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Careone, LLC, et al v. William G. Burris

June 28, 2011

CAREONE, LLC, ET AL., PLAINTIFFS,
v.
WILLIAM G. BURRIS, JR., ET AL., DEFENDANTS.



The opinion of the court was delivered by: Wolfson, United States District Judge:

**NOT FOR PUBLICATION**

OPINION

Against a backdrop of numerous state-court litigations between the parties, which litigations each arise out of Plaintiffs CareOne, LLC's ("CareOne's"), Burris & Straus Beach Development/Cranmer, LLC's ("Burris & Straus-Cranmer's"), and Burris & Straus Beach Developers, LLC's ("Burris & Straus-Developers'")(collectively "Burris & Straus'," and the three plaintiffs collectively referred to as the "CareOne Companies'") construction of assisted living facilities in New Jersey, Plaintiffs obtained leave from a state court judge to bring this Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. §§1961, et seq., action in this Court. In their complaint here, Plaintiffs allege that a former, high-ranking employee of the CareOne Companies, William G. Burris, Jr., orchestrated and operated a kickback scheme with several construction vendors ("Vendor Defendants")*fn1 whom he directed to fraudulently inflate their invoices and, thereby, used the CareOne Companies to line his own pockets. After the complaint was filed, CareOne settled with Burris and all but one of the Vendor Defendants. The sole remaining Vendor Defendant, Daniel Bossi, has filed a motion to dismiss Plaintiffs' Complaint and a motion to strike Plaintiffs' Amended Complaint. Defendant Bossi, further, seeks sanctions against Plaintiffs' counsel pursuant to Federal Rule of Civil Procedure 11 for filing a suit without conducting an appropriate pre-filing verification of facts alleged in the complaint. For the reasons that follow, the Court grants Defendant Bossi's motions to dismiss and to strike, but denies the request for sanctions.

I. BACKGROUND

The following facts are taken from Plaintiffs' Complaint, which facts must be taken as true on a motion to dismiss. The gravamen of Plaintiff's Complaint is that William Burris, along with his wife Linda Burris and other of their relatives, engaged in "a long-continuing pattern of mail fraud and wire fraud" involving "fraudulent and inflated invoices submitted to plaintiffs by vendors who are defendants herein, arising from a kickback scheme between and among those vendor defendants and defendants Burris and his wife." Compl., ¶ 1. Before delving into the details of Plaintiffs' Complaint, the Court first explains the genesis of the parties' dispute and the several state-court litigations of which this suit is a part.

According to the complaint, "[f]or nearly ten years, Burris was the Executive Vice President for Construction and Development of CareOne and a member of Burris & Straus performing the same functions for those entities." Id. at ¶ 2.

As part of CareOne's and Burris & Straus' senior management team, Burris had significant control and influence over CareOne and Burris & Straus, as he directed their construction and development activities. With respect to his position at CareOne, Burris was responsible for selecting and acquiring land and existing properties, and then designing, developing and converting that real estate into assisted living or healthcare facilities to be run by CareOne, its affiliates or subsidiaries. Similarly, Burris selected and acquired land and existing properties on behalf of the Burris & Straus entities, and then designed, developed and converted that real estate for resale.

Id. As part of his job responsibilities, Burris selected and hired vendors to perform construction work on the properties. Id. at ¶ 3.

Plaintiffs allege that, throughout his ten-year tenure, "Burris regularly used the Vendor Defendants for his own personal gain at the expense of the CareOne Companies by . . . convert[ing], steal[ing] and embezzl[ing] millions of dollars from the CareOne Companies ...." Id. at ¶ 4. Specifically, the complaint alleges, "Burris abused his senior management position at the CareOne Companies by conducting the affairs of the CareOne Companies to pressure and obtain kickbacks from the Vendor Defendants in exchange for dispensing with competitive bidding resulting in the Vendor Defendants submitting padded and excessive invoices to the CareOne Companies which were, as a result, false and fraudulent." Id. at ¶ 5. Once the Vendor Defendants "submitted false and fraudulent invoices to the CareOne Companies . . . Burris, with the assistance of another CareOne employee, defendant Joseph Foy, would approve these invoices, arrange for payment of the fraudulent invoices by the CareOne Companies, and affirmatively conceal the no-bid, kickback scheme from the principal of the CareOne Companies." Id.

It is alleged that Bossi, as owner of Extreme Construction, Inc. ("Extreme Construction"), "a New Jersey corporation that was formed specifically for the purpose of performing work on CareOne projects," id. at ¶ 21, provided kickbacks to Burris in response to Burris' demand for such payments. Id. "As a result, Bossi conspired with Burris to conduct and to participate in the conduct of the affairs of the CareOne Companies and Extreme Construction through the pattern of mail and wire fraud arising from Burris' false and fraudulent invoice scheme." Id.

Noticeably, the complaint does not describe in what manner the invoices are fraudulent other than to state that they "were for work performed at an inflated price, made possible by the lack of competitive bidding and the kickbacks to Burris." Id. at ¶ 37.

Plaintiffs attach copies of the invoices to the complaint, and state summarily that "[e]ach one of the transactions listed in [an exhibit attached to the complaint] caused or resulted in the use of mails or the interstate wires in violation of 18 U.S.C. §§1341 and 1343." Id. at ¶ 38. These invoices, the complaint alleges, constitute "The Bossi and Extreme Construction Pattern of Fraudulent Invoices and Payments." Id. at ¶¶ 37-8.

Burris was terminated in March of 2009 for conduct unrelated to the alleged kickback scheme. Id. at ¶ 6. Following Burris' termination, Plaintiff brought several state court actions against Burris and others. See Fram Decl., ¶¶ 2-9 (detailing litigations). One suit was filed in 2009 in the New Jersey Chancery Division, Bergen County. Through discovery obtained in that action, Plaintiffs encountered testimony that Burris allegedly orchestrated and operated the aforesaid RICO scheme to defraud the CareOne Companies. Plaintiffs then sought permission from the judge, who presided over the Bergen County action, to bring the instant suit in federal court. While noting that New Jersey's Entire Controversy Doctrine would ordinally require such claims to be brought in the pending state court action, the Judge granted Plaintiffs' request because requiring that the RICO claims be brought in that suit would have unduly delayed trial. See generally Tr. of Motion dated Apr. 30, 2010 at 8 -9, Exh. J to Def. Open. Br. This suit followed.

Plaintiffs filed their initial complaint in May of 2010 asserting federal RICO claims under 18 U.S.C. § 1962(c), conspiracy to commit federal RICO claims under § 1962(d), common law fraud, and civil conspiracy under New Jersey Law. With respect to the RICO and conspiracy to commit RICO claims, the complaint contains 19 counts that each focus on distinct RICO enterprises. For example, Count I is titled "RICO § 1962(c) - The CareOne Enterprise" and is directed at Burris' and Foy's alleged conduct together with all Vendor Defendants in orchestrating an all-encompassing scheme to defraud. See Compl., ¶¶ 47-53. Count II is titled "RICO § 1962(d) - The CareOne Enterprise" and alleges that Bossi and the other Vendor Defendants "conspired among themselves and with Burris and Foy to conduct and participate in the conduct of the affairs of CareOne through a 'pattern of racketeering' violation of 18 U.S.C. §1962(c)." Id. at ¶ 56. Thereafter, the complaint delineates numerous enterprises, including "The Burris & Straus Enterprises," Counts III and IV, "The Pulaski Construction Enterprise," Counts XXII and XXIII, and, notably, "The Extreme Construction Enterprise," Counts X and XI, with a matching RICO, and conspiracy to commit RICO, count for each enterprise.*fn2

As suggested by the counts' titles, The Extreme Construction Enterprise allegations focus on Defendant Bossi's alleged conduct as owner of Extreme Construction. Id. at ¶¶ 93-102. No detail is provided in these counts as to the nature of Bossi's alleged fraudulent conduct, other than the assertion that Bossi transmitted "false invoices, checks, and wires, in furtherance and as a result of the schemes and artifices to defraud, in violation of 18 U.S.C. §1341 and 18 U.S.C. §1343." Id. at ¶ 96. Plaintiffs, further, attach to the Complaint a spreadsheet identifying payments made by the CareOne Companies to Extreme Construction. Compl., Exh. B. The spreadsheet lists the project for which Extreme Construction performed work, e.g., CareOne at Evesham Assisted Living, the amount invoiced, the invoice date, the check amount paid, and the check number.

Piggy-backing on the RICO allegations, the common law fraud claim alleges simply that "Defendants Burris, Linda Burris, Foy, DeAngelis, Heiler, Bossi, Pulaski, Borglund, Yeager, and Linda Burris Inc., directly and indirectly, engaged in such fraud, as described in detail in the Complaint and Exhibits." Id. at ¶ 147. Similarly, the civil conspiracy claim alleges that "Defendants Burris, Linda Burris, Foy, DeAngelis, Heiler, Bossi, Pulaski, Borglund, Yeager, and Linda Burris Inc., directly and indirectly, conspired to, aided, abetted and facilitated the fraud and conversion, as described in detail in the Complaint and Exhibits." Id. at ¶ 150.

Defendants Borglund, Linda Burris, William G. Burris, Jr, Nancy Deangelis, Linda Burris Inc., Richard Pulaski, and David Yeager jointly moved to dismiss Plaintiffs' complaint pursuant to Federal Rule of Civil Procedure 12(b)(6) in June of 2010, arguing that the complaint's RICO allegations failed to satisfy Rule 9(b)'s heightened pleading requirement and, since Plaintiffs' fraud and civil conspiracy claims rely upon the RICO allegations, the complaint should be dismissed in its entirety.*fn3 Defendant Bossi subsequently joined in the other defendants' motion.

While the motion was pending, and prior to submitting opposition to the defendants' motion, Plaintiffs filed an Amended Complaint without leave of Court. Attached to the Amended Complaint was a letter from Plaintiffs' counsel stating that "[a]s a result [of the filing of Plaintiffs' Amended Complaint], the previously filed motions to dismiss the initial Complaint are moot ...." Sellinger Letter dated July 30, 2010 (Docket Entry No. 27). In response, Defendants filed a motion to strike the Amended Complaint as violative of Rule 15(a), arguing that Rule 15(a) permits amendment as of right only if made within 21 days of service of a responsive pleading.*fn4

Thereafter, the suit was stayed for a series of months while the parties negotiated settlement. Once settlement was reached with certain parties, disputes arose as to enforcement of the settlement's terms. Finally, all parties with the exception of Bossi settled their claims in this suit. Accordingly, the only remaining counts in the suit are those that are asserted against Defendant Bossi-the substantive RICO claims and RICO conspiracy claims found in ...


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