Federal judge says restaurateur adequately pled violations of RICO Act by supply company

By Nicholas Malfitano | Jan 13, 2016

U.S. District Court In Allentown  

ALLENTOWN – A restaurant supply company’s motion to dismiss a lawsuit against it alleging violations of the Racketeer Influenced and Corrupt Organization Act and various state law fraud claims has failed.

Judge Richard Barclay Surrick ruled Monday that plaintiffs Joseph A. O’Keefe and Simmeria Café & Bistro, Inc. averred sufficient evidence to support their allegations against defendants Ace Restaurant Supply and its owners, Korey and Nick Blanck.

In February 2010, O’Keefe contacted Korey Blanck and inquired about buying supplies for Simmeria, his new restaurant. O’Keefe soon contracted with the defendants on two occasions over the following month to buy restaurant supplies, in a total amount of $25,274.64.

O’Keefe paid the defendants $35,803.62 in advance, for the aforementioned supplies and other fees not itemized in his suit.

O’Keefe alleged after the defendants received payment, they failed to deliver any of the restaurant supply items he ordered, including a grill and an oven. O’Keefe claimed he learned the defendants never ordered the items from their respective manufacturers and fraudulently misrepresented their intentions, while refusing to refund any of his money.

The plaintiffs also argued a pattern of similar incidents, pointing to similar complaints from other proprietors and businesses filed against the defendants in the Berks County Court of Common Pleas, for fraud and misrepresentation in not delivering ordered restaurant supply equipment.

On Feb. 25, 2011, the plaintiffs filed a complaint against the defendants alleging a violation of the RICO Act, a RICO conspiracy claim and state law claims of fraud, unjust enrichment, intentional misrepresentation and negligent misrepresentation, while also seeking declaratory relief.

The defendants responded to the complaint with a motion to dismiss, alleging the plaintiffs did not adequately plead wire and mail fraud – predicate elements for a RICO case – nor “a pattern of racketeering activity.”

Nonetheless, Surrick said the plaintiffs’ allegations regarding wire and mail fraud do in fact survive the defendants’ motion to dismiss.

“Plaintiffs allege that defendants used the mails and interstate wires to perpetrate the fraudulent transaction,” Surrick said. “They identify the dates that the sales agreements were faxed and consummated, as well as the dates of mailings between O’Keefe and Korey Blanck. Defendants’ use of the wires and mails was therefore a necessary element of the overall scheme.”

Surrick added the point regarding the defendants never ordering the equipment O’Keefe paid for, allegedly confirmed by the equipment manufacturer, suggested the defendants entered the transaction knowing full well they would not deliver the merchandise as promised.

“Plaintiffs here do not merely refashion a contract dispute. Instead, they allege misrepresentations made by Korey Blanck that evince a scheme to defraud,” Surrick said.

In order to prove a “pattern of racketeering activity” under the RICO, a plaintiff must show evidence of at least two related incidents of continued criminal activity within a 10-year period.

Surrick shot down the defendants’ view of the plaintiffs not adequately pleading continuity of criminal activity by stating, “Each use of the mails or wires constitutes a distinct violation of the mail and wire fraud statutes, even if the violations were part of the same fraudulent scheme.”

Moreover, Surrick reiterated the plaintiffs’ inclusion of two state court complaints against the defendants on similar charges within the requisite 10-year time period.

“The similar conduct alleged in all of the actions brought against Defendants are sufficient to demonstrate, for purposes of this motion, that the commission of fraud was Ace’s regular way of doing business. These facts support open-ended continuity,” Surrick commented.

Surrick said the plaintiffs provided sufficient evidence of a timeline to support their allegations of illegal activity on the part of the defense, and denied the latter’s motion to dismiss.

“Plaintiffs’ allegations regarding continuity and a pattern of racketeering survive defendants’ motion,” Surrick stated.

The plaintiffs are represented by Jacob T. Thielen of O’Keefe Miller & Thielen, in Fleetwood.

The defendants are represented by James Christopher Froelich, in Robesonia.

U.S. District Court for the Eastern District of Pennsylvania case 5:14-cv-04225

From the Pennsylvania Record: Reach Courts Reporter Nicholas Malfitano at nickpennrecord@gmail.com

More News

The Record Network