Opinion
CIVIL NO. CCB-03-912
July 30, 2003
MEMORANDUM
Timothy Harrison, estranged brother-in-law of Martin L. Grass, filed a complaint in this court on March 28, 2003, alleging RICO violations, a conspiracy to violate his civil rights, and various related state law claims arising out of a series of actions directed against him by Grass and others in an effort either to retaliate against Harrison or to intimidate him for cooperation and testimony provided to federal authorities in their investigation and prosecution of Grass. Because the allegations are sufficient to state a claim under the RICO statute, the motions to dismiss filed by all defendants will be denied.
Racketeer Influenced and Corrupt Organizations Act, see 18 U.S.C. § 1961, et seq.
In the interests of efficiency, I will not repeat the factual chronology alleged in the complaint. Much of it is identical to the facts stated in Count 33 of the federal indictment to which Grass recently pled guilty in the Middle District of Pennsylvania. (See Ex. A to Harrison's Motion to Preserve Evidence). That count charged a conspiracy to obstruct justice involving Grass, Franklin Brown, and others from October 1999 through the date of the indictment, June 20, 2002. Particularly relevant to Harrison are the following acts charged as part of that conspiracy: (1) actions taken by Grass and others to strip Harrison of control and income from the Harrison Grass and GH Property real estate entities, which began in the summer of 2000 immediately following Harrison's refusal to maintain his signature on a back-dated contract; and (2) efforts by Grass to influence Harrison's grand jury testimony in the fall of 2001. The civil complaint continues with allegations concerning a letter sent to Harrison by Grass on Elysian Partners L.P. letterhead on December 19, 2001, the day Harrison testified before the grand jury, threatening monthly "cash calls" of substantial sums of money in 2002; and the "purchase" and immediate pledge-back of multi-million dollar Mercantile notes in June 2002 by Grass and by defendants Alexander Grass and Philip Markovitz, which were then used to file confessed judgments against Harrison in Baltimore County Circuit Court in February 2003, shortly before he was anticipated to testify against Grass and others in the criminal trial in Pennsylvania.
Brown, who awaits trial in the fall, allegedly was involved with Grass in the effort to obtain a back-dated contract.
These cases were removed to this court in March 2003 (CCB-03-822 and 823). By separate Memorandum and Order, the judgments have been vacated.
"A motion to dismiss under Rule 12(b)(6) tests the sufficiency of a complaint; importantly, it does not resolve contests surrounding the facts, the merits of a claim, or the applicability of defenses." Republican Party of North Carolina v. Martin, 980 F.2d 943, 952 (4th Cir. 1992). When ruling on a 12(b)(6) motion, the court must view the complaint in the light most favorable to the plaintiff and accept the plaintiff's factual allegations, as well as all reasonable inferences therefrom, as true. See Mylan Labs., Inc. v. Matkari, 7 F.3d 1130, 1134 (4th Cir. 1993); Martin, 980 F.2d at 952; Westray v. Porthole, Inc., 586 F. Supp. 834, 836 (D. Md. 1984). Consequently, a motion to dismiss under Rule 12(b)(6) may be granted only when "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46 (1957); see also Rogers v. Jefferson-Pilot Life Ins. Co., 883 F.2d 324, 325 (4th Cir. 1989).
The defendants' principal attack on the sufficiency of the complaint is their assertion that the pattern of racketeering acts alleged involve only one victim. While there is "no per se rule against a RICO claim involving only one victim," the Fourth Circuit, in cases involving ordinary commercial fraud, has held that schemes involving only one victim do not satisfy the pattern requirement of RICO. Al-Abood v. El-Shamari, 217 F.3d 225, 238 (4th Cir. 2000). The present case is distinguishable both in scope and in character from Al-Abood.
Preliminarily, I agree with the defendants that the relevant pattern of acts to be examined is the series of witness-related acts (obstruction of justice, intimidation, retaliation, etc.) alleged in the complaint rather than the acts charged in connection with the underlying fraud against Rite Aid and its shareholders, although the Rite Aid fraud provides the background and motivation. I do not agree, however, that this pattern involves only a single victim. The conspiracy to obstruct justice was aimed at potential witnesses (in addition to Harrison), Rite Aid's internal investigators, the U.S. Attorney's Office, the SEC, and the federal grand jury. Nor is it a completed scheme: as is evident from the filing of the confessed judgments as recently as February 2003, this is a continuing pattern of conduct that threatens future injury. See H.J. Inc. v. Northwestern Bell Tel. Co., 492 U.S. 229, 241-43 (1989). In addition, far from being a "garden-variety" commercial fraud, this complaint rests on a federal criminal conspiracy that presents a continued and "`special threat to social well-being.'" See Menasco, Inc. v. Wasserman, 886 F.2d 681, 684 (4th Cir. 1989) (citation omitted); see also ePlus Tech., Inc. v. Aboud, 313 F.3d 166, n. 15 (4th Cir. 2002); Mylan Labs., 7 F.3d 1130, 1135 (finding predicate acts of bribery and obstruction of justice sufficient for the purposes of Rule 12(b)(6)); First Guar. Mortgage Corp. v. Procopio, 217 F. Supp.2d 633, 636-37 (D.Md. 2002) (loan fraud scheme sufficiently posed a threat of continuing criminal activity). Accordingly, the complaint alleges a continuing pattern of racketeering activity sufficient to withstand a motion to dismiss.
Defendants Markovitz and Alan Garubba separately challenge their inclusion in the RICO claim, primarily for failure to allege specific facts to show their intentional and knowing participation. In light of their alleged cooperation with Grass in the takeover of Harrison Grass and GH Property, including their involvement with Elysian Partners, and the personal participation of Markovitz in the confessed judgment filings, their motions will be denied.
Similarly, Count III of the complaint is sufficient to state a claim against Alexander Grass for his participation in the "purchase" of the Harrison Grass and the GH Property Note from Mercantile. While the evidence may be circumstantial, there are many specific factual allegations supporting the claim of an agreed upon and intentional course of action as to Alexander Grass, Markovitz, and Garubba that distinguish this case from the "merely conclusory allegations of conspiracy" found insufficient in Simmons v. Poe, 47 F.3d 1370, 1376-77 (4th Cir. 1995) (upholding, at the summary judgment stage, a ruling in favor of the defendants on a claim brought under 42 U.S.C. § 1985).
The allegations supporting a veil-piercing theory are sufficient to maintain the partnership and other business entities as defendants at this time. See Thomas v. Ross Hardies, 9 F. Supp.2d 547, 555-59 (D.Md. 1998).
Because the case will continue in this court on Counts I-III, in the interests of judicial economy I will not address the motions to dismiss the state law claims. Further, in light of defense counsels' representation that discovery obligations will be complied with, the Motion to Preserve Evidence will be denied at this time, without prejudice to a more narrowly-tailored request if warranted by further developments in the case.
A separate Order follows.
ORDER
For the reasons stated in the accompanying Memorandum, it is hereby ORDERED that:
1. the following Motions are Denied: Docket numbers 2, 20, 21, 22, 23, 25, 26, 27, 28; and
2. the Clerk shall send copies of this Order and the accompanying Memorandum to counsel of record.