SANDRA L. TOWNES, District Judge.
Maxim Ostrovskiy, and his companies, MAVL Capital, Inc. and IAM & AL Group Inc. (collectively, "Plaintiffs") — who are in the business of purchasing automobiles in America and selling them in Europe — bring this action against (1) Marine Transport Logistics, Inc., ("MTL"), and its director, Dimitry Alper, and (2) Aleksandr Solovyev, and his companies, Royal Finance Group, Inc. ("Royal Finance") and Car Express & Import Inc. ("Car Express") (collectively, "Defendants") — who are in the business of financing and transporting vehicles overseas — alleging that Defendants violated various state and federal laws by asserting a lien on Plaintiffs' automobiles and other property. Defendants filed their answer, and then their motion for judgment on the pleadings, styled as a motion to dismiss.
Federal Rule of Civil Procedure 12(c) provides that "[a]fter the pleadings are closed — but early enough not to delay trial — a party may move for judgment on the pleadings." Fed.R.Civ.P. 12(c). "Judgment on the pleadings is appropriate where material facts are undisputed and where a judgment on the merits is possible merely by considering the contents of the pleadings." Sellers v. M.C. Floor Crafters, Inc., 842 F.2d 639, 642 (2d Cir.1988).
The standard applied to a motion for judgment on the pleadings is the same as that used for a motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(6). Patel v. Contemporary Classics of Beverly Hills, 259 F.3d 123, 126 (2d Cir.2001). "In both postures, the district court must accept all allegations in the complaint as true and draw all inferences in the non-moving party's favor." Id.; see also Johnson v. Rowley, 569 F.3d 40, 44 (2d Cir.2009). A complaint should be dismissed only if it does not contain enough allegations of fact to state a claim for relief that is "plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). While a complaint "does not need detailed factual allegations, a plaintiff's obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Twombly, 550 U.S. at 555, 127 S.Ct. 1955 (alteration, citations, and internal quotation
With this standard in mind, the following facts, which are drawn from Plaintiffs' complaint, are deemed true for purposes of this motion.
Plaintiffs are in the business of purchasing vehicles from within the United States and from abroad, and then selling those vehicles to customers in Europe. (Compl. ¶ 2.) Defendants are in the business of financing the purchase of vehicles, storing vehicles, and shipping them to foreign ports. (Compl. ¶¶ 3-9.) MTL, of which Alper is the director, is a licensed Non-Vessel Operating Common Carrier ("NVOCC") regulated by the Federal Maritime Commission. (Compl. ¶ 3.) MTL does not itself operate a vessel, but rather arranges for cargo to be delivered to one of its United States storage facilities, where it consolidates the cargo, and then retains ocean carriers to perform the overseas carriage. (Compl. ¶ 4.) It also acts as a "logistics service company, and provides services including, but not limited to ocean freight, ground transportation, auto shipping, warehousing, tracking and tracing, and containerization." (Compl. ¶ 53). In addition to its role as shipping provider, MTL also provides financing for automobile dealerships and personal shippers who wish to purchase automobiles for shipment to various ports abroad. (Compl. ¶ 5.) Solovyev is principal of both Royal Finance and Car Express, both of which are agents of MTL. (Compl. ¶ 18.) Royal Finance issues invoices, collects payments for shipping, delivery charges, commissions and other fees from automobile dealerships and personal shippers who have used MTL's services. (Compl. ¶ 9.) Car Express is a licensed automobile dealer that purchases used and salvaged cars from auctions and dealerships for sale to its customers, and acts on behalf of MTL in coordinating the purchase and transport of those vehicles for shipment from the United States to various ports abroad. (Compl. ¶¶ 6-8.)
Between January and August of 2013, Plaintiffs contracted with MTL to, inter alia, ship cars abroad. (Compl. ¶ 45.) The financing arrangement/ownership status of each car was one of the following: (1) Plaintiffs owned some of the cars out-right; (2) foreign customers had already paid Plaintiffs, in whole or in part, for some of the cars; and (3) Defendant Royal Finance Group provided financing for some of the cars and, in exchange, MTL was to be the exclusive shipping agent for those cars. (Compl. 45-48.) Plaintiffs agreed to pay for shipping and delivery, inclusive of all freight and charges. (Compl. ¶ 50.) In addition, for cars financed by Defendants, Plaintiffs agreed to pay a flat fee of 2.5% of the amount financed at the time of delivery. (Compl. ¶ 51.)
In August 2013, the parties' relationship soured after Plaintiffs worked out a more favorable arrangement with another shipping company and notified Defendants of their intent to wind down their relationship. (Compl. ¶¶ 65-70.) At that point, Defendants had five of Plaintiffs' vehicles and two replacement seats in their possession. (Complaint ¶¶ 78-109) (2006 Mercedes SL65, 2004 Bobcat S205, 2006 Bobcat S250, 2010 Bobcat S185, 2011 Porsche
By complaint filed December 12, 2013, Plaintiffs commenced this action seeking to recover over one million dollars in compensatory and punitive damages. The complaint alleges (1) federal question jurisdiction, under the Carriage of Goods by Sea Act ("COGSA"), 46 U.S.C. § 30701, and the Shipping Act of 1984, 46 U.S.C. § 40101 et seq.; (2) jurisdiction under this Court's "original jurisdiction in maritime matters," and (3) supplemental jurisdiction over Plaintiffs' state law claims. (Compl. ¶¶ 29-30). Plaintiffs assert that Defendants' failure to release their cargo violated the Shipping Act by, in effect, imposing an unlawful tariff, and amounted to extortion in violation of the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1961 et seq. ("RICO"). (Compl. 128-130, 171-179.) Plaintiffs further allege claims for breach of fiduciary duties, conversion, civil conspiracy, tortious interference with business relations, breach of contract, common-law fraud and a violation of N.Y. Gen. Bus. Law § 349, and plead claims against individual defendants under a corporate veil piercing theory. (Compl. ¶¶ 131-173.) On May 14, 2014, Defendants answered, denying all of Plaintiffs' allegations and asserting a counterclaim for non-payment of outstanding freight and/or storage charges. (Ans. ¶¶ 184-188.)
Plaintiffs claim that MTL violated the Shipping Act, 46 U.S.C. § 40101 et seq., "by imposing charges which were never agreed upon and never published with the [Federal Maritime Commission ("FMC")] and by unlawfully seizing Plaintiffs' cargo, holding it as security and/or collateral for the payment of an unjust and unlawful debt." (Compl. ¶ 129.) Plaintiffs do not identify under which section or sections of the Shipping Act they purport to bring suit.
The Shipping Act, which regulates the carriage of cargo over seas, was enacted to "establish a nondiscriminatory regulatory process for the common carriage of goods by water in the foreign commerce of the United States...." 46 U.S.C. § 40101. The statute empowers the FMC, an independent federal agency, to enforce violations of the Act. Fed. Mar. Comm'n v. S. Carolina State Ports Auth., 535 U.S. 743, 773, 122 S.Ct. 1864, 152 L.Ed.2d 962 (2002) (describing the FMC as an independent federal agency "most appropriately considered to be part of the Executive Branch"); See 46 U.S.C. § 41301 (complaints for violations of the Shipping Act are filed with the FMC); 46 U.S.C. § 41302 (the FMC may investigate suspected violations of the Shipping Act on complaint or its own motion); 46 U.S.C. § 41304 (before assessing penalties, the FMC shall provide an opportunity for a hearing); 46 U.S.C. § 41305 (the FMC may award damages and attorney's fees); 46 U.S.C. § 41109 (the FMC may also assess civil penalties, payable to the United States); 46 U.S.C. § 41307 (in connection with an investigation, the FMC may enjoin conduct that violates the Shipping Act).
Generally, "the Shipping Act does not provide for a private cause of action in
"To establish a RICO claim, a plaintiff must show: (1) a violation of the RICO statute, 18 U.S.C. § 1962; (2) an injury to business or property; and (3) that the injury was caused by the violation of Section 1962." DeFalco v. Bernas, 244 F.3d 286, 305 (2d Cir.2001) (internal quotation marks and citations omitted). Here, Plaintiffs allege a violation of § 1962(c). To establish a violation of § 1962(c), "a plaintiff must show (1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity." Id. at 306 (citation omitted). "Racketeering activity" encompasses a variety of state and federal offenses, enumerated in 18 U.S.C. § 1961(1), while a "pattern" of such activity requires at least two such predicate acts or offenses, 18 U.S.C. § 1961(5).
Here, Plaintiffs allege that in August of 2013, after their business relationship soured and Plaintiffs decided to retain a different NVOCC, Defendants held Plaintiffs' cargo `hostage' unless Plaintiffs paid purportedly trumped-up fees, (Compl. ¶¶ 62-66) and when Plaintiffs refused to pay, refused to return the cargo (Compl. 81, 92, 108, 123), and shipped some of it overseas without Plaintiffs' consent (Compl. ¶¶ 87, 98, 104). Plaintiffs contend that this conduct constitutes multiple acts of extortion — a predicate act under 18 U.S.C. § 1961(1).
In any event, Plaintiffs have failed to plead a pattern of racketeering. To constitute a pattern of racketeering activity, predicate acts must be "related" and "amount to or pose a threat of continued criminal activity." DeFalco v. Bernas, 244 F.3d 286, 320 (2d Cir.2001) (citing H.J. Inc. v. Nw. Bell Tel. Co., 492 U.S. 229, 239, 109 S.Ct. 2893, 106 L.Ed.2d 195 (1989)); see also Spool v. World Child Int'l Adoption Agency, 520 F.3d 178, 184-186 (2d Cir.2008); Cofacredit, S.A. v. Windsor Plumbing Supply Co., 187 F.3d 229, 242 (2d Cir.1999). The continuity requirement may be satisfied by showing either "close-ended continuity" or "open-ended continuity." DeFalco, 244 F.3d at 320. Closed ended continuity is "demonstrated by predicate acts that amount to continued criminal activity by a particular defendant." Id. at 321 (citing H.J. Inc., 492 U.S. at 242, 109 S.Ct. 2893). This requires the plaintiff to allege "a series of related predicates extending over a substantial period of time," and although there is no bright-line defining "a substantial period of time," the Second Circuit "has never held a period of less than two years to constitute a `substantial period of time.'" Id. (citing H.J. Inc., 492 U.S. at 242, 109 S.Ct. 2893; Cofacredit, 187 F.3d at 242). Alternatively, the plaintiff may plead open-ended continuity, which exists when "there was a threat of continuing criminal activity beyond the period during which the predicate acts were performed." Id. at 323 (citing Cofacredit, 187 F.3d at 242); see also GICC Capital Corp. v. Tech. Fin. Grp., Inc., 67 F.3d 463, 466 (2d Cir.1995) (describing an open-ended pattern of racketeering as "past criminal conduct coupled with a threat of future criminal conduct"). When an open-ended pattern of racketeering is alleged, a court looks to the nature of the RICO enterprise and of the predicate acts. DeFalco, 244 F.3d at 323. The Second Circuit has explained that:
Id. (internal quotation marks and citations omitted).
Here, Plaintiffs have failed to plausibly allege a pattern of racketeering activity under either a "closed-ended" or "open-ended" theory. Plaintiffs plead that:
(Pls.' Br. at 24 (quoting Compl. ¶¶ 69-70, 176) (emphasis in original)). Plaintiffs allege that Defendants first "unlawfully seized" Plaintiffs' cargo "in or around August 2013." (Compl. ¶¶ 62, 65). The most recent incident detailed in the complaint is October 23, 2013, the date that Alper fraudulently obtained a replacement title for one of Plaintiffs' motorcycles. (Compl. ¶ 119.) Even assuming Plaintiffs have sufficiently pleaded at least two incidents of extortion taking place between August and October 2013, a period of two months does not amount to a "substantial period of time," as required to state a closed-ended pattern of racketeering. Likewise, Plaintiffs fail to plead open-ended continuity, i.e., "a threat of continuing criminal activity." DeFalco, 244 F.3d at 323 (quoting Cofacrèdit, 187 F.3d at 242). Although Plaintiffs clarify in their brief that they "are not referring solely to the specific acts committed by defendants against Plaintiffs" (Pls.' Br. at 24), the complaint does not plead that Defendants still possess any more of Plaintiffs' cargo, nor do Plaintiffs plausible allege the existence of any other victims of Defendants' racketeering scheme. The facts here do not suggest that the alleged extortion was part of Defendants' "regular way of operating th[eir] business." DeFalco, 244 F.3d at 323 (citation omitted). Nor does "the nature of the predicate acts themselves impl[y] a threat of continued criminal activity," given that the dispute between the parties appears to have arisen out of a soured business arrangement between two otherwise law-abiding businesses and their principals, and this business arrangement has ended. Id. Plaintiffs' mere speculation that Defendants engaged in an "ongoing scheme," and "over and over again" "lure[d] customers" into its scheme does not suffice to plead open-ended continuity. Accordingly, because Plaintiffs have failed to allege a pattern of racketeering, Plaintiffs' RICO claims are dismissed.
The complaint alleges that this Court has jurisdiction over Plaintiffs' federal and state law claims under its federal question, maritime, and supplemental jurisdiction, 28 U.S.C. §§ 1331, 1333, and 1367, and "the court's original jurisdiction
Title 28 U.S.C. § 1367(c)(3) "permits a district court in its discretion, to decline to exercise supplemental jurisdiction over state law claims if it has dismissed all federal claims." Tops Markets, Inc. v. Quality Markets, Inc., 142 F.3d 90, 103 (2d Cir.1998). "The court must `consider and weigh in each case, and at every stage of the litigation, the values of judicial economy, convenience, fairness, and comity in order to decide whether to exercise jurisdiction' over the pendent claim." Raucci v. Town of Rotterdam, 902 F.2d 1050, 1055 (2d Cir.1990) (quoting Carnegie-Mellon University v. Cohill, 484 U.S. 343, 350, 108 S.Ct. 614, 98 L.Ed.2d 720 (1988)). "[I]n the usual case in which all federal-law claims are eliminated before trial, the balance of factors ... will point toward declining to exercise jurisdiction over the remaining state-law claims." Cohill, 484 U.S. at 350 n. 7, 108 S.Ct. 614. Given that Plaintiffs federal claims against Defendants have all been dismissed, the court declines to exercise supplemental jurisdiction over the remaining state law claims.
In their complaint, Plaintiffs suggest that this Court has jurisdiction over this action under its maritime jurisdiction. However, no claims sounding in maritime law are pleaded in the complaint. E. River S.S. Corp. v. Transamerica Delaval, Inc., 476 U.S. 858, 864, 106 S.Ct. 2295, 90 L.Ed.2d 865 (1986) ("With admiralty jurisdiction comes the application of substantive admiralty law."). Given that Plaintiffs invoke this Court's maritime jurisdiction, rather than dismissing Plaintiffs' remaining state law claims, Plaintiffs are ordered to show cause within 30 days of the date of this order why this Court should not dismiss Plaintiffs' remaining claims in light of this decision.
Defendants' motion for judgment on the pleadings is granted in part. Given that Plaintiffs invoke this Court's maritime jurisdiction, Plaintiffs are ordered to show cause within 30 days of the date of this order why this Court should not dismiss Plaintiffs' remaining claims.
