Irish v. Ferguson

970 F.Supp.2d 317

George P. IRISH, et al., Plaintiffs,

v.Harry J. FERGUSON, et al., Defendants.

Civil Action No. 12–0174.

United States District Court, M.D. Pennsylvania.

Sept. 3, 2013.

Joseph G. Murray, Law Offices of Joseph G. Murray, Hawley, PA, for Plaintiffs.

Lawrence A. Durkin, Durkin MacDonald, LLC, J. Timothy Hinton, Michael F. Cosgrove, Haggerty, McDonnell & O'Brien, Lucille Marsh, Kreder, Brooks, Hailstone & Ludwig, Matthew P. Barrett, O'Malley, Harris, Durkin & Perry, P.C., Scranton, PA, Michael P. Lehutsky, Attorney & Counselor at Law, Honesdale, PA, Glen H. Waldman, Jason Gordon, Heller Waldman, PL, Coconut Grove, FL, Randolph T. Borden, Randolph T. Borden, P.C., Hawley, PA, Kathryn M. Brady, Paul C. Troy, Kane, Pugh, Knoell, Troy & Kramer, LLP, Norristown, PA, Jonathan K. Hollin, Mary J. Pedersen, Powell Trachtman Logan Carrle Bowman & Lomboardo, P.C., King of Prussia, PA, Constantine T. Fournaris, Wiggin and Dana LLP, Glen D. Kimball, Thomas J. Gregory, O'Connor Kimball LLP, Josh J.T. Byrne, Jeffrey B. McCarron, Kathleen M. Carson, Swartz Campbell, LLC, Philadelphia, PA, Ciaran B. Way, James V. Fareri, Newman Williams Mishkin Corveleyn Wolfe & Fareri, Stroudsburg, PA, Sean P. McDonough, Dougherty, Leventhal & Price, L.L.P., Moosic, PA, for Defendants.

Martin Woldow, Solebury, PA, pro se.

OPINION

SLOMSKY, District Judge.

TABLE OF CONTENTS

I.

INTRODUCTION

328

II.

BACKGROUND

328

A.

Causes of Action in Complaint

329

B.

Parties and Related Entities

329

1.

Plaintiffs

329

2.

Lakefront Development Company, LLC

329

3.

Defendants

330

a.

“Owner Defendants”: Harry Ferguson, William Black, William Waldman, and Martin Woldow

330

b.

“Carversville Defendants”: “Owner Defendants” (Ferguson, Black, Waldman, and Woldow), and Ronald Bugaj, Christine Vehstedt, Carversville Development Company, and Carversville Group

330

c.

“Accounting Defendants”: WeiserMazars, LLP, Alan Cohen, and Benjamin Fishbein

330

d.

Re/Max, LLC

331

e.

“ESSA Defendants”: ESSA Bank and Trust Company, and William Lewis

331

f.

“Meagher Defendants”: Meagher Realty Group, LLC, Meagher Associates, Incorporated, Tim Meagher, Heather Meagher, Paul Meagher Sr., Paul Meagher Jr., and Matthew Meagher

331

g.

“Anderson Defendants”: G. Anderson Homes, Inc., Grace Anderson, Santos Rolon, and Tammy Lee Clause

331

h.

“Weichert Defendants”: Weichert Realtors/Paupack Group, Inc., Thomas McColligan, Judith Rodonski, Deborah Friese, and Karen Rice

331

C.

Statement of Facts as Alleged In Complaint

332

1.

Origins of Lakefront Development Company, LLC

332

2.

Fraud Upon Lakefront: Corporate Waste

332

3.

Agreement to Transfer the Re/Max Franchise

332

4.

Fraud Upon Blue Cross

333

5.

Fraud Upon Lakefront and The Internal Revenue Service: Payments for Services Not Rendered, Unauthorized Distributions, and Underreporting of Lakefront's Income and Profits

333

6.

Fraud Upon Lakefront: Scheme To Divert Lakefront's Profits

334

7.

Fraud Upon Lakefront and ESSA: Loans Made For The Benefit Of Others Paid For By Lakefront

334

8.

Fraud Upon Lakefront: The “1740 House”

335

9.

Attempts to Conceal the Fraud Upon Lakefront

335

a.

ESSA Defendants

335

b.

Attempt to Liquidate Lakefront, Allegations Regarding Schedule K–1 Tax Form

335

c.

Extortion

337

d.

Irish's Petition to Compel Inspection of Corporate Records

337

10.

Fraud Upon Lakefront: Credit Card Processing Account

338

11.

Conspiracy to Disparage Irish's Name with Law Enforcement

338

12.

Conspiracy to Transfer Re/Max Franchise and Destroy Irish and MIK

339

13.

Unauthorized Alteration of “Multiple Listing Service” Records

341

14.

Lawsuits Involving Plaintiffs

341

15.

Franchise Litigation

342

16.

Receivership Litigation

342

III.

STANDARD OF REVIEW

343

IV.

ANALYSIS

343

A.

Elements of Plaintiffs' RICO Claims

343

1.

18 U.S.C. § 1962(c)

344

a.

Defendant Must Be Associated With an Enterprise

344

b.

Defendant Must Conduct or Participate in the Conduct of the Enterprise's Affairs through a Pattern of Racketeering Activity

345

c.

Defendant Must Knowingly Commit At Least Two Acts of Racketeering Activity

345

d.

Two Acts of Racketeering Activity Committed By a Defendant Must Be Connected By a Common Scheme, Plan, or Motive Constituting a Pattern of Racketeering Activity

345

e.

The Enterprise Must Be Involved In or Affect Interstate Commerce

346

2.

18 U.S.C. § 1962(a)

346

3.

18 U.S.C. § 1962(b)

347

4.

18 U.S.C. § 1962(d)

347

B.

Plaintiffs Have Not Stated a Claim under RICO for Which Relief May Be Granted

347

1.

Plaintiffs Lack RICO Standing

347

a.

Plaintiffs' Claims Regarding Harm to Lakefront by Carversville Defendants, Accounting Defendants, and ESSA Defendants Are Derivative in Nature and Do Not Confer Standing on Plaintiffs

348

b.

Plaintiffs Have No Standing to Recover Damages for Harm to Blue Cross, the Internal Revenue Service, or ESSA

351

2.

Plaintiffs' Claims Involving the Re/Max Franchise Are Barred By Collateral Estoppel

352

3.

Plaintiffs Have Not Established That Carversville Defendants or Accounting Defendants Have Committed a Predicate Act With Regard To the Schedule K–1 Forms

356

4.

All RICO Counts Will Be Dismissed

361

C.

Plaintiffs Have Not Stated a Claim under the Sherman Act for Which Relief May Be Granted

362

1.

Count Nineteen: Plaintiffs Lack Antitrust Standing Because They Have Not Established an Antitrust Injury

362

a.

The Attempted Transfer and Cancelation of the Re/Max Franchise Did Not Have a “Competition–Reducing” Effect on the Marketplace

363

b.

Weichert Defendants and Meagher Defendants Do Not Have Market Power

364

c.

Plaintiffs Have Not Established an Antitrust Injury Because They Only Allege Harm to Themselves, Not To Market Competition

365

2.

Count Twenty: Plaintiffs Have Not Alleged Anticompetitive Conduct

366

a.

There is No Per Se Liability Because Defendants Named in Count Twenty Do Not Have Market Power

367

b.

Plaintiffs' Allegations in the Complaint Contradict Their Claims of an Illegal Boycott and Anticompetitive Conduct

367

D.

The Court Will Decline to Exercise Supplemental Jurisdiction over the Pennsylvania Common Law Claims

368

V.

CONCLUSION

368

Appendix I: Defendants By Group

368

Appendix II: Defendants By Count

369

I. INTRODUCTION

Plaintiff George Irish, a real estate agent in the Lake Wallenpaupack region of Northeast Pennsylvania, filed this lawsuit alleging a plethora of legal claims against thirty-two defendants, who include his former business partners, other real estate agents, attorneys, accountants, and a bank, among others. The Complaint is lengthy—ninety-six pages containing 520 paragraphs with a four-page table of contents—and describes what is alleged to be a narrative of conspiratorial and deceitful misdeeds. Irish and his co-Plaintiff, MIK, Inc., accuse the thirty-two defendants of engaging in a widespread scheme of criminal and tortious efforts to steal their assets, keep them in the dark about illicit activities, and render them unable to compete in the regional real estate market.

The claims brought by Plaintiffs fall into three categories. Nearly all Defendants are accused of committing substantive and conspiratorial criminal acts in violation of the Racketeer Influenced and Corrupt Organizations Act of 1970 (“RICO”). Plaintiffs also allege certain Defendants unlawfully restrained commerce in violation of the Sherman Antitrust Act of 1890 (“Sherman Act”). Finally, Plaintiffs assert various Pennsylvania common law tort claims against certain Defendants.

These are serious allegations. Despite its length, however, the Complaint fails to adequately allege facts to support the federal RICO and antitrust claims. Consequently, all federal causes of action will be dismissed, and the Court will decline to exercise supplemental jurisdiction over the remaining state law claims.

II. BACKGROUND

The Complaint tests the limits of Federal Rule of Civil Procedure 8(a)(2), which requires that a pleading contain a “short and plain statement of the claim showing that the pleader is entitled to relief.” ¹ The Complaint describes the parties and their relationship to each other on pages two to ten. Pages ten through sixty-five contain the factual allegations, a sprawling tale of alleged fraud, subterfuge, backstabbing, and misdirection. Pages sixty-five through sixty-nine contain “general RICO allegations.” Pages seventy through ninety-one describe in twenty-four counts the claims made against the thirty-two Defendants. Page ninety-two sets forth a jury demand, and pages ninety-three through ninety-six are the table of contents.

A. Causes of Action in Complaint

The Complaint alleges violations in twenty-four counts. They are as follows:

• Violations of federal law (Counts One through Twenty)

• Prohibited activity in violation of RICO

• 18 U.S.C. § 1962(a) (Count One)

• 18 U.S.C. § 1962(b) (Count Two)

• 18 U.S.C. § 1962(c) (Counts Three, Five, Seven, Nine, Eleven, Thirteen, Fifteen, and Seventeen)

• 18 U.S.C. § 1962(d) (Counts Four, Six, Eight, Ten, Twelve, Fourteen, Sixteen, and Eighteen)

• Prohibited activity in violation of the Sherman Act

• Conspiracy to Violate the Sherman Act, 15 U.S.C. § 1 (Count Nineteen)

• Illegal Boycott in Violation of the Sherman Act, 15 U.S.C. § 1 (Count Twenty)

• Violations of Pennsylvania common law (Counts Twenty–One through Twenty–Four)

• Breach of the Covenant of Good Faith and Fair Dealing (Count Twenty–One)

• Commercial Disparagement (Count Twenty–Two)

• Civil Conspiracy (Count Twenty–Three)

• Negligent Infliction of Emotional Distress (Count Twenty–Four)

B. Parties and Related Entities

1. Plaintiffs

Plaintiff George Irish is a Pennsylvania real estate agent. (Doc. No. 1 at 2.) Plaintiff MIK, Inc. (“MIK”) is a Pennsylvania corporation. ( Id.) Irish has been a shareholder of MIK since 1998. ( Id.) MIK formerly did business as Re/Max of Lake Wallenpaupack–North. ( Id.) MIK owned the Re/Max Franchise from 1998 to 2005. ( Id.) On February 1, 2005, MIK transferred the Re/Max franchise to a partnership operated by Defendants William Waldman and William Black. ( Id. at 2–3.) Plaintiffs continued to operate as real estate agents under the Re/Max Franchise until it was terminated in ...