239, 243 (D.C. Cir. 1999) (citing Steel Co. v. Citizens for a Better Env’t, 523 U.S. 83,
103 (1998)).
Furthermore, in order to state a valid RICO claim, a plaintiff must plead sufficient facts
indicating that the defendant engaged in a “pattern” of racketeering activity. 18 U.S.C. §
1962(c). To constitute a “pattern” there must be at least two acts of racketeering activity that
have occurred within ten years of each other. 18 U.S.C. § 1961(5). In addition, the Supreme
8 Court has required plaintiffs to allege a “relationship” between the predicate acts (the
“relationship requirement”) as well as a “threat of continuing activity” (the “continuity
requirement”) to illustrate a “pattern of racketeering activity.” H.J. Inc. v. NW. Bell Tel. Co., 492
U.S. 229, 239 (1989) (internal quotation omitted).
The “relationship requirement” demands “criminal acts that have the same or similar
purposes, results, participants, victims, or methods of commission, or otherwise are interrelated
by distinguishing characteristics and are not isolated events.” H.J. Inc., 492 U.S. at 240 (quoting
18 U.S.C. § 3575(e)). The “continuity requirement” requires that “the predicates themselves
amount to, or . . . otherwise constitute a threat of, continuing racketeering activity.” Id.
(emphasis in original). “The Court said that the [continuity] concept . . . refers ‘either to a closed
period of repeated conduct, or to past conduct that by its nature projects into the future with a
threat of repetition.’” Edmondson & Gallagher v. Alban Towers Tenants Ass’n, 48 F.3d 1260,
1264 (D.C. Cir. 1995) (quoting H.J. Inc., 492 U.S. at 242).
This Circuit has adopted the six factor analysis of the Third Circuit when determining
whether the closed-ended continuity requirement has been established. See Edmondson, 48 F.3d
at 1265. The six factors to be considered are “[1] the number of unlawful acts, [2] the length of
time over which the acts were committed, [3] the similarity of the acts, [4] the number of
victims, [5] the number of perpetrators, and [6] the character of the unlawful activity.” Kehr
Packages, Inc. v. Fidelcor, Inc., 926 F.2d 1406, 1412-13 (3d Cir. 1991) (quoting Barticheck v.
Fidelity Union Bank/First Nat’l State, 832 F.2d 36, 39 (3d Cir. 1987)). “In some cases . . . some
factors will weigh so strongly in one direction as to be dispositive.” Edmondson, 48 F.3d at
1265. In addition, “[t]he six factors prescribed in Edmondson should be applied in a manner that
9 is fluid, flexible, and commonsensical, rather than rigid or formulaic.” W. Assocs. Ltd. P’ship,
235 F.3d at 637. “Predicate acts extending over a few weeks or months and threatening no
future criminal conduct do not satisfy [the closed period] requirement.” H.J. Inc., 492 U.S. at
242.
3. The Plaintiffs’ Injuries Were Not Caused “By Reason Of” the Defendants’ Actions
The plaintiffs contend that they have suffered monetary losses because of the RICO
Defendants’ actions. See generally Pls.’ Opp’n. Specifically, plaintiffs Turner and Lopez gave
$850 in cash and provided $350 worth of services to Days to handle their divorce and
immigration matters respectively. Compl. ¶ 73-76. Plaintiff Abdussalaam wired Days $200 via
Western Union (and paid a $23.99 surcharge) for Days to file a lawsuit on his behalf. Id. ¶ 57.
Plaintiff Nur did not give any money to Days but, upon his advice, refused an offer by her then
employer, Star Tek, to transfer her to another department. Id. ¶ 92. As a result, Nur had to
relocate her family to North Carolina to find employment and suffered $7,425 in lost wages and
$1,500 in moving expenses. Id. ¶ 124.
The RICO Defendants argue that their alleged efforts to cover up Days’s scheme were
not the proximate cause of the plaintiffs’ monetary injuries. Defs.’ Mot. at 13-14. In the
complaint, the plaintiffs allege that all of the defendants, from February 2008 to September 2008,
conspired with one another to conceal the fact that Days was not a lawyer and that the plaintiffs
had been victims of his fraud and, as part of that cover-up, perpetrated mail and wire fraud. See
generally Compl. Yet the plaintiffs’ monetary losses were incurred between July 2007 and
November 2007, id. ¶¶ 58, 75, 76, 88-93, at least two months before the alleged conspiracy.
The plaintiffs maintain that by February 2008, the RICO Defendants all knew about the
10 scheme and agreed to conceal it from the public. Id. ¶¶ 37-38, 113. “Instead of ending the
Scheme, the CAIR Defendants joined it, forming a conspiracy to carry out its objectives.” Pls.’
Opp’n at 19. The plaintiffs maintain that by creating a conspiracy to cover-up Days’s scheme,
the defendants became co-conspirators with Days in the scheme and, as a result are responsible
for the prior predicate acts of mail and wire fraud committed by Days. Id. at 19-20. The
plaintiffs point to language in Salinas v. United States stating that “a conspirator must intend to
further an endeavor which, if completed, would satisfy all of the elements of a substantive
offense, but it suffices that he adopt the goal of furthering the criminal endeavor.” 522 U.S. 52,
65 (1997).
The defendants counter that the complaint alleges two separate schemes. Defs.’ Mot. at
11. Specifically, they argue that the complaint alleges that Days alone perpetrated the fraud
scheme and the RICO Defendants perpetrated a scheme to cover-up Days’s activities. Id. at 12.
In fact, the complaint alleges that it was not until after Days had been fired from the CAIR
MD/VA offices that the RICO Defendants began their fraudulent conduct. Compl. ¶¶ 65, 79,
102.
The apparent primary objective of Days’s scheme was to obtain money from the
plaintiffs for legal work that he never carried out. See generally id. In contrast, as the plaintiffs
note, the primary purpose of the RICO Defendants’ actions was to conceal the fraud to prevent
CAIR from being “damaged irreparably.” See Pls.’ Opp’n at 9. Therefore, the complaint does
not allege that the RICO Defendants endeavored to carry out the objectives of Days’s scheme.
See Salinas, 522 U.S. at 65 (noting that a conspirator must adopt the goal of furthering the
underlying criminal endeavor).
11 A sister court, in resolving an issue analogous to that presented in this case, stated:
[A]t best, the facts suggest two separate instances of wrongdoing – the underlying agent fraud followed by an improper cover-up scheme . . . . Even assuming the [defendants’] clean-up activities were unlawful, the [defendants] cannot be liable for losses incurred in the . . . frauds [committed by their agents] (unlawful activity A) simply because they participated in the post-fraud cover-up (unlawful activity B). [Citation omitted]. The plaintiffs in this case lost their money in the first place because they were defrauded by [the defendants’ agents] and a host of other former defendants. Plaintiffs did not lose their money because of the clean-up actions of defendants.
Albright v. Attorney’s Title Insurance Fund, 504 F. Supp. 2d 1187, 1204 (D. Utah 2007).
In this case, the plaintiffs have alleged two separate acts of wrongdoing, the initial fraud
by Days and the subsequent cover-up by the RICO Defendants. See id.; Albright, 504 F. Supp.
2d at 1204. The plaintiffs’ injuries were caused by Days, not by the subsequent cover up. See
Albright, 504 F. Supp. 2d at 1204. 6
Even assuming that the plaintiffs could show that the RICO Defendants joined in a
conspiracy to further the objectives of Days’s scheme, the plaintiffs still cannot demonstrate that
the RICO Defendants proximately caused the plaintiffs’ monetary losses. See 18 U.S.C. §
1964(c). The plaintiffs correctly point out that the common law principles of civil conspiracy
apply to a RICO civil conspiracy case. See Beck v. Prupis, 529 U.S. 494, 500 (2000) (stating
that “to determine what it means to be ‘injured . . . by reason of’ a ‘conspir[acy],’ we turn to the
well-established common law of civil conspiracy”). In an effort to attribute Days’s tortious
conduct to the RICO Defendants, the plaintiffs cite Van Winkle v. Owens-Corning Fiberglas
6 The plaintiffs attempt to distinguish Albright by arguing that the defendant had done nothing to cover-up the fraud initially perpetrated by “the crooked lawyers.” Pls.’ Sur-Reply at 5. It is clear, however, that the Albright court assumed, for the purposes of summary judgment, that the defendant did attempt to cover-up the original fraud. See Albright, 504 F. Supp. 2d at 1204 (noting that one of the defendants “attempt[ed] to cover up the frauds that had already occurred” and that the defendants “cannot be liable for losses incurred [as a result of the underlying] frauds . . . simply because they participated in the post-fraud cover-up”). 12 Corp., 683 N.E.2d 985, 992 (Ill. App. 4th Dist. 1997) in which an Illinois appellate court held
that late-joining conspirators to a conspiracy are liable for prior tortious acts of their co-
conspirators if, when they joined the conspiracy, they knew about and approved of those prior
acts. Pls.’ Sur-Reply at 4. The plaintiffs also cite several civil conspiracy cases in the antitrust
context which stand for the same general proposition. See Havoco of Am., Ltd. v. Shell Oil Co.,
626 F.2d 549, 554 (7th Cir. 1980) (recognizing that “a co-conspirator who joins a conspiracy
with knowledge of what has gone on before and with an intent to pursue the same objectives
may, in the anti-trust context, be charged with the preceding acts of its co-conspirators”); In re
K-Dur Antitrust Litig., 338 F. Supp. 2d 517, 539 (D. N.J. 2004) (noting that “a co-conspirator is
liable for all acts committed in furtherance of a conspiracy, regardless of when it entered the
conspiracy”); In re Nissan Motor Corp. Antitrust Litig., 430 F. Supp. 231, 232 (S.D. Fla. 1977)
(explaining that “proof of unlawful affiliation is sufficient to render a co-conspirator liable for all
damages that the conspiracy caused, regardless of the exact time defendant became a member or
the extent of its participation”). The plaintiffs maintain that the RICO Defendants are liable for
Days’s prior tortious conduct of mail and wire fraud because they are late joining co-conspirators
with Days, and they assert that his conduct, which was the proximate cause of the plaintiffs’
injuries, can be attributed to the RICO Defendants. Pls.’ Opp’n at 19-20.
The plaintiffs’ reliance on the law for late-joining conspirators is misplaced. There is no
allegation in the complaint that the RICO Defendants joined a pre-existing conspiracy. See
generally Compl. Indeed, the plaintiffs are foreclosed from making such an assertion given that
one of the essential elements of a civil conspiracy claim is an agreement between two or more
persons. Hobson v. Wilson, 737 F.2d 1, 51 (D.C. Cir. 1984), abrogated on other grounds by
13 Leatherman v. Tarrant County Narcotics Intelligence & Coordination Unit, 507 U.S. 163, 168
(1993). The complaint alleges that Days alone falsely represented that he was an attorney and
schemed to take money from the plaintiffs. Compl. ¶¶ 25, 26. Thus the original scheme cannot
constitute a conspiracy because Days was the only perpetrator of the scheme and the act of
conspiring requires two or more people. See Hobson, 737 F.2d at 51. Consequently, the
complaint does not allege that, upon learning about this scheme, the RICO Defendants joined an
existing conspiracy, but instead alleges that the RICO Defendants joined the scheme by forming
a conspiracy to cover it up from the public and the victims of the scheme. Pls.’ Opp’n at 19.
Therefore, the plaintiffs’ reliance on case law concerning the liability of late-joining conspirators
to an already formed conspiracy is misplaced since no conspiracy previously existed. See
generally Compl. As a result, the prior predicate acts of mail and wire fraud by Days, which led
to the plaintiffs’ monetary losses, cannot be attributed to the RICO Defendants through a
conspiracy theory.
Finally, the plaintiffs mention in passing that the RICO Defendants’ cover up actions
proximately caused other, non-monetary injuries to the plaintiffs. Pls.’ Sur-Reply at 8. They
allege that they “relied on lawsuits to protect their business and property interests.” Id. The
plaintiffs assert that they relied on Days to vindicate their rights through lawsuits he never filed.
See generally Compl. The plaintiffs argue that because the RICO Defendants did not inform the
plaintiffs that Days had been fired for fraud, and only informed them that Days was no longer
employed at CAIR MD/VA, they caused injury to the plaintiffs’ business and/or property by
preventing the plaintiffs from discovering that Days had not filed their respective legal claims.
Id. There is, however, no allegation that the plaintiffs could not have filed lawsuits upon
14 learning about the fraud or cannot now file their lawsuits, or that they have been damaged in
some quantifiable way by the defendants’ cover-up activities. Id. Because the plaintiffs’ alleged
injury is speculative at best, the plaintiffs have not made the requisite showing that their injuries
were the proximate cause of the RICO Defendants’ acts. See Byrd, 174 F.3d at 243; see also
Maio v. Aetna, Inc., 221 F.3d 472, 483 (3d Cir. 2000) (noting that a showing of injury requires
proof of a concrete financial loss and not mere injury to an intangible property interest) (quoting
Steele v. Hosp. Corp. of Am., 36 F.3d 69, 70 (9th Cir. 1994)).
4. The Defendants’ Actions Did Not Constitute a “Pattern” of Racketeering Activity
The plaintiffs argue that they have pled sufficient facts to meet the closed-ended
continuity requirement enunciated by the Supreme Court in H.J. Inc. because they have alleged a
single scheme that involved multiple instances of mail and wire fraud, extended for over two
years (counting Days’s actions) and involved multiple victims. 7 See Pls.’ Opp’n at 16. The
defendants contend that the plaintiffs have not pled sufficient facts that show that the RICO
Defendants’ acts constitute a “pattern of racketeering activity.” 8 Defs.’ Mot. at 15.
The Circuit has noted that “RICO claims premised on mail or wire fraud must be
particularly scrutinized because of the relative ease with which a plaintiff may mold a RICO
pattern from allegations that, upon closer scrutiny, do not support it.” W. Assocs. Ltd. P’ship,
7 The plaintiffs state in a footnote that they have alleged sufficient facts for the open-ended continuity requirement. Pls.’ Opp’n at 18 n.24. To satisfy this requirement, the plaintiffs must show “that the predicate[ offenses] are a regular way of conducting the defendants’ ongoing legitimate business.” H.J. Inc. v. NW. Bell Tel. Co., 492 U.S. 229, 243 (1989). Aside from vague accusations that there exist other victims of Days who are unaware of the scheme, the plaintiffs do not address this factor at all in the complaint and, thus, the court determines that the plaintiffs have failed to adequately plead the open-ended continuity requirement.
8 The defendants do not challenge the sufficiency of the plaintiffs’ allegations regarding the “relationship” requirement. See generally Defs.’ Mot.
15 235 F.3d at 637 (quoting Efron v. Embassy Suites (P.R.), Inc., 223 F.3d 12, 20 (1st Cir. 2000)).
As this Circuit has noted, “if a plaintiff alleges only a single scheme, a single injury, and few
victims it is ‘virtually impossible for plaintiffs to state a RICO claim.’” See id. at 634 (quoting
Edmondson, 48 F.3d at 1265). As described above, the RICO Defendants’ actions allegedly
constituted one scheme, involving eleven predicate acts of mail and wire fraud, which occurred
between February and September 2008 and harmed the four plaintiffs. See Pls.’ Reply at 14.
Because this conduct extended for only a few months, the plaintiffs have not pled sufficient facts
to constitute a “pattern of racketeering activity.” H.J. Inc., 492 U.S. at 242 (stating that
“predicate acts extending over a few weeks or months and threatening no future criminal conduct
do not satisfy” the closed-ended continuity requirement).
Even if the court were to credit the plaintiffs’ assertion that the scheme should be seen as
extending from August 2006, when Days began working at CAIR MD/VA, to September 2008,
when the RICO Defendants posted a press release about Days’s scheme on their website, the
plaintiffs still have not alleged sufficient facts with respect to the closed-ended continuity
requirement. See W. Assocs. Ltd. P’ship, 235 F.3d at 636. This extended scheme includes six
additional predicate acts of mail and wire fraud by Days and lasted for about twenty-four
months. See generally Compl. In Western Associates Ltd. Partnership, however, the plaintiffs
alleged “dozens of predicate acts extending continually over an eight-year period.” 235 F.3d at
635. In rejecting the RICO claim, the Circuit noted that “an eight-year time period, though
highly relevant, is not dispositive.” Id. at 636. “[T]he mere longevity of a scheme or schemes
does not necessarily mean that a ‘pattern of racketeering activity’ is present.” Id. Similarly, in
Edmondson, the Circuit dismissed the plaintiff’s claim despite the plaintiff’s allegation of a
16 single scheme spanning three years with multiple predicate acts of mail and wire fraud and three
victims. 48 F.3d at 1265.
Moreover, the plaintiffs’ assertion that the scheme lasted for over two years is not
dispositive with regard to the pattern requirement. See W. Assocs. Ltd. P’ship, 235 F.3d at 635
(recognizing that “mere longevity of a scheme or schemes does not necessarily mean that a
pattern of racketeering activity is present”). The plaintiffs still allege only one scheme, spanning
about two years, with only four identified victims. See generally Compl. Thus, the plaintiffs’
have not pled sufficient facts under the precedent of this Circuit to indicate that the RICO
Defendants engaged in a “pattern of racketeering activity.” See generally W. Assocs. Ltd. P’ship,
235 F.3d at 635 (affirming the dismissal of a complaint alleging an eight year-long fraudulent
scheme); Edmondson, 48 F.3d at 1265 (affirming the dismissal of a complaint alleging multiple
victims and numerous predicate acts). 9
C. The Court Lacks Supplemental Jurisdiction Over the Plaintiffs’ State Law Claims
1. Legal Standard for Exercising Supplemental Jurisdiction Over State Law Claims
“When a federal court has an independent basis for exercising federal jurisdiction, it may,
in certain circumstances, also exercise supplemental jurisdiction over related claims under state
law.” Women Prisoners of the D.C. Dep’t of Corr. v. District of Columbia, 93 F.3d 910, 920
(D.C. Cir. 1996). To determine when the assertion of supplemental jurisdiction is appropriate,
the district court should apply a two-part test. Id. (citing United Mine Workers of Am. v. Gibbs,
9 The defendants also argue that the plaintiffs have failed to meet the heightened pleading requirement under Federal Rule of Civil Procedure Rule 9(b) for a conspiracy to commit RICO claim predicated on mail and wire fraud. Id. at 17-19. Because the court dismisses the plaintiffs’ claim for failing to plead that they were injured “by reason of” the defendants’ actions and failing to plead sufficient facts to indicate a pattern of racketeering activity by the defendants, the court does not reach the heightened pleading standard argument. 17 383 U.S. 715, 725 (1966)). The court first must determine whether the state and federal claims
derive from a common nucleus of operative fact. Id. If so, “the court has the power, under
Article III of the Constitution, to hear the state claim.” Id. The court then must decide whether
to exercise its discretion to assert jurisdiction over the state claim. Id. (noting the Supreme
Court’s observation that supplemental jurisdiction “is a doctrine of discretion, not of plaintiff’s
right”). In deciding whether to assert supplemental jurisdiction over a state claim, the court
should consider whether judicial economy, convenience and fairness to litigants weigh in favor
of doing so. Id. A court may decline to exercise supplemental jurisdiction, however, if the state
claim raises a novel or complex issue of state law, substantially predominates over the federal
claims or remains after the court has dismissed the federal claims. Id. at 921 (citing 28 U.S.C. §
1367(c)).
In addition, if a district court dismisses the sole federal claim for lack of subject matter
jurisdiction pursuant to Federal Rule of Civil Procedure Rule 12(b)(1), it is precluded from
exercising supplemental jurisdiction over any state law claims. Saksenasingh v. Sec’y of Educ.,
126 F.3d 347, 351 (D.C. Cir. 1997). If however, the district court dismisses the federal claim
pursuant to Rule 12(b)(6), it may nevertheless exercise supplemental jurisdiction over the state
law claims at its discretion. Id.
2. The Court Dismisses the Plaintiffs’ State Law Claims
As previously discussed, the court dismisses the plaintiffs’ sole federal claim, conspiracy
to violate RICO. See supra Part III.A.1. Consequently, the court is precluded from exercising
jurisdiction over the plaintiff’s state law claims. See Saksenasingh 126 F.3d at 351.
18 IV. CONCLUSION
For the foregoing reasons, the court grants the plaintiffs’ motion to file a sur-reply, grants
the CAIR Defendants’ motion to dismiss and grants defendant Goraya’s motion to dismiss. The
plaintiffs’ RICO claims are dismissed with prejudice; all other claims are dismissed without
prejudice. An Order consistent with this Memorandum Opinion is separately and
contemporaneously issued this 28th day of September, 2009.
RICARDO M. URBINA United States District Judge