Invacare Supply Group, Inc. v Star Promotions, Inc.

[*1] Invacare Supply Group, Inc. v Star Promotions, Inc. 2010 NY Slip Op 50521(U) [27 Misc 3d 1202(A)] Decided on March 31, 2010 Supreme Court, Kings County Demarest, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on March 31, 2010
Supreme Court, Kings County

Invacare Supply Group, Inc., a Wholly Owned Subsidiary of Invacare Corporation, Plaintiff,

against

Star Promotions, Inc. a/t/a/ Star Promotions NY, Inc., et al., Defendants.



28374/08



Attorney for Plaintiff:

Aaron Weissberg, Esq.

Helfand & Helfand

60 E. 42nd St., Suite 1048

New York, NY 10165

Attorney for Defendants Reuven Sobel, Moses Neuman, Lenny Neuman and Adelphia Supply, Inc.:

Neil Moritt, Esq.

Moritt Hock Hamroff & Horowitz LLP

400 Garden City Plaza, Suite 202

Garden City, New York 11530

Attorney for Defendant Confidential Lending, LLC:

John Cannistraci, Esq.

230 Park Avenue, 23rd Floor

New York, NY 10169

Attorney for Defendants Israel Neiman, Joseph Friedman and I & J Supplies Inc.:

Michael J. Halberstam, Esq. 3711 Shore Parkway

Brooklyn, NY 11235

Carolyn E. Demarest, J.

In this action by plaintiff Invacare Supply Group, Inc., a wholly-owned subsidiary of Invacare Corporation, (plaintiff) against defendants Star Promotions, Inc. a/t/a/ Star Promotions NY, Inc., Star Promotions, NY, Inc. (collectively, Star), Reuven C. Sobel a/k/a Ruben Sobel a/k/a Charles Sobel (Reuven Sobel), Martin Gold, Moses G. Neuman a/k/a Neuman Moses a/k/a Moishe Neuman a/k/a Moishe G. Neuman a/k/a Moseds Neuman a/k/a Moses Neuman (Moses Neuman), individually and d/b/a Tristate Medical Supply, a fictitious corporation (Tristate), Sunset Medical Supplies Inc. (Sunset), NS 43rd Street Realty LLC (NS), Confidential Lending LLC (Confidential), I & J Supplies Inc. d/b/a I & J Medical Supplies d/b/a IMJ Supplies (I & J), Isreal Neiman, Joseph Friedman, Adelphia Discount Services Inc. d/b/a Adelphia Diabetic Supply Inc. d/b/a Adelphia Discount Supply Services d/b/a Adelphia Dental (Adelphia), Lenny Neuman a/k/a Lenny Newman (Lenny Neuman), Adelphia Supplies Inc. f/k/a Carol Royal Importers Inc., David Neuman a/k/a David Neuman, M.D. (David Neuman), A Plus Medical Center (A Plus), and Choose Us Inc. (Choose), alleging claims of breach of contract, fraud, and recovery of attorneys' fees, claims under the Debtor and Creditor Law, and a civil claim under the Racketeer Influenced and Corrupt Organizations Act, 18 USC § 1961 et seq. (RICO), Defendants Reuven Sobel, Moses Neuman, Lenny Neuman, and Adelphia move, pursuant to CPLR 3211 (a) (5), for an order dismissing plaintiff's RICO claim, asserted in its fifteenth cause of action, as time-barred under the applicable statute of limitations, or, pursuant to CPLR 3211 (a) (7), for failure to state a cause of action.

Plaintiff is a manufacturer and distributor of medical equipment for use in the home, and sells its health care products to home health care and medical equipment providers and distributors throughout the United States and internationally. Star is a New York corporation whose principals and officers are Reuven Sobel and Martin Gold. Plaintiff alleges that Reuven Sobel and Martin Gold, along with Moses Neuman, David Neuman, Lenny Neuman, Isreal Neiman and Joseph Friedman, also conduct business as Tristate and that Tristate is a fictitious corporation. Although it is alleged that the defendants are engaged in interstate commerce, all of the defendants are New York corporations or New York residents.

Plaintiff asserts that on or about July 26, 2004, Tristate, in order to induce plaintiff to extend credit, faxed plaintiff a credit application for purchases on an open account.

Plaintiff alleges that Tristate's credit application contained false information since Tristate was a fictitious corporation and that this false information included false tax ID numbers and references. Plaintiff claims that Tristate submitted this false credit application in order to obtain medical equipment and supplies on credit for which it had no intention of ever paying. A copy of this application is annexed to the complaint.

On or about June 12, 21, 22, 27, and 29, and July 6, 7, 8, 11, and 12, 2005, pursuant to telephone orders placed by defendant David Neuman, plaintiff sold and delivered to [*2]Tristate medical equipment and supplies for the price of $370,528.03. Although payments for these deliveries were due 30 days from the date of invoice, the

latest being due August 12, 2005, Tristate failed to make any payment for this merchandise.

Plaintiff further alleges that on or about August 12, 2004, in order to induce it to extend credit, Star faxed a credit application for purchases on an open account. Plaintiff asserts that this credit application contained misinformation which misrepresented Star's financial picture and deceived plaintiff into extending substantial credit to Star. No copy of this application has been provided and the nature of the allegedly "false and fraudulent pretenses, representations and promises" is not defined other than that Star is alleged to a be a "fictitious corporation" (Complaint ¶ 144). On or about June 22, 23, and 29, 2005, more than 10 months after Star had applied for credit, plaintiff sold and delivered to Star, pursuant to telephone orders placed by defendant Reuven Sobel, medical equipment and supplies for the price of $153,633. Although payments for this merchandise were due 30 days from the date of invoice, with the latest being due on July 29, 2005, Star failed to make any payment for this merchandise.[FN1] Plaintiff also alleges receipt, via fax, on September 26, 2007 of an additional fraudulent credit application from another fictitious corporation, I & J, which has subsequently only placed pre-paid orders for merchandise.

Plaintiff alleges that Reuven Sobel, Martin Gold, Moses Neuman, David Neuman, Lenny Neuman, Isreal Neiman, and Joseph Friedman are the principals, officers, and owners of Star, Tristate, Sunset, I & J, Adelphia, A Plus, and Choose, and that the merchandise sold to Tristate and Star was transferred to Sunset, I & J, Adelphia, A Plus, and Choose for no or nominal consideration. Plaintiff claims that the named corporations are sham corporations and alter egos of their principals, and that plaintiff's merchandise was fraudulently conveyed to these corporations. Plaintiff also alleges that Reuven Sobel and Moses Neuman fraudulently conveyed real property to NS for no or nominal consideration, and that Confidential gave NS a $600,000 mortgage on this real property, in order to shield the property from satisfaction of the judgment obtained in the earlier action.

On October 16, 2008, plaintiff filed the instant action. Plaintiff's first cause of action seeks to recover for breach of contract against Reuven Sobel, Martin Gold, Moses Neuman, David Neuman, Lenny Neuman, Isreal Neiman, and Joseph Friedman, individually and doing business as Tristate, for failure to pay the $370,528.03 owed for the merchandise delivered to Tristate, and plaintiff's second cause of action against these defendants seeks to recover attorneys' fees incurred or to be incurred by them in collecting this sum. Plaintiff's third cause of action is asserted against these defendants, as well as I & J, Adelphia, A Plus, [*3]Sunset, and Star, seeking to recover for fraud based upon the misrepresentations contained in Tristate's credit application, which allegedly induced it to extend credit to Tristate. Plaintiff's fourth, fifth, sixth, seventh, and eighth causes of action are asserted against all of those defendants plus Choose, alleging that the merchandise sold by plaintiff to Star and Tristate was fraudulently transferred to Sunset, I & J, Adelphia, A Plus, and Choose for no or nominal consideration in violation of Debtor and Creditor Law §§ 273, 274, 275, and 276, seeking attorneys' fees pursuant to Debtor and Creditor Law § 276-a. Plaintiff's ninth, tenth, eleventh, twelfth, and thirteenth causes of actions allege that Reuven Sobel and Moses Neuman's conveyance of their interest in real property to NS for no or nominal consideration and the mortgage given by Confidential on this property were fraudulent pursuant to Debtor and Creditor Law §§ 273, 273-a, 274, 275, and 279, and plaintiff's fourteenth cause of action seeks to recover attorneys' fees pursuant to Debtor and Creditor Law § 276-a against these defendants. Plaintiff's fifteenth cause of action purports to allege a civil RICO claim against Reuven Sobel, Martin Gold, Moses Neuman, David Neuman, Lenny Neuman, Israel Neiman, and Joseph Friedman, individually and d/b/a Tristate, Choose, Sunset, Adelphia, A Plus, I & J, and Star (the RICO defendants). Only Reuven Sobel, Moses Neuman, Lenny Newman and Adelphia have moved to dismiss this cause of action.

Plaintiff alleges that the RICO defendants, as individuals and entities, constitute an enterprise organized with a common scheme for the fraudulent and criminal purpose to

defraud it through a continuous pattern of racketeering activities, and to thereby obtain property and money by fraud. Plaintiff asserts that the RICO defendants perpetrated this common plan and scheme by submitting false credit applications, via fax, through fictitious corporations, under the color of honest dealing, so as to establish credit which would then permit them to place large orders without immediate payment, in order to obtain goods. Such fraudulently obtained merchandise would then be transferred to other RICO defendants. Plaintiff alleges that the RICO defendants never intended to pay for such merchandise.

Plaintiff alleges that it relied on the misleading information contained in the credit applications, extended substantial credit to the RICO defendants and delivered the merchandise, whereupon the RICO defendants sold the merchandise worth $524,161.03, to the public, transporting the goods in interstate and/or foreign commerce in violation of 18 USC § 2314, which makes it unlawful for anyone to transport, transmit, or transfer in interstate or foreign commerce any "merchandise . . . of the value of $5,000 or more, knowing the same to have been stolen, converted or taken by fraud."

Discussion

Dismissal of the RICO cause of action pursuant to CPLR 3211 (a) (7) is warranted only where the facts alleged, even if accepted as true, fail to establish that the plaintiff has a cause of action (see Noble v Graham,8 AD3d 641, 642 [2004]). However, since "[t]he mere assertion of a RICO claim . . . has an almost inevitable stigmatizing effect on those named as defendants . . . courts should strive to flush out frivolous RICO allegations at an early stage of the litigation"(Figueroa Ruiz v Alegria, 896 F2d 645, 650 [1st Cir 1990]; see also Peralta v Figueroa, 17 Misc 3d 1128[A], 2007 NY Slip Op 52184[U], *13 [Sup Ct, [*4]Kings County 2007]).

In its fifteenth cause of action, plaintiff does not plead separately its alleged violations of 18 USC §§ 1962 (a), (b), (c), and (d), but combines these alleged violations in this single cause of action. Plaintiff contends, however, that it has sufficiently alleged violations of each of the statutory provisions.

The criminal RICO statute defines four methods by which the statute is violated: (1) under § 1962 (a), by using or investing directly or indirectly, any racketeering-derived income in the "acquisition of any interest in, or the establishment or operation of, any enterprise" engaged in interestate or foreign commerce; (2) under § 1962 (b), "through a pattern of racketeering . . . acquir[ing] or maintain[ing], directly or indirectly, any interest in or control of any enterprise [which is] engaged in . . . interstate or foreign commerce"; (3) under § 1962 (c), by conducting or participating in the conduct of the affairs of an enterprise engaged in interstate or foreign commerce "through a pattern of racketeering activity or collection of unlawful debt"; and (4) under § 1962 (d), by conspiring to violate subsections (a), (b) or (c) (see 18 USC § 1962). Though a criminal prosecution is anticipated, a private right of action is available where the plaintiff has been injured by reason of a RICO violation (see 18 USC § 1964 [c]). The pleading of an injury caused by the alleged RICO violation, as distinct from the predicate acts alleged to constitute the "pattern of racketeering activity," is critical (see Katzman v Victoria's Secret Catalogue, 167 FRD 649 [SD NY 1996], affd 113 F3d 1229 [2d Cir 1997]; Carmona v Spanish Broadcasting System, Inc., 2009 US Dist. LEXIS 26479, *23-30 [SD NY 2009]). Plaintiff has failed to identify any injury other than the losses sustained as a result of defendants' failure to pay for goods shipped on credit.

In order for plaintiff to plead a violation of 18 USC § 1962 (a), it must allege that it "was injured as a proximate consequence of the investment of funds derived from the alleged racketeering activity . . . distinct from the injuries resulting from the predicate acts" (see Carmona v Spanish Broadcasting System, Inc., 2009 US Dist. LEXIS 26479 at *23-24). Conclusory allegations are insufficient; nor is it sufficient to establish the necessary injury, to allege that the proceeds of the racketeering activity were reinvested in the enterprise itself so as to perpetuate the alleged RICO operation (id.). As plaintiff's complaint is devoid of any factual allegations supporting either the required investment or the necessary injury, dismissal of this claim under § 1962 (a) must be granted (see CPLR 3211 [a][7]).

In order for plaintiff to sufficiently show that the RICO defendants violated 18 USC § 1962 (b), it must plead that plaintiff's injury proximately resulted from the RICO defendants' "acquisition or maintenance of an interest in or control of an enterprise" (Medgar Evers Houses Tenants Assn. v Medgar Evers Houses Associates, L.P., 25 F Supp 2d 116, 124 [ED NY 1998], affd 201 F3d 430 [2d Cir 1999], cert denied 529 US 1130 [2000]). Under 18 USC § 1962 (b), in contrast to 18 USC § 1962 (c), "[t]he enterprise' referred to . . . is . . . something acquired through the use of illegal activities or by money obtained from illegal activities" (National Organization for Women, Inc. v Scheidler, 510 US 249, 259 [1994]). Thus, the "enterprise" in 18 USC § 1962 (b) is not the racketeering enterprise, but contemplates investment in some other legitimate business, and "[t]he acquisition or [*5]maintenance injury must be separate and apart from the injury suffered as a result of the predicate acts of racketeering" (Greenstone/Fontana Corp. v Feldstein, 20 Misc 3d 1118[A], 2008 NY Slip Op 51387[U],*7 [Sup Ct, Nassau County 2008], mod on rearg on other grounds 2008 NY Slip Op 33396[U] [Sup Ct Nassau County 2008], quoting Tuscano v Tuscano, 403 F Supp 2d 214, 228 [ED NY 2005]). Since there is no independent enterprise alleged to have been invested in or acquired by the RICO defendants, and, thus, no "acquisition injury" has been alleged by plaintiff, plaintiff has also failed to state a cause of action under 18 U.S.C. § 1962 (b) (see Greenstone/Fontana Corp., 2008 NY Slip Op 51387[U], *7). Consequently, this claim must be dismissed (see CPLR 3211 [a][7]).

To establish a cause of action under 18 USC § 1962 (c), "a plaintiff must show that [it] was injured by defendants' (1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity"(Azrielli v Cohen Law Offices, 21 F3d 512, 520 [2d Cir 1994] [internal quotation marks and citation omitted]). Unlike the culpable activities described in sections 1962 (a) and (b), under subsection (c), there is no requirement that a defendant have infiltrated or acquired an otherwise legitimate business independent of the RICO enterprise itself. However, the elements of the offense must be sufficiently pleaded. In moving for dismissal of plaintiff's RICO cause of action under 18 USC § 1962 (c)[FN2] for failure to state a cause of action, defendants argue that plaintiff has failed to sufficiently allege the existence of an "enterprise," or a "pattern or racketeering" to sustain its claim.

Under the RICO statute, the terms "enterprise," "racketeering activity" and "pattern" are terms of art (Mikhlin v HSBC, 2009 WL 485667, *3 [ED NY 2009]). " Racketeering activity' includes any act indictable under a variety of state and federal criminal statutes including the mail fraud statute, 18 U.S.C. § 1341, and the wire fraud statute, 18 U.S.C. § 1343" (id.), both of which are alleged to have been violated here, in addition to 18 USC. § 2314, prohibiting the transport in interstate commerce of merchandise known to have been taken by fraud, which is also listed in 18 USC § 1961 (l) as a predicate act.

" [A] pattern of racketeering activity' requires at least two acts of racketeering activity . . . the last of which occurred within ten years . . after the commission of a prior act of racketeering activity" (18 USC § 1961 [5]). The acts of racketeering activity must be "related, and . . . amount to or pose a threat of continued criminal activity" (Cofacredit, S.A. v Windsor Plumbing Supply Co., Inc., 187 F3d 229, 242 [2d Cir 1999], quoting H.J. Inc. v Northwestern Bell Tel. Co., 492 US 229, 239 [1989]). Although the statute requires a minimum of two predicate acts of racketeering, as defined by the statute, a "pattern" requires more; a relationship evidencing an organizing principle is required. (See H.L. Inc., 492 U.S. at 237-238). When seeking to satisfy this requirement of "continuity" in a pattern of racketeering, a plaintiff must show that the defendants' activities were "neither isolated nor sporadic" (GICC Capital Corp. v Technology Finance Group, Inc., 67 F3d 463, 467 [2d Cir [*6]1995], cert denied 518 US 1017 [1996]), but may be closed-ended, "a series of related predicate acts extending over a substantial period of time" in the past, or open-ended, posing a threat of continuing criminal conduct beyond the period during which the predicate acts were performed (see H.J. Inc. v Northwestern Bell Tel. Co., 492 US at 239-243; Cofacredit, S.A.,187 F3d at 242 - 243; GICC Capital Corp., 67 F3d at 466). The aspect of continuity critical to making out a RICO violation is the risk of repeated criminal activity extending into the future (see H.J. Inc. v Northwestern Bell Tel. Co., 492 US at 242). Plaintiff asserts that the predicate acts alleged here to constitute the pattern of racketeering activity are related and demonstrate a threat of continuing criminal activity designed to defraud, sufficient to establish both closed-ended continuity and open-ended continuity.

Plaintiff alleges that the RICO defendants engaged in a continuous pattern of racketeering activities, including mail and wire fraud, to obtain and convert merchandise. The alleged predicate acts of wire fraud consist of the July 26, 2004 false credit application by Tristate, and the August 12, 2004 false credit application by Star, both transmitted by fax, and the additional fraudulent credit application, submitted by fax on or about September 19, 2007, by another allegedly fictitious corporation, I & J, containing false information, including a false tax ID.[FN3] The alleged mail fraud consists of the RICO defendants' receipt of the medical equipment and supplies, which were sent from plaintiff by mail. Plaintiff also alleges wire fraud based upon a check for $62,073.16, faxed by David Neuman on June 30, 2005, to pay for the merchandise, which bounced, and defendants' advertisements over the internet concerning the fictitious corporations (which have not been further described) and various telephone conversations relating to orders placed.

Plaintiff contends that this "multitude" of predicate acts of mail fraud, wire fraud, and the interstate transportation of stolen goods, spanning the course of four years, establishes a pattern of closed-ended continuity. Plaintiff asserts that these predicate acts are part of the RICO defendants' larger scheme to utilize the mail and wires to defraud it, as well as the public and other medical supplies providers, by submitting false credit applications in order to convert medical supplies and resell such stolen supplies to the public. Plaintiff alleges that this fraudulent scheme is the primary purpose of the RICO enterprise and that open-ended continuity may also be inferred from the more recent submission of I & J's fraudulent credit application, notwithstanding the absence of any purchase made on credit as yet.Plaintiff argues that RICO does not require more than two predicate acts spanning two years in order to establish continuity. While acknowledging (at p. 90 of its Memorandum of Law) that the Second Circuit "has never found a closed-ended pattern where the predicate acts spanned fewer than two years" (First Capital Asset Mgt., Inc. v Satinwood, Inc., 385 F3d 159, 181 [2d Cir 2004]; Fresh Meadow Food Servs. v RB 175 Corp., 282 Fed Appx 94, 98 [2d Cir 2008]; Oppenheim v Moho Stumer Assoc. Architects, P.C., 25 Misc 3d 1222[A], 2009 [*7]NY Slip Op 52243[U], *4 [Sup Ct, NY County 2009]), plaintiff contends that the predicate acts, consisting of the false credit applications by Tristate, Star and I & J on July 26, 2004, August 12, 2004 and September 19, 2007, respectively, and the ordering of goods in June and July of 2005 for which payment was not made, are sufficient to constitute closed-ended continuity. Arguing that the two year rule is, in any case, "not hard and fast," plaintiff cites the single federal district court decision of First Interregional Advisors Corp. v Wolff (956 F Supp 480, 486 [SD NY 1997]), in which a complaint alleging closed-ended continuity was found to be sufficient in a scheme that lasted only 14 months, to dispute defendants' claim that the period of predicate acts is insufficient to make out a pattern. Clearly, the duration of the scheme to defraud, as alleged by plaintiff, would be sufficient to meet the temporal requirement for closed-ended continuity that it extend over "a substantial period of time" exceeding two years (see DeFalco v Bernas, 244 F3d 286,321 [2d Cir 2001]).

However, "[a]lthough closed-ended continuity is primarily a temporal concept, other factors such as the number and variety of predicate acts, the number of both participants and victims, and the presence of separate schemes are also relevant in determining whether closed-ended continuity exists" (DeFalco, 244 F3d at 321). "Courts in the Second Circuit have generally held that where the conduct at issue involves a limited number of perpetrators and victims and a limited goal, the conduct is lacking in closed-ended continuity" (FD Property Holding, Inc. v U.S. Traffic Corp., 206 F Supp 2d 362, 372 [ED NY 2002]). Thus, "where a RICO claim is based on acts narrowly directed toward a single fraudulent end with a limited goal, the claim will usually fail" (Skylon Corp. v Guilford Mills, Inc., 1997 WL 88894, *7 [SD NY 1997] [internal quotation marks omitted]; see also Oppenheim, 2009 NY Slip Op 52243[U], *4).

Although plaintiff claims that it has alleged multiple victims since it alleges that, in addition to itself, other medical supplies providers and the public have been defrauded, plaintiff has not specified the names of any other medical supplies providers who have been defrauded, nor has it shown that the public sustained any damages by the RICO defendants' alleged scheme. Rather, plaintiff has alleged only one scheme committed against only one victim (i.e., plaintiff) essentially over the course of one year since no loss is attributed to I & J's alleged fraudulent application. Thus, the limited duration of the alleged pattern of racketeering, coupled with plaintiff's failure to allege the other non-temporal aspects of a RICO pattern of racketeering, demonstrates that the allegations contained in plaintiff's complaint are insufficient to establish closed-ended continuity (see DeFalco, 244 F3d at 321; FD Property Holding, Inc., 206 F Supp at 372; Becher, 64 AD3d at 677).

In attempting to satisfy the requirement of open-ended continuity, plaintiff argues that there is a threat of continuing criminal activity beyond the period during which the predicate acts were performed because the RICO defendants assumed the identity of a number of fictitious corporations to continually and perpetually defraud it as well as other medical supply companies and the public. Plaintiff alleges that the RICO defendants continue to submit credit applications by fictitious corporations in their effort to continue to defraud it. Plaintiff, however, has not shown any further continuing attempt to defraud other than I & [*8]J's September 19, 2007 submission of an allegedly false credit application two years after Star and Tristate's June and July 2005 orders for goods for which they did not pay, in response to which, plaintiff did not extend credit.

"In assessing whether or not the plaintiff has shown open-ended continuity, the nature of the RICO enterprise and of the predicate acts are relevant" (Cofacredit, S.A., 187 F3d at 242; see also Schlaifer Nance & Co. v Estate of Warhol, 119 F3d 91, 97 [2d Cir 1997]). "Where the enterprise is engaged primarily in racketeering activity and the predicate acts are inherently unlawful," the threat of continued activity is presumed, and open-ended continuity is shown (Cofacredit, S.A., 187 F3d at 242-243; see also Aulicino, 44 F3d at 1111). However, "where the enterprise primarily conducts a legitimate business, there must be some evidence from which it may be inferred that the predicate acts were the regular way of operating that business, or that the nature of the predicate acts themselves implies a threat of continued criminal activity" (Cofacredit, S.A., 187 F3d at 243; see also H.J. Inc., 492 US at 243; GICC Capital Corp., 67 F3d at 466; Azrielli, 21 F3d at 521).

Plaintiff has pleaded that the RICO defendants' enterprise is primarily engaged in racketeering activity and that the predicate acts are inherently unlawful since they involve mail fraud, wire fraud, and interstate transportation of stolen goods. Plaintiff argues that the court, therefore, can presume the existence of open-ended continuity. However, this argument must be rejected as the business of the alleged enterprise cannot be characterized as primarily or inherently unlawful. The allegations do not support plaintiff's contention that the RICO defendants' business was to engage in mail fraud, wire fraud, and the interstate transportation of stolen goods. Rather, plaintiff's allegations show only that there were submissions of false credit applications and the ordering of goods for which Tristate and Star did not pay, amounting to an alleged breach of contract and/or fraud, but not rising to the level of an unlawful business so as to satisfy the requirement of open-ended continuity (see Aulicino, 44 F3d at 1111). Nor does the alleged behavior itself demonstrate that defendants' otherwise legitimate business regularly operates in such manner. "Mere common-law fraud does not constitute racketeering activity for RICO purposes" (Cofacredit, S.A., 187 F3d at 242; see also 18 USC § 1961 [1]).

Moreover, the predicate acts of mail and wire fraud alleged by plaintiff are subject to the heightened fraud pleading requirement (see Mikhlin v HSBC, 2009 WL 485667 at *5; Southwell v Middleton, 17 Misc 3d 1129[A], 2007 NY Slip Op 52185[U], *10 [Sup Ct, Kings County 2007], affd in part, appeal dismissed in part 67 AD3d 866 [2009]; 47 Thames Realty, LLC v Kreiling, 16 Misc 3d 1112[A], 2007 NY Slip Op 51397[U], *13 [Sup Ct, Kings County 2007]). "Allegations of predicate mail and wire fraud acts [must] state the contents of the communications, who was involved, [and] where and when they took place, and [must] explain why they were fraudulent'" (Spool v World Child Intl. Adoption Agency, 520 F3d 178, 185 [2d Cir 2008], quoting Mills v Polar Molecular Corp., 12 F3d 1170, 1176 [2d Cir 1993]). Although plaintiff alleges that the credit applications submitted by defendants were fraudulent and contained false identifying information, only the Tristate application has been submitted and there are no specific [*9]allegations to support the conclusory claim of fraud. Plaintiff's complaint also fails to specifically identify the nature of the participation in the alleged fraud by any of the moving defendants or allege that any of the moving defendants committed two or more predicate acts (see DiVittorio v Equidyne Indus., Inc., 822 F2d 1242, 1247 [2d Cir 1987]; Mikhlin, 2009 WL 485667, *5).

With respect to the statutory requirement of 18 USC § 1962 (c) that plaintiff allege the existence of an "enterprise," a RICO enterprise is defined as "any individual, partnership, corporation, association, or other legal entity, and any union or group of individuals associated in fact although not a legal entity" (18 USC § 1961 [4]). "The enterprise' is not the pattern of racketeering activity'; it is an entity separate and apart from the pattern of activity in which it engages" (Mikhlin, 2009 WL 485667, *3, quoting United States v Turkette, 452 US 576, 583 [1981]), although, under § 1962 (c), the enterprise may be the vehicle for the racketeering activity (id.; see also National Organization for Women, Inc. v Scheidler, 510 US at 259 ("The enterprise' referred to in subsections (a) and (b) is . . . the victim of unlawful activity . . . . By contrast, the enterprise' in subsection (c) connotes generally the vehicle through which the unlawful pattern of racketeering activity is committed. . .")). "The existence of an enterprise is proved by evidence of an ongoing organization, formal or informal, and by evidence that the various associates function as a continuing unit'"(Mikhlin at *3). "Where a complaint alleges an association-in-fact enterprise, courts . . . look to the hierarchy, organization, and activities of the association to determine whether its members functioned as a unit" (Cedar Swamp Holdings, Inc v Zaman, 487 F Supp 2d 444, 450 [SD NY 2007] [internal quotation marks and citations omitted]).

Plaintiff argues that while defendants do not constitute a formal legal enterprise, they do constitute a RICO enterprise by association in fact, separate from the pattern of racketeering activity, comprised of nine corporations, some legal and some fictitious, and various individuals who direct and operate all of these business entities, all based out of common locations, and all involved in providing medical supplies. Plaintiff alleges that this enterprise by association in fact was used by the RICO defendants to violate 18 USC §§ 1341, 1342, and 1343, federal mail and wire fraud laws, and to transport stolen goods interstate in violation of 18 USC § 2314. Plaintiff claims that the RICO defendants' enterprise operates by fraudulently obtaining credit and placing orders for merchandise without the intention of honoring the ensuing debt obligations and then distributes and sells the illegally procured goods to the public.

It is well established, however, that " [i]n a fraud-based RICO claim, if the sole purpose of the alleged enterprise is to perpetrate the alleged fraud, there can be no enterprise for RICO purposes'"(Atkins v Apollo Real Estate Advisors, L.P., 2008 WL 1926684, *15 [ED NY 2008], quoting Goldfine v Sichenzia, 118 F Supp 2d 392, 401 [SD NY 2000]; see also United States v International Longshoremen's Assn., 518 F Supp 2d 422, 473 [ED NY 2007]). Here, it is alleged that the sole purpose of the purported enterprise was to perpetrate the fraud against plaintiff. Thus, there is no enterprise [*10]separate from the alleged racketeering activity (see Turkette, 452 US at 583). Plaintiff also insufficiently pleads the role that each individual and entity played in the alleged enterprise or how the group operated according to any structure or hierarchy (see Cedar Swamp Holdings, Inc., 487 F Supp 2d at 450). Thus, plaintiff has failed to adequately allege the existence of an enterprise (see Turkette, 452 US at 583).

As plaintiff has not alleged a cognizable RICO claim under 18 USC § 1962 (c), dismissal of this claim is mandated (see CPLR 3211 [a][7]).

To plead a RICO conspiracy under 18 USC § 1962 (d), plaintiff must allege "the existence of an agreement to violate RICO's substantive provisions"(see Cofacredit, S.A., 187 F3d at 244). A conspiracy under 18 USC § 1962 (d) alleging violations of the substantive provisions of the statute, 18 USC § 1962 (a)-(c), must fail if the substantive claims based on 18 USC § 1962 (a)-(c) fail (see Discon, Inc. v Nynex Corp., 93 F3d 1055, 1064 [2d Cir 1996]; Crab House of Douglaston Inc. v Newsday, Inc., 418 F Supp 2d 193, 212 [ED NY 2006]; Maddaloni Jewelers, Inc. v Rolex Watch U.S.A., Inc., 354 F Supp 2d 293, 300 [SD NY 2004]). Since plaintiff has failed to state a claim under 18 USC § 1962 (a), (b), or (c), it has not stated a claim for conspiracy under 18 USC § 1962 (d). Dismissal of this claim is, therefore, warranted (see CPLR 3211 [a][7]).

Inasmuch as no cognizable RICO claim is stated by plaintiff's fifteenth cause of action, it must be dismissed, pursuant to CPLR 3211 (a)(7), in its entirety. Since the court finds that plaintiff has failed to allege a viable RICO cause of action, it need not address the RICO defendants' argument that plaintiff's RICO claim is barred by the four-year statute of limitations applicable to such a claim (see Lichtenstein v Reassure America Life Ins. Co., 2009 WL 792080, *11 [ED NY 2009]).

Accordingly, the motion for an order dismissing plaintiff's fifteenth cause of action is granted.

This constitutes the decision and order of the court.E N T E R,

J. S. C. Footnotes

Footnote 1: Plaintiff brought an earlier action with respect to the monies owed to it by Star, and, on August 30, 2007, a default judgment in favor of plaintiff was entered against Star, Ruben Sobel, Charles Sobel, and Martin Gold (see Invacare Supply Group, Inc. v Star Promotions, Inc., Sup Ct, Kings County, Index No. 10352/06). Following an inquest before Referee Richard Allman, on or about June 13, 2008, Justice David Schmidt so ordered the decision of Referee Allman awarding $408,730.73 in damages ($245,576.13 based on breach of contract plus $163,154.60 for fraud) plus 9% interest from June 13, 2008 against Star and the individual defendants under a piercing of the corporate veil.

Footnote 2:Although plaintiff has asserted claims under all four provisions of the RICO statute, both sides appear to direct their arguments to § 1962 (c). In fact, it is only this provision, and dependent subsection d, which could substantively support a RICO claim under the facts alleged.

Footnote 3:Although the RICO defendants are alleged to have begun making purchases from plaintiff under the fictitious name of I & J on prepayment terms, they have also purportedly attempted (albeit unsuccessfully) to make purchases under the name of I & J on credit, in an alleged attempt to continue to defraud it.