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March 20, 1991


The opinion of the court was delivered by: Brotman, District Judge.


Plaintiffs have requested the court to reconsider its decision of October 30, 1990 granting defendants' motion to dismiss plaintiffs' Racketeer Influenced and Corrupt Organizations Act (RICO) claims on statute of limitations grounds.*fn1 See Panna v. Firstrust, 749 F. Supp. 1372 (D.N.J. 1990). The court has reconsidered that decision and, after closer examination, finds that plaintiffs' complaint alleges a pattern of racketeering activity of which plaintiffs knew within the four-year limitations period. Therefore, the Third Circuit's ruling in Keystone Ins. Co. v. Houghton, 863 F.2d 1125 (1988) compels the court to vacate its previous order and deny defendants' motion to dismiss.


Plaintiffs, limited partners of Oceanaire Associates, filed a complaint on September 7, 1989 alleging that defendant Firstrust, with the participation of other defendants, initiated a criminal plan to defraud Oceanaire's investors, Firstrust's depositors, the Federal Deposit Insurance Corporation (FDIC) and the general public for the purpose of accomplishing its conversion from a mutual savings and loan institution to a Pennsylvania stock savings bank. The complaint alleges that on March 16, 1981, Firstrust loaned $3,800,000 to defendant Fifty-Three Hundred Boardwalk, Inc. (Fifty-Three Hundred) to finance the proposed sale of the Oceanaire Apartments in Ventnor, New Jersey as individual condominium units. When Fifty-Three Hundred failed to market the condominiums successfully and defaulted on its loan a year later, Firstrust chose not to foreclose on the property. Instead, in order to avoid disclosing the bad loan to the general public at the same time it was attempting to convert to a stock savings bank, Firstrust allegedly initiated a fraudulent syndication of the property with the participation of co-defendants.

Plaintiffs are the unsuspecting limited partners who, interested in investing in a high-risk tax shelter like the one described in the Offering Memorandum, collectively purchased 20 units at $50,000 per unit, or $70,000 per unit on an installment basis. This investment having been made on August 31, 1984, the court found that plaintiffs did not bring this lawsuit within the four-year limitations period judicially imposed by the Supreme Court in Agency Holding Corp. v. Malley-Duff & Assocs., 483 U.S. 143, 107 S.Ct. 2759, 97 L.Ed.2d 121 (1987) and later applied by the Third Circuit in Keystone Ins. Co. v. Houghton, 863 F.2d 1125 (1988).*fn3 For reasons more fully set forth in this court's earlier opinion, the court found that plaintiffs' RICO claim accrued on the date of their investment on August 31, 1984. Given the substantial warnings and disclosures in the Offering Memorandum, plaintiffs knew or reasonably should have known (1) the elements of their civil RICO cause of action and (2) of their last RICO injury within four years of the date of their investment. Panna, 749 F. Supp. at 1378-81. The court further concluded that the last predicate act alleged on the face of plaintiffs' complaint occurred in July 1985, when Firstrust allegedly filed "false and misleading Proxy Statements with the FDIC . . . in connection with Firstrust's conversion to a stock company," Complaint at ¶ 92(a). Id. at 1381. The court rejected plaintiffs' suggestion that the court find Firstrust's mortgage foreclosure action or Oceanaire's bankruptcy filing predicate acts falling within the limitations period. Id. at 1381-82. Finding no predicate acts within the limitations period, the court dismissed plaintiffs' RICO claim as time-barred.

Plaintiffs then timely filed this motion for reconsideration, challenging this court's findings on several points: 1) Plaintiffs have continued to experience injury from their investments in Oceanaire through ongoing installment payments falling within the limitations period; 2) plaintiffs' damages are distinguishable from those experienced by the plaintiffs in Fleischhauer v. Feltner, 879 F.2d 1290 (6th Cir. 1989), cert. denied, ___ U.S. ___, 110 S.Ct. 1122, 107 L.Ed.2d 1029 (1990), which held expectancy damages not recoverable where plaintiffs were fully informed of the risks associated with the investment; 3) plaintiffs' discovery of their cause of action is a factual matter exclusively reserved to the jury; and 4) further predicate acts falling within the limitations period reasonably can be inferred from the nature of the scheme.*fn4 This last point has required the court to reassess its concept of the nature of the pattern alleged, leading it to deny defendants' motion to dismiss on grounds distinct from those raised in plaintiffs' motion to reconsider.


A. Motion for Reconsideration Standard:

District Court of New Jersey Rule 12(I) provides that a motion for reconsideration shall be served with "a memorandum setting forth concisely the matters or controlling decisions which counsel believes the Court has overlooked." A party seeking reconsideration must show more than a disagreement with the court's decision, and "recapitulation of the cases and arguments considered by the court before rendering its original decision fails to carry the moving party's burden." Carteret Savings Bank, F.A. v. Shushan, 721 F. Supp. 705, 709 (D.N.J. 1989). See also Egloff v. New Jersey Air National Guard, 684 F. Supp. 1275, 1279 (D.N.J. 1988). The only proper ground for granting a motion for reconsideration, therefore, is that the matters or decisions overlooked, if considered by the court, "might reasonably have altered the result reached. . . ." New York Guardian Mortgage Corp. v. Cleland, 473 F. Supp. 409, 420 (S.D.N.Y. 1979); U.S. v. International Business Machines Corp., 79 F.R.D. 412, 414 (S.D.N.Y. 1978). There is nothing to prevent the court from examining new facts or evidence that might lead to a different result if considered by the court. See In the Matter of Arbitration between Dow Jones & Co., Inc. v. Irwin & Leighton, Inc., 1990 WL 8733, 1990 U.S.Dist. LEXIS 1068 (D.N.J. Civ. No. 89-3641, Jan. 29, 1990); Efrain Maldonado v. Rusty Lucca, 636 F. Supp. 621 (D.N.J. 1986).

  B.  Analysis of the Pattern Alleged in Plaintiffs'

The court's reconsideration of its opinion and of plaintiffs' RICO claims has led it to a different conclusion about the pattern plaintiffs allege and at what point the court may find that plaintiffs knew or should have known about their RICO cause of action. In its previous opinion, this court proceeded to apply the Keystone limitations rule to injuries and predicate acts flowing from a pattern of racketeering activities, namely that pattern composed of predicate acts of wire and mail fraud in connection with the offering and sale of partnership interests in Oceanaire Associates. In analyzing that particular set of predicate acts, the court found that at least some of those predicate acts associated with selling interests in the Oceanaire partnership were sufficiently related and continuous to form a pattern of which plaintiffs knew or should have known. The misstep, however, was to reach that conclusion without examining the larger pattern alleged on the face of plaintiffs' complaint. See Keystone, 863 F.2d at 1135 (for statute of limitations purposes, court should refer to the pattern upon which plaintiff relied in bringing its claim).

In fact, the particular "pattern" analyzed by the court is but a sub-pattern of the larger interrelated pattern actually alleged in plaintiffs' complaint. For example, at ¶¶ 48 and 49, plaintiffs state, "In connection with Firstrust's conversion to a stock company, Firstrust was intending to sell securities to the public, and was therefore required to prepare a proxy statement and other documents disclosing in-depth financial information concerning Firstrust, . . ." including financial information about its problem loans and bad debts. Paragraph 50 states, "Rather than initiate mortgage foreclosure proceedings in connection with the Oceanaire Apartments and the bad loan of Fifty-Three Hundred — which would have been required to be disclosed in connection with Firstrust's efforts to convert to a stock company — Firstrust put into motion a fraudulent scheme designed to avoid disclosure and to get this problem loan off its books."

Thus, the pattern presented on the face of plaintiffs' complaint involves a sub-scheme, which allegedly defrauded these plaintiffs, as part of a larger scheme to defraud the public into buying Firstrust securities at a later time. Thus, at ¶ 92(a)-(m), plaintiffs list a series of predicate acts "including, but not limited to" (a) Firstrust's filing of false and misleading Proxy Statements with the FDIC in at leas 1984 and in July, 1985 in connection with Firstrust's conversion to a stock company and (b) Firstrust's failure to disclose the bad Fifty-Three Hundred loan when selling securities to the general public beginning in 1984 and thereafter. The remaining predicate acts alleged by plaintiffs involve the marketing of the Oceanaire syndication. Those predicate acts in themselves form a pattern, but it is not the same comprehensive pattern plaintiffs allege in their complaint. In effect, plaintiffs have alleged that, but for Firstrust's plan to convert to a stock bank without disclosing bad loans, the Oceanaire partnership never would have been created and they would not have invested in "essentially worthless securities."*fn5

An argument raised in defendants' motion to dismiss but not explicitly discussed in this court's previous opinion is whether such a pattern of racketeering activities meets the definition enunciated by the Supreme Court in H.J. Inc. v. Northwestern Bell Telephone Co., 492 U.S. 229, 109 S.Ct. 2893, 106 L.Ed.2d 195 (1989). "To prove a pattern of racketeering activity a plaintiff or prosecutor must show that the racketeering predicates are related, and that they amount to or pose a threat of continued criminal activity." 109 S.Ct. at 2901. The Court also suggested that the legislative history on this issue was enlightening: "[C]riminal conduct forms a pattern if it embraces criminal acts that have the same or similar purposes, results, participants, victims, or methods of commission, ...

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