The opinion of the court was delivered by: DICKINSON R. DEBEVOISE
DEBEVOISE, Senior District Judge
On April 4, 1995, the Court of Appeals vacated the order of dismissal in this case and remanded for reconsideration in light of Jaguar Cars, Inc. v. Royal Oaks Motor Car. Co., 46 F.3d 258 (3d Cir. 1995). The parties submitted extensive briefs to assist reconsideration of the order of dismissal. In addition, plaintiffs filed a motion for leave to serve a second amended and supplemental complaint and to add and drop parties.
A detailed procedural history of this case ("Rolo II") and its predecessor case ("Rolo I") is set forth in the opinion which accompanied the order of dismissal under reconsideration here. Rolo v. City Investing Company Liquidating Trust, 845 F. Supp. 182 (D.N.J. 1993). Similarly, there is contained in that opinion a recital of the facts upon which plaintiffs rely to establish their various claims. Except as necessary to explain the reasons for the conclusions on reconsideration, these facts will not be repeated here.
In essence, the plaintiffs in this action (Jose and Rosa Rolo and Dr. William and Roseanne Tenerelli) were among the thousands of persons who purchased Florida real estate from General Development Corporation ("GDC"). The final version of their complaint, which was dismissed on December 27, 1993, asserted claims under the Racketeer Influenced and Corrupt Organizations Act ("RICO"), The Interstate Land Sales Full Disclosure Act ("Land Sales Act"), § 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder ("Securities Act"), as well as various state law causes of action.
The complaint named 35 defendants, each of whom fell into one or more categories. The defendants and the categories are described in some detail in the 1993 opinion.
The categories are: (i) "City Defendants," consist of corporations and individuals alleged to have owned or exercised control over GDC. (ii) "Inside Director Defendants," consist of the four persons alleged to have had the greatest control over GDC. They are also characterized as City Defendants and Director Defendants. (iii) "Director Defendants" are the persons who were directors of GDC. (iv) "Financing Defendants" are the banks and brokerage houses which provided loans and other forms of financing to GDC, often receiving as security blocks of mortgages given by land purchasers. (v) "Mortgagee Defendants" are the institutions which purchased large blocks of purchase money mortgages derived from GDC land sales. (vi) "Lot Contract Defendants" are corporations which purchased large blocks of lot contracts and notes derived from GDC land sales.
In May 1993, the defendants moved to dismiss the First Amended Complaint in Rolo II under Fed. R. Civ. P. 12(b)(6) and certain defendants moved to dismiss the Land Sales Act and common law claims under Rule 12(b)(2) for lack of jurisdiction. At the same time, plaintiffs filed a motion for class certification. By that time plaintiffs had dropped many of their state law claims and the only remaining claims were claims under RICO, the Land Sales Act, the Securities Act and common law fraud.
In the course of responding to the motions to dismiss, plaintiffs in their brief revised their RICO allegations which defined the "enterprise" involved. Rather than requiring plaintiffs to move formally to file another amended complaint, I treated the revised RICO allegations as a proposed Second Amended Complaint and decided the motions as if they were directed to the Second Amended Complaint as well as the First Amended Complaint.
The December 27, 1993 opinion contained the following determinations:
Land Sales Act (Count III)
1. Persons who can be held liable under the Land Sales Act include not only a developer (such as GDC) and its agents, but also a person who provides knowing assistance to or engages in active participation in a fraudulent land sale scheme. Rolo, supra at 219, 220.
2. Applying that standard to the allegations of the Second Amended Complaint, (i) the motions of the Mortgagee Defendants, the Lot Contract Defendants and the financing Defendants to dismiss the Land Sales Act claims relying on the aiding and abetting theory were granted, (ii) the similar motions of defendants Askew, Clark, Simons, Brinckerhoff and AmBase were granted, (iii) the similar motions of defendants City Trust, Schaffenberger, Manley, Hatch and Pyne were denied, and (iv) the similar motions of defendants Cravath and Ormsby were denied.
3. All of plaintiffs' claims against all defendants under the Land Sales Act were barred by the Land Sales Act statute of limitations.
1. The amended complaint failed to allege the existence of a RICO enterprise because it defined the enterprise as the racketeering activity itself.
2. Plaintiffs' revised RICO allegations set forth in their briefs (which were deemed to have become a part of an amended complaint) effectively redefined the enterprise by asserting that the enterprise was GDC and its subsidiaries.
3. However, plaintiffs failed to plead that the RICO "persons" (GDC's officers, directors and controlling shareholders
) were separate and distinct from the enterprise (GDC) as required by such Third Circuit opinions as Hirsch v. Enright Refining Co., 751 F.2d 628 (3d Cir. 1984), Petro-Tech, Inc. v. Western Co., 824 F.2d 1349 (3d Cir. 1987), and Brittingham v. Mobil Corp., 943 F.2d 297 (3d Cir. 1991).
4. Because plaintiffs failed to plead RICO persons separate and distinct from the enterprise, the RICO claim under § 1962(c) was dismissed.
5. The RICO conspiracy claims under § 1962(c) was dismissed both because of the dismissal of the underlying substantive RICO claim and because of failure to plead ...