causation does not preclude recovery on underlying fraud). As for plaintiffs' state law claims, they too necessarily rise and fall on the element of causation and are therefore subject to the discussion above and, accordingly, will be dismissed as well. Id. at 1438.
Count IV of the complaint asserts a claim under the civil provisions of the Racketeer Influenced and Corrupt Organizations act, 18 U.S.C. § 1961 et seq. This count as presently pled, at least as against Alexander Grant, is a prime example of the misuse of civil RICO in cases of fraud.
The remainder of the count is remarkable, not for what it says but for what it does not say. Merely tracking the statutory language, it appears to assert sections (a), (b), and (c) liability against all of the defendants. Putting aside the multitude of problems such an interpretation would entail,
plaintiffs' brief in opposition appears to narrow its RICO allegations against Alexander Grant to § 1962(c). As plaintiffs correctly note, in order to state a cause of action under § 1962(c), plaintiffs must allege (1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering. Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 87 L. Ed. 2d 346, 105 S. Ct. 3275 (1985). Here we can assume, even though it is not pled, that Alexander Grant is a "person" within the meaning of § 1962(c). This is of course a critical fact since the Court of Appeals for the Third Circuit has made it clear that in § 1962(c) cases the "person" whose conduct is proscribed must be distinct from the "enterprise." Hirsch v. Enright Refining Co., 751 F.2d 628 (3d Cir. 1984). The reason for this is simple. Section 1962(c) was intended to prevent the infiltration of legitimate business through illegal means. Petro-Tech, Inc. v. Western Co. of North America, 824 F.2d 1349 (3d Cir. 1987).
However, if we try to apply this rule to the allegations of the complaint we reach an absurd result. In search of the victim, or enterprise, that has been conducted by Alexander Grant through a pattern of illegal activity we find that it is the victims who have "violated Section 10b [sic] of the Securities Act, and Rule 10(b)-5 [sic] promulgated thereunder . . . in an ongoing scheme of fraudulent activity. . . ." Brief in Op. at 26. Clearly, that allegation does not state a claim under § 1962(c) against Alexander Grant. See Petro-Tech, 824 F.2d at 1359 (§ 1962(c) cannot be read to make the enterprise liable). A similar analysis applies to plaintiffs' bald assertion that defendant aided and abetted the enterprises' § 1962(c) violation. One cannot aid and abet a victim. Id. at 1361.
Of course, it is possible that plaintiffs mean to assert, despite the clear import of their brief, a § 1962(a) claim against defendant. Even that claim is frought with difficulty since there is no allegation that Alexander Grant received any income from the predicate acts and used it, or invested it, in an enterprise, a necessary predicate for § 1962(a) liability. Eastern Corporate Federal Credit Union v. Peat, Marwick, Mitchell & Co., 639 F. Supp. 1532, 1537 (D.Mass. 1986) (gravamen of § 1962(a) claim is not racketeering activity itself but subsequent use and investment of proceeds). Be that as it may, the court should not, in any event, be engaged in a speculative inquiry as to what plaintiffs intended to plead. Federal Rule of Civil Procedure 8, read in conjunction with the dictates of Rule 9, require plaintiffs to state in plain and simple terms the nature of their allegation. Seville, 742 F.2d at 786 (defendant entitled to know the precise misconduct with which they are charged). The foregoing discussion should make clear that it is impossible for this court, and hence for the defendant, to know the precise nature of the statutory claim against it. For that reason alone, Count IV must be dismissed as to defendant Alexander Grant.
It is therefore concluded that, to the extent they name defendant Alexander Grant, the securities counts -- the First and Second Claims -- and the state law claims -- the Third and Fifth Claims -- must be dismissed for failure to allege proximate cause and therefore for failure to state a claim. Fed.R.Civ.P. 12(b)(6). Similarly, the Fourth Claim, the civil RICO claim, must be dismissed for failure to allege the necessary elements. Id.
The court will enter an appropriate order.
This matter having been opened to the court by Cole, Schotz, Bernstein, Meisel & Forman, P.A. (Robert L. Ritter, Esq. appearing), attorneys for defendant Alexander Grant & Company, on notice to all counsel, for an order dismissing plaintiffs' complaint pursuant to Rule 9(b) and Rule 12(b)(6) of the Federal Rules of Civil Procedure; and the court having read and considered the Memorandum of Law submitted on behalf of Alexander Grant & Company and having read and considered all papers submitted by plaintiffs in opposition to the motion; and the court having heard the arguments of counsel and it appearing to the court that plaintiffs have failed to state a claim against defendant Alexander Grant & Company upon which relief can be granted; and for good cause shown; and
For the reasons expressed in this court's opinion dated October 30, 1987,
It is on this 30th day of October, 1987
ORDERED that plaintiffs' complaint as to defendant Alexander Grant & Company be and the same is hereby dismissed.