Rolo v. City Investing Co. Liquidating Trust

Page 644

155 F.3d 644

41 Fed.R.Serv.3d 1055, RICO Bus.Disp.Guide 9549

Jose and Rosa ROLO; and Dr. William and Roseanne Tenerelli v. CITY INVESTING COMPANY LIQUIDATING TRUST; AmBase Corporation; Carteret Bancorp, Inc.; Federal Deposit Insurance Corporation, as Successor to Resolution Trust Corporation, in its capacity as Receiver of Carteret Savings Bank, FA; The Home Insurance Company; George T Scharffenberger; Marshall Manley; Edwin I. Hatch; Eben W Pyne; Reubin O'D. Askew; Howard L. Clark, Jr.; Charles J Simons; Peter R. Brinkerhoff; David F. Brown; Robert F Ehrling; Cravath, Swaine & Moore; David G. Ormsby; Federal Deposit Insurance Corporation, in its capacity as Receiver of Southeast Bank, NA; Painewebber Incorporated; Merrill Lynch, Pierce, Fenner & Smith, Inc.; The Prudential Insurance Company of America; National Bank of Canada; Citicorp Real Estate, Inc.; First National Bank of Boston; Federal National Mortgage Association; Federal Home Loan Mortgage Corporation; Chase Federal Bank, FSB; Citizens and Southern Trust Company (Florida), NA; Regions Bank of Louisiana, as Successor to Secor Bank, FSB; Oxford First Corp.; The Oxford Finance Companies, Inc.; Lasalle Business Credit, Inc.; as Successor to Stanchart Business Credit, Inc.; Harbor Federal Savings and Loan Association; Greyhound Financial Corporation; Lloyds Bank PLC; and John Does 1-10. Jose Rolo, Rosa Rolo, Dr. William Tenerelli, and Roseanne Tenerelli, and proposed intervenor plaintiffs Dominick J. Capezza, Estrelita Capezza, Jacques Cormier, Anite Cormier, Steven Kalinowski, Bernard Kalinowski, Charles R. Panellino, and Clarisse Panellino, Appellants in 95-5768. Proposed intervenor plaintiffs Dominick J. Capezza, Estrelita Capezza, Jacques Cromier, Anite Cormier, Steven Kalinowski, Bernard Kalinowski, Charles R. Panellino, and Clarisse Panellino, Appellants in 96-5128.

Nos. 95-5768, 96-5128.

United States Court of Appeals, Third Circuit.

Argued Sept. 16, 1996.

Decided Aug. 31, 1998.

As Amended Oct. 2, 1998.

Herbert I. Deutsch, Roy A. Heimlich (Argued), Deutsch & Frey, New York, NY, William J. O'Brien, Delany & O'Brien, Voorhees, NJ, for Appellants Jose Rolo; Rosa Rolo; William Tenerelli; Roseanne Tenerelli; Dominick J. Capezza; Estrelita Capezza; Jacques Cormier; Anite Cormier; Steven Kalinowski; Bernard Kalinowski; Charles R. Panellino and Clarisse Panellino.

Douglas S. Eakeley (Argued), Lowenstein, Sandler, Kohl, Fisher & Boylan, Roseland, NJ, Paul M. Dodyk, Cravath, Swaine & Moore, New York, NY, for Appellees AmBase; City Investing Company Liquidating Trust; Carteret Bancorp Inc.; George T. Scharffenberger; Marshall Manley; Edwin I. Hatch; and Eben W. Pyne.

Nicholas deB. Katzenbach (Argued), Princeton, NJ, Peter N. Perretti, Jr., Riker, Danzig, Scherer, Hyland & Perretti, Morristown, NJ, for Appellees Cravath, Swaine & Moore and David G. Ormsby.

Alan J. Kluger (Argued), Steve I. Silverman, Kluger, Peretz, Kaplan & Berlin, Miami, FL, Joseph A. Boyle, Kelley, Drye & Warren, Parsippany, NJ, for Appellee Greyhound Financial Corporation.

John W. Little, III, Gerry S. Gibson (Argued), Steel, Hector & Davis, West Palm Beach, FL, Joseph J. Schiavone, Budd, Larner, Gross, Rosenbaum, Greenberg & Sade, Short Hills, NJ, for Appellee Federal National Mortgage Association.

Steven M. Edwards, Davis, Scott, Weber & Edwards, New York, NY, for Appellees David F. Brown and Robert F. Ehrling.

Elizabeth J. Sher, Pitney, Hardin, Kipp & Szuch, Morristown, NJ, for Appellee Home Insurance Co.

Peter W. Homer, Homer & Bonner, Miami, FL, for Appellee Citizens and Southern Trust Company National Association.

Joseph L. Buckley, Mark E. Duckstein, Sills, Cummis, Zuckerman, Radin, Tischman, Epstein & Gross, Newark, NJ, Robert T. Wright, Jr., Shutts & Bowen, Miami, FL, for Appellees Reubin O'D. Askew; Howard L. Clark, Jr.; Charles J. Simons; and Peter R. Brinkerhoff.

James J. Hagan, Bruce D. Angiolillo, Simpson, Thacher & Bartlett, New York, NY, James M. Altieri, Shanley & Fisher, Morristown, NJ, for Appellee Painewebber, Inc.

Warren H. Colodner, Kirkpatrick & Lockhart, New York, NY, for Appellee Merrill, Lynch, Pierce, Fenner & Smith, Inc.

Steven H. Reisberg, Willkie, Farr & Gallagher, New York, NY, Robert E. Bartkus, Pinto, Rodgers and Kopf, Morristown, NJ, for Appellee Prudential Insurance Company of America.

L. Louis Mrachek, Roy E. Fitzgerald, Gunster, Yoakley, Valdes-Fauli & Stewart, West Palm Beach, FL, for Appellee National Bank of Canada.

George J. Wade, Shearman & Sterling, New York, NY, Steven M. Richman, Herrick, Feinstein, Princeton, NJ, for Appellee Citicorp Real Estate.

Steven I. Adler, Cole, Schotz, Meisel, Forman & Leonard, Hackensack, NJ, for Appellee The First National Bank of Boston.

Gerald J. Houlihan, Houlihan & Partners, Miami, FL, for Appellee Chase Federal Bank.

Robert L. Young, Carlton, Fields, Ward, Emmanuel, Smith & Cutler, Orlando, FL, for Appellee Harbor Federal Savings and Loan Association.

David T. Eames, Bodian & Eames, New York, NY, for Appellee Lloyds Bank, PLC.

Edward B. Deutsch, McElroy, Deutsch & Mulvaney, Morristown, NJ, for Appellee Regions Bank LA, as Successor to SECOR Bank, FSB.

Kevin M. Hart, Stark, & Stark, Princeton, NJ, for Federal Deposit Insurance Corporation, in its capacity as Receiver of Southeast Bank, NA and Federal Deposit Insurance Corporation, as Successor to Resolution Trust, in its capacity as Receiver of Carteret Savings Bank, FA.

John H. Denton, Connell, Foley & Geiser, Roseland, NJ, for Appellee Federal Deposit Insurance Corporation, as Successor to Resolution Trust, in its capacity as Receiver of Carteret Savings Bank, FA.

J. Marbury Rainer, Parker, Hudson, Rainer & Dobbs, Atlanta, GA, for Appellee LaSalle Business Credit, as Successor to Stanchart Business Credit, Inc.

George Kielman, Federal Home Loan Mortgage Corporation, Legal Department, McLean, VA, Gerald T. Ford, Landman, Corsi, Ballaine & Ford, Newark, NJ, for Appellee Federal Home Loan Mortgage Corporation.

Alan I. Moldoff, Adelman, Lavine, Gold & Levin, Philadelphia, PA, for Appellees Oxford Fin Co., and Oxford First Corp.

Before: BECKER, NYGAARD and ROTH, Circuit Judges.

OPINION OF THE COURT

ROTH, Circuit Judge:

This case arises from the sale of residential realty in Florida. Plaintiffs, Jose and Rosa Rolo and Dr. William and Rosanne Tenerelli, purchased lots and homes from General Development Corporation ("GDC") and its subsidiary GDV Financial, Inc. ("GDV"). They claim that they were deceived by a fraudulent marketing scheme which induced them to purchase residential lots and homes at inflated prices. This case and its related proceedings have a long and convoluted history. The present appeal is the third time this Court has considered this case.

Plaintiffs originally filed suit in 1989 in the United States District Court for the District of New Jersey alleging claims under the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1961 et seq (RICO), the Interstate Land Sales Full Disclosure Act, 15 U.S.C. § 1701 et seq ("Land Sales Act"), federal securities laws, and common law fraud against thirty-five named defendants. They also sought to represent a putative class consisting of all persons who purchased houses or homesites from GDC or GDV over the period from 1957 to 1990 and who are members of the North Port Out-of-State Lot Owners Association ("NPA").

The district court dismissed plaintiffs' claims in their entirety. Rolo v. City Investing Co. Liquidating Trust, 845 F.Supp. 182 (D.N.J.1993). The court held that plaintiffs' RICO claims were time-barred; plaintiffs had failed to plead adequately the existence of a RICO conspiracy; and they had failed to satisfy the essential requirements for pleading aider and abettor liability under RICO. Although the court found that plaintiffs' complaint stated claims under the Land Sales Act for aiding and abetting against some defendants, but not others, all of their Land Sales Act Claims were time barred. The district court dismissed plaintiffs' Securities Act claims on the grounds that the sales contracts and mortgage notes were not securities within the meaning of § 10 of the 1934 Act or Rule 10b-5. Having dismissed all of plaintiffs' federal claims, the court declined to exercise pendent jurisdiction over plaintiffs' common law fraud claims. Finally, the district court denied plaintiffs' Motion to file a Second Amended Complaint that would have restructured and reformulated their action. Following a remand for reconsideration of plaintiffs' claims in light of our decision in Jaguar Cars, Inc. v. Royal Oaks Motor Car Co., 46 F.3d 258 (3d Cir.1995), the district court reaffirmed its dismissal of each of plaintiffs' claims and its denial of further leave to amend the complaint. Rolo v. City Investing Co. Liquidating Trust, 897 F.Supp. 826 (D.N.J.1995).

The present appeal is from the district court's decision on remand. Plaintiffs assert that the district court erred in dismissing their RICO claims and abused its discretion by denying them leave to amend their complaint. We conclude that there were adequate grounds to dismiss each of plaintiffs' RICO claims and that the district court did not abuse its discretion by denying plaintiffs further leave to amend their complaint. Accordingly, we will affirm the district court's decision on remand in its entirety.

I. BACKGROUND

A. The Fraudulent Scheme

Plaintiffs allege that GDC and GDV engaged in a fraudulent marketing scheme to sell real estate in violation of several federal criminal and civil statutes. The First Amended Complaint alleges that GDC improved only a small portion of the 1,000 square mile tract of land that it owned in Florida and that it had no intention of developing the land further. Prospective purchasers were told, however, that the entire tract would be developed. According to plaintiffs, GDC targeted unsophisticated purchasers, particularly those who spoke English only as a second...