CYNTHIA GREGORY, FERNANDO BUJONES, KEVIN MCKENZIE, MARTINE
VAN HAMEL, CYNTHIA HARVEY, MARIANNA TCHERKASSKY, JUDITH
FUGATE, CAROLE VALLESKEY, and DONALD WILLIAMS, individually
on behalf of all others similarly situated, Plaintiffs, v.
AMERICAN GUILD OF MUSICAL ARTISTS, and SANFORD I. WOLFF,
ALAN D. OLSEN, MARK WEINSTEIN, PATRICIA TURK, KAREN BROWN,
DOMINIC COSSA, GARY DUNNING and DANIEL RULE, individually
and as Trustees of the American Guild of Musical Artists
Pension Fund, Defendants.
91 Civ. 6751 (SWK)
UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF
1993 U.S. Dist. LEXIS 6971
May 24, 1993, Filed
COUNSEL: [*1] For Plaintiffs: Hilary B. Miller, 112 Parsonage Road, Greenwich, Connecticut 06830-3941, By: Hilary B. Miller.
For Defendants American Guild of Musical Artists, Sanford I. Wolff, Alan D. Olsen, Dominic Cossa and Karen Brown: Cohen, Weiss and Simon, 330 West 42nd Street, New York, New York 10036, By: Bruce H. Simon. Becker London Kossow, 1841 Broadway, New York, New York 10023, By: Mortimer Becker.
OPINIONBY: SHIRLEY WOHL KRAM
OPINION: MEMORANDUM OPINION AND ORDER
SHIRLEY WOHL KRAM, U.S.D.J.
In this class action on behalf of all ballet dancers against the dancers' labor union and the trustees of the union pension fund, plaintiffs move, pursuant to Rule 15(a) of the Federal Rules of Civil Procedure, for an order granting them leave to amend the complaint. Defendants American Guild of Musical Artists ("AGMA"), Sanford I. Wolff ("Wolff"), Alan D. Olsen ("Olsen"), Dominic Cossa ("Cossa") and Karen Brown ("Brown") (collectively "defendants") oppose the motion. For the reasons set forth below, plaintiffs' motion to amend is granted in part and denied in part.
Plaintiffs are present and former members of four major ballet companies: American Ballet Theatre, New York City [*2] Ballet, Joffrey Ballet and Dance Theatre of Harlem. Defendant AGMA is a labor union representing employees in industries affecting commerce, and was also the recognized collective bargaining representative of dancers employed by the four major ballet companies. As part of their collective bargaining agreement, effective August 31, 1968, plaintiffs and their employers, specifically, American Ballet Theatre, the New York City Ballet, the Joffrey Ballet and the Dance Theatre of Harlem, established, pursuant to Section 302(c)(5) of the Labor Management Relations Act ("LMRA"), 29 U.S.C. § 186(c)(5), an employee pension benefit plan called the American Guild of Musical Artists Pension Fund (the "Fund"). The participants in the Fund are performing artists, including opera singers, choristers, and dancers. Defendants Wolff, Olsen, Cossa and Brown are trustees of this Fund and have participated on behalf of AGMA in the negotiation and execution of collective bargaining agreements.
On October 8, 1991, plaintiffs filed a complaint against AGMA, the individual union defendants, and the trustees of the Fund. In the complaint, plaintiffs allege that the [*3] defendants have breached their duty of fair representation in violation of LMRA and the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1104(a)(1)(A), et seq. Specifically, plaintiffs allege that: (1) defendants caused plaintiffs to participate in a pension plan with a retirement age of 65 that bears no rational relationship to the age at which dancers are compelled to retire and need income -- almost always prior to age 40; and (2) maintained the retirement age of 65 arbitrarily (Count I). Plaintiffs further allege that defendants breached their fiduciary duty by failing to amend the plan -- despite a $12,000,000 surplus in funding -- to provide dancers with career-transition benefits (Count II).
On November 21, 1991, defendants filed an answer to the complaint and began responding to plaintiffs' discovery demands. Thereafter, upon production of the defendants' internal reports, plaintiffs allegedly discovered that the defendants knew for the past five years that the design of the Fund resulted in prejudicial treatment of the plaintiff class, yet consistently concealed this information from the plaintiffs during collective [*4] bargaining. In fact, according to the plaintiffs, the defendants' internal reports reveal that: (1) dancers, who account for 73% of the Fund's contributions, receive only 21% of the retirement benefits paid to date; and (2) non-dancers can expect to receive 99.3% higher benefits per dollar contributed to the Fund than dancers. Plaintiffs further allege that this information was withheld by the defendants from the plaintiff class during the negotiation of more than a dozen collective bargaining agreements with every major ballet company in the country over the last five years.
In view of these documentary disclosures, plaintiffs now move, pursuant to Rule 15(a) of the Federal Rules of Civil Procedure, for an order granting them leave to amend the complaint to (1) add causes of action against the union for common law fraud and racketeering in violation of the Racketeer Influenced and Corrupt Organization Act of 1970 ("RICO"), 18 U.S.C. § 1961, et seq.; (2) correct numerical and typographical errors, including a change in the case caption; and (3) add a jury demand. Defendants oppose the motion on the grounds that plaintiffs' fraud and RICO [*5] claims would not survive a motion to dismiss. Specifically, defendants contend that plaintiffs' common law fraud and RICO claims are preempted by federal collective bargaining law, namely, the National Labor Relations Act ("NLRA"), 29 U.S.C. § 151, et seq. In addition, defendants argue that the amended complaint fails to plead fraud with the degree of particularity required by Rule 9(b) of the Federal Rules of Civil procedure. Defendants argue further that plaintiffs' RICO claim is deficient because it fails to plead predicate acts, causation, and the existence of a RICO enterprise. And finally, defendants claim that plaintiffs' motion should be denied because the amended complaint would unduly prejudice defendants at this advanced stage of the litigation.
I. Standard of Law
Rule 15(a) of the Federal Rules of Civil Procedure provides, in part, that once a responsive pleading has been served, "a party may amend the party's pleading only by leave of court or by written consent of the adverse party; and leave shall be freely given when justice so requires." Fed. R. Civ. P. 15(a). Although Rule 15(a) is to be liberally [*6] construed, see Foman v. Davis, 371 U.S. 178, 182, 9 L. Ed. 2d 222, 83 S. Ct. 227 (1962), the decision to grant or deny leave to amend lies within the Court's discretion. Zenith Radio Corp. v. Hazeltine Research, Inc., 401 U.S. 321, 330, 28 L. Ed. 2d 77, 91 S. Ct. 795 (1971); Sobel v. Yeshiva Univ., 477 F. Supp. 1161, 1168-69 (S.D.N.Y. 1979). Specifically, the Court may deny leave to amend if the movant unduly delayed, exhibited bad faith or dilatory motive, or repeatedly failed to cure deficiencies by previous amendments; if the opposing party would be caused undue prejudice; or if amendment would be futile. Foman v. Davis, 371 U.S. at 182; Clay v. Martin, 509 F.2d 109, 113 (2d Cir. 1975); State of N.Y. v. Cedar Park Concrete Corp., 741 F. Supp. 494, 496 (S.D.N.Y. 1990). The Court should deny leave to amend on the basis of futility where the amended pleading would be dismissed pursuant to Fed. R. Civ. P. 12(b)(6) for failure to state a claim. Thompson v. Gjivoje, 687 F. Supp. 922, 924 (S.D.N.Y. 1988), aff'd, 896 F.2d 716 (2d Cir. 1990); [*7] Halpert v. Wertheim & Co., Inc., 81 F.R.D. 734, 735 (S.D.N.Y. 1979); 3 James W. Moore, Moore's Federal Practice P 15.08 (2d ed. 1985).
II. The Common Law Fraud Claim
In their proposed amended complaint, plaintiffs allege a common law fraud claim, namely, that AGMA, Wolff and Olsen "failed to disclose material facts to the plaintiff class which they had a duty to disclose," Proposed Amended Complaint at P 57, and that breach of that duty "proximately caused damage to plaintiffs in that they were induced to enter into collective bargaining agreements with their employers which provided retirement benefits which are of substantially lower value than plaintiffs could otherwise have obtained." Proposed Amended Complaint at P 60. AGMA, Wolff and Olsen argue that this amendment will be futile as plaintiffs' proposed fraud claim is preempted by existing federal collective bargaining law, and therefore, would not survive a motion to dismiss. The Court agrees.
Sections 8(b) and 9(a) of the National Labor Relations Act, 29 U.S.C. §§ 158(b) and 159(a), authorize a union to act as the exclusive representative [*8] of all the employees in the collective bargaining process. As the employees' exclusive agent, the union owes each employee the "duty of fair representation," i.e., the duty to act "without hostility or discrimination . . [in] complete good faith and honesty . . . to avoid arbitrary conduct." Vaca v. Sipes, 386 U.S. 171, 177, 17 L. Ed. 2d 842, 87 S. Ct. 903 (1967); see also Air Line Pilots Ass'n, Int'l v. O'Neill, 113 L. Ed. 2d 51, 111 S. Ct. 1127, 1134-1135 (1991) (expressly extending the "duty of fair representation" to the negotiation of labor agreements). Breach of the duty of fair representation can occur as a result of non-disclosure by the union, of material facts to union members during the collective bargaining process. See, e.g., Anderson v. United Paperworkers Int'l Union, AFL-CIO, 641 F.2d 574, 576-78 (8th Cir. 1981) (citing cases) (finding suit could lie for breach of the NLRA duty of fair representation where the union's false representations allegedly induced plaintiff employees to ratify a collective bargaining agreement).
Congress intended, however, that federal law completely regulate the duties which an NLRA collective [*9] bargaining representative owes to the workers it represents. See Amalgamated Ass'n of Street, Elec. Ry. & Motor Coach Employees of Am. v. Lockridge, 403 U.S. 274, 276, 29 L. Ed. 2d 473, 91 S. Ct. 1909 (1971). Thus, state common law claims, based upon a breach of the duty of fair representation, are preempted by federal law. Vaca v. Sipes, 386 U.S. at 177, 181-194. For example, in Gorodkin v. Q-Co. Indus., Inc., et al., 89 Civ. 8033, 1992 U.S. Dist. LEXIS 7713, at *40-41 (S.D.N.Y. May 27, 1992), the court, dismissing a common law fraud claim alleging plaintiff's detrimental reliance upon misinformation from the union, held that "state law claims are preempted 'when an activity is arguably subject to [section 8 of the National Labor Relations Act]' [and] . . . there is even the potential for conflict between state regulation and federal labor law policy." Id. (quoting San Diego Bldg. Trades Council v. Garmon, 359 U.S. 236, 245, 3 L. Ed. 2d 775, 79 S. Ct. 773 (1959)); see also Richardson v. United Steelworkers of Am., 864 F.2d 1162, 1169 (5th Cir. 1989) (where plaintiffs allege that the [*10] union breached a duty arising from its status as the exclusive collective bargaining agent, this duty must be defined by federal law), cert. denied, 495 U.S. 946, 109 L. Ed. 2d 531, 110 S. Ct. 2204 (1990).
In the case at hand, plaintiffs' common law fraud claim alleges that defendants AGMA, Wolff and Olsen failed to disclose material facts in an effort to induce plaintiffs to enter into a discriminatory pension plan. Specifically, plaintiffs allege that the "Union, Wolff and Olsen failed to disclose material facts to the plaintiff class," Proposed Amended Complaint at P 57, and that the "concealment of such facts proximately caused damage to the plaintiffs in that they were induced to enter into collective bargaining agreements" containing discriminatory pension plans. Proposed Amended Complaint at P 60. Examination of the proposed amended complaint reveals, however, that plaintiffs' fraud claim is essentially identical to the alleged breach of the union's duty of fair representation contained in Count I, i.e., that "the Union has, in the course of negotiations leading to the collective bargaining agreements covering plaintiffs' employment, concealed from plaintiffs material facts which [*11] the Union had a duty to disclose." Proposed Amended Complaint at P 47. In fact, plaintiffs' allegations reference no independent state-law duty of care, but rather, trigger a duty arising solely from the Union's collective bargaining relationship under the NLRA with the bargaining unit members. Thus, if plaintiffs recover on their state law claims, it will only be because they have established a violation of federal law. As a result, plaintiffs' common law fraud claim, premised upon the doctrine of fair representation, is preempted by federal law and would be dismissed. See Gorodkin v. Q-Co. Indus., Inc., at al., 1992 U.S. Dist. LEXIS 7713, at *40-41 (dismissing state common law fraud claims); Peterson v. Air Line Pilots Ass'n, Int'l, 759 F.2d 1161, 1169-70 (4th Cir.) (dismissing state law claims of fraud and tortious interference), cert. denied, 474 U.S. 946, 88 L. Ed. 2d 289, 106 S. Ct. 312 (1985). Accordingly, plaintiffs' motion for an order granting them leave to add a cause of action sounding in common law fraud is denied.
In the alternative, plaintiffs argue that their common law fraud claim can be construed as [*12] a cause of action for breach of the duty of fair representation and/or a violation of 18 U.S.C. § 664, the pension fund conversion statute. As the Union properly notes, however, plaintiffs have not moved for leave to amend the complaint on this basis. As a result, defendants AGMA, Wolff and Olsen have had no opportunity to respond to such an amendment. Nor have plaintiffs demonstrated (1) how such an amendment, asserting a cause of action for breach of the duty of fair representation, would vary from the "Breach of Duty of Fair Representation" claim set forth in Count I of the original complaint; or (2) how and why plaintiffs seek to maintain both duty of fair representation claims.
Accordingly, the Court, sua sponte, grants plaintiffs twenty days from the date of this Order to move for leave to amend the complaint to include a cause of action for breach of the duty of fair representation and/or a violation of 18 U.S.C. § 664. Should plaintiffs choose to pursue this option, AGMA, Wolff and Olsen shall then have fourteen days to submit any opposition. Plaintiffs shall then submit any reply within ten [*13] days.
III. The RICO Claim
In their Proposed Amended Complaint, plaintiffs also allege that the union is an "enterprise" which transmitted communications by means of the United States mail, wire services and telephones for the purpose of defrauding the plaintiffs of their property, in violation of RICO, 18 U.S.C. § 1962(c). Proposed Amended Complaint PP 61-67. In response, defendants argue that this amendment is once again futile and should be dismissed on the grounds of: (1) preemption; (2) failure to plead the predicate acts of fraud with particularity pursuant to Fed. R. Civ. P. 9(b); (3) failure to allege a RICO enterprise; and (4) failure to allege causation. The Court disagrees.
Subsection (c) of 18 U.S.C. § 1962 provides, in relevant part, that "it shall be unlawful for any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise's affairs through a pattern of racketeering activity." 18 U.S.C. § 1962 [*14] (c). In order to establish a "pattern of racketeering activity," a plaintiff must allege two or more predicate acts, i.e., other criminal offenses, within a ten year period. 18 U.S.C. § 1961(5); see also United States v. Weisman, 624 F.2d 1118, 1121 (2d Cir.), cert. denied, 449 U.S. 871, 66 L. Ed. 2d 91, 101 S. Ct. 209 (1980).
In this case, plaintiffs allege that defendants made use of the United States mail, wire service, and telephones to transmit summary plan descriptions of the Fund, annual pension benefit statements, contribution reports, collective bargaining agreements, etc., in furtherance of their plan to defraud. Proposed Amended Complaint at P 65. Plaintiffs further allege that these activities constitute predicate acts under 18 U.S.C. § 1961(1), and are sufficient to demonstrate liability for racketeering activity independent of any federal labor law violations.
Defendants contend, however, that the conduct underlying plaintiffs' RICO complaint is based upon a violation of federal labor law, namely, breach of the duty of fair representation, see NLRA, 29 U.S.C. §§ 158 [*15] (b) and 159(a), which preempts plaintiffs' RICO claim. In support of this contention, defendants argue that the mail and wire fraud statutes do not provide a substantive standard for determining whether the prohibited conduct constitutes fraud, but are merely "conduits" through which the fraud is committed. See 18 U.S.C. §§ 1341 and 1343. n1 According to defendants, the Court would be forced to look to state common law fraud standards to determine the merits of plaintiffs' claim. Thus, plaintiffs, by virtue of pleading a RICO cause of action, would be able to subject defendants to liability under state common law fraud principles, even though federal labor law preempts the application of all state law standards to collective bargaining conduct. See Discussion, supra, at 7. The defendants indicate further that plaintiffs' RICO and fair representation (Count I) causes of action are incompatible: in sharp contrast to RICO's treble damages provision and four year statute of limitations, a duty of fair representation claim does not permit punitive damages and imposes a six month statute of limitations. Thus, the defendants urge the Court [*16] to reject plaintiffs' attempt to circumvent federal labor law by litigating their duty of fair representation claims as RICO mail and wire fraud. The Court finds, however, that although the defendants' argument has appeal, it is not supported by law in this Circuit.
n1 Section 1341 provides, in part, that "whoever, having devised or intending to devise any scheme or artifice to defraud . . . places in any post office or authorized depository for mail matter, any matter or thing whatever to be sent . . . shall be fined no more than $1,000 or imprisoned not more than five years, or both." Section 1343 provides, in part, that "whoever, having devised or intending to devise any scheme or artifice to defraud . . . transmits or causes to be transmitted by means of wire, radio, or television . . . any writings, signs, signals, pictures, or sounds for the purpose of executing such scheme or artifice, shall be fined not more than $1,000 or imprisoned not more than five years, or both."
Although in other jurisdictions, [*17] courts have occasionally -- although far from universally -- dismissed RICO claims on the basis of preemption, see, e.g., Brennan v. Chestnut, 777 F. Supp. 1469 (D. Minn. 1991), aff'd, 973 F.2d 644 (8th Cir. 1992); McDonough v. Gencorp, Inc., 750 F. Supp. 368 (S.D. Ill. 1990), courts in this Circuit have not. See United States v. International Bhd. of Teamsters, Chauffeurs, Warehousemen and Helpers of Am., AFL-CIO, 948 F.2d 98, 105 (2d Cir. 1991) (citing United States v. Boffa, 688 F.2d 919, 931 (3d Cir. 1982) for the proposition that preemption is not applicable where federal laws other than the NLRA are involved), vacated on other grounds, 113 S. Ct. 31 (1992): United States v. International Bhd. of Teamsters, 708 F. Supp. 1388, 1394 (S.D.N.Y. 1989) (holding that RICO claim, alleging predicate acts of mail and wire fraud, was not preempted by the federal labor law); Rodonich v. House Wreckers Union Local 95 of Laborers' Int'l Union of North Am., 624 F. Supp. 678, 686 (S.D.N.Y. 1985) [*18] (refusing to dismiss plaintiffs' RICO claim despite causes of action asserting violations of federal labor laws).
Moreover, the Court finds that preemption originates from the Supremacy Clause of the United States Constitution and comes into play only when a case involves a conflict between federal and state laws, not a conflict between two federal statutes. See San Diego Bldg. Trades Council v. Garmon, 359 U.S. at 244 ("When it is clear or may fairly be assumed that the activities which a State purports to regulate are protected by § 7 or § 8 of the [NLRA], or constitute an unfair labor practice under § 8, due regard for the federal enactment required that state jurisdiction must yield.") (emphasis added). When a case presents a conflict between two federal statutes, however, no constitutional concerns are implicated and preemption is not warranted. See United States v. International Bhd. of Teamsters, Chauffeurs, Warehousemen and Helpers of Am., AFL-CIO, 948 F.2d at 105 ("where federal laws and policies other than the NLRA are implicated, [preemption] is frequently considered inapplicable."); see also Connell Constr. Co., Inc. v. Plumbers & Steamfitters Local Union No. 100, 421 U.S. 616, 635, 44 L. Ed. 2d 418, 95 S. Ct. 1830 n.17 (1975) [*19] ("where there is an independent federal remedy that is consistent with the NLRA, the parties may have a choice of federal remedies."); United States v. Boffa, 688 F.2d at 931 (in RICO prosecution alleging mail fraud, prohibition by defendants' conduct under § 8 of the NLRA would not preclude the "enforcement of a federal statute that independently proscribes that conduct as well.").
Nor is there any indication either in the language or legislative history of the NLRA that Congress intended federal labor law to displace other federal laws regulating fraud. n2 "If the legislative history of the NLRA points in any direction, it suggests that Congress did not intend the NLRA to displace either state or federal laws relating to fraud or violence." United States v. Boffa, 688 F.2d at 932. Thus, the Court declines to accept the proposition that a duty of fair representation claim under the NLRA precludes the enforcement of another federal statute, RICO, which similarly prescribes the conduct at issue.
n2 The Court thus rejects defendants' argument that the specific inclusion by Congress of two labor statutes, 29 U.S.C. §§ 186 and 501(c), as RICO predicate acts, signifies that Congress did not intend RICO to govern any other conduct regulated by collective bargaining law. Rather, the Court finds the specific inclusion of these two statutes merely indicates that Congress did not intend the violation of any other labor law to constitute a RICO predicate act.
B. Pleading Fraud with Particularity
Defendants also contend that plaintiffs' proposed RICO claim does not contain allegations of fraud specific enough to satisfy Rule 9(b) of the Federal Rules of Civil Procedure. Specifically, defendants maintain that plaintiffs fail (1) to identify the time, place, speaker and content of the alleged misrepresentations; (2) provide each defendant with "particularized" notice of his alleged participation in the fraud; and (3) state what the union defendants obtained as a result of any misrepresentations or omissions.
Rule 9(b) provides that "in all cases of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity." Fed. R. Civ. P. 9(b); see also Azurite Corp. Ltd. v. Amster & Co., 730 F. Supp. 571, 576 (S.D.N.Y. 1990) (extending Rule 9(b)'s particularity requirements to RICO claims alleging fraudulent conduct). Although, as defendants suggest, Rule 9(b) generally requires that plaintiffs identify the time and place of the fraud, the contents of the alleged misrepresentations or omissions, and the identity of the party or parties perpetrating the fraud, see United States v. International Bhd. of Teamsters, 708 F. Supp. at 1396, [*21] in cases of fraudulent concealment, plaintiffs need only allege the facts a defendant, who was under a duty to disclose, failed to reveal. United States v. Carpenter, 791 F.2d 1024, 1035 (2d Cir. 1986), aff'd, 484 U.S. 19, 98 L. Ed. 2d 275, 108 S. Ct. 316 (1987); DiVittorio v. Equidyne Extractive Indus., Inc., 822 F.2d 1242, 1247 (2d Cir. 1987); United States v. International Bhd. of Teamsters, 708 F. Supp. at 1397 (fraudulent concealment "by its nature, places most of the particulars of the fraud in question in control of the defendants.").
With this unique standard in mind, the Court concludes that plaintiffs have stated their claim under RICO with sufficient particularity. The wire and mail fraud set forth in the Proposed Amended Complaint alleges fraudulent concealment by the Union, Wolff and Olsen, namely, that these defendants failed to disclose that "although contributions in respect of the plaintiff class accounted in 1990 for 73% of all contributions to the Fund, the plaintiff class has received only 21% of the retirement benefits paid to date . . . [and] that historically non-dancers [*22] can expect to receive from the Fund 99.3% higher retirement benefits per dollar contributed to the Fund than members of the plaintiff class. Proposed Amended Complaint at PP 29-30. Thus, contrary to defendants' assertions, the facts not disclosed are stated particularly, namely: that from 1986 through 1991, union officials, specifically, defendants Wolff and Olsen, failed to disclose information that (a) plaintiffs, who contribute 73% of all Fund monies, receive only 21% of the Fund's benefits (Proposed Amended Complaint at P 29) and (b) nonclass members receive twice the benefits of class members (Proposed Amended Complaint at P 30). Furthermore, to the extent possible, plaintiffs have set forth the contents of the items mailed and/or wired and specified how each of the items was false and misleading. See Proposed Amended Complaint at P 34-35; see also Azurite Corp. Ltd. v. Amster & Co., 730 F. Supp. at 576. No more need be alleged in a case of fraudulent concealment. Therefore, the Court finds that the allegations of mail and wire fraud satisfy Rule 9(b).
C. Allegation of a RICO "Enterprise" and Causation
The defendants also challenge [*23] the sufficiency of plaintiffs' allegations of a RICO enterprise and causation. First, defendants argue that plaintiffs' enterprise allegation fails because it does not distinguish between the RICO "person", as defined by 18 U.S.C. § 1961(3), and the RICO "enterprise" as required by 18 U.S.C. § 1962(c). Second, defendants maintain that the plaintiffs' request for leave to add a RICO claim must be denied as the plaintiffs have not established that the defendants' conduct was a "but for" and proximate cause of plaintiffs' injuries. The Court finds both these arguments unpersuasive.
1. The RICO Enterprise
In order to survive a motion to dismiss, plaintiffs must establish the existence of a RICO enterprise. "[An] 'enterprise' includes any individual, partnership, corporation, association, or other legal entity, and any union or group of individuals associated in fact although not a legal entity." 18 U.S.C. § 1961(4); see also United States v. Turkette, 452 U.S. 576, 580-83, 69 L. Ed. 2d 246, 101 S. Ct. 2524 (1981); Kuczynski v. Ragen Corp., 732 F. Supp. 378, 387 (S.D.N.Y. 1989). [*24] An enterprise is proven by evidence of an ongoing organization and by evidence that the various associates function as a continuing unit. United States v. Turkette. 452 U.S. at 580-83.
The Second Circuit also requires that the RICO "person", i.e. the person conducting the affairs of the enterprise in a prohibited manner, and the "enterprise" itself must be different entities. Bennett v. United States Trust Co. of N.Y., 770 F.2d 308, 315 (2d Cir. 1985), cert. denied, 474 U.S. 1058, 88 L. Ed. 2d 776, 106 S. Ct. 800 (1986). Thus, "under 1962(c) a corporate entity may not be simultaneously the 'enterprise' and the 'person' who conducts the affairs of the enterprise through a pattern of racketeering activity." Id. Where, however, "the overlap between the defendants and the alleged RICO enterprise is only partial, a RICO claim may be sustained." Jacobson v. Cooper, 882 F.2d 717, 720 (2d Cir. 1989) (citing Cullen v. Margiotta, 811 F.2d 698, 730 (2d Cir.), cert. denied, 483 U.S. 1021, 97 L. Ed. 2d 764, 107 S. Ct. 3266 (1987)). Thus, the defendant may be a RICO person [*25] and one of a number of members of the RICO enterprise.
Here, plaintiffs proffer three alternative RICO enterprises: the Union, the Union and individual defendants Wolff and Olsen, and the Fund. The defendants contend that none of these three proposed alternatives can serve as a basis for establishing an enterprise because the RICO persons, namely the Union, Wolff and Olsen, are the same as the RICO enterprise, the Union, Wolff and Olsen. Based on the Court's reading of the complaint, however, an enterprise consisting of the association-in-fact of the Union, Wolff and Olsen is separate and distinct from the RICO persons, namely, the individual defendants set forth in the caption of the complaint. See Haggiag v. Brown, 728 F. Supp. 286, 295-296 (S.D.N.Y. 1990) (refusing to dismiss RICO claim where the persons liable were distinct from the enterprise in that the "defendants individually" were persons liable and none of them individually were the enterprise; rather "three 'persons'. . . joined together to defraud plaintiffs" constituted a "separate and distinct" enterprise); Azurite Corp. v. Amster & Co., 730 F. Supp. at 579 [*26] (upholding the enterprise allegation where the plaintiffs alleged that the defendants, a broker-dealer firm and three of its general partners, acted as an association-in-fact to defraud the plaintiffs); Richardson Greenshields Sec. v. Mui-Hin Lau, 693 F. Supp. 1445, 1449 (S.D.N.Y. 1988) (an enterprise composed of a corporation and a number of individuals constitutes a valid enterprise as that term is defined by RICO); Fustok v. Conticommodity Serv., Inc., 618 F. Supp. 1074, 1076 (S.D.N.Y. 1985) ("an association in fact which constitutes a RICO enterprise is not merely a synonym for the collective of 'individuals' which form the association, but instead is a distinct entity."). Thus, as the Proposed Amended Complaint describes an enterprise distinct from the individual RICO persons, the claim would not be subject to dismissal under Rule 12(b)(6). n3
n3 Defendants further contend that to plead an association in fact, plaintiffs must show: (1) an ongoing organization; (2) associating together for a common purpose of engaging in a course of conduct; (3) that is separate and apart from the pattern of activity in which it engages; and (4) having either a hierarchial or consensual decision making structure. Viewing the Proposed Amended Complaint with all reasonable inferences drawn in plaintiffs' favor, see Dahlberg v. Becker, 748 F.2d 85, 88 (2d Cir. 1984), cert. denied, 470 U.S. 1084, 85 L. Ed. 2d 144, 105 S. Ct. 1845 (1985), the Court finds that: (1) individual defendants Wolff and Olsen have an ongoing relationship with the Union, as co-officers and co-employees (Proposed Amended Complaint at PP 13 and 14); (2) associating together for the negotiation and execution of collective bargaining agreements (Proposed Amended Complaint at P 13); (3) which is separate and apart from the alleged pattern of RICO activity, namely, the mail and wire fraud (Proposed Amended Complaint at P 67); with (4) a structure or framework within the group for making decisions and delegating responsibility (Proposed Amended Complaint at P 13(b)). See United States v. Turkette, 452 U.S. at 583-584; Griffin v. McNiff, 744 F. Supp. 1237, 1257 (S.D.N.Y. 1990); see also United States v. Riccobene, 709 F.2d 214, 222 (3d Cir.), cert. denied, 464 U.S. 849, 78 L. Ed. 2d 145, 104 S. Ct. 157 (1983).
2. RICO Causation
In order to recover RICO damages under 18 U.S.C. § 1964(c), plaintiffs must also establish that they were deprived of money or property "by reason of" the defendants' alleged RICO violations. In order to satisfy this RICO causation requirement, plaintiffs must establish that defendants' conduct was both the "but for" and "proximate" cause of the plaintiffs' alleged injury. Hecht v. Commerce Clearing House, Inc., 897 F.2d 21, 23-24 (2d Cir. 1990) (RICO causation requires that plaintiffs' injuries be a "substantial factor in the sequence of responsible causation" and "reasonably foreseeable or anticipated as a natural consequence.").
Plaintiffs' Proposed Amended Complaint alleges that due to defendants' fraudulent concealment, plaintiffs were induced to accept lower pension benefits than those they could have otherwise obtained. Proposed Amended Complaint at P 60. Defendants claim that this alleged injury is far too speculative as a matter of law to meet RICO's proximate cause requirement. Defendants also claim that even if plaintiffs were able to establish an actual deprivation of property, [*28] they cannot demonstrate that (1) the vote to ratify the collective bargaining agreement would have been different if defendants had not misrepresented the pension benefit information; and (2) if plaintiffs had voted otherwise, the employers would have acceded to their demands. n4
n4 Defendants have relied upon a Ninth Circuit breach of fair representation case, Acri v. International Assoc. of Machinists, 781 F.2d 1393 (9th Cir.), cert. denied, 479 U.S. 816, 93 L. Ed. 2d 29, 107 S. Ct. 73 (1986), in arguing that plaintiffs must demonstrate that the vote to ratify would have been different and that the company would have acceded to different demands. As the Second Circuit has not, however, applied this element to RICO cases, the Court will not hold plaintiffs to this standard.
The Court finds, for purposes of this motion, that assuming plaintiffs were fraudulently misled to endorse a discriminatory pension plan, which diverted 79% of the fund's benefits to nondancers, the plaintiffs have [*29] alleged a deprivation of property rights, namely, the loss of that portion of their contributions diverted to compensate nondancers, sufficient to satisfy the Court that the injury is not speculative. The Court further finds that this injury was allegedly caused, at least in part, by the RICO acts (Proposed Amended Complaint at PP 35, 67) and is reasonably foreseeable as a natural consequence. See Hecht v. Commerce Clearing House, 897 F.2d at 23-24. n5
n5 With respect to defendants' remaining RICO arguments, the Court finds that plaintiffs have pled the predicate acts of mail and wire fraud sufficiently to defeat a motion to dismiss. The allegations that the defendants used the mail and telephone in furtherance of their scheme to conceal the discriminatory nature of the pension fund must be taken as true for purposes of this motion, see Miree v. DeKalb County, 433 U.S. 25, 23, 53 L. Ed. 2d 557, 97 S. Ct. 2490 n.2 (1977). Thus, plaintiffs have satisfactorily plead (a) participation in a scheme to defraud and (2) knowing use of the interstate mails or wires to further that scheme. See United States v. Gelb, 700 F.2d 875, 879 (2d Cir.), cert. denied, 464 U.S. 853, 78 L. Ed. 2d 152, 104 S. Ct. 167 (1983).
Finally, defendants contend that amendment of the complaint in this "advanced stage of the litigation" would result in undue prejudice. Defendants claim that the plaintiffs deliberately delayed filing the instant motion until after the close of discovery. As a result, an amendment of the complaint would necessitate reopening discovery, including the redeposition of six plaintiffs, at considerable cost and delay. The Court finds defendants' argument without merit.
Pursuant to a January 27, 1992 letter and before the taking of a single deposition, the defendants were apprised by plaintiffs of the substance of the proposed amendments to the complaint. On February 12, 1992, defendants commenced, but did not conclude, six depositions, expressly reserving the right to recall the six deponents. Thereafter, plaintiffs continued to cooperate with defendants in providing discovery, including the taking of three depositions beyond the official discovery cut-off date ordered by the Court and after the filing of the instant motion. Thus, defendants had, and still have, an opportunity to obtain discovery regarding the proposed amendments to the complaint.
Moreover, [*31] the Court finds that service of the instant motion, a mere five months after the filing of the original complaint, does not constitute the sort of inexcusable delay necessary to deny the motion solely on that basis. See, e.g., Polycast Tech. Corp. v. Uniroyal, Inc., 728 F. Supp. 926 (S.D.N.Y. 1989) (delay of two years insufficient basis to deny addition of fraud claim); Azarbel v. Medical Ctr. of Del., Inc., 724 F. Supp. 279 (D. Del. 1989) (delay of eight months not sufficient grounds to deny request to amend the complaint). In fact, the record indicates that plaintiffs requested leave to file an amended complaint at the first available opportunity, a pretrial conference scheduled for February 28, 1992, only three months after discovery commenced. Thus, finding that plaintiffs timely requested leave to file their motion to amend and that discovery is not yet concluded, the Court perceives no undue prejudice resulting from plaintiffs' amendment of the complaint. The parties will, however, be afforded an additional six months, until November 1, 1993, to conclude whatever discovery is still outstanding.
V. The Jury [*32] Demand
As defendants have offered no opposition to plaintiffs' request for an order granting them leave to amend the complaint to demand a jury trial and correct certain typographical errors, this request is granted.
For the reasons set forth above, plaintiffs' motion, pursuant to Rule 15(a) of the Federal Rules of Civil Procedure, for an order granting them leave to amend the complaint is (1) denied with respect to the common law fraud cause of action (proposed Count III); (2) granted with respect to the RICO cause of action (proposed Count IV); and (3) granted with respect to the addition of a jury demand and correction of typographical errors. In addition, plaintiffs shall have thirty (30) days from the date of this Order to move for leave to amend the complaint to include a cause of action for breach of the duty of fair representation and/or a violation of 18 U.S.C. § 664. Should plaintiffs choose to pursue this option, defendants shall have fourteen (14) days to submit any opposition. Plaintiffs shall then submit any reply within ten (10) days. All remaining discovery shall be completed by November 1, 1993.
SO ORDERED. [*33]
SHIRLEY WOHL KRAM
UNITED STATES DISTRICT JUDGE
Dated: New York, New York
May 21, 1993