Petition for Writ of Certiorari — Vild v. Visconsi

InThe un wal

Supreme Court OF Che Unitas States—

OCTOBER TERM, 1991

JOHN VILD,

Petitioner,

v.

DOMINIC A. VISCONSI et al.,

Respondent.

PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT

G. Robert Blakey

Notre Dame Law School

Notre Dame, Indiana 46556

(219) 239-5717

Gregory T. Straika

400 The Standard Building

1370 Ontario Street

Cleveland, Ohio 44113

(216) 524-7499

Counsel for Petitioner

QUESTION PRESENTED

John Vild sought to recover damages

for mail and wire fraud subject to civil

sanctions under RICO, 18 U.S.C. s.196l,

et. seq. The Court of Appeals for the

Sixth Circuit dismissed the claim for

failure to establish "a pattern of

racketeering activity." This litigation

raises an important, unsettled, and

recurring issue:

Does the requirement that the

plaintiff in a civil RICO action allege a

"pattern of racketeering activity"

require that the plaintiff show injury

from each act of racketeering activity in

the pattern?

In conflict with four Circuit Courts

of Appeal, the Court of Appeals for the

Sixth Circuit held in the affirmative on

both issues.

This Petition seeks review of this

decision.

LIST OF PARTIES

The following parties appeared

below.

Party Plaintiff:

John Vild

Parties Defendant:

Dominic Visconsi

Patricia Sattenfield

Sea/Mountain Resorts, Inc.

Cc. W. Sattenfield

Gerald Plonski

John Does

ii

TABLE OF CONTENTS

Page

QUESTION PRESENTED 2 ae Oe tae ee ee ee es” i

bigs OF FRMLALBD « « « « se 2 & @ © © & ii

TABLE OF AUTHORITIES CITED ae a ae iv

OPINIONS BELOW » «& @ '« «4 & «1% ae 2

JURISDICTION a oe a ce a ee eee ee ee ee 2

STATUTORY PROVISIONS INVOLVED... . 3

Statens VE tee CABER «© «© « «© «© «¢ & * 5

REASONS FOR GRANTING THE WRIT

This Court Should Grant A Writ of

Certiorari To Review The Court Of

Appeals' Decision Since It Is In Direct

Conflict With Controlling Decisions Of

Other Courts Of Appeal, And With The

Teachings of This Court. Paces 7

CONCIUGION « = » © © © © © * He HUH UD 24

iii

TABLE OF AUTHORITIES CITED

CITED

CASES: PAGE NO.

Agency Holding Corp. v. Malley, Duff

& Associates, 483 U.S. 143

PROG. 2) STs ee ee Se

Banks v. Wolk, 918 F.2d 418 (3d Cir.

1990) pee ee at ees bay 46, 186

Durham v. Business Management Associates,

847 F.2d 1505 (llth Cir. 1988) ... 14

H.J. Inc., et al., v. Northwestern

Bell Telephone Company, 109

S.Ct. 2693 (1989 .....s 9, 10,

ai, 24, 16, 19, 20, 23

Kerr-McGee Refining Corporation v.

M/T Triumph, 924 F.2d 467 (2d

Gees. SOE Ss 4s ee ae te eS es 17

Landry v. Airline Pilots Assn.

Intl., 901 F.2d 404 (Sta Cir.

1991) - _ — . . . . * . . . - 7 a. 3

Marshall & Ilsley Trust Co. v. Pate,

819 F.2d 806 (1987) ‘=. © * 18, 20

Russello v. United States, 464 U.S.

16 (1983) ee es aa, @3

Sedima, S.P.R.L., v. Imrex Company,

Inc., et al., 473 U.S. 479

[A9GeP « & & 4 S, 24, i939, 20, fhe Ge

Shearson/American Express, Inc. v.

McMahon, 482 U.S. 220 (1987) ... 9

Tafflin v. Levitt, 110 S.ct. 792

PRE se ae a ae

iv

Town of Kearny v. Hudson Meadows

Urban Renewal Corp., 829 F.2d

1263 (3d Cir. 1987) cite ecre ae « 15

United States v. Indelicato, 865

St Sh See ae eee

United States v. Masters, 924 F.2d

1362 (7th Cir. 1991) .... it, £0

United States v. Turkette, 452 U.S.

3) i |) rrr ee ee a eee

Yellow Bus Lines, Inc. v. Drivers,

Chauffeurs & Helpers Local

Union 639, 883 F.2d 132 (D.C.

Cie. AOPAl « «6 6 ee eS He ws i3

FEDERAL STATUTES:

Racketeer Influenced and Corrupt

Organizations Act 18 U.S.C.

s. 1961, et. seq. + « « wy By Gy

7, SB. Be 20, 3a; 23, A355 17, LO, 25,

21, 22, 23, 24

84 Stat. 947 (1970) . « «=» © © © e@ © « BD

\

LEGISLATIVE MATERIALS:

Federal Government's Use of RICO

Statute And Other Efforts

Against Organized Crime, S.

Rep. No. 101-407, 101st Cong.,

2d Sess. (1990) c *« *, a “Ss se «

MISCELLANEOUS:

Blakey and Gettings, Racketeer

Influenced and Corrupt

Organizations (RICO): Basic

Concepts---Criminal and Civil

Remedies, 53 Temp. L.Q. 1009

(1981) eck ee ee

vi

22

No.

IN THE SUPREME COURT OF

THE UNITED STATES

October Term, 1991

JOHN VILD,

Petitioner,

Vv.

DOMINIC VISCONSI, et. al.

Respondent.

PETITION FOR A WRIT OF CERTIORARI TO THE

COURT OF APPEALS

FOR THE SIXTH CIRCUIT

OPINIONS BELOW

The opinion of the United States

District Court for the Northern District

of Ohio is unreported.

The decision of the United States

Court of Appeals for the Sixth Circuit is

reported at 956 F.2d 560 (1991). It is

reproduced in the Appendix.

The Court of Appeals for the Sixth

Circuit denied a Petition for Rehearing.

JURISD ON

The Court of Appeals for the Sixth

Circuit denied rehearing on March 27,

1992. This Petition is timely filed.

Jurisdiction is invoked under 28 U.S.C.

Section 1254(1) (certiorari) and Rule

10.1(b) (conflict) and (c) (important and

unsettled questions) of this Court.

STATUTORY PROVISIONS INVOLVED

The Racketeer Influenced and Corrupt

Organizations Act (RICO), Title 18,

United States Code, provides in part:

Section 1961. Definitions.

As used in this chapter --

(1) “racketeering activity" means

any act or threat involving ... [State

law extortion]; ... any act ... under

Title 18 United States Code ... Section

1341 (relating to mail fraud), Section

1343 (relating to wire fraud) ... Section

1951 (relating to ... extortion) ...;

(4) "enterprise" includes any

legal entity, and any ... group of

individuals associated in fact although

not a legal entity ...;

(5) “pattern of racketeering

activity" requires at least two acts of

racketeering activity ... ;

Section 1962. Prohibited Activities.

(a) It shall be unlawful for any

3

person who has received any income

derived ... from a pattern of

racketeering activity ... to use or

invest ... any part of such income, or

the proceeds of such income, in

acquisition of any interest in, or the

establishment or operation of, any

enterprise ... ;

(c) It shall be unlawful for any

person employed by or associated with any

enterprise ... to conduct or participate

in the conduct of such enterprise's

affairs through a pattern of racketeering

activity ... ?

xxx

Section 1964. Civil Remedies.

(c) Any person injured in his

business or property by reason of a

violation of section 1962 of this chapter

may sue therefor in any appropriate

United States district court and shall

recover threefold the damages he sustains

4

and the cost of the suit, including a

reasonable attorney's fee.

xk

84 Statutes at Large 947 (1970)

provides:

Section 904 (a) The provisions of

(RICO) shall be liberally construed

to effectuate its remedial purposes.

STATEMENT OF THE CASE

On October 10, 1989, John Vild

("Vild") filed a complaint in the

Nistrict Court for the Northern District

of Ohio. The Complaint alleged that in

June, 1989 Vild entered into a marketing

agreement with C.W. Sattenfield

("Sattenfield"), a general partner in

Longboat Ventures, Ltd., to market

interests in a Florida time-share resort

called the Longboat Bay Club in Ohio.

Vild entered the agreement in reliance on

Sattenfield's assurance that adequate

start-up capital was available and would

5

be provided for the project.

Longboat Ventures, Ltd. failed to

provide Vild with the promised capital.

Sattenfield unilaterally altered the

agreement to require a 50% kickback of

all Vild's profits upon a general threat

against his business and family, and

compelled Vild to sign a note for $20,000

in order to open the Club. Meanwhile,

the respondents began and have continued

to solicit purchasers themselves through

unlicensed salespeople and unregistered

brokers using unlawful mailings.

Vild's complaint charged the

respondents with a number of counts

separately and in violation of

subsections (a) and (c) of the Racketeer

Influenced and Corrupt Organizations Act

("RICO"), 18 U.S.C. ninth den 1961, et.

seg. Vild alleged an association in fact

enterprise composed of four named

individuals, one corporation, and ten

6

unnamed individuals. In addition, he

alleged a pattern of racketeering

activity comprised of the acts of wire

fraud committed against himself and the

acts of wire and mail fraud committed

against potential and ultimate purchasers

of the interests.

The United States District Court for

the Northern District of Ohio granted the

respondents' motion to dismiss pursuant

tc Federal Rule of Civil Procedure

12(b) (6) for failure to establish a

pattern of racketeering activity. The

Court of Appeals for the Sixth Circuit

affirmed the decision, dismissing Vild's

RICO claim for his failure to allege

injury by each of the alleged predicate

acts.

REASONS FOR GRANTING THE WRIT

This Court Should Grant A Writ of

Certiorari To Review The Court’ of

Appeals' Decision Since It Is In Direct

7

Conflict With Controlling Decisions of

Other Courts Of Appeal, And With The

Teachings of This Court.

The application of RICO, an

important federal statute, to ostensibly

legitimate enterprises engaged in

patterns of racketeering activity is in

continuing conflict in light of the

decision of the Court of Appeals for the

Sixth Circuit in this case. The need for

effective use of the civil RICO

provisions requires that this conflict be

settled.

RICO was enacted in 1970 as part of

the Organized Crime Control Act. The

statute is being used in the successful

prosecution of numerous associations,

fully illegitimate and ostensibly

legitimate, which are engaging in

systemic criminal activity.’ Although

private parties did not begin to bring

Civil RICO suits until about 1975, today

a considerable number of civil RICO

claims are also filed each year.

This Court has rejected efforts to

construe RICO narrowly in five civil

actions. Sedima S.P.R.L. v. Imrex Co.,

473 U.S. 479 (1985); Shearson/American

Express, Inc., v. McMahon, 482 U.S. 220

(1987); Agency Holding Corp. v. Malley,

Duff & Associates, 483 U.S. 143 (1989);

H.J. Inc. v. Northwestern Beil Telephone

Co., 492 U.S. 229 (1989); Tafflin v.

Levitt, 110 S. Ct. 792 (1990).? Here,

' Federal Government's Use of

RICO Statute and Other Efforts Against

Organized Crime, S. Rep. No. 101-407,

101st Cong., 2nd Sess. 31-36 (1990).

e This Court's decision in Holmes

v. Securitie ves -

112 S. Ct. 1311 (1992) is not to the

contrary. There, this Court neither

narrowed nor broadened RICO; it merely

applied traditional proximate cause

standards to the statute. See 112 S. Ct.

9

too, this court should reject

unjustifiable efforts to narrow the

statute.

This Court, moreover, specifically

rejected a narrow construction of the

requirement of a pattern of racketeering

activity in H.J. Inc. v. Northwestern

Be e mpany, 492 U.S. 229

(1989). Finding but a "broad outer

limit" on the concept of a pattern, the

Court declined to contrive a special or

strict definition. "It is not the number

of predicates, but the relationship that

they bear to each other or to some

external organizing principle that

renders then ‘ordered’ or ‘arranged.'

"H.-J. Inc., 492 U.S. at 238. The Court

found that Congress intended a "flexible

approach" to RICO and held that a pattern

could be demonstrated by reference to "a

at 1321 ("nothing illiberal in our

construction").

10

range of different ordering principles

between predicates" as long as the

plaintiff shows that the acts "are

related, and ... amount to or pose a

threat of continued criminal activity."

HJ. Inc., 492 U.S. at 238, 239. After

alleging predicate acts of racketeering

activity in connection with the

enterprise, the plaintiff must negate the

possibility that the acts are random or

"sporadic". Beyond this, nothing more is

required. Sedima, 473 U.S. at 497.

The Sixth Circuit here, however,

held that Vild could not include in "his"

pattern of predicate acts those directed

not only at him, but also those directed

at other entities doing business with the

Club. Since Vild was not injured by the

acts directed at the other persons or

entities, he could not, moreover, use

those acts to establish continuity.

Accordingly, as for the scheme that did

aa

re

injure him, six to seven months was too

short a period to establish a closed

period of repeated activity and as the

predicate acts were neither inherently

threatening nor a regular way of doing

business, they did not establish a threat

of continuity. As such, Vild had not

alleged a pattern.

The Sixth Circuit attempted to

justify its narrow position by drawing a

distinction between civil and criminal

RICO cases based on the difference

between ostensibly legitimate and wholly

criminal enterprises. In the context of

a wholly criminal enterprise, said the

Court, the predicate acts are necessarily

interrelated as they involve the same

purpose and relationship to the

enterprise. Illegitimate acts committed

by an otherwise legitimate enterprise are

not so intrinsically related, and a °

plaintiff then faces a stricter standard

12

for establishing that the alleged

predicate acts comprise a pattern of

racketeering activity.

Similarly, the Fifth and District of

Columbia Circuits have held that a civil

RICO plaintiff may not allege predicate

acts that are not directed at him as part

of a pattern of racketeering activity.

Landry v. Airline Pilots Assn., Intl.,

901 F.2d 404, 426 (5th Cir. 1990); Yellow

Bus Lines, Inc. v. Drivers, Chauffeurs &

Helpers Local Union 639, 883 F.2d 132,

138 (D.C. Cir. 1991). Neither court,

however, offered any substantive reason

to justify its position.

In direct conflict with the Sixth,

Fifth and District of Columbia Circuits,

the Third Circuit in Banks v. Wolk, 918

F.2d 418 (3d Cir. 1990) upheld a claim

under 18 U.S.C. 1962(c) based on one

count of fraud against the plaintiff and

six other incidents of fraud committed

13

against third parties. "The reference to

‘similar victims' in H.J. Inc. cannot,

"the Court held," be read to require that

a plaintiff be injured by more than one

predicate act." Banks, 918 F.2d at 423.

The schemes viewed as a whole showed that

the defendants were “at least partially

in the business of defrauding those who

dealt with [the enterprise]," and the

alleged victims "were 'similar' in the

sense that they all were engaged in

business dealings with the [enterprise]}."

Banks, 918 F.2d at 423.

Similarly, the Eleventh Circuit in

Durham v. Business Management Associates,

847 F.2d 1505, 1512 (llth Cir. 1988), a

decision that involved two schemes to

defraud different investors, held that

"the acts...{in the two schemes were]

sufficiently similar" to constitute part

of a "pattern". —

Under the Third Circuit's view, a

14

requirement of injury by all of the acts

"conflate[s]} ... two separate injuries:

first, was there a pattern of

racketeering activity violating RICO, and

second, was the plaintiff injured by the

RICO violation." Town of Kearny v.

Hudson Meadows Urban Renewal Corp., 829

F.2d 1263, 1264 (3d Cir. 1987). A

plaintiff need not, therefore, allege a

pattern of injury to prove a pattern of

racketeering activity, but need Only show

a series of offenses related to a common

purpose of the enterprise. Otherwise

separate and distinct acts of fraud which

comprise "a related pattern of oe

corruption ne the benefit of the common

participants" is sufficient. Town of

Kearny, 829 F.2d at 1268.

The Third Circuit also correctly

teaches that both prongs of the pattern

test are to be broadly construed,

particularly in the context of a

15

diversified criminal enterprise. "(In

cases] which allege multiple fraudulent

schemes conducted through an otherwise

legitimate entity, the [pattern]

requirement should not insulate

defendants who merely vary the methods by

which they defraud their victims."

Banks, 918 F.2d at 425.

The Second Circuit, too,

consistently gives the pattern

requirement a "generous reading." United

States v. Indelicato, 865 F.2d 1370, 1373

(1989). The standards for relatedness

listed in H.J. Inc. are suggestions, and

a pattern can be established even if none

of these elements is present. Indelicato,

865 F.2d at 1382-3. If the plaintiff

suffers injury by reason of the pattern,

therefore, even though he is not injured

by every predicate act under the

teachings of Kerr-McGee Refining

Corporation v. M/T Triumph, 924 F.2d 467,

16

a

469-70 (2nd Cir. 1991). A rule that the

plaintiff cannot allege unrelated

incidents as part of a pattern of

racketeering activity would, the court

held, have the anomalous effect of

precluding civil RICO claims except in

those “rare instances" in which a pattern

Of predicate acts are directed against

the plaintiff. Kerr-McGee, 924 F.2d 467

at 470.

The Seventh Circuit in United States

Vv. Masters, 924 F.2d 1362 (1991) also

deemed the fact that the activities of an

enterprise are diverse grounds for

expanding, not narrowing the test for a

pattern of racketeering activity.

"Versatility, flexibility, and diversity

are not inconsistent with pattern ... [On

the contrary,] [a] criminal enterprise is

more, not less dangerous if it is

versatile, flexible, [and] diverse in its

objectives and capabilities." Masters,

17

924 F.2d at 1367. Under the better view,

therefore, it is immaterial whether the

enterprise was designed or merely used

for illegitimate purposes in order for

those acts to be alleged as part of the

pattern of racketeering activity. "The

acts of a criminal enterprise within the

scope of the enterprise's evolving

objectives form pattern enough to satisfy

the requirements of the RICO statute."

Masters, 924 F.2d at 1367. Accordingly,

separate acts of fraud can constitute a

pattern and “each victim can sue the

violator, adducing evidence of the

offense against the other victims to meet

the proof requirement [for] a pattern."

Marshall & Ilsley, 819 F.2d 806, 810 (7th

Cir. 1987).

This Court has stated that the

injury that confers standing is injury

flowing from the predicate acts, rather

than from the pattern of such acts.

18

Sedima, 473 U.S. at 497. Once the

plaintiff has shown injury by a predicate

act, the court should look to the acts'

relationship to the enterprise, not the

plaintiff, in determining whether a

pattern has been established. "[T])he

essence of the violation is the

commission of those acts in connection

with the conduct of an enterprise."

Sedima, 473 U.S. at 497.5 A requirement

of injury by every predicate act is,

therefore, contrary to the specific

standards set forth by this Court in H.J.

Inc., under which a plaintiff may allege

activities directed at a variety of

victims in order to prove a pattern.

: "If a plaintiff adequately

proves a violation of s. 1962 by showing

a pattern of racketeering activity in

furtherance of the purposes of an

enterprise, then the plaintiff should

recover for whatever damages are directly

caused by any part of the acts that added

up to the pattern." Marshall & Ilsley,

819 F.2d 806 at 810.

19

Such a requirement is also illogical

regarding RICO as a whole, which is

directed against acts which are "distinct

and separate in time." Marshall &

Ilsley, 819 F.2d at 810.

This Court also squarely rejected an

oiganized crime-type limitation on the

civil provisions of RICO in Sedima. 473

U.S. at 497. In addition, the Court

expressly denied separate treatment for

"admittedly criminal" and "ostensibly

legitimate" enterprises in H.J. Inc.,

rejecting a claim that, despite the

"capacious language" it used, Congress

designed the RICO pattern element with an

"organized crime nexus" in mind. H.J.

Inc., 492 U.S. at 236, 246. The Sixth

Circuit's effort to reintroduce the

distinction between illegitimate and

legitimate organizations is, therefore,

but another unjustified effort to limit

RICO to organized crime type activity.

20

As such, it ought to be rejected.

The Sixth Circuit's decision here is

also in direct conflict with the text of

RICO. "The language of the statute [is]

the most reliable evidence of [Congress']

intent," and RICO states on its face that

it is to be ""liberally construed to

effectuate its remedial purposes. '"*

Turkette, 452 U.S. at 593; 84 Stat. 904

(1970). The breadth of the pattern

requirement derives, therefore, from the

statute's aim to encompass a wide range

of criminal activities.

"'(T)j]he fact that RICO has been

applied in situations not expressly

anticipated by Congress does not

demonstrate ambiguity. It demonstrates

. "In determining the scope of a

statute we look first to its language.

If the statutory language is unambiguous,

in the absence of a clearly expressed

legislative intent to the contrary, that

language must ordinarily be regarded as

conclusive." Unite at v. Turkette,

452 U.S. 576, 580 (1981).

21

breadth,'" and breadth is the distinctive

characteristic of RICO, which is the only

substantive provision of Title 18

containing a liberal construction

directive. Sedima, 473 U.S. at 499;

Russello, 464 U.S. at 27.°?

Under the restrictive reading

proposed by the Sixth Circuit, however,

"trtwjhole areas of organized criminal

activity... [might well] be placed

beyond' the substantive reach of the

enactment .... [including many of] the

very crimes'" RICO was designed to

eradicate. Russello, 464 U.S. at 27.

To summarize, the Sixth Circuit's

decision is based on a misconstruction of

the standards set forth in H.J. Inc. and

imposes an additional limitation on the

RICO pattern concept that is in neither

’ "(Ij]f too close a relationship

among multiple schemes is required, cases

within RICO's intended ambit may be

improperly dismissed." Banks, at 422.

22

the text nor legislative history of the

statute. The Court's position is in

direct conflict with the positions of the

Second, Third, Seventh and Eleventh

Circuit Courts of Appeal; it also

expressly contradicts the liberal

. Construction that Congress and this Court

have mandated be given RICO.

This Court's approach to the

exercise of its Certiorari jurisdiction

is well-established. The resolution of

conflicts "is one of the traditional

function of this Court." Charles Dowd

Bos. Co. v. Courtney, 368 U.S. 502, 514

(1962). See Moskal v. United States, 111

S. Ct. 461, 464 (1990) ("to resolve a

divergence of opinion among the courts of

appeals."). "[{I]mportant and recurring"

issues ought to be settled, Glus vy.

Brooklyn Eastern District Terminal, 359

U.S. 231, 232 (1959), which affect a

"considerable number of suits,"

23

Massachusetts Trustees of Eastern Gas and

Fuel Associates v. United States, 377

U.S. 235, 237 (1964). Under these

standards, this Petition is, therefore,

eminently Certiorari-worthy.

CONCLUSION

For these reasons, a Writ of

Certiorari should be issued to the Sixth

Circuit.

ea age: submitted,

ra» THR A

G. Robert Sat otca

Notre Dame Law School

Notre Dame, Indiana 46556

(219) 239-5717 _ i

PES ave Tore

Gregory 1% tralka

Suite 400

The Standard Building

1370 Ontario Street

Cleveland, Ohio 4411

(216) 524-7499

Attorneys for Petitioner

24

FILING AND MAILING CERTIFICATE

I, Barbara E. Grove, certify that on this 11th

day of June, 1992, I filed 40 copies of a Petition

for a Writ of Certiorari with the Clerk’s Office

of the Supreme Court of the United States and

further certify that I mailed via first class mail,

postage prepaid, the required three (3) copies to

Mark I. Wachter and Paul I. Caimi of MAYS,

KARBERG & WACHTER, Suite 250, Corporate

Circle, 30100 Chagrin Boulevard, Cleveland, OH,

44124-5705.

)

The necessary filing and mailing was performed

in accordance with the instructions given me by

Jeary £ Orme

Barbara E. Grove

Lawyers Printing

Suite B-115

701 E. Franklin St.

Richmond, VA 23219

counsel in this case.

John VILD, Plaintiff-Appellant,

Cross~Appellee,

Dominic A. VISCONSI; Patricia

Sattenfield; Sea/Mountain

Resorts, Inc.; Cc. W.

Sattenfield; Gerald Plonski;

John Does; Defendants-

Appellees, Cross-Appellants.

Nos. 90-4048, 90-4088

United States Court of Appeals,

Sixth Circuit.

Affirmed in part and remanded in

part.

Ralph B. Guy, Jr., J., filed a

dissenting opinion and would grant

rehearing.

Gregory T. Stralka (argued and

briefed), Cleveland, Ohio, for John Vild.

Mark I. Wachter (argued and

App. 1

aes

briefed), Paul A. Caimi, Mays, Karberg &

Wachter, Cleveland, Ohio, for Dominic A.

Visconsi, Patricia Sattenfield,

Sea/Mountain Resorts, Inc., C. W.

Sattenfield, Gerald Plonski, John Does

(Nos. 1-10).

Before GUY, Circuit Judge, WELLFORD,

Senior Circuit Judge, and CHURCHILL*,

Senior District Judge.

WELLFORD, Senior Circuit Judge.

John Vild, the plaintiff, appeals

from the district court's denial of his

Fed. R. Civ. P. 59(e) motion to alter or

amend an earlier judgment dismissing his

RICO' complaint and Fed. R. Civ. P. 15 (a)

motion to amend his RICO complaint. The

defendants, various persons involved in a

series of real estate enterprises, cross-

appeal from the district court's denial

' Racketeer Influenced and

Corrupt Organizations Act, 18 U.S.C. §

1961, et. seq.

App. 2

of their Fed. R. Civ. P. 11 motion for

sanctions against the plaintiff. Put

Simply, Vild tries to convince us that he

has properly stated a RICO claim in his

complaint or proposed amended complaint,

while the defendants maintain that he

failed to state a claim, and that his

failure should bring about sanctions. We

find that the district court did not err

when it denied the plainciff's motions

under Rules 15(a) and 59(e), and

therefore, we AFFIRM that portion of the

decision. Although we do not rule on the

merits of the sanctions issue, we find it

appropriate to REMAND this issue for

Clarification as to the basis for the

district court's denial of sanctions.

I. BACKGROUND

Plaintiff, an Ohio citizen, sued

Dominic Visconsi of Ohio, C. W. and

Patricia Sattenfield of Florida, Gerald

Plonski of Ohio, and ten other unnamed

App. 3

iheneeeeeeenemeeereeneneee neil

individuals and several business

entities, for alleged violations of RICO,

common law fraud, intentional ©

interference with business relationships,

conversion, negligence and breach of

contract. Vild's allegations arose from

a failed scheme im which he was to market

interests in the Longboat Bay Club

(Club), a real estate resort venture.

In addition to the original

complaint, the plaintiff filed, or

attempted to file, three amended

complaints, the details of which are

necessary for a complete understanding of

the controversy before us. The plaintiff

alleged throughout subject matter

jurisdiction under RICO and under 28

U.S.C. § 1332 (diversity of citizenship).

The original complaint alleges that

in late Jenuary, 1989, defendant c. W.

Sattenfield, on behalf of the other named

defendants, Dominic Visconsi, Patricia

App. 4

Sattenfield, and Gerald Plonski,

contacted the plaintiff by telephone to

induce him to sign a marketing agreement

to sell real estate interests in the

Club. Vild contends that the defendants

made material misrepresentations

regarding the marketing agreement. He

maintains in particular that the

defendants represented that there was

sufficient start-up capital to begin

business operations. Allegedly due to

these material misrepresentations, Vild

complained that he entered into an

exclusive marketing agreement and shortly

thereafter signed a note for money

advanced to him by defendants to initiate

the venture. Vild asserts that the

defendants encouraged him to establish

the business so that they could later

force him out and acquire the enterprise

for themselves.

From the outset, the arrangement was

App. 5

0

a failure. Once the plaintiff entered

into the business relationship, C. WwW.

Sattenfield telephoned him seeking to

change the terms of the marketing

agreement and proposing that the

defendants receive "kickbacks" on any

interests sold to the public. According

to Vild, C. W. Sattenfield made threats

to him, his family and to ruin his

reputation. When Vild did not comply

with the proposed changes, the defendants

allegedly refused to provide additional

inventory and start-up money .¢ The

original complaint also alleges that the

defendants refused to compensate Vild for

sales made by him under the marketing

agreement. Plaintiff maintains that

these threats, phone calls, and material

e Defendants provided $20,000 to

the plaintiff, but they did not supply

additional funds and inventory allegedly

promised under an oral agreement. No

reference was made to this in the written

agreement.

App. 6

sciatica

misrepresentations all constitute

predicate acts under RICO because they

are violations of mail fraud, wire fraud

and extortion statutes as well as the

Hobbs Act.

The original complaint also alleges

other predicate acts which are separate

and distinct from the previously

described scheme to defraud and extort

the plaintiff. Vild contends that the

defendants used, and continue to use,

telephones and facsimile machines to

solicit customers in Ohio to purchase

interests in the Club. According to

Vild, these solicitations constitute wire

fraud because the defendants'

salespersons are not licensed and

registered to do business in Ohio. The

plaintiff also alleges that the

defendants engaged in, and continue to

engage in, mail fraud because they used,

and continue to use, letters which

App. 7

—————e

technically violate several laws and

regulations governing direct mail

solicitation in Ohio. For instance, the

letters do not maintain, as required by

law, the odds of winning prizes. They

also improperly use the word

"sweepstake." vVild further complains

that the defendants sent Similar letters

to potential consumers in Indiana in

Violation of that state's laws.

Plaintiff maintains also that the

defendants violated Florida law by

fraudulently using real estate contracts

which did not contain a mandatory ten-day

cancellation provision.

Vild amended his Original complaint

by introducing several additional

defendants, Gerald Plonski and ten

unnamed individuals, who allegedly also

violated the RICO statute. The plaintiff

contends that Plonski, his sales agent,

refused to pay him money earned from Club

App. 8

Sales because of "kickbacks" to the other

defendants. The ten unnamed defendants

were alleged officers, directors and

shareholders of Sea/Mountain Resorts Inc.

(Sea Mountain) established by defendants

to market real estate interests in Ohio.

These added individual defendants also

allegedly engaged in the same type of

racketeering, wire and mail fraud

activities as the other defendants.

The plaintiff also attempted to file

a second amended complaint, but the court

denied his motion to amend. The second

amended complaint alleges several new

predicate acts and introduces a ho. = of

additional defendants. The new predicate

acts center on the allegedly illegal

status of another business entity

controlled by the defendants. Vild

maintains that Longboat Venture Ltd.

(Longboat), the owner of the Club, was

prohibited from doing business in Ohio

App. 9

and Florida because its general partner,

DVB, Inc. (DVB), failed to maintain its

legal corporate status and also failed

properly to register to do business. The

plaintiff maintains that any

solicitations by Longboat accordingly

constitute wire and mail fraud.

The second amended complaint also

alleges that several new RICO defendants

were a part of the illegal enterprise.

Vild contends that the defendants' law

firm and three lawyers representing

defendants fraudulently represented DVB's

corporate status and its capacity to do

business. One defendant lawyer allegedly

sent a letter to the state of Ohio which

indicated incorrectly that DVB had good

Standing in Ohio. Another defendant

lawyer allegedly made a similar

misrepresentation to the Court of Common

Pleas of Cuyahoga County stating that

Longboat was a valid limited partnership.

App. 10

Plaintiff's contention is that Longboat

was not a valid limited partnership

because of DVB's status. These

misrepresentations were allegedly

intentionally made with knowledge that

they were false.

Vild moved to file still another

amended complaint, but this motion was

denied. The third amended complaint adds

very little to the earlier versions.

Defendants further committed mail fraud

by misrepresenting DVB's status to the

State of Florida in order to validate its

certificate to do business. The

plaintiff also alleges that the

defendants committed another RICO

predicate act by misrepresenting DVB's

status to the State of Ohio during the

course of settlement negotiations.

hae DISTRICT COURT ACTIONS

After Vild filed his first amended

App. 11

irene

complaint, the defendants moved to

dismiss the action under Fed. R. Civ. P.

12(b) (6) for failure to state a claim and

under Fed. R. Civ. P. 9(b) for failure to

allege fraud with particularity. While

these motions were pending, the plaintiff

requested leave to file his second

amended complaint which the court denied.

The next day, the district court

granted defendants' motion to dismiss for

failure to state a RICO claim because

Vild did not allege "a pattern of

racketeering activity," as defined by

H.J. Inc. v. Northwestern Bell] Telephone

Co., 492 U.S. 229, 109 S. Ct. 2893, 106

L. Ed. 2d 195 (1989). The Supreme Court

in H.J., Inc. held that a plaintiff must

allege facts which prove that the

predicate acts are related and pose a

genuine threat of continuity. Id. 109 s.

ct. at 2900. Applying these requirements

to Vild's case, the district court

App. 12

concluded that "there exist[{ed] no set of

facts to show ‘'continuity.'" The

district court stated, "[a]t best, the

predicate acts alleged occurred over

[sic] period of only a few months, and

therefore, cannot be considered to have

extended over a 'substantial' period of

time." Continuity was also lacking

because the plaintiff failed to show that

the defendants “"threat[(ened]...long term

racketeering activity" or that the

predicate acts constituted a "regular way

of doing business." In sum, the district

court found that "the acts alleged

amount[ed] at best to a breach of

contract with a single customer."

Without a valid RICO claim, the

district court concluded that there was

no subject matter jurisdiction. The

plaintiff could not invoke 28 U.S.C. §

1332 diversity jurisdiction because he

did not show that "each defendant [was] a

App. 13

—.-

citizen of a different State from each

plaintiff."

Following the dismissal, Vild filed

a motion to alter or amend the judgment

under Fed.R.Civ.P. 59(e) and also to

amend the complaint once again under

Fed.R.Civ.P. 15(a). By a marginal entry,

the district judge denied the plaintiff's

motion: "After careful consideration, of

the pleadings, the Court finds that the

acts alleged amount to breach of

contract. Accordingly, the Motion is

denied." The plaintiff now appeals from

the district court's action.

Prior to the district court's denial

of the plaintiff's motion to alter or

amend, the defendants filed a motion for

Fed.R.Civ.P. 11 sanctions on the ground

that the plaintiff's counsel failed to

make an adequate prefiling inquiry into

RICO requirements. By use of another

marginal entry, the district court denied

App. 14

the defendants' motion. The defendants

accordingly cross-appeal.

III. STANDARD OF REVIEW

There appears to be some confusion

regarding the proper standard of review

of the district court's decision.

Instead of appealing from the district

court's original dismissal of the

complaint under Fed.R.Civ.P. 12(b) (6),

the plaintiff appeals from the later

order which denied his motion to alter or

amend the judgment pursuant to

Fed.R.Civ.P. 59(e) and to amend the

complaint for a third time under

Fed.R.Civ.P. 15(a). Defendants maintain

that a limited standard of review should

apply, suggesting that the scope of our

review is confined to whether the

district court committed a "clear error

of law." On the other hand, the

plaintiff contends that we should apply

App. 15

the more liberal "abuse of discretion"

Standard because he also appeals from the

district court's denial of leave to amend

the complaint. See Janikowski v. Bendix

Corp., 823 F.2d 945, 951 (6th Cir. 1987).

[1] We typically review a district

court's denial of a party's motion to

amend under the abuse of discretion

Standard. See id. When, however, the

district court has based its decision on

"a legal conclusion that the amended

pleading would not withstand a motion to

dismiss," there is authority that we

review such a decision de novo. Martin

v. Associated Truck Lines, Inc., 801 F.2d

246, 248 (6th Cir. 1986); see also Dana

Corp. v. Blue Cross & Blue Shield, 900

F.2d 882, 887 (6th Cir. 1990). In this

case, following Martin's mandate, we will

review the district court's RICO decision

de novo to determine whether the district

court abused its discretion because the

App. 16

decision was based on the legal

conclusion that the third amended

complaint did not satisfy RICO's

requirements.

[2] If the third amended complaint

is not sufficient to establish a RICO

claim and rectify what the district court

deemed to be jurisdictional deficiencies,

then there was no error in denying the

motion to amend. See Martin, 801 F.2d at

248. If, on the other hand, the third

amended complaint does sufficiently state

a RICO claim, then we must examine with

great care the denial of leave to amend.

The essence of Vild's appeal is his

assertion that the third amended

complaint sufficiently stated a RICO

claim.

IV. RICO'S PATTERN

REQUIREMENTS

A. RELATED ACTIVITIES

App. 17

The district court held that the

plaintiff failed to satisfy RICO's

“pattern of racketeering" requirement.

See Sedima, S.P.R.L. v. Imrex Co., ae. .

473 U.S. 479, 496 n. 14, 105 S.ct. sars,

32€5 n.14, 87 L.Ed.2d 346 (1985). A

“pattern of racketeering activity,"

requires that a plaintiff must prove "at

least two acts of racketeering activity,

one of which occurred after [October 15,

1970} and the last of which occurred

within ten years...after the commission

of a prior act of racketeering activity."

a8 U.8.€. § 1961(5). The Supreme Court

has determined that there is more to the

pattern requirement than this statutory

definition. In addition to proving the

prerequisite of two predicate acts, a

plaintiff must show both a "relationship

between the predicates" and the "threat

of continuing activity." H.J. Inc., 109

S.Ct. at 2900. "It is this factor of

App. 18

continuity plus relationship which

combines to produce a pattern." Id.

Continuity and relationship constitute

two analytically distinct prongs of the

pattern requirement. Id.

The district court determined that

the plaintiff failed to satisfy the

continuity prong of the pattern

requirement. Although we are prone to

agree with the district court that the

plaintiff has not alleged a RICO pattern,

we reach this conclusion by using a

slightly different analysis. The

district court did not determine whether

the plaintiff fulfilled the relationship

prong of the test. We find it necessary

to examine the relatedness issue first

before arriving at the continuity prong.

The plaintiff may satisfy the

relationship requirement if the predicate

acts alleged "have the same or similar

purposes, results, participants, victims,

App. 19

or methods of commission, or otherwise

are interrelated by distinguishing

characteristics and are not isolated

events." Id. at 2901. This "test is not

a cumbersome one for a RICO plaintiff,"

but it sets forth a requirement for a

RICO cause of action nevertheless.

Feinstein v. Resolution Trust Corp., 942

F.2d 34 (1st Cir. 1991).

(3] Here, Vild alleges two types of

predicate acts to satisfy RICO's pattern

requirement. The first type of conduct

involves acts directed at the plaintiff

by the defendants. Vild is the alleged

victim of fraudulent and unlawful acts

which include allegations of mail and

wire fraud designed to induce him to

enter into the marketing agreement plus

allegations of extortion, threats and

fraud in the administration of the

marketing agreement. These events

occurred over the course of a few months.

App. 20

\iiiineaeae

The second type of conduct alleged in the

proposed amended complaint involves

improprieties by defendants directed at

others including ultimate purchasers of

real estate interests, the states of

Florida, Ohio and Indiana, and an Ohio

court. These allegations focus on wire

and mail fraud resulting from technical

violations of laws regulating direct mail

solicitation and marketing,

misrepresentations about the status of

one of the defendant business entities,

and the use of illegal real est ate

contracts in Florida. The plaintiff

maintains that all of these activities,

whether directly involving him or others,

are related for the purpose of the

pattern requirement. We do not agree.

Even if the predicates within each of the

two types of conduct may be somehow

interrelated, the two types of alleged

conduct are not related within the

App. 21

Le Oe

meaning of RICO.

Applying the H.J., Inc. relationship

test, we find that the two types of

conduct have distinct and dissimilar

"purposes, results, participants,

victims, or methods of commission."

H.J., Inc., 109 S.Ct. at 2901. According

to the plaintiff's third amended

complaint, the defendants' conduct

directed toward him had two purposes--to

induce him to sign the marketing

agreement and then to force him out of

business. The other alleged conduct was

directed at ultimate purchasers of the

real estate interests. This conduct,

violations of laws governing direct mail

solicitation and the use of certain

illegal contracts in Florida, has, in our

view, separate and unrelated purposes.

In the case of the direct mail

solicitations, the defendants' purpose

was to sell real estate interests to

App. 22

purchasers without the use of middlemen

such as the plaintiff and to gain a

marketing advantage with persons and

entities beside plaintiff. None of this

conduct had a similar or related purpose

of inducing the plaintiff to make a

contract with defendants or forcing the

plaintiff out of business.

The two types of conduct also had

disparate results. The first line of

activities resulted in the plaintiff's

association with the defendants in a

marketing agreement and the eventual

demise of the business venture. The

second line of conduct was directed

toward ultimate purchasers and resulted

in unspecified individuals attending

sales meetings and perhaps acquiring real

estate interests in the Club, Longboat,

or some other venture of defendants.

That the two types of conduct were

directed at different victims indicates

App. 23

another critical distinction which

suggests to us that the alleged illegal

acts were unrelated and dissimilar. The

plaintiff was the only victim of the

threats, extortion and fraud perpetrated

with regard to the failed marketing

agreement. He alleges no activity

directed against anyone in his position.

In contrast, ultimate purchasers and the

states of Ohio, Florida and Indiana were

the alleged victims of the illegal direct

mail solicitations and the invalid real

estate contracts. The plaintiff was

never an ultimate purchaser of real

estate interests, and never sought to be

a customer or owner of the Club or

Longboat. Plaintiff does not come to the

court as an innocent purchaser of Florida

swampland who was hoodwinked by the fast-

talking defendants. He cannot complain

about harm to these other persons or any

state agency.* The plaintiff alleges

that the defendants denied him the

benefits of a marketing agreement which

would, in actuality, have put the

plaintiff in the same position as the

defendants, vis-a-vis third party

purchasers, if the agreement had not been

breached. Vild would have been an agent

of defendant sellers. The plaintiff sues

the defendants because he could not sell

real estate interests, as he planned and

contracted to do, to ultimate purchasers,

the alleged victims of the conduct which

the plaintiff now cites as related

predicate acts under RICO. We do not

hold that a civil RICO plaintiff must

necessarily be directly harmed by all-.the

alleged predicate acts, because harm from

one enumerated violation may, in certain

. The plaintiff's contentions

present something akin to a standing

problem, though we decline to use that

analysis in this case.

App. 25

Situations, be sufficiently: connected.

Our conclusion merely reflects that this

plaintiff, under the circumstances of

this case, may not use unrelated

predicate acts that allegedly may have

harmed ultimate purchasers or other third

parties not similarly situated to the

plaintiff. When Vild complains that he

was not allowed to reap the benefits of

the injury-causing enterprise, of which

he would have been a part, he has failed

the relationship test.

(4, 5) Plaintiff's third amended

complaint and its predecessors also fail

to plead fraud with sufficient

particularity under Fed.R.Civ.P. 9(b).

To satisfy the requirements of this rule,

the plaintiff must allege specifically

times, places, contents and victims of

the underlying fraud. See New England

Data Servs., Inc. v. Becher, 829 F.2d

286, 292 (lst Cir. 1987). Though he has

App. 26

satisfied the pleading requirements with

regard to the conduct directed at hin,

plaintiff has not sufficiently pled other

fraudulent conduct (improper direct

mailings and illegal land contracts). He

has not, for example, pled that

defendants had no intention of carrying

out sales of land interests to other

persons.

[6] Our conclusion that the two

lines of conduct were unrelated is also

bolstered by the different "methods of

commission" used by the defendants. The

allegations regarding the marketing

scheme with Vild involved extortion,

threats, wire and mail fraud. The other

alleged conduct included only alleged

mail and wire fraud in the form of

illegal telephone, fax and mail

communications under consumer protection

laws and misrepresentations concerning

DVB's corporate status. The claimed

App. 27

violations are technical in nature and

would not necessarily preclude purchasers

toon enforcing contract rights. A mere

allegation that the defendants used wire

and mail fraud in two otherwise

dissimilar schemes does not, under the

circumstances, satisfy the relationship

prong of the pattern test. We agree that

multiple wire and mail fraud allegations

"are perhaps unique among the various

sorts of 'pattern of racketeering

activity.'" U.S. Textiles, Inc. v.

Anheuser-Busch Co., 911 F.2d 1261, 1268

(7th Cir. 1990) (citation omitted). The

"number of [mail and wire fraud] offenses

is only tangentially related to the

underlying fraud, and can be a matter of

happenstance" in some instances. Ashland

Oil Inc. v. Arnett, 875 F.2d 1271, 1278

(7th Cir. 1989) (discussing wire and mail

frauca in connection to the continuity

prong of the pattern requirement). We

App. 28

believe this description of "tangentially

related" offenses applies in this case.

Though the direct mail solicitations may

have been part of a concerted plan, we

find that the wire and mail fraud

offenses perpetrated against the

plaintiff during the negotiation and

administration of the marketing agreement

were, at best, "happenstance," and

therefore, unrelated to the other alleged

conduct committed against ultimate

consumers.

That some of the same participants

engaged in both lines of conduct does not

alter our conclusion that the predicate

acts in the two schemes were unrelated.

See Feinstein, 942 F.2d at 45.

We draw support for our analysis

from cases in which other courts have put

teeth into the relationship prong of

RICO's pattern requirement. See

Feinstein, 942 F.2d at 44-45; Hartz v.

App. 29

Friedman, 919 F.2d 469, 474 (7th Cir.

1990) (concluding that the plaintiff did

not satisfy the relationship prong of the

pattern requirement even though the same

victims were involved in both alleged

schemes). In Feinstein, the plaintiff

alleged that the defendants engaged in

two separate real estate schemes, one in

New York in 1986 and another in Texas in

1988. As predicate acts, the plaintiff

alleged that the defendants perpetrated a

series of wire fraud offenses. Of the

various defendants, only two, Gleason and

Foster, were involved in both schemes.

The court found:

We recognize that, as pleaded,

the 1986 and 1988 episodes each

featured serial transactions that

had some common reference points,

most notably the victim's identities

App. 30

and the Gleason/Foster axis.‘

Moreover, the purpose of the

underlying transactions were at

least similar. But notwithstanding

these facts, plaintiffs' RICO claim

founders on the bald assertion that

these two episodes, nearly two years

apart in time, hundreds of miles

apart in space and involving two

largely distinct groups of

participants, were somehow pieces of

a unitary scheme. We fully agree

with the court below that the facts

as alleged...did not implicate any

of the other defendants in the same

way.

° It should be noted that the

court indicated that the allegations

against Gleason and Foster were only

arguably sufficient to meet the

relationship portion of the test,

Feinstein, 942 F.2d at 45. The court did

not have to address this issue because

Gleason and Foster did not move to

dismiss the complaint.

App. 31

Id. at 44-45. As in Feinstein, plaintiff

has failed to allege facts sufficient to

draw the necessary nexus between the two

types of conduct perpetrated by the

defendants, and Vild constructs a weaker

nexus than the plaintiff in Feinstein.

We are aware that some cases hold

that the relationship test is satisfied

by conduct which seems to us to be

disconnected or dissimilar. See e.g.,

Banks v. Wolk, 918 F.2d 428 (3rd Cir.

1990). In Banks, applying a very liberal

version of this test, the court

determined that the seven episodes were

sufficiently related because, among other

things, several of the allegations

involved breaches of fiduciary duty and

attempts to drive down the price of real

estate. Id. at 425. We construe the

relationship prong more narrowly than the

Third Circuit did in Banks.

(7] Three other cases do not

App. 32

conflict with our decision, in our view:

United States v. Busacca, 936 F.2d 232

(6th Cir.), cert. denied, --U.S.--, 112

S.Ct .595 (1991); United States v.

Eufrasio, 935 F.2d 553 (3rd Cir.), cert.

denied, --U.S.--, 112 S.Ct. 340, 116

L.Ed.2d 280 (1991); United States v.

Kaplan, 886 F.2d 536 (2d Cir. 1989),

cert. denied, 493 U.S. 1076, 110 S.Ct.

1127, 107 L.Ed.2d 1033 (1990). In

Eufrasio, a criminal proceeding, the

court held "that separately performed,

functionally diverse and directly

unrelated predicate acts and offenses

will form a pattern under RICO, as long

as they all have been undertaken in

furtherance of one or another varied

purposes of a common organized crime

enterprise." Eufrasio, 935 F.2d at 566.

Eufrasio dealt with an organized crime

enterprise whose sole reason for

existence was to make money by committing

App. 33

illicit predicate acts sometimes

involving violence. In a criminal

prosecution context, predicate acts

committed by organized crime families are

necessarily related because they have the

Same purpose and

enterprise. Id.

not hold true in

relationship to the

at 565. The same does

Civil cases in which

businesses may have multiple legitimate

purposes and the

predicate acts are not

related to the enterprise in the same

way. Kaplan and

Busacca which are

involved violent

analysis because

United States to

acts, did not alter our

they merely allowed the

Satisfy the continuity

requirement by referencing arguably

related external

facts beyond the

predicate offenses charged in the context

of criminal proceedings.

B. CONTINUITY

We do not end our inquiry with the

App. 34

conclusion that the two lines of alleged

conduct in this case are not related to

one another for civil RICO purposes. We

proceed to the second prong of RICO's

pattern requirement to determine whether

the plaintiff has alleged facts which

demonstrate a "threat of continuing

activity." HJ. Inc., 109 S.Ct. at 2900.

Since the two types of conduct we have

described are not related, the plaintiff

must prove that either or both of the

schemes satisfies the continuity prong on

its own, without reference to predicates

in the other scheme.

[8] Continuity "is both a closed

and open-ended concept, referring either

to a closed period of repeated conduct,

or to past conduct that by its nature

projects into the future with a threat of

repetition." Id. at 2902. The plaintiff

may prove continuity by showing a series

of past related predicates occurring over

App. 35

an extended period of time. A few months

period usually is not sufficient. A

second means of establishing continuity

is to show that the predicates, by their

nature, “involve a distinct threat of

long-term racketeering activity." Id.

Though the Court was not able to craft a

bright-line test to define further this

type of continuity, it provided the

often-quoted example of a hoodlum who

extorts money from a number of shop

Owners and threatens to return each month

to collect protection money. Id. A

third way to prove continuity in this

case is to allege "predicates (that] are

a regular way of conducting defendant's

Ongoing legitimate business...or of

conducting or participating in an ongceing

and legitimate 'RICO enterprise.'" Id,

[9] As to defendants! conduct

directed toward the plaintiff himself, we

find no error in the district court's

App. 36

decision holding that the plaintiff did

not prove continuity because the improper

activities lasted only a short time. The

third amended complaint alleges that the

first fraudulent conduct in the marketing

agreement scheme occurred in January,

1989, and the last acts took place in the

summer of the same year. If the

allegations are to be taken as true, at

nent, the defendants threatened and

defrauded the plaintiff over the course

of about six or seven months. This

limited period of time is not adequate to

satisfy the closed-ended formulation of

continuity. Cf. Dana Corp., 900 F.2d at

887 (continuity requirement satisfied

when fraud occurred over the course of

seventeen years). Similarly, the

plaintiff cannot fulfill the open-ended

formulations of the continuity test

because he has not alleged facts which,

by their nature, demonstrate only a

App. 37

threat of indefinite improper activity,

nor has he alleged facts which show that

the conduct directed toward him is a

normal way of doing business for the

defendants. There is no allegation that

defendants continued to threaten and

defraud him or threatened and defrauded

others in similar marketing agreements.

As the district court concluded, "the

acts alleged amount at best to a breach

of contract with a single customer."

[10] The plaintiff's allegations

regarding the second type of conduct--

acts directed toward others including

ultimate purchasers and the states of

Florida, Ohio and Indiana--also fail to

satisfy the continuity prong of the

pattern test. These activities simply

did not harm, nor threaten to harm, the

plaintiff. We conclude that even if

these activities by themselves were

deemed to satisfy the continuity prong,

App. 38

the plaintiff would still fail to state a

RICO pattern. Plaintiff may not complain

about conduct which did not harm him

under the guise of RICO continuity,

unless those improper acts directed

toward others are functionally related to

the acts which harmed the plaintiff. A

pattern of racketeering activity

accordingly is not present in this case.”

[11] We are persuaded that only

conduct which is essentially related may

be used to establish continuity. See,

H.J. Inc., 109 S.Ct. at 2902. A civil

plaintiff may not use one type of conduct

(acts directed at him) to satisfy the

relationship test, and then invoke a

; We do not believe that

bolstering our analysis of the

relationship test by citation to the

continuity test violates the Supreme

Court's admonition that "[fJjor analytic

purposes these two constituents of RICO's

pattern requirement [relationship and

continuity] must be stated separately."

H.J., Ince, 109 S.Ct. at 2900.

App. 39

second type of conduct (unrelated acts

directed at others) to fulfill the

continuity test absent similar types of

conduct and victims who are essentially

in the same position. Only predicate

acts that are related to each other may

be used to satisfy both tests where

plaintiff complains essentially that

defendants' conduct deprived him of a

position as agent for defendants.

A pattern of conduct is an

"arrangement or order of things or

activity." Id. at 2900 (citation

omitted). To form a pattern, all

predicate actions must have a

relationship to one another. The conduct

cited by the plaintiff does not form a

"pattern" under the general description

of H.J. because the two types of

activities--the fraudulent acts committed

against the plaintiff in the context of

forming and operating the marketing

App. 40 '

agreement, and the alleged unrelated

fraudulent acts perpetrated against

others--do not have an internal

connection or arrangement; there is no

real nexus between then.

We conclude that the plaintiff has

failed to allege facts-in his third

amended complaint which would remedy the

problems in the previous complaints. We

conclude, for the reasons stated, that

the third anendedcomplaint fails to

present facts which would satisfy the

relationship and continuity prongs of

RICO's pattern of racketeering test.

V. DIVERSITY JURISDICTION

{i2z, 13] Plaintiff also maintains

that subject matter jurisdiction is

proper under 28 U.S.C. § 1332. We find

no error in the decision that complete

diversity as required by Qwen Equipment &

Erection Co. v. Kroger, 437 U.S. 365,

App. 41

373, 98 S.Ct. 2396, 2402, 57 L.Ed.2d 274

(1978), does not exist because the

plaintiff and at least two of the

defendants are citizens of Ohio. To

counter this fact, the plaintiff cites

Schuckman v. Rubenstein, 333 U.S. 875, 68

S. Ct. 905, 92 L.Ed. 1151 (1948), for the

proposition that the non-diverse parties,

not the complaint, should have been

dismissed. We will not entertain this

argument because the plaintiff admitted

at oral argument that he did not request

in the district court that the non-

diverse parties be dismissed. We will

not consider such arguments when they are

not raised below. See Maczko v. Joyce,

814 F.2d 308, 310 (6th Cir.), cert

denied, 484 U.S. 828, 108 S. Ct. 98, 98

L.Ed.2d 58 (1987).We find no merit to the

plaintiff's additional claim that subject

matter jurisdiction is proper under

United Mine Workers v. Gibbs, 383 U.S.

App. 42

715, 86 S.Ct. 1130, 16 L.Ed.2d 218

(1966). Pendent jurisdiction does not

exist in this case because, as previously

discussed, the federal RICO claim has

been properly dismissed under

Fed.R.Civ.P. 12(b)(6). See Aschinger v.

Columbus Ww Co., 934 F.2d 1402,

1412-13 (6th Cir. 1991); Gaff v. FDIC,

814 F.2d 311, 319 (6th Cir. 1987). The

new supplemental jurisdiction statute, 28

7.8.6. 8 1367 (a), which was intended to

codify pendent and ancillary

jurisdiction, does not apply to this case

because Vild filed his complaint prior to

December 10, 1990, the effective date of

the statute. See Miller v. Glanz, 948

F.2d 1562 (10th Cir. 1991).

VI. RULE 11 SANCTIONS

[14] The standard of review for all

aspects of a district court's Rule 11

determination is “abuse of discretion."

App. 43

Cooter & Gell v. Hartmarx.Corp., 496 U.S.

384, 110 S.Ct. 2447, 110 L.Ed.2d 359

(1990). The defendants argue that Rule

11 sanctions are mandatory when a breach

of the duty to make a proper prefiling

investigation has occurred. See Albright

v. Upjohn Co.,788 F.2d 1217, 1222 (6th

Cir. 1986). They reason that the

plaintiff's four amended complaints, none

of which successfully stated a cause of

action under RICO or established subject

matter jurisdiction, constituted a

violation of the duty to know the

applicable law. See Fleischhauer v.

Feltner, 879 F.2d 1290 (6th Cir. 1989),

cert. denied, 493 U.S. 1074, 110 S.Ct.

1122, 107 L.Ed.2d 1029 (1990). To

support their position, the defendants

cite Smith Lumber Co. v. Edidin, 845 F.2d

750 (7th cir. 1988), A case in which the

court of appeals imposed sanctions when

the plaintiff failed to allege facts to

App. 44

establish a RICO pattern. In the

alternative, the defendants argue that if

we will not impose sanctions, then we

should remand this issue to the district

court so that it can clarify the basis

for its decision to deny the defendants'

motions.

We do not express any opinion on the

merits of the district court's decision

to deny the defendants' motions because

we believe that a remand is appropriate

in this case so that the district judge

can specify the rationale for his

holding. See Szabo Food Serv., Inc. v.

Canteen Corp., 823 F.2d 1073, 1084 (7th

Cir. 1987), cert. dismissed, 485 U.S.

901, 108 S.Ct. 1101, 99 L.Ed.2d 229

(1988) (holding that a reviewing court

cannot tell whether the district court

abused its discretion absent articulated

reasons); Lieb v. Topstone Indus., Inc.,

788 F.2d 151, 158 (3d Cir. 1986) (holding

App. 45

that remand is appropriate when a

district court has failed to specify its

reasons for denying a Rule 11 motion).

The district court has not provided

a rationale to allow us to review whether

it has abused its discretion by denying

the defendants' motions. In this case,

the defendants filed two separate motions

for sanctions--one which was attached to

their brief in opposition to the

plaintiff's Rule 59(e) motion and a

second which was filed one and one-half

months later as an independent motion.

In a marginal entry, the district court

denied the defendants' motion because

"(defendants'] [a]ttorney has cited All

Hawaii Tours v. Polynesian Cultural

Center, 116 F.R.D..645 (D. Hawaii 1987)

in his Brief in Opposition to Plaintiff's

Moticn to Alter or Amend Judgment.

However, see 855 F.2d 860 (9th Cir.

11988): that decision was reversed on

App. 46

8/16/88." This annotation appears on the

second motion for sanctions, but that

motion does not rely on the All Hawaii

Tours decision. We cannot tell whether

the district court examined the motions

independently and/or whether there were .

adequate grounds for awarding sanctions

oased on the second motion apart from the

overruled case.

VII. CONCLUSION

The district court did not abuse its

discretion by denying the plaintiff leave

to amend once again. The district court

was not in error in concluding that none

of the complaints established a RICO

claim, and it did not err when it denied

the plaintiff's motion under Fed. R. Civ.

P. 59(e) to alter or amend its earlier

12(b) (6) judgment. We AFFIRM the

district court's decision on the RICO and

jurisdictional issues. With regard to

App. 47

the Rule 11 question, we REMAND the

decision to the district court so that it

can clarify the basis for its decision.

RALPH B. GUY, Jr., Circuit Judge,

dissenting.

The court concludes that the

continuity requirement is not met because

the defendants' allegedly fraudulent

marketing practices are not related to

the conduct involving Vild. Since I

believe the two types of alleged conduct

are sufficiently related to constitute a

pattern of racketeering activity, I

respectfully dissent.

The Supreme Court has held that

predicate acts are related if they have

“the same or similar purposes, results,

participants, victims, or methods of

commission, or otherwise are interrelated

by distinguishing characteristics and are

not isolated events." H.J., Inc. v,.

App. 48

Northwestern Bell Tel. Co., 492 U.S. 229,

240, 109 S.Ct. 2893, 2901, 106 L.Ed.2da

195 (1989) (emphasis added). The use of

the disjunctive indicates that the

relatedness requirement is met if the

predicate acts are the same or similar in

any of the enumerated ways.

The two types of predicate acts

alleged in Vild's complaint meet this

broad test of relatedness because the two

schemes have the same participants. This

fact distinguishes this case from

Feinstein v. Resolution Trust Corp., 942

F.2d 34 (lst Cir. 1991). In Feinstein,

the court held that the two predicate

schemes were unrelated as to most of the

defendants because only two of the

defendants participated in both schemes.

Id. at 45. However, the court stated

that the two schemes were "arguably

sufficient to show relatedness with .

regard to the actions of common

App. 49

participants...." Id.

Since both sets of Vild's

allegations involve the same

participants, I would find that his

complaint meets the relatedness

requirement. Since Vild alleges that the

defendants' have fraudulently marketed

the condominiums to investors for several

years, I would also find that the

continuity requirement is met. I would

therefore reverse the district court's

dismissal of Vild's RICO count.

App. 50