Nygard v. Bacon

PETER J. NYGARD, Plaintiff, v. LOUIS M. BACON, JOHN DOES 1-20 and DOE CORPS. 1-10, Defendants.

No. 19 Civ. 1559 (LGS)

United States District Court, S.D. New York

August 20, 2021

OPINION AND ORDER

LORNA G. SCHOFIELD, District Judge:

Plaintiff Peter J. Nygard objects to portions of Magistrate Judge Fox's Report and Recommendation (“R&R”) that Plaintiff's First Amended Complaint (“FAC”) be dismissed pursuant to Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim. For the following reasons, the recommendation of the R&R is adopted, and the motion to dismiss is granted.

I. BACKGROUND

The FAC claims that Defendant, in conjunction with twenty John Does and ten Doe Corporations, planned to “destroy” Plaintiff and businesses associated with Plaintiff. The FAC alleges that Plaintiff's claims against Defendant began with a property dispute in the Bahamas that expanded into several incidents over ten years: (1) the filing of “Jane Doe” lawsuits against Plaintiff alleging sexual misconduct, with associated attempts to bribe, coerce and threaten witnesses; (2) attempts to frame Plaintiff in a murder for hire scheme, and related reports to (and raids by) the FBI and the Department of Homeland Security; (3) associated media reports in The New York Times and other media outlets; (4) successful attempts to have retailers and business partners drop Plaintiff's fashion brands; (5) promotion of Plaintiff's resignation from certain companies; (6) appointment of a receiver for companies with which Plaintiff was associated and (7) institution of receivership proceedings involving certain companies.

Two corporate entities associated with Plaintiff -- Nygard International Partnership (“NIP”) and Nygard Inc. (collectively, the “Associated Businesses”) -- originally brought suit alongside Plaintiff. The FAC alleges that Plaintiff is the indirect beneficial owner of NIP, which had “a business relationship with Nygard Inc., such that damage to Nygard Inc. could impact [NIP], and thereby damage Plaintiff.” These entities were voluntarily dismissed with prejudice after entering receivership proceedings.

The FAC asserts two causes of action for violations of the Racketeer Influenced and Corrupt Organizations (“RICO”) Act: (1) a pattern of racketeering activity in violation of 18 U.S.C. § 1962(c), giving rise to civil liability under 18 U.S.C. § 1964(c) (Count I) and (2) conspiracy to engage in racketeering activity in violation of 18 U.S.C. § 1962(d) (Count II). The FAC claims that Defendant engaged in racketeering activity by bribing, coercing or extorting witnesses to give false statements; laundering money to those witnesses and others; tampering with witness protection programs; transmitting obscene materials and stolen goods in interstate commerce and trafficking in persons.

The FAC also asserts state law claims for: (3) tortious interference with prospective economic advantage (Count III); (4) aiding and abetting the filing of a false report (Count IV); (5) filing a false report (Count V); trafficking and harboring certain aliens to further a fraudulent act (Count VI) and abuse of process (Count VII).

The FAC alleges federal question jurisdiction over the RICO claims pursuant to 28 U.S.C. § 1331, and supplemental jurisdiction over the state claims pursuant to 28 U.S.C. § 1367.

On September 10, 2020, Defendant moved to dismiss the FAC pursuant to Federal Rule of Civil Procedure 12(b)(6). The motion was referred to Judge Fox, who recommended dismissal. Judge Fox first concluded that the FAC failed to state a civil RICO claim because the FAC alleges three classes of injuries, none of which are cognizable under RICO: (1) harm to Plaintiff's personal reputation and resulting public relations expenses; (2) follow-on reputational harm to businesses associated with Plaintiff, including diminution in the value of their trademarks and other intellectual property and (3) legal fees related to criminal proceedings and unspecified other litigation. Judge Fox also recommended that, absent federal question jurisdiction, the Court should decline to exercise supplemental jurisdiction. Plaintiff filed objections to the R&R, and Defendant responded.

II. LEGAL STANDARDS

A. Review of a Magistrate Judge's Report and Recommendation

A reviewing court “may accept, reject, or modify, in whole or in part, the findings or recommendations made by the magistrate judge.” 28 U.S.C. § 636(b)(1)(C). “The district judge must determine de novo any part of the magistrate judge's disposition that has been properly objected to.” Fed.R.Civ.P. 72(b)(3) (emphasis added); accord 28 U.S.C. § 636(b)(1). “Portions of a magistrate judge's report to which no or merely perfunctory objections are made are reviewed for clear error.” G.T. v. New York City Dep't of Educ., No. 18 Civ. 11262, 2020 WL 1503508, at *1 (S.D.N.Y. Mar. 30, 2020) (internal quotation marks omitted) (citation omitted). “When a party . . . simply reiterates the original arguments made below, a court will review the report strictly for clear error.” Espada v. Lee, No. 13 Civ. 8408, 2016 WL 6810858, at *2 (S.D.N.Y. Nov. 16, 2016). “Objections to a report and recommendation are to be specific and are to address only those portions of the proposed findings to which the party objects.” Chembulk Mgmt. PTE Ltd. v. Vedanta Ltd., No. 16 Civ. 9799, 2018 WL 3410013, at *1 (S.D.N.Y. July 13, 2018) (internal quotation marks omitted). “In addition, new arguments and factual assertions cannot properly be raised for the first time in objections to the report and recommendation, and indeed may not be deemed objections at all.” 3 W. 16th St., LLC v. Commonwealth Land Title Ins. Co., No. 18 Civ 1914, 2019 WL 1397135, at *2 (S.D.N.Y. Mar. 28, 2019), appeal withdrawn, No. 19-1167, 2019 WL 5549317 (2d Cir. Sept. 17, 2019) (internal quotation marks omitted).

B. Pleading Requirements

On a motion to dismiss, a court accepts as true all well-pleaded factual allegations and draws all reasonable inferences in favor of the non-moving party, Montero v. City of Yonkers, 890 F.3d 386, 391 (2d Cir. 2018), but gives “no effect to legal conclusions couched as factual allegations, ” Stadnick v. Vivint Solar, Inc., 861 F.3d 31, 35 (2d Cir. 2017). To withstand a motion to dismiss, a pleading “must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). “Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Iqbal, 556 U.S. at 678. It is not enough for a plaintiff to allege facts that are consistent with liability; the complaint must “nudge[ ]” claims “across the line from conceivable to plausible.” Twombly, 550 U.S. at 570. “To survive dismissal, the plaintiff must provide the grounds upon which his claim rests through factual allegations sufficient ‘to raise a right to relief above the speculative level.'” ATSI Commc'ns, Inc. v. ShaarFund, Ltd., 493 F.3d 87, 98 (2d Cir. 2007) (quoting Twombly, 550 U.S. at 555). In ruling on a motion to dismiss, the court may consider: (1) the complaint; (2) documents attached to the complaint, quoted therein or incorporated by reference and (3) documents upon which the plaintiff relies and which are integral to the complaint. Halebian v. Berv, 644 F.3d 122, 131 n.7 (2d Cir. 2011); accord Bergesen v. Manhattanville Coll., No. 20 Civ. 3689, 2021 WL 3115170, at *2 (S.D.N.Y. July 20, 2021). The court will not consider factual allegations made solely in the parties' briefing in connection with a motion to dismiss. See Brandenburg v. Greek Orthodox Archdiocese of N. Am., No. 20 Civ. 3809, 2021 WL 2206486, at *7 (S.D.N.Y. June 1, 2021) (“Plaintiffs cannot amend their complaint by asserting new facts or theories for the first time in opposition to Defendants' motion to dismiss.”).

C. RICO

“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.” Spool v. World Child Int'l Adoption Agency, 520 F.3d 178, 183 (2d Cir. 2008) (internal citations and quotations omitted); accord Malvar Egerique v. Chowaiki, No. 19 Civ. 3110, 2020 WL 1974228, at *7 (S.D.N.Y. Apr. 24, 2020).

Section 1962(c) makes it “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 debt.” 18 U.S.C. § 1962(c). According to RICO's definitional section, “‘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 U.S.C. § 1961(5). The acts that constitute the pattern must be among the various criminal offenses listed in § 1961(1), and they must be “related, and [either] amount to or pose a threat of continuing criminal activity.” Spool, 520 F.3d at 183 (quoting 18 U.S.C. § 1961(5)); Cofacredit, S.A. v. Windsor Plumbing Supply Co., 187 F.3d 229, 242 (2d Cir.1999)) (alteration in original).

Section 1962(d) makes it “unlawful for any person to conspire to violate [the RICO statute].” 18 U.S.C. § 1962(d). “[T]o establish a RICO conspiracy, a plaintiff must show a conspiracy to commit a substantive RICO violation. . . . Thus, ‘[u]nder any prong of § 1962, a plaintiff in a civil RICO suit must establish a ‘pattern of racketeering activity.''” Spool, 520 F.3d at 183 (citing...