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Township of Marlboro v. Scannapieco

April 23, 2008

TOWNSHIP OF MARLBORO, PLAINTIFF,
v.
MATTHEW SCANNAPIECO, ET AL., DEFENDANTS.



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

FOR PUBLICATION

OPINION

On October 17, 2007, Plaintiff the Township of Marlboro ("Marlboro") filed a Complaint against various individuals and entitles, asserting statutory claims under 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"), as well as various common law claims. On November 12, 2007, Marlboro filed its Amended Complaint.*fn1 The crux of the Amended Complaint is that Defendants defrauded Marlboro by engaging in a scheme whereby certain Defendants bribed their co-Defendants former Marlboro Mayor Matthew Scannapieco ("Scannapieco"), former Marlboro Planning Board Member Stanley Young ("Young"), former Marlboro Municipal Utilities Authority ("MUA") Member Richard Vuola ("Vuola"), and former Executive Director of the Western Monmouth Utilities Authority ("WMUA") Frank G. Abate ("Abate")in exchange for land use approvals necessary for the construction of certain land developments.

Presently before the Court are various motions to dismiss the RICO claim for failure to state a claim upon which relief may be granted pursuant to Federal Rule of Civil Procedure 12(b)(6). Marlboro opposes the motions. For the reasons set forth herein, the Court grants the motions to dismiss brought by Meiterman Defendants, Scannapieco, and Anthony and Joseph Spalliero (collectively, "Spalliero"), and joined by Defendants Young, Vuola, and Abate. In addition, the Court denies Marlboro's request for leave to amend its Amended Complaint and refrains from exercising supplemental jurisdiction over Marlboro's state law claims.

I. BACKGROUND

Although this is a civil case, the conduct which forms the basis of Marlboro's allegations was the subject of previous criminal proceedings. The Amended Complaint alleges that Scannapieco, Young, Vuola, and Abate, in their official capacities, accepted bribes from Meiterman Defendants and Spalliero. Scannapieco served as Marlboro's mayor from 1992 until December 31, 2003. (Amended Complaint ("Am. Cmplt.") ¶ 28). As mayor, Scannapieco was also a member of the municipality's Planning Board and voted on development plans and projects in Marlboro. (Am. Cmplt. ¶¶ 28, 60). On April 12, 2005, Scannapieco pled guilty "to accepting bribes totaling approximately $245,000 from various developers seeking to develop real estate in Marlboro, and to tax evasion for failing to pay federal taxes on the money he accepted from the developers." (Am. Cmplt. ¶ 28).

On July 7, 2005,*fn2 Vuola pled guilty to "having offered a corrupt payment on behalf of developers to members of the Town Council on two separate occasions, being solicited and received payment from a developer in exchange for his cooperation as a member of the MUA, possession of a firearm[,] and submission of a false 1998 tax return." (Am. Cmplt. ¶ 29). On June 20, 2005,*fn3 Young, who had served as a Planning Board Member from 2001 to 2004, pled guilty to receipt of corrupt payments. (Am. Cmplt. ¶¶ 33, 35). On May 25, 2007, a jury found Abate guilty of five counts of engaging in a scheme to defraud the public of his honest services, as well as one count of attempting to obstruct a grand jury investigation. (Am. Cmplt. ¶¶ 70-71).*fn4

Based on these allegations, Marlboro asserts claims arising under 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"), as well as various common law claims. Specifically, Marlboro asserts a claim under 18 U.S.C. § 1962(c). In Count One, the township alleges that Defendants "engaged in a pattern of racketeering activity individually and through the respective corporations and business entities in order to defraud Marlboro through an elaborate bribery and extortion network." (Am. Cmplt. ¶ 77). Marlboro claims that, "between no later 1997 and 2004, . . . Defendants knowingly and willfully conspired to commit bribery and other fraudulent acts against Marlboro, directly and indirectly, through a pattern of various schemes, all with the specific intent to steal from and otherwise defraud [P]laintiff." (Am. Cmplt. ¶ 81).

The township proffers that these actions caused it "to suffer damages[.]" (Am. Cmplt. ¶ 87). Marlboro states that, "[a]s a direct and proximate cause of . . . Defendants' pattern of racketeering activity, Marlboro has suffered injuries and losses, including the total sum of all bribes and/or gratuities paid by and among . . . Defendants, and such other losses as will be established by evidence." (Am. Cmplt. ¶ 88). Based on those allegations, Marlboro seeks to recover, in part, "an amount equal to the sum of all bribes and/or gratuities, [and] disgorgement of all profits illegally obtained and received[.]" (Am. Cmplt. ¶ 77).

In Count Two of the Amended Complaint, Marlboro alleges that Defendants engaged in a conspiracy to violate RICO, in contravention of 18 U.S.C. § 1962(d). Marlboro reiterates that, "[a]s a direct and proximate cause of the aforesaid conspiracy, Marlboro has suffered injuries and losses, including the total sum of all bribes paid by and among . . . Defendants." (Am. Cmplt. ¶ 95). Counts Three through Eight assert state statutory and common law claims.

Meiterman Defendants, Scannapieco, and Spalliero move to dismiss Marlboro's Amended Complaint for failure to state a claim upon which relief may be granted, pursuant to Federal Rule of Civil Procedure 12(b)(6).*fn5 Meiterman Defendants argue that the Amended Complaint fails to set forth a RICO claim against them because Marlboro did not sufficiently allege a pattern of racketeering activity or a specific injury sustained. Meiterman Defendants also submit that, even if Marlboro has sufficiently pled an injury, Marlboro's Amended Complaint nevertheless fails to establish a nexus between that injury and the conduct of Meiterman Defendants.

Scannapieco also argues that Marlboro fails to set forth any RICO claim because Marlboro has not alleged a business or property injury. Scannapieco contends that RICO grants standing to bring a civil action only to those persons sustaining an injury to its business or property and, because Marlboro cannot establish proof of a concrete financial loss suffered due to the alleged bribery scheme, Marlboro lacks standing under 18 U.S.C. § 1964(c). Scannapieco further submits that the Court, if finding that Marlboro lacks standing to bring a civil RICO action, should refrain from exercising supplemental jurisdiction over Marlboro's state statutory and common law causes of action. Spalliero's arguments parallel those asserted by Scannapieco, but adds that the Court also should dismiss Marlboro's NJRICO claim for Marlboro's failure to establish a business injury.

Marlboro opposes the motions. Marlboro argues that its Amended Complaint sets forth an injury sufficient to establish standing by its broad assertion that it sought to recover for all of the injuries sustained. Marlboro further submits that municipalities have standing under civil RICO to recover as damages the value of bribes paid to its employees and the salary paid to an employee who is disloyal to the municipality. Moreover, Marlboro contends that its pleading adequately alleges a pattern of racketeering activity. Alternatively, the township requests that the Court, in the event it finds the Amended Complaint insufficient to state a RICO claim, grant Marlboro leave to amend pursuant to Federal Rule of Civil Procedure ...


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