Berg, Green and Tucker, Charles and Cohen were alleged to be
involved only in the single offering of CROBA securities.
Defendants urge the court to conclude that their involvement
does not meet the test of continuity, specifically
participation in a closed-end scheme over a substantial period
of time. However, when plaintiffs have shown a scheme involving
the repetition of similar misrepresentations to multiple
victims over a relatively short period of time, courts in this
circuit have ruled that the pattern element has been met.
See Barticheck, 832 F.2d at 39 (misrepresentations made to
twenty-three investors in a failed limited partnership);
Saporito v. Combustion Engineering, Inc., 843 F.2d 666 (3d
Cir.1988), vacated and remanded on other grounds,
489 U.S. 1049, 109 S.Ct. 1306, 103 L.Ed.2d 576 (1989) (multiple
inducements to retire made to thirty-two retirees over roughly
six months); Bloch v. Prudential-Bache Securities, 707 F. Supp. 189,
195 (W.D.Pa.1989) (similar misrepresentations to ten
investors over several years); see also, Keystone Insurance
Company v. Houghton, 863 F.2d 1125, 1132 (3d Cir.1988)
(reaffirming Barticheck that repetition of similar
misrepresentations to more than twenty investors was "most
significant" factor). The presence of this factor distinguishes
this case from Banks and Marshall-Silver Construction Company
v. Mendel, et al., 835 F.2d 63 (3d Cir.1987), where the single
fraudulent scheme involved only one victim of racketeering
activity and thus no pattern was found.
Having concluded that the pattern element has been met, the
court must determine whether remaining contested elements are
met for each RICO count. As to both Charles and Cohen,
plaintiffs have not alleged, nor do they argue in their briefs,
that these specific defendants violated § 1962(a) or § 1962(b).
The court agrees with defendants that there is no evidence that
Cohen or Charles invested the proceeds of racketeering activity
to acquire the named RICO "enterprises" (COBRA, AREA, MCR and
OBCR) or that they acquired control of such enterprises through
racketeering activity. Therefore, the court will grant summary
judgment in favor of Charles and Cohen on counts II and III.
The remaining arguments submitted by defendants in favor of
granting summary judgment on plaintiffs' §§ 1962(c) and 1962(d)
claims fail for virtually the same reasons they failed in the
context of the § 10(b) claims. See the court's discussion of
scienter and aiding/abetting liability, supra. There is
sufficient evidence to let the jury decide whether these
defendants knowingly or recklessly participated in the conduct
of the RICO enterprises' affairs through a pattern of
racketeering activity and whether such participation was
effected by means of a conspiracy among the defendants.
Furthermore, the court finds Charles' arguments of RICO
unconstitutionality as applied to him unpersuasive.
Count XII of plaintiffs' amended complaint alleges violations
of sections 2C:41-2 of the New Jersey Code of Criminal Justice,
otherwise known as the New Jersey RICO statute. Although there
is little guidance from New Jersey state courts in interpreting
the statute, the legislative history indicates that it was
modeled after the federal RICO statute, and courts have
interpreted its provisions no differently. See, e.g.,
Environmental Tectonics v. W.S. Kirkpatrick, Inc.,
847 F.2d 1052, 1064 (3d Cir.1988), cert. granted in part, 492 U.S. 905,
109 S.Ct. 3213, 106 L.Ed.2d 563 (June 26, 1989). This court,
and the parties, see no reason to depart from this principle.
Therefore, summary judgment will be granted as to 2C N.J.S.A.
41-2 a and 41-2 b and denied as to 2C N.J.S.A. 41-2 c and 41-2
E. New Jersey Consumer Fraud Act
Defendants Charles and Cohen seek judgment as a matter of law
on Count VI of plaintiffs' complaint, which alleges violations
of the New Jersey Consumer Fraud Act, 56 N.J.S.A. 8-2. The
court has already concluded that, since the complaint "contains
facts alleging fraud in the sale of real estate in addition to
securities fraud," the claim should remain, citing Arroyo v.
Arnold Baker and Assoc. Inc., 206 N.J.Super. 294-97,
502 A.2d 106 (Law Div.1985). Gilmore v. Berg, No. 86-4694 (June 24,
1987), slip op. at 15. Defendants have failed to present any
New Jersey case law to undermine the Arroyo decision or to
persuade the court otherwise. The motion will be denied.
F. Breach of Fiduciary Duty and Mismanagement:
Count XIII of plaintiffs' complaint alleges that defendants
Cooper River, AREA, Berg "and those other defendants charged
with the responsibility of managing the affairs of Cooper
River," violated their fiduciary duties to plaintiffs. The
court has already concluded that Cohen and Charles had no duty
to disclose certain omitted facts to these plaintiffs. It
reaches the same conclusion here, particularly since plaintiffs
have failed to show how Cohen and Charles were in any way
responsible for managing the affairs of Cooper River.
Therefore, Count XIII will be dismissed against Cohen and
For the reasons set forth above, the court will allow
plaintiffs to move forward with their federal securities fraud
claims. Such claims are timely and there are sufficient facts
to let the jury decide whether these defendants acted with
recklessness in making certain statements in their respective
opinion letters. The court will dismiss Counts II and III of
the complaint alleging violations of RICO §§ 1962(a) and (b),
as well as its state law counterparts, while retaining Counts
IV and V as triable issues for the jury. Finally, Count XIII
will be dismissed against Cohen and Charles.
An appropriate order will be entered.
This matter having come before the court on the motions to
stay, to dismiss and for summary judgment filed by defendants
Pat Charles, Charles, Sturm & Masters and Norman Cohen, and
joined in by defendants Tucker and Green; and
The court having considered the submissions of the parties
and having heard oral argument; and
For the reasons set forth in the opinion accompanying this
IT IS this 3rd day of April, 1991 hereby
ORDERED that the motion to stay is DENIED; and further
ORDERED that the motion to dismiss Count I as time-barred is
DENIED WITH PREJUDICE; and further
ORDERED that the motion to dismiss Counts I-V and XI for
failure to state a cause of action is DENIED WITH PREJUDICE;
ORDERED that the motion for summary judgment on Count I is
DENIED WITH PREJUDICE; and further
ORDERED that the motion for summary judgment on Counts II and
III, relevant parts of Count XII and all of Count XIII is
GRANTED WITH PREJUDICE as to Cohen and Charles; and further
ORDERED that the motion for summary judgment on Counts IV, V,
VI, VIII, IX, X and XI, and remaining portions of Count XII is
DENIED WITH PREJUDICE.