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
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, or otherwise are interrelated by distinguishing
characteristics and are not isolated events." Sedima, S.P.R.L.
v. Imrex Co., 473 U.S. 479, 496 n. 14, 105 S.Ct. 3275, 3285 n.
14, 87 L.Ed.2d 346 (1985).
The Supreme Court in H.J. Inc. elaborated on the continuity
prong of the pattern test, stating, "A party alleging a RICO
violation may demonstrate continuity over a closed period by
proving a series of
related predicates extending over a substantial period of
time." 109 S.Ct. at 2902. The Court also commented that "proof
that a RICO defendant has been involved in multiple criminal
schemes would certainly be highly relevant to the inquiry into
the continuity of defendant's racketeering activity."
Id. at 2901. The Third Circuit has stated that the court must
inquire into the extent of the racketeering activity based on
the circumstances of the particular case. Barticheck v.
Fidelity Union Bank/First National State, 832 F.2d 36 (3d Cir.
1987). Above all, the court must take a flexible approach in
reaching a determination of whether a pattern exists. H.J.
Inc., 109 S.Ct. at 2900.
Based on the standards discussed above, the court finds that
the pattern of predicate acts plaintiffs allege meets the test
of "continuity plus relationship." The multiple schemes — one
to defraud plaintiffs into purchasing partnership interests,
the other to defraud the public into buying Firstrust stock —
are related in purpose by the fact that the former scheme was
allegedly concocted for the purpose of achieving Firstrust's
goal of concealing the bad Fifty-Three Hundred loan from the
public. The method and results of both schemes are the same —
Firstrust fraudulently conceals the problem loan, leading
plaintiffs to buy devalued partnership interests in Oceanaire
and the public to buy devalued Firstrust stock. Although the
victims of each scheme are different,*fn6 some of the
participants are the same and shared in the benefits. Both
schemes are characterized by Firstrust's alleged involvement as
a major participant who set them both in motion. Since the two
patterns are related, their respective predicate acts must be
related as well.
Accepting the allegations supporting these common
characteristics as true, as the court must on a motion to
dismiss, the court finds that the thirteen predicate acts
alleged are "ordered" or "arranged" in a RICO pattern. See H.J.
Inc., 109 S.Ct. at 2900. Furthermore, the predicate acts
occurred over a substantial period of time (over one year)
threatening future criminal activity in order to accomplish its
ultimate purpose — selling devalued Firstrust stock.
C. Application of Keystone to the Pattern Alleged:
With this more inclusive picture of the RICO pattern now in
mind, the court must determine when plaintiffs' RICO claim
accrued. The Keystone discovery rule pins accrual at "the date
plaintiffs knew or should have known that the elements of the
civil RICO cause of action existed. . . ." 863 F.2d at 1130-31.
Thus, the Keystone rule must be applied individually to: the
pattern of racketeering, the enterprise, the effect on
interstate commerce and the injury elements of the civil RICO
cause of action.
As to the pattern element, there is nothing in the meager
record outside the complaint to indicate when plaintiffs knew
or should have known that the pattern alleged in their
complaint existed. The only statement by plaintiffs is that
they were not aware and "by the exercise of reasonable
diligence could not have become aware of the fraudulent and
other wrongful conduct . . . until on or about March 21, 1989,
when they engaged counsel to investigate the underlying
transactions." Complaint at ¶ 84. This court's earlier opinion
imputed to plaintiffs their constructive knowledge of at least
some predicate acts as of the date of their investment, and
would do so again if the pattern alleged in the complaint was
so limited.*fn7 However, mindful
of its obligation to accept plaintiffs' reasonable allegations
as true and without the benefit of the Offering Memorandum to
impute to plaintiffs their knowledge of the overall pattern
they allege, the court is bound to accept plaintiffs' assertion
of discovery. Their RICO claims, therefore, are timely, the
complaint being filed on September 7, 1989.
In reinstating plaintiffs' RICO claims, the court
acknowledges that the result comports with Congress' mandate
that RICO "shall be liberally construed to effectuate its
remedial purpose." Organized Crime Control Act, Pub.L. No.
91-452 § 904(a), 84 Stat. 942, 947 (1970) (codified at
18 U.S.C. § 1961 note (1982)). The Supreme Court and the Third
Circuit have relied on this language "to construe liberally
RICO provisions as well as RICO as a whole." See Sedima, 473
U.S. at 498, 105 S.Ct. at 3286; Keystone at 1128 and cases
cited at n. 3.
The court has reconsidered its decision granting defendants'
motion to dismiss plaintiffs' RICO claims and has concluded
that the complete pattern plaintiffs allege in their complaint,
rather than the sub-pattern of predicate acts the court found
previously, is the proper reference for analyzing when
plaintiffs knew or should have known of their RICO claim. Since
the court must accept as true plaintiffs' statement that they
did not and reasonably could not have known of the complete
pattern until March 1989, their RICO claims are timely.
Therefore, the court vacates its October 30, 1990 opinion and
order only to the extent it dismisses plaintiffs' RICO claims.
The court will deny defendants' motion to dismiss in toto, as
the remaining points raised in their collective briefs are
meritless. An appropriate order will be entered.
This matter having come before the court on plaintiffs'
motion to reconsider this court's October 30, 1990 decision
dismissing plaintiffs' RICO claims as time-barred, see Panna v.
Firstrust, 749 F. Supp. 1372 (D.N.J. 1990); and
The court having reconsidered its decision and for the
reasons set forth in the opinion accompanying this order;
IT IS this 20th day of March, 1991 hereby
ORDERED that the court's October 30, 1990 opinion and order
in the above-captioned case is VACATED to the extent it
dismissed plaintiffs' RICO claims;
FURTHER ORDERED that defendants' motion to dismiss
plaintiffs' RICO claims is DENIED WITH PREJUDICE;
FURTHER ORDERED that plaintiffs' motion for leave to amend is
DISMISSED WITHOUT PREJUDICE.