The opinion of the court was delivered by: Joel A. Pisano, U.S.D.J.
On January 23, 2006, the County of Hudson ("the County"), Hudson County Executive Thomas A. DeGise ("DeGise"), the Board of Chosen Freeholders of the County of Hudson ("the Board"), and the Hudson County Improvement Authority ("HCIA") (collectively "Plaintiffs") filed a complaint against numerous persons and entities,*fn1 alleging a variety of statutory and common law causes of action, including allegations of violations of the federal Racketeer Influence and Corporate Organizations ("RICO") Act, 18 U.S.C. § 1961 et seq., and the New Jersey RICO Act, N.J.S.A. 2C:41-1 et seq., ("NJRICO"). The essence of Plaintiffs' allegations is that Defendants defrauded Plaintiffs by engaging in a scheme whereby certain Defendants bribed their co-Defendant former Hudson County Executive Robert Janiszewski ("Janiszewski") in exchange for the award or renewal of public contracts or other favors from the County. Plaintiffs also named as a defendant Western Surety Company ("Western Surety"), which issued fidelity bonds in respect of Janiszewski covering the period of September 3, 1991 through September 3,
2004. As to Western Surety, Plaintiffs seek a declaratory judgment, pursuant to 28 U.S.C. §§ 2201 and 2202 and N.J.S.A. § 2A:16-50 to -62, "to determine the respective rights, duties and obligations of the parties to this litigation under the Western bonds." (Plaintiffs' Complaint ("Cmplt.") ¶¶ 145 and 152).
On March 24, 2006, Defendant Oscar Sandoval, M.D. ("Sandoval"), a psychiatrist conducting business under the entities Oscar Sandoval, M.D., P.C. ("Sandoval P.C.") and Hudson County Psychiatric Associates ("HCPA"), (collectively "Sandoval") raised various counterclaims against Plaintiffs and filed a Third-Party Complaint against Third-Party Defendants Janiszewski, Donald Scarinci, Richard Myrlak, Geoffrey Perselay, Abraham Antun, Robert Murray, and one or several fictitious persons. Sandoval specifically alleges that Third-Party Defendants engaged in a fraudulent scheme of extortion, in violation of the RICO Act, and that Third-Party Defendants retaliated against him for his cooperation with the Federal Bureau of Investigation ("FBI") in respect of this fraudulent scheme by failing to renew the Sandoval entities' public contracts. (Third-Party Plaintiffs' Complaint ("TP Cmplt.") ¶¶ 48-51, 55-56).*fn2
Presently before the Court are motions by multiple Defendants for summary judgment and to dismiss Plaintiffs' Complaint, a motion by Western Surety for summary judgment in respect of damages or in the alternative to limit damages, a motion by Plaintiffs to dismiss Sandoval's counterclaims, and motions by Third-Party Defendants to dismiss the Third-Party Complaint. For the reasons set forth herein, the Court grants the motions for summary judgment and to dismiss Plaintiffs' Complaint brought by Janiszewski, Fallon and Fallon, LLP, and Sandoval; denies Western Surety's motion for summary judgment as to Plaintiffs' Complaint; grants Western Surety's motion to limit the damages sought by Plaintiffs to the period of September 3, 1993 through November 30, 2000; grants Plaintiffs' motion to dismiss Sandoval's counterclaims; and grants the motions to dismiss the Third-Party Complaint brought by Third-Party Defendants Scarinci, Myrlak, Perselay, Antun, Murray, and Janiszewski.
Although this is a civil case, the conduct which forms the basis of Plaintiffs' allegations was the subject of previous criminal proceedings. The Complaint alleges that, beginning "no later than 1993," Janiszewski, in his official capacity as County Executive, accepted bribes from co-Defendants, various county vendors, in exchange for securing for those Defendants service contracts with the County. (Cmplt. ¶¶ 28 and 35). Janiszewski served as County Executive for Hudson County from January 1, 1988 through October 1, 2001. In accordance with N.J.S.A. 40A:5-34, Western Surety issued a series of Official Bonds to Janiszewski in his capacity as County Executive, covering the period between September 3, 1991 and September 3, 2004. Between September 3, 1991 and September 3, 1996, three series of Bonds each provided a penal sum of $100,000. The Bond covering the period from September 3, 1996 through September 3, 2000 was originally issued as providing a penal sum of $100,000, but was increased on June 30, 1999 to $350,000. The final Bond, effective from September 3, 2000 through September 3, 2004, provided a penal sum of $350,000.
On September 6, 2001, Janiszewski sent a letter of resignation to Third-Party Defendant Antun, the County Administrator, indicating that his resignation would be effective October 1, 2001. Janiszewski sent a copy of this letter to the County's Members of the Board of Freeholders, as well as County Counsel and Chief of Staff. Upon Janiszewski's resignation, Antun assumed the position of County Executive.
Janiszewski's resignation did not go unnoticed. The following day, on September 7, 2001, three different news publications-The Star-Ledger, The Record, and The New York Times-reported that Janiszewski resigned from his position as County Executive and that his resignation was the result of an investigation by the Federal Bureau of Investigation ("FBI") of political corruption within the County. (Defendant Western Surety's Brief for Summary Judgment ("WS Br.") Ex. F). A follow-up article, re-iterating much of the same information, appeared on September 8, 2001 in The New York Times. On September 30, 2001, The Star-Ledger reported that the FBI permitted Janiszewski to have his personal effects removed from his County office on September 28, 2001 and that it was speculated that the FBI had a video surveillance tape of Janiszewski accepting a bribe from a county vendor. On October 8, 2001, The New Jersey Law Journal published an article stating that the FBI caught Janiszewski accepting bribes from Sandoval, who had worked with the FBI, and that, after being caught, Janiszewski cooperated with the authorities to expose others involved in the bribery scheme. Three more articles discussing much of the same content were published in The Record, The New York Times, and The Star-Ledger on October 11, 2001, October 12, 2001, and December 8, 2001, respectively.
Notably, on September 27, 2001, Hudson County officials declined to renew Sandoval's contract with the County to provide psychiatric care to two county jails and a county psychiatric hospital. Sandoval, through his entities Sandoval P.C. and HCPA, had been providing these services pursuant to contracts with the County since 1995. (TP Cmplt. ¶ 3). The County also refused to consider a bid by HCPA for a County contract in 2002.
On October 3, 2002, Janiszewski pled guilty to extortion under color of official right, in violation of 18 U.S.C. § 1951, and tax evasion, in violation of 26 U.S.C. § 7201. Subsequently, Lisa and Fallon also entered guilty pleas in respect of charges for the use of the mails to execute a scheme to defraud the citizens of Hudson County, in violation of 18 U.S.C. §§ 1341 and 1346.
In addition, Fallon pled guilty to a charge of tax fraud, in violation of 26 U.S.C. § 7206(2).
On February 25, 2003, Plaintiffs, through County counsel, informed Western Surety that they sought a claim against the Bonds issued on behalf of Janiszewski, by virtue of Janiszewski's involvement in the bribery scheme. On March 25, 2003, Western Surety's representative responded to Plaintiffs' letter, notifying Plaintiffs that, in order to process any claim against the Bonds, they would have to complete Notice of Discovery and Proof of Loss forms. More than one year later, on August 23, 2004, Plaintiffs submitted the completed Notice of Discovery and Proof of Loss forms, seeking a claim under the Bond issued during the period of September 3, 1993 through September 3, 2004. On October 6, 2004, Western Surety, through its representative, responded and explained that it needed additional information, including "[a] statement of actual damages incurred during each term of office." (WS Br. Ex. N). Further correspondence ensued between February 2005 and January 2006, whereby Western Surety continually requested additional information from Plaintiffs.
On January 23, 2006, Plaintiffs filed the present cause of action in this Court.Currently before the Court are the following motions: Janiszewski's motions for summary judgment and to dismiss Plaintiffs' Complaint; Fallon and Fallon, LLP's motion for summary judgment as to Plaintiffs' Complaint, incorporating Janiszewski's motions; Sandoval's motions to dismiss Plaintiffs' Complaint and to convert the motion to dismiss into a motion for summary judgment; Western Surety's motion for summary judgment as to Plaintiffs' Complaint; Western Surety's motion for summary judgment as to damages or, in the alternative, to limit damages; Plaintiffs' cross-motion to dismiss Sandoval's counterclaims; Third-Party Defendant Scarinci's motion to dismiss the Third-Party Complaint; Third-Party Defendants Myrlak, Perselay, Antun, and Murray's motion to dismiss the Third-Party Complaint, incorporating Scarinci's motion; and Janiszewski's motion to dismiss the Third-Party Complaint as barred by the applicable statute of limitations. Plaintiffs and Third-Party Plaintiffs oppose the relevant motions.*fn3
A. Applicable Standards of Review
1. Standard of Review under Federal Rule of Civil Procedure 12(b)(6)
Under Federal Rule of Civil Procedure 12(b)(6), a court may grant a motion to dismiss if the complaint fails to state a claim upon which relief can be granted. Previously, the standard of review under Rule 12(b)(6) permitted dismissal "only if it appear[ed] that the plaintiffs could prove no set of facts that would entitle them to relief." Watson v. Abington Twp., 478 F.3d 144, 151 (3d Cir. 2007) (internal quotations omitted). Recently, however, the United States Supreme Court dispensed with that standard: the "'no set of facts' language has been questioned, criticized, and explained away long enough. . . . [T]his famous observation has earned its retirement." Bell Atl. Corp. v. Twombly, 127 S.Ct. 1955, 1969 (2007).
The Twombly Court refashioned the standard and found that, "[w]hile a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, . . . a plaintiff's obligation to provide the 'grounds' of his 'entitle[ment] to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do[.]" Id. at 1964-65 (internal citations omitted); see also Baraka v. McGreevey, 481 F.3d 187, 195 (3d Cir. 2007) (stating that standard of review for motion to dismiss does not require courts to accept as true "unsupported conclusions and unwarranted inferences" or "legal conclusion[s] couched as factual allegation[s]" (internal quotation marks omitted)). Therefore, for a complaint to withstand a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), the "[f]actual allegations must be enough to raise a right to relief above the speculative level, . . . on the assumption that all the allegations in the complaint are true (even if doubtful in fact) . . . ." Twombly, supra, 127 S.Ct. at 1965 (internal citations and footnote omitted).
2. Standard of Review under Federal Rule of Civil Procedure 56(c)
A court shall grant summary judgment under Federal Rule of Civil Procedure 56(c) "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c). The substantive law identifies which facts are critical or "material." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).
On a summary judgment motion, the moving party must show, first, that no genuine issue of material fact exists. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). The burden then shifts to the non-moving party to present evidence that a genuine fact issue compels a trial. Id. at 324. In so presenting, the non-moving party must offer specific facts that establish a genuine issue of material fact,not just "some metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986).
The Court must consider all facts and their logical inferences in the light most favorable to the non-moving party. Pollock v. Am. Tel. & Tel. Long Lines, 794 F.2d 860, 864 (3d Cir. 1986). The Court shall not "weigh the evidence and determine the truth of the matter," but need determine only whether a genuine issue necessitates a trial. Anderson, supra, 477 U.S. at 249. If the non-moving party fails to demonstrate proof beyond a "mere scintilla" of evidence that a genuine issue of material fact exists, then the Court must grant summary judgment. Big Apple BMW, Inc. v. BMW of N. Am., Inc., 974 F.2d 1358, 1363 (3d Cir. 1992), cert. denied, 507 U.S. 912 (1993).
1. Motions as to Plaintiffs' ...