Anwar Alkhatib v. New York Motor Group, LLC, et al., Defendants.

Nos. CV-13-2337 (ARR), (E.D.N.Y. 2015)

MEMORANDUM & ORDER AND REPORT & RECOMMENDATION

STEVEN M. GOLD, Magistrate Judge.

INTRODUCTION

Plaintiffs in these six related cases allege, among other things, that they were defrauded when they purchased automobiles and obtained financing from defendants. Plaintiffs allege multiple causes of action, including violations of the Racketeer Influenced and Corrupt Organizations Act (“RICO”), the Truth in Lending Act (“TILA”), the Magnuson-Moss Warranty Act (“MMWA”), consumer protection laws of New York, and state common law.

Plaintiffs now move for leave to file Amended Complaints to bring the claims alleged in the related cases into conformity, to refine already asserted claims, and to address issues raised by defendants in pre-motion submissions. Docket Entry 71.[1] Defendants respond by crossmoving to dismiss the Proposed Amended Complaints pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6), in large part by arguing that the complaints fail to satisfy the pleading standard of Rule 9(b). Docket Entry 77, Docket Entry 60 in 13-cv-5643.[2] Specifically, the used car dealership defendants, New York Motor Group and Planet Motor Cars, Mamdoh Eltouby, who owns and operates them, and Nada Eltouby, who was at relevant times employed by them, seek dismissal of the RICO claims against them.[3] M&T Bank moves to dismiss the RICO, TILA, MMWA, and state law consumer protection claims asserted by plaintiffs against it. Plaintiffs have filed opposition to defendants’ cross-motions and a reply in support of their original motion. Docket Entry 80, (“Pls. Reply”). The dealership defendants have filed a reply on their motion, arguing that the RICO claims, as pleaded in the proposed Amended Complaints, are legally deficient, Docket Entry 85, (“NYMG Reply”), as has M&T Bank, Docket Entry 66 in 13-cv-5643, (“M&T Bank Reply”), challenging the sufficiency of the RICO, TILA, MMWA, and state law consumer protection claims made against it.

United States District Judge Ross has referred plaintiffs’ motion to amend to me for decision and defendants’ cross-motions to dismiss for report and recommendation. Docket Entry 65. I heard oral argument on November 25, 2014. Docket Entries 88-89. Plaintiffs then filed a supplemental letter with a revised proposed amended complaint attached. Docket Entry 92. M&T Bank filed a letter in response. Docket Entry 75 in 13-cv-5643.

FACTS

The facts set out below are drawn primarily from plaintiffs’ Proposed Amended Complaints and are deemed true for purposes of the pending motions. Facts drawn from the Proposed Amended Complaint (“PAC”) filed by Alkhatib explain the retail installment contract (“RIC”) scheme in detail. Because the overall alleged scheme is similarly described in the remaining complaints, the discussion of the pleadings filed by the other plaintiffs is more limited and focuses on facts specific to their respective dealings with defendants.[4]

The Parties

Defendant Mamdoh Eltouby owns and operates defendant New York Motor Group and either owns or has an ownership interest in defendant Planet Motor Cars and non-party Hillside Motors. These entities are dealerships that sell used cars and advertise cars for sale on various Internet sites. A: ¶ 34; T: ¶ 16. Nada Eltouby is Mamdoh Eltouby’s daughter and was employed at New York Motor Group and Planet Motor Cars at times relevant to plaintiffs’ claims. Nada Eltouby assisted with the sale of automobiles and arranging financing for vehicle purchases. A: ¶ 28. Julio Estrada was an employee of the dealerships whose primary responsibilities included arranging financing for customers buying cars from the dealerships. A: ¶ 30. M&T Bank, Capital One Auto Finance, Inc. (“Capital One”), and Santander Consumer USA, Inc. (“Santander”) are financial institutions that provided financing to plaintiffs pursuant to Retail Installment Contracts fraudulently prepared by the dealership defendants.

The Fraudulent Retail Installment Contract Scheme

The following facts are drawn from the PAC filed by plaintiff Alkhatib and generally resemble those alleged by the other plaintiffs. In December 2012, Anwar Alkhatib saw a 2008 Honda Odyssey mini-van advertised on cars.com for a purchase price of $14,995. A: ¶ 34. A few days later, Alkhatib went to New York Motor Group to inquire about purchasing the vehicle and saw the sale price advertised as $16,995 on the car’s window. A: ¶¶ 35-36. After some negotiation, Alkhatib agreed to purchase the car for $14,995, with $10,000 down and the remaining $4,995 financed. A: ¶¶ 37-38. A salesperson then agreed to lower the price to $13,995 and prepared a purchase invoice listing this amount as the sales price. A: ¶¶ 39-40. The salesperson asked Alkhatib to leave a deposit of $200 to keep the deal open and to return the next day to make the financing arrangements. A: ¶¶ 41-42. Although he originally refused to do so, the salesperson also provided Alkhatib with a photocopy of a portion of a service invoice that reflected the $200 deposit. A: ¶¶ 43-44.

When Alkhatib returned the next day, the salesperson told him he had to pay the remainder of the $10,000 down payment before he would be allowed to complete a loan application. A: ¶ 46. After giving the salesperson $9,800, Alkhatib waited approximately two hours before he was introduced to a man identified as “John Figueroa,” but who, plaintiffs contend, was in fact defendant Julio Estrada. A: ¶¶ 47-50. Even though Alkhatib had not yet signed a loan application, Figueroa/Estrada (referred to as “Figueroa” below) informed him that two banks had already declined his credit request. A: ¶¶ 51-52. Figueroa refused to provide Alkhatib with the rejection documents and assured him that the banks would send letters to him directly by mail. A: ¶ 53. Alkhatib never received any such letters. A: ¶ 54. Figueroa then reported that Alkhatib had bad credit, leaving him with two options for financing the vehicle, each of which would result in a drastic increase in the car’s cost: one option included a $4,500 processing fee, an annual percentage rate of 15%, and a prepayment penalty, while the other required a $1,750 processing fee, an annual percentage rate of 10%, a $2,700 insurance policy, and a $3,000 service contract. A: ¶ 55.

At this point, Alkhatib sought to get his deposit back and go elsewhere, but Figueroa told him that the financing process had begun and that Alkhatib could not cancel it or leave without incurring a penalty equal to 35% of the car’s cash price. A: ¶ 56-57. Figueroa also asserted that, if Alkhatib canceled the deal, the dealership would retain the $10,000 cash deposit and Alkhatib would be required to hire a collection company to get even a portion of it back. A: ¶ 58. Alkhatib then offered to pay the entire price for the car in cash. A: ¶ 59. Figueroa, though, insisted that was no longer possible and that, if Alkhatib wished to buy the vehicle and avoid the penalty, he would have to select one of the dealership’s financing options. A: ¶ 60.

Alkhatib reluctantly selected the second financing option and was told the $7,450 in additional charges were “security conditions” necessary to obtain the loan. A: ¶¶ 62-63. Figueroa prepared a retail installment contract and purchase agreement that stated the vehicle price was $21,457.50 and failed to itemize the additional processing, insurance and service contract charges. A: ¶ 64. The final retail installment contract indicated that the amount financed was $13,309.53 with a $4,034.67 finance charge and an annual percentage rate of 10.76% — amounting to $17,344 in financing and fees and a total cost exceeding $27,000 for a car that had been advertised for $14,995 and for which Alkhatib at one point offered to pay the full amount in cash. A: ¶¶ 66-68. Although Alkhatib had responded to an Internet ad for New York Motor Group and had traveled to a dealership by that name, the $3,000 service contract indicated that the selling dealership was Planet Motor Cars and listed the vehicle’s purchase price as $20,000. A: ¶¶ 76-77.

Figueroa represented to Alkhatib that the insurance policy for which Alkhatib was charged $2,700 would mature into a policy with complete automobile insurance coverage after six months. A: ¶ 72. However, the product was not in fact a replacement for car insurance, but a “Theft Deterrent Product Protection policy.” A: ¶ 70. Although Figueroa promised Alkhatib that an insurance card would be mailed to him, Alkhatib never received one. A: ¶¶ 73-74. Moreover, when Alkhatib contacted the provider of the Theft Deterrent policy in attempt to cancel it, he learned he could not do so because the providers of that plan had no record of him having a policy with them in the first place. A: ¶¶ 80-81. Alkhatib contacted both NYMG and Planet Motors Cars about cancelling the “insurance policy” and the service contract, but neither responded to his inquiries. A: ¶¶ 82-86.

New York Motor Group sent the retail installment contract and other information to Capital One via either fax or the Internet. A: ¶ 79. Capital One successfully became an assignee of Alkhatib’s loan and continued to send him billing statements and receive monthly payments, at least up to the time Alkhatib filed his complaint. A: ¶ 87.

The other plaintiffs had similar experiences with the dealership defendants. Some were exposed to additional tactics, including promises that the financing discussions were being recorded, G: ¶ 53; T: ¶ 28; pressure to sign the documents quickly, F: ¶ 68; G: ¶ 63; T: ¶ 31; and false assurances or avoidance during subsequent visits, T: ¶ 48; C: ¶¶ 86, 92; F: ¶¶ 72, 76, 82-83; G: ¶¶ 123-25.

On June 19, 2013, Shahadat Tuhin went to NYMG to purchase a vehicle he had seen advertised on the dealership’s website for $14,995. T: ¶ 16. When he arrived there, Estrada told Tuhin he would have to sign a sales contract before he could obtain financing, and that the car would be financed at 5.84% interest for six months and at 2.17% interest for the remaining 54 months of the loan if Tuhin made the first six payments on time. T: ¶¶ 18, 23. Estrada falsely explained that if Tuhin made these payments, he would pay $2,000 down and $9,529.86 in financing payments for a car advertised at $14,995 on the Internet. T: ¶ 27. When Tuhin questioned a sales contract showing $22,795.87 as the sales price, Estrada showed him a new contract reflecting the lower agreed upon price of $12,000. T: ¶¶ 29-30. Estrada rushed Tuhin to sign this document, obscured the areas surrounding the signature block, and refused to immediately provide Tuhin with a copy. T: ¶¶ 30-31. When Tuhin returned home, he saw that the document he signed was in fact the original sales contract with the higher sales price. T: ¶ 35. Tuhin had also unknowingly signed a retail installment contract for $26,209, which included $4,997.96 in finance charges, a $3,000 service contract, and other unrequested and previously undisclosed “add-ons.” T: ¶ 35. Moreover, the car itself was not merchantable in that it shook violently when driven. T: ¶ 53. Tuhin tried to return the vehicle to NYMG but was met with resistance from Nada Eltouby, Mamdoh Eltouby, and other NYMG employees. T: ¶¶ 59-65.

In December 2012, plaintiff Simon Gabrys went to NYMG in response to an Internet advertisement for a used car. G: ¶ 40. When he arrived, Gabrys agreed to pay $10,000 in a bank check and borrow $9,000 to purchase a vehicle. G: ¶ 48. Gabrys met with Estrada, who told Gabrys that he had poor credit and could only obtain a loan from M&T Bank at a rate of 5.7%. G: ¶ 54. Estrada represented, however, that the loan could be refinanced at a rate of 2.13% if Gabrys made the first eight loan payments on time. G: ¶ 55. Estrada also stated that this deal required purchasing a package of additional products, including a $3,995 service contract, but that Gabrys was entitled to a refund of $3,920 of that charge if Gabrys cancelled the service contract after six months. G: ¶¶ 57-59. Gabrys signed a retail installment contract listing a vehicle cash price of $30,895, a down payment of $10,000, and an unpaid balance of $20,895. G: ¶¶ 63-65. Gabrys was able to receive only $2,2246.36 after cancelling the service contract, and the loan was never refinanced at a lower rate as promised despite Gabrys’ payments and multiple attempts to have Estrada process his refinancing application. G: ¶¶ 77, 101-06.

In February 2013, plaintiff Boris Freire sought to buy a vehicle after seeing it advertised on NYMG’s website for $14,900.[5] F: ¶¶ 42-43. Freire met with a representative of the dealership who identified himself as John Dos Santos, but who plaintiffs contend was in fact defendant Estrada. F: ¶¶ 15-16, 49. Dos Santos presented Freire with two financing options after telling Freire that he had a poor credit rating. F: ¶ 51. Freire agreed to the second option, which Dos Santos represented would allow Freire to refinance his loan and reduce his monthly payments from $624.72 to $155.27 after four payments. F: ¶ 51. Freire, having agreed to the deal, made arrangements to return with a down payment of $7,500. F: ¶ 53. When Freire returned the next day with the down payment, he questioned the RIC presented to him because it listed a vehicle cash price of $30,199.96, showed a down payment of $10,500, and required $22,999.96 to be financed. F: ¶¶ 56, 58. The contract also stated that Freire was obligated to pay the higher payments over the entirety of the loan period and did not memorialize the promised opportunity to refinance after four payments. F: ¶ 57. Additionally, Dos Santos told Freire that the lender required Freire to purchase a package of products including insurance priced at $5,500 and a service contract costing $3,000. F: ¶¶ 59-60. Dos Santos made a number of fraudulent assurances to convince Freire to sign the contract. F: ¶¶ 61-64, 66-67. Four months later, Dos Santos convinced Freire to pay an additional $3,000 to receive the refinancing he had been promised earlier. F: ¶¶ 85, 87, 90. In this interaction, Dos Santos told Freire that if he did not pay the additional $3,000, he would be bound by the terms of the high interest loan for another 56 months. F: ¶ 88. After paying the $3,000, Freire signed a new RIC providing for a lower monthly payment, but the loan was never refinanced as promised. F: ¶ 90, 98-99.

In April 2013, plaintiff Zeng Hui Dong went to NYMG and inquired about a car she saw on the lot. D: ¶ 43. After Dong put down $7,000 in cash towards the purchase of the car she had selected, Estrada advised her she would have to purchase insurance and service contracts that would add more than $6,000 to the price of the car. D: ¶ 51. When Dong said she was not interested and wanted to leave, Estrada threatened that she would lose all but $2,000 of her deposit if she declined to proceed with the purchase and arrange for financing. D: ¶¶ 54-55. Although Dong proceeded to sign a RIC, it was never processed, and the lending bank, Capital One, never contacted her. D: ¶¶ 57, 60-62. On July 30, 2013, Dong returned to the dealership at Estrada’s request. D: ¶¶ 64-65. When she arrived, Estrada tried to present her with another RIC, and Dong responded by offering to pay off the balance due for her car in cash. D: ¶¶ 66-67. After some negotiations, Estrada accepted her cash and prepared a document crediting Dong for her two lump sum payments, indicating $0 financed, 0% interest charged, and a total down payment matching the car’s sale price. D: ¶¶ 68, 70-73. Despite this new arrangement, though, in December 2013, Dong received a certificate of title for the purchased vehicle in the mail that listed Santander Consumer USA as a lienholder. D: ¶¶ 81-82. Dong later learned that Santander had received a third RIC in her name dated August 2013, bearing a signature distinctly different from her own and indicating an unpaid balance of $18,041.23. D: ¶¶ 85, 88, 93. Dong returned to the dealership in February 2014 and showed a copy of the third RIC to Nada Eltouby. D: ¶ 105. Nada Eltouby denied knowing about the RIC and advised Dong that the dealership could not do anything to help her because Estrada no longer worked there. D: ¶ 105. On March 24, 2014, Santander repossessed Dong’s car for not making payments on the third RIC and returned the car to Dong only after this lawsuit was filed. D: ¶¶ 119, 130.

In January 2013, plaintiff Nasrin Chowdhury went to NYMG after seeing an Internet advertisement for a car for sale there. C: ¶ 41. A salesperson rejected her offer to pay for the car in cash, and Chowdhury ultimately agreed to pay $10,000 in cash and to finance $3,500 of the purchase price. C: ¶¶ 43, 44, 47. Estrada offered Chowdhury two financing options with the shorter term, lower interest option requiring a warranty or service contract on the vehicle. C: ¶¶ 61, 63-64. Chowdhury received a sales contract reflecting a sale price of $13,500 and understood that the total price of the vehicle would be $16,556.10 including interest and the service contract. C: ¶¶ 57, 67. However, when Chowdhury received the RIC, it stated a total price of $24,471.00 with $14,911.99 of that amount financed. C: ¶ 77. Estrada assured Chowdhury that a final lump sum payment on the seventh month would pay off the loan in full and that their original agreement was not altered by the RIC. C: ¶ 82. In August 2013, Chowdhury’s son gave Estrada the final lump sum payment and Estrada assured him, both verbally and in writing, that the debt on the car had now been fully paid. C: ¶¶ 89-90. However, the lender, M&T Bank, continued to bill Chowdhury and sent her a letter asserting that she was behind in her payments. C: ¶ 96. Chowdhury’s son spoke with Nada Eltouby in early October and explained to her that the loan had been paid, and Nada Eltouby assured him that the dealership would take care of everything. C: ¶¶ 101-03. Nada Eltouby spoke with Chowdhury’s son again in mid-October and told him that he should speak with the bank because there was nothing she or the dealership could do to assist him. C: ¶¶ 104-05. In early November 2013, Estrada called Chowdhury at her home and threatened to divulge her personal financial information to others and to call her at work in possible retaliation for her persistence. C: ¶ 116. After police intervention, Estrada had Nada Eltouby prepare a money order from the dealership in the amount of the August 2013 lump sum payment. C: ¶¶ 124-25. Around this time, Chowdhury also discovered that her signature had been forged on the service contract and that the contract contained other falsified information. C: ¶¶ 131, 133-34. Chowdhury was able to recover only 45% of the $2,314 she paid for the service contract despite Estrada’s earlier assurance that she would be eligible for a full refund. C: ¶¶ 139-40.

Chowdhury, Tuhin, and Gabrys, the only plaintiffs suing M&T Bank, allege that M&T Bank agreed to fund their loans despite knowing or recklessly disregarding that they had been fraudulently induced to agree to financing agreements. G: ¶ 20. In June 2013, Tuhin called M&T Bank immediately after NYMG electronically sent the assignment documents to M&T Bank, but before the bank had paid any funds to NYMG. T: ¶¶ 44-45. Although Tuhin told an M&T Bank representative he had been defrauded and wanted to cancel his loan, the M&T representative responded that the Bank could not cancel the transaction once the dealership submitted a RIC with his signature. T: ¶ 45. In October 2013, approximately ten months after their loans had been processed and issued, Gabrys and Chowdhury contacted M&T Bank as well. G: ¶ 126; C: ¶ 106. M&T Bank at first made assurances that it would investigate further, but then generally told each plaintiff that there was nothing the bank could do to cancel the loans. T: ¶ 46; G: ¶ 127; C: ¶¶ 107, 112-14. A bank representative suggested to Chowdhury, through her son, that she should retain an attorney, and another bank representative advised Tuhin that he could report any claim of fraud to the New York State Attorney General. C: ¶ 114; T: ¶ 45.

Plaintiffs allege that Nada Eltouby was a key participant who knowingly assisted the dealerships’ fraudulent scheme throughout the relevant period. At separate points, plaintiffs observed Nada Eltouby faxing documents to an apparently nonexistent person, G: ¶ 117, and creating a money order at Estrada’s request, C: ¶ 125. Nada Eltouby served as a manager with authority to act on behalf of the dealership. C: ¶ 122; T: ¶¶ 47, 61. For instance, she spoke with police officers responding to a protest held by fraud victims, C: ¶ 122; D: ¶ 107, and received a cash down payment made by one of the plaintiffs and signed a receipt for it, T: ¶ 18. Plaintiffs further allege that Nada Eltouby often spoke on behalf of the dealership to the plaintiffs and, at times, made assurances on NYMG’s behalf. C: ¶¶ 102-03; T: ¶ 19; F: ¶ 83.

Mamdoh Eltouby was present for various interactions between the dealerships and the plaintiffs and also authorized numerous actions by his subordinates. Eltouby hired Estrada to serve as a finance manager only weeks after Estrada had been indicted and arrested on multiple counts of theft, larceny, forgery, and fraud related to his actions as the finance manager of another dealership. T: ¶¶ 79, 82. Eltouby hired Estrada despite a public announcement from the Queens County District Attorney that Estrada had defrauded more than 23 consumers out of more than $115,000 with the promise that they could return to him to refinance their high interest loans after six months of timely payments. T: ¶ 80. Plaintiffs allege that Mamdoh Eltouby continues to operate the fraudulent scheme even after Estrada’s re-arrest in March 2014 and even without Estrada’s continued participation. T: ¶ 85.

DISCUSSION

1. Standards Governing Leave to Amend and Judgment on the Pleadings

Leave to amend a pleading “should [be] freely give[n] . . . when justice so requires.” Fed. R. Civ. P. 15(a); see also Foman v. Davis, 371 U.S. 178, 182 (1962) (“In the absence of any apparent or declared reason — such as undue delay, bad faith . . . undue prejudice to the opposing party . . . futility of the amendment, etc. — the leave sought should, as the rules require, be `freely given.'”). Amendments are generally favored because they “tend to facilitate a proper decision on the merits.” Sokolski v. Trans Union Corp., 178 F.R.D. 393, 396 (E.D.N.Y. 1998) (internal quotation marks and citations omitted). The party opposing an amendment to the pleadings has the burden to establish “that leave to amend would be prejudicial or futile.” Id.; see also Block v. First Blood Assoc., 988 F.2d 344, 350 (2d Cir. 1993) (“The rule in this Circuit has been to allow a party to amend its pleadings in the absence of a showing by the nonmovant of prejudice or bad faith.”); Harrison v. NBD Inc., 990 F. Supp. 179, 185 (E.D.N.Y. 1998). Thus, “[i]f the movant has at least colorable grounds for relief, justice . . . requires that the court grant leave to amend the complaint.” Sokolski, 178 F.R.D. at 396 (quoting Golden Trade, S.r.L. v. Jordache, 143 F.R.D. 504, 506 (S.D.N.Y. 1992)) (internal quotation marks and brackets omitted).

Whether a proposed amendment to a pleading would be futile is decided pursuant to the same standard that applies to a motion to dismiss. “An amendment is considered futile if the amended pleading fails to state a claim or would be subject to a successful motion to dismiss on some other basis.” Chan v. Reno, 916 F. Supp. 1289, 1302 (S.D.N.Y. 1996). “In deciding whether an amended complaint meets this threshold, the Court is required to accept the material facts alleged in the amended complaint as true and draw reasonable inferences in the plaintiffs’ favor.” Mendez v. U.S. Nonwovens Corp., 2 F. Supp. 3d 442, 451 (E.D.N.Y. 2014) (citing Ashcroft v. Iqbal, 556 U.S. 662, 678-79 (2009)). These principles apply as well when considering a motion to dismiss, whether under Rule 12(b)(6) or 12(c):

The standard for granting a Rule 12(c) motion for judgment on the pleadings is identical to that of a Rule 12(b)(6) motion for failure to state a claim. In both postures, the district court must accept all allegations in the complaint as true and draw all inferences in the non-moving party’s favor. The court will not dismiss the case unless it is satisfied that the complaint cannot state any set of facts that would entitle [the plaintiff] to relief.

Patel v. Contemporary Classics of Beverly Hills, 259 F.3d 123, 126 (2d Cir. 2011) (internal citations omitted).

To survive a motion to dismiss, “the plaintiff must provide the grounds upon which his claim rests through factual allegations sufficient to raise a right to relief above the speculative level.” ATSI Commc’ns, Inc. v. Shaar Fund, Ltd., 493 F.3d 87, 98 (2d Cir. 2007) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007)) (internal quotation marks omitted). In other words, “a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (internal quotation marks and citation omitted). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. While the court accepts all well-pleaded factual allegations as true, “[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Id. Dismissal is appropriate if the well-pleaded allegations in the complaint do not “nudge[] . . . claims across the line from conceivable to plausible.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007).

Fraud claims are subject to a heightened pleading standard that requires plaintiffs to “state with particularity the circumstances constituting fraud.” Fed. R. Civ. P. 9(b). “The complaint must adequately specify the statements it claims were false or misleading, give particulars as to the respect in which plaintiff contends the statements were fraudulent, state when and where the statements were made, and identify those responsible for the statements.” Lundy v. Catholic Health Sys. of Long Island Inc., 711 F.3d 106, 119 (2d Cir. 2013) (internal quotation marks and citation omitted). “To survive a motion to dismiss, a complaint alleging fraud must [also] `allege facts that give rise to a strong inference of fraudulent intent.'” Space Hunters, Inc. v. United States, 500 F. App’x 76, 78-79 (2d Cir. 2012) (citation omitted).

Because defendants who oppose leave to amend on futility grounds face the same standard as those who move for judgment on the pleadings under Rule 12, I address defendants’ motions to dismiss and their opposition to plaintiffs’ motion for leave to amend together.

1. Plaintiffs’ RICO Claims

RICO provides a civil remedy to persons injured in their business or property by a violation of the statute. 18 U.S.C. § 1964(c). Plaintiffs assert RICO and RICO conspiracy claims pursuant to 18 U.S.C. §§ 1961(c) and (d) against the various dealership and financial institution defendants. Alkhatib PAC Count 2; Tuhin PAC Counts 1-2; Freire PAC Counts 3-4; Gabrys PAC Counts 2-3; Dong PAC Counts 1-2; Chowdhury PAC Counts 1-2.

A plaintiff asserting a civil RICO claim must allege “(1) a violation of the RICO statute, 18 U.S.C. § 1962; (2) an injury to business or property; and (3) that the injury was caused by the violation of Section 1962.” Spool v. World Child Int’l Adoption Agency, 520 F.3d 178, 183 (2d Cir. 2008) (quoting DeFalco v. Bernas, 244 F.3d 286, 305 (2d Cir. 2001)). A defendant may be held liable for violating RICO if the defendant, through the commission of two or more acts constituting a pattern of racketeering activity, directly or indirectly participated in the affairs of an enterprise involved in interstate commerce. Hemi Group, LLC v. City of New York, 559 U.S. 1, 6 (2010); Allstate Ins. Co. v. Valley Phys. Med. & Rehab., P.C., 2009 WL 3245388, at *3 (E.D.N.Y. Sept. 30, 2009) (quoting United States v. Turkette, 452 U.S. 576, 583 (1981)). Defendants challenge the sufficiency of plaintiffs’ RICO allegations on a number of grounds, each of which is addressed below.[6]

RICO Enterprise

In their proposed amended complaints, each plaintiff brings a RICO claim against Mamdoh Eltouby, Nada Eltouby and Julio Estrada that alleges an association-in-fact enterprise “comprised of the auto dealerships owned, operated, overseen or otherwise controlled by Mr. Eltouby, or in which Mr. Eltouby is an officer. They include New York Motor Group, Planet Motor Cars, and Hillside Motors, LLC.” T: ¶ 127.[7] This alleged enterprise is referred to below as the “Dealership Enterprise.” In addition, plaintiffs Chowdhury, Gabrys, and Tuhin each assert a RICO claim against New York Motor Group and M&T Bank that alleges an association-in-fact enterprise comprised of these two named defendants. T: ¶ 96; G: ¶¶ 146-47 (including Planet Motor Cars in addition to NYMG and M&T Bank), C: ¶¶ 148-49 (including Planet Motor Cars in addition to NYMG and M&T Bank). This second alleged enterprise is referred to below as the “M&T Enterprise.”

A RICO 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). An “association-in-fact” enterprise must have “at least three structural features: a purpose, relationships among those associated with the enterprise, and longevity sufficient to permit these associates to pursue the enterprise’s purpose.” Boyle v. United States, 556 U.S. 938, 956 (2009); see also United States v. Turkette, 452 U.S. 576, 583 (1981) (describing an enterprise as “a group of persons associated together for a common purpose of engaging in a course of conduct”); Hemmerdinger Corp. v. Ruocco, 976 F. Supp. 2d 401, 413 (E.D.N.Y. 2013) (same). Courts in this district have recognized that “Boyle establishes a low threshold for pleading such an enterprise.” Delgado v. Ocwen Loan Servicing, LLC, 2014 WL 4773991, at *16 (E.D.N.Y. Sept. 24, 2014) (quoting McGee v. State Farm Mut. Auto. Ins. Co., 2009 WL 21232439, at *4 n.7 (E.D.N.Y. July 10, 2009)). Formal hierarchy, role differentiation, regular meetings, or established procedures are not required; rather, an informal group may constitute an enterprise as long as “the group . . . function[s] as a continuing unit and remain[s] in existence long enough to pursue a course of conduct.” Boyle, 556 U.S. at 948.

A RICO enterprise must have an ascertainable structure distinct from the pattern of racketeering activity in which its members engage. Turkette, 452 U.S. at 583 (holding that “[t]he `enterprise’ is not the `pattern of racketeering activity;’ it is an entity separate and apart from the pattern of activity in which it engages”). Nevertheless, “the evidence used to prove the pattern of racketeering activity, and the evidence establishing an enterprise `may in particular cases coalesce.'” Boyle, 556 U.S. at 947 (quoting Turkette, 452 U.S. at 583); see also United States v. Int’l Longshoremen’s Ass’n, 518 F. Supp. 2d 422, 473 (E.D.N.Y. 2007). Finally, the enterprise as alleged must be distinct from the person or persons alleged to be conducting the affairs of the enterprise. See Cedric Kushner Promotions, Ltd. v. King, 533 U.S. 158, 161 (2001); Cruz v. FXDirectDealer, LLC, 720 F.3d 115, 121 (2d Cir. 2013); Riverwoods Chappaqua Corp. v. Marine Midland Bank, N.A., 30 F.3d 339, 343-45 (2d Cir. 1994). This requirement is satisfied when an owner or employee of a corporation is the person alleged to be conducting the affairs of the enterprise and the enterprise is the corporation itself. Kushner, 533 U.S. at 163-64; see also, Palatkevich v. Choupak, 2014 WL 1509236, at *14-15 (S.D.N.Y. Jan. 24, 2014) (concluding, after close analysis of relevant precedent, that, “[a]fter Kushner and Riverwoods/Cruz, the distinctness rules are as follows: within the meaning of § 1962(c), a natural person named as the defendant `person’ is inherently distinct from a corporate entity `enterprise’ for which he acts as an agent; in such a case, the distinctness requirement is met”).

Defendants contend that plaintiffs’ enterprise allegations are insufficient. The dealership defendants argue that the plaintiffs fail to allege that the Dealership Enterprise has any hierarchical structure or an existence separate and apart from its alleged racketeering activity. NYMG Memorandum of Law in Support of Cross-Motion (“NYMG Mem.”), Docket Entry 79, at 12-13. This argument lacks merit for several reasons. First, “an established hierarchy is not essential to the existence of an enterprise.” U.S. v. Burden, 600 F.3d 204, 215 (2d Cir. 2010) (citing Boyle, 556 U.S. at 948). Even if it were, plaintiffs’ allegations would be sufficient; plaintiffs allege that NYMG is a limited liability company owned and operated by defendant Mamdoh Eltouby that employed defendants Nada Eltouby and Julio Estrada. T: ¶¶ 9, 11-13. Plaintiffs’ factual allegations describe actions taken by each of the individual defendants on behalf of NYMG from which their roles in the enterprise may be logically inferred. T: ¶¶ 23-34, 47-48, 56, 63, 65. Second, the facts alleged by plaintiffs indicate that NYMG and the other dealerships owned and operated by Mamdoh Eltouby were ongoing businesses that, among other things, advertised on the Internet, maintained lots where used cars could be viewed, and employed personnel with whom purchases of cars could be arranged. To the extent plaintiffs’ complaints suggest that the dealerships owned by Eltouby engaged in fraud as a matter of course, the alleged facts establishing the enterprise and the pattern of racketeering may “coalesce,” but that is no obstacle to concluding that the enterprise allegations are sufficient. Boyle, 556 U.S. at 947. Finally, as noted above, a complaint satisfies RICO’s distinctness requirement if it alleges an enterprise comprised of a corporation or related corporations and names as defendants natural persons who own or work for the corporations and participated in the corporation’s affairs through a pattern of racketeering.[8] That is certainly the case here. Accordingly, defendants’ challenge to the sufficiency of the allegations describing the Dealership Enterprise should be rejected.

Defendant M&T Bank similarly challenges the sufficiency of plaintiffs’ enterprise allegations. M&T Bank Memorandum of Law in Support of Cross-Motion (“M&T Bank Mem.”), Docket Entry 62 in 13-cv-5643, at 7-8. Here too, however, the allegations are sufficient. NYMG and M&T Bank are distinct legal entities, separate and apart from each other and hence from the alleged enterprise consisting of them both. Plaintiffs Chowdhury, Gabrys, and Tuhin allege that these entities developed an ongoing relationship whereby NYMG would arrange financing for its customers through M&T Bank. Even if most or even all of the financing NYMG provided to its customers involved fraud, the result would be only “coalescing” of the facts establishing the existence of the enterprise and those proving the pattern of racketeering, and would not undermine the sufficiency of plaintiffs’ allegations concerning the M&T Enterprise. Nor is it necessarily fatal to plaintiffs’ M&T Enterprise allegations that, as discussed below, I conclude that plaintiffs’ allegations against M&T Bank as a RICO defendant are insufficient. Courts have often found an association-in-fact enterprise to be properly pled even if some members of the alleged enterprise are not named as defendants in the case. See, e.g., City of New York v. Smokes-Spirits.com, Inc., 541 F.3d 425, 448, 451 (2d Cir. 2008), rev’d on other grounds, Hemi Grp., LLC v. City of New York 559 U.S. 1 (2010); Mark v. J.I. Racing, Inc., 1997 WL 403179, at *5 (E.D.N.Y. July 9, 1997); see also Three Rivers Provider Network, Inc. v. Meritain Health, Inc., 2008 WL 2872664, at *14-15 (S.D. Cal. July 23, 2008); Titan Int’l, Inc. v. Becker, 189 F. Supp. 2d 817, 820, 824 (C.D. Ill. 2001); Metrahealth Ins. Co. v. Anclote Psychiatric Hosp., Ltd., 1997 WL 728084, at *4 (M.D. Fla. Oct. 23, 1997) (motion to dismiss denied as to question of enterprise, but granted to the extent of requiring a more detailed RICO statement; Benard v. Hoff, 727 F. Supp. 211, 214-15 (D. Md. 1989). Accordingly, defendants’ challenge to the sufficiency of plaintiffs’ allegations with respect to the M&T Enterprise should be rejected as well.

1. Conducting the Enterprise’s Affairs Through Racketeering Activity

RICO liability does not extend to all “persons” associated with an enterprise, but is limited to those who “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(c). Defendants challenge the sufficiency of plaintiffs’ allegations of racketeering activity. At least two defendants — Nada Eltouby and M&T Bank — argue as well that plaintiffs’ allegations about their participation in the conduct of an enterprise’s affairs through racketeering activity are insufficient to support RICO claims against them. Finally, defendants argue that, even if racketeering activity were otherwise properly alleged, plaintiffs’ RICO claims would be subject to dismissal because plaintiffs fail to allege a pattern of racketeering that satisfies RICO’s continuity requirement.

“Racketeering activity” is defined in the RICO statute as any of various state or federal crimes, including mail fraud, 18 U.S.C. § 1341, and wire fraud, 18 U.S.C. § 1343. See 18 U.S.C. § 1961(1)(B). A “pattern of racketeering activity” requires at least two predicate acts of racketeering activity committed within a ten-year period. 18 U.S.C. § 1961(5); First Capital Asset Mgmt., Inc. v. Satinwood, 385 F.3d 159, 178 (2d Cir. 2004). “To establish a pattern, a plaintiff must also make a showing that the predicate acts of racketeering activity by a defendant are `related, and they amount to or pose a threat of continued criminal activity.'” Cofacrèdit, S.A. v. Windsor Plumbing Supply Co., Inc., 187 F.3d 229, 242 (2d Cir. 1999) (quoting H.J., Inc. v. Nw. Bell Tel. Co., 492 U.S. 229, 239 (1989)).

1. Mail and Wire Fraud — Specificity

Mail and wire fraud under 18 U.S.C. §§ 1341 and 1343, respectively, require proof of three elements: (1) the existence of a scheme to defraud, (2) the defendant’s knowing or intentional participation in the scheme, and (3) the use of the mails or interstate transmission facilities in furtherance of the scheme. S.Q.K.F.C., Inc. v. Bell Atl. TriCon Leasing Corp., 84 F.3d 629, 633 (2d Cir. 1996) (quoting United States v. Gelb, 700 F.2d 875, 879 (2d Cir. 1983)). A scheme to defraud “has been described as a plan to deprive a person `of something of value by trick, deceit, chicane, or overreaching.'” United States v. Autori, 212 F.3d 105, 115 (2d Cir. 2000) (citations omitted).

As noted above, claims of fraud are subject to a heightened pleading standard. Allegations of predicate mail and wire fraud violations must state the “contents of the communications, who was involved, [] where and when they took place, and [] explain why they were fraudulent.” Spool, 520 F.3d at 185 (internal quotation marks and citation omitted). In addition, while a defendant’s “intent to defraud may be averred generally under Rule 9(b), such allegations of scienter must be supported by facts `giving rise to a strong inference that the defendant knew the statements to be false and intended to defraud the plaintiff’ at the time they were made.” U.S. Fire Ins. Co. v. United Limousine Service, Inc., 303 F. Supp. 2d 432, 443-44 (S.D.N.Y. 2004) (quoting Ouaknine v. MacFarlane, 897 F.2d 75, 79-80 (2d Cir. 1990)); see also First Capital Asset Mgmt., 385 F.3d at 179.

Defendants argue that plaintiffs’ complaints fail to plead the predicate acts with sufficient specificity and instead rely on mere “bare-boned conclusory allegations.” NYMG Mem. at 6; see also M&T Bank Mem. at 15. As the facts recounted above demonstrate, though, plaintiffs’ Proposed Amended Complaints are anything but bare-boned. Plaintiffs describe in exhaustive detail a sophisticated scheme pursuant to which the dealership defendants lure customers in with low advertised prices, use aggressive sales tactics and false promises to induce customers to enter into onerous financing agreements, and fraudulently conceal from customers that the documents presented to them contain undisclosed charges. Plaintiffs identify the particular individuals who made statements to them, what statements they made, and why the statements were part of a fraudulent scheme.

Alkhatib, for example, alleges that he arrived at NYMG interested in a car that was advertised for $14,995, only to be essentially coerced and defrauded into signing a retail installment contract with a total cost exceeding $27,000. Alkhatib’s complaint describes how a NYMG salesperson required that he turn over a $10,000 down payment that Estrada would later refuse to return when Alkhatib — unwilling to enter into the financing arrangements proposed by Estrada — asked for his deposit back. Alkhatib also alleges that Estrada falsely informed him that two banks denied his loan application before he had even made one, and refused to provide any documents evidencing the banks’ rejection, promising the bank would send the documents — which never arrived — directly to Alkhatib. Finally, Alkhatib alleges that he was promised, and paid for, insurance he never received, and was charged for processing, insurance and service fees that were never itemized.

Tuhin’s complaint is similarly specific. Among other allegations, Tuhin asserts that Estrada persuaded him to enter into a high-interest loan by falsely representing to him that the interest rate would drop markedly after six months if Tuhin made his first six payments on time. Tuhin also alleges that, when he questioned a sales contract showing a $22,795.87 sales price, Estrada showed him a new contract reflecting a lower agreed-upon price of $12,000, but then switched the documents, so that Tuhin ended up signing the first sales contract with the higher sales price. Gabrys and Freire allege, among other things, similar false representations about a reduction in the interest rates on their loans after a few months of timely payments. Dong alleges that she paid Estrada a lump sum equal to the amount owed on her car loan, but that her signature was forged on a retail installment contract and that she was provided a certificate of title encumbered by a lien in favor of a lender to whom she owed nothing. Like the other plaintiffs, Chowdhury found that she had signed a RIC with terms substantially different from those described to her by Estrada, and continued to receive billing notices from her lender even after paying off her loan in full by delivering cash directly to Estrada.

These are only some of the highly specific allegations of fraud set forth in plaintiffs’ complaints. Defendants’ contention that plaintiffs have failed to plead fraud with sufficient specificity should therefore be rejected.

2. Mail and Wire Fraud — Use of the Mails and Interstate Wires

Defendants also challenge the adequacy of plaintiffs’ allegations that the mails or interstate wire communications were used in furtherance of the alleged fraudulent scheme. As defendants point out, while plaintiffs identify a large number of wire transmissions in their complaints, they do not allege that these transmissions crossed state lines. T: ¶¶ 104(b)-(g). Rather, the alleged wire transfers were between NYMG and M&T Bank, both of which are located in New York. T: ¶¶ 9-10. These allegations are therefore not sufficient to plead interstate use of the wires. See Bernstein v. Misk, 948 F. Supp. 228, 239 (E.D.N.Y. 1997) (“[W]here all parties are New York residents, `all telephone calls are presumed to be intrastate and, absent any indications otherwise, the predicate act of wire fraud is not stated.'” (citation omitted)).

Plaintiffs, however, also allege that NYMG used the Internet to advertise and that several of the plaintiffs came to the dealership in response to Internet ads. T: ¶ 104(a). The use of advertising on the Internet in furtherance of an alleged fraud satisfies the interstate wire requirement of § 1343. See DNJ Logistic Group, Inc. v. DHL Express (USA), Inc., 2010 WL 625364, at *6 n.4 (E.D.N.Y. Feb 19, 2010) (finding plaintiff adequately pleaded wire fraud even though plaintiff and defendant were located in New York because “recent cases appear to treat any use of the internet as sufficiently interstate in nature”). Because each plaintiff except Dong responded to an Internet advertisement posted by the dealership defendants, plaintiffs allege a pattern of use of the interstate wires in furtherance of the fraud occurring on multiple occasions within a period of ten years.

Plaintiffs either allege, or indicate they will allege, having received billing statements in the mail from the lender on their respective RICs. T: ¶ 104(h), (i), (k). While the dealership defendants may not have mailed these billing statements, it is well-settled that a defendant may be liable for mail fraud even if he or she did not personally use the mails; rather, a plaintiff need only show that “defendants could reasonably have foreseen that [a] third-party would use the mail in the ordinary course of business as a result of defendants’ act.” United States v. Bortnovsky, 879 F.2d 30, 36 (2d Cir. 1989); see also Pereira v. United States, 347 U.S. 1, 8-9 (1954) (holding that, “[w]here one does an act with knowledge that the use of the mails will follow in the ordinary course of business, or where such use can reasonably be foreseen, even though not actually intended, then he `causes’ the mails to be used” (citation omitted)). Certainly, repeated mailings of multiple billing statements by lenders to plaintiff borrowers were a reasonably foreseeable consequence of a scheme to defraud plaintiffs into entering into onerous retail installment contracts. The mailing to Dong of a certificate of title reflecting a lien despite the fact that Dong did not finance her purchase was reasonably foreseeable as well. Plaintiffs’ allegations therefore satisfy the element of use of the mails.

3. Mail and Wire Fraud — Intent/Participation through a Pattern of Racketeering

To be held liable under RICO, a defendant must be shown to have participated in the conduct of the charged enterprise’s affairs through a pattern of racketeering activity. 18 U.S.C. § 1962(c). In the context of this case, then, plaintiffs must allege facts that, if true, establish that each defendant participated in the conduct of the affairs of the relevant enterprise, and that each did so at least in part by committing mail or wire fraud.

As noted above, to establish that a defendant committed mail or wire fraud, a complaint must allege “facts giving rise to a strong inference that the defendant knew the statements to be false and intended to defraud the plaintiff at the time they were made.” U.S. Fire Ins. Co., 303 F. Supp. 2d at 444 (internal quotation marks and citation omitted). A plaintiff contending that a defendant participated in conducting the affairs of an enterprise must allege that the defendant “participated in the operation or management of the enterprise itself.” Reves v. Ernst & Young, 507 U.S. 170, 183 (1993). While a person who participates in the conduct of an enterprise “must have some part in directing [the enterprise’s] affairs . . . RICO liability is not limited to those with primary responsibility” for those affairs, but may extend to “lower rung participants in the enterprise who are under the direction of upper management.” Id. at 179, 184; see also DeFalco v. Bernas, 244 F.3d 286, 309 (2d Cir. 2001); United States v. Diaz, 176 F.3d 52, 92 (2d Cir. 1999) (holding that a RICO defendant need “not act[] in a managerial role,” but may be held “liable for directing the enterprise’s affairs if he exercised broad discretion in carrying out the instructions of his principal”). Nonetheless, “the simple taking of directions and performance of tasks that are necessary or helpful to the enterprise, without more, is insufficient to bring a defendant within the scope of § 1962(c).” Diaz, 176 F.3d at 92 (citing United States v. Viola, 35 F.3d 37. 41 (2d Cir. 1994)); see also, United States v. Allen, 155 F.3d 35, 42 (2d Cir. 1998) (“In most of the cases in which we have held lower level employees to be RICO participants, the defendant was shown to have played some management role in the enterprise.”) (collecting cases).

1. Mamdoh Eltouby and Nada Eltouby

Mamdoh Eltouby and Nada Eltouby are alleged to have participated in the conduct of the affairs of the Dealership Enterprise. T: ¶ 128. The facts alleged in the complaints with respect to Mamdoh Eltouby and Nada Eltouby are sufficient to establish their participation in the conduct of the charged enterprise and to give rise to a strong inference of intent to defraud.

Mamdoh Eltouby is alleged to have owned and operated NYMG at the time of the transactions involving the plaintiffs. T: ¶ 11. This alone indicates that he participated in the operation and management of the enterprise, and — particularly in light of the pervasiveness of the fraudulent scheme suggested by the number of plaintiffs who had similar experiences — gives rise as well to a strong inference that he knew of and abetted the scheme. In addition, plaintiff Tuhin alleges that, when he came to the dealership to participate in an organized protest, Mamdoh Eltouby identified himself as the owner of NYMG and attempted to assault the protestors by hitting them with his car. T: ¶ 56. Mamdoh Eltouby also refused to make arrangements for safekeeping of the car NYMG sold to Tuhin, even after Tuhin retained counsel and alerted NYMG to his complaints. T: ¶ 65. Plaintiffs have also identified a NYMG customer who has not filed suit but who met directly with Mamdoh Eltouby and was directed by Eltouby to meet first with Estrada and later with an employee at Hillside Motors. This customer, like plaintiffs, was urged to enter into a sub-prime loan and was falsely promised he could refinance the loan within six months. T: ¶¶ 138(a), (j). Finally, plaintiffs allege that Mamdoh Eltouby hired Estrada to work at NYMG even after Estrada had been indicted and arrested for defrauding customers while working at other used car dealerships, and that Estrada continued to work for NYMG even after the District Attorney for Queens County issued a press release announcing Estrada’s indictment. T: ¶¶ 79-83. These allegations are more than ample to demonstrate Mamdoh Eltouby’s participation in the conduct of the enterprise’s affairs and to give rise to a strong inference of knowledge of the scheme and intent to defraud.

The allegations concerning Nada Eltouby are likewise sufficient. Plaintiff Tuhin alleges that Nada Eltouby, after assuring Tuhin he was getting a good deal, took $2,000 from him and provided him with a receipt. T: ¶¶ 18-19. On each of several occasions when Tuhin returned to the dealership to complete his transaction, he observed Nada Eltouby there, interacting with other employees in what appeared to be a supervisory role. T: ¶ 34. On another occasion when Tuhin arrived at the dealership in an attempt to cancel the transaction, the employee he approached called over Nada Eltouby and Julio Estrada. Nada Eltouby urged Tuhin to trust Estrada and repeated the false representation, previously made by Estrada, that Tuhin’s interest rate would be reduced after six timely payments. T: ¶¶ 47-48. Subsequently, after Tuhin left the car he had purchased and the keys to it with NYMG, Nada Eltouby advised Tuhin’s attorney that NYMG had driven the car back to Tuhin’s neighborhood and parked it in the street near Tuhin’s home without license plates. T: ¶ 61. Plaintiff Chowdhury similarly alleges that, when her son went to the dealership to complain, it was Nada Eltouby who met with him, and who at first assured him the dealership “would take care of everything,” but later told him there was nothing the dealership could do and that he should “speak to `the bank.'” C: ¶¶ 102-05. Plaintiff Dong alleges that, upon returning to the dealership to complain about her transaction, she too met with Nada Eltouby. Nada Eltouby told Dong that there was nothing the dealership could do to help her. Dong then called for police assistance. When police officers arrived, Nada Eltouby met with them and spoke to them on NYMG’s behalf. D: ¶¶ 104-07. Finally, plaintiffs Freire and Gabrys also allege that Nada Eltouby was among the NYMG employees who met with them when they returned to NYMG after completing their transactions to complain that the representations made to them turned out not to be true. F: ¶¶ 83, 86; G: ¶¶ 116, 123.

Plaintiffs’ allegations give rise to a strong inference that Nada Eltouby’s role involved more than simply taking directions and performing tasks helpful to the enterprise, and that she was aware of the overall fraudulent scheme. By alleging that she spoke with disgruntled customers and gave them false assurances, met with police officers and presented NYMG’s position with respect to customer complaints to them, and even communicated with plaintiffs’ counsel about bringing a returned vehicle back to a customer’s neighborhood and leaving it there without license plates, plaintiffs allege that Nada Eltouby played a significant part in directing the affairs of the enterprise and advancing the goals of the scheme to defraud. Even if Nada Eltouby’s role were less clear, dismissal of plaintiff’s RICO claim against her would not be warranted at this stage of the case:

It is not always reasonable . . . to expect that when a defrauded plaintiff frames his complaint, he will have available sufficient factual information regarding the inner workings of a RICO enterprise to determine whether a defendant was merely “substantially involved” in the RICO enterprise or participated in the “operation or management” of the enterprise. Thus, where the role of the particular defendant in the RICO enterprise is unclear, plaintiffs may well be entitled to take discovery on this question.

Aiu Ins. Co. v. Olmecs Med. Supply, Inc., 2005 WL 3710370, at *8 (E.D.N.Y. Feb. 22, 2005) (citing Friedman v. Hartmann, 1994 WL 376058, at *2 (S.D.N.Y. July 15, 1994)).

1. M&T Bank

Plaintiffs name M&T Bank and NYMG as defendants in a RICO count that charges an association-in-fact enterprise comprised of the two defendants and a pattern of racketeering activity consisting of mail and wire fraud. The allegations with respect to New York Motor Group’s participation in the fraud are plainly sufficient, as demonstrated by the discussion above of the facts asserted with respect to its owner and operator, Mamdoh Eltouby, and its employees, Julio Estrada and Nada Eltouby. The facts alleged with respect to M&T Bank, however, fall short.

Plaintiffs’ allegations with respect to M&T Bank’s scienter are limited. Plaintiffs suggest that M&T Bank continued to process and fund loans even after it knew or should have known of NYMG’s fraudulent scheme. Plaintiffs contend that M&T Bank should have known of the scheme because several customers had made complaints about NYMG and because of how the “value of the collateral . . . compared to the sale price and the amount of add-on charges.” T: ¶ 46. Plaintiffs’ specific allegations, however, simply do not give rise to a strong inference that M&T Bank knew of any false statements or intended to participate in defrauding any of the plaintiffs.

Plaintiffs place particular emphasis on M&T Bank’s decision to fund the Tuhin loan even after Tuhin called the bank and complained he had been defrauded. Plaintiffs allege that M&T Bank should have known when Tuhin called that NYMG was engaged in a fraudulent scheme because of complaints from other customers. T: ¶ 46. The only other customers plaintiffs specifically identify as having raised complaints with M&T Bank, however, are Gabrys and Chowdhury. Tuhin made his call to M&T Bank on June 24, 2013. T: ¶ 45. Gabrys and Chowdhury made their complaints to M&T Bank in October of 2013. G: ¶ 126, C: ¶ 106. Thus, the complaints made by Gabrys and Chowdhury could not possibly have informed M&T Bank’s response to Tuhin.

Moreover, plaintiffs do not adequately allege that any representative of M&T Bank made any false representation to any plaintiff. Tuhin alleges that an M&T Bank representative told him that the bank could not refuse to fund his loan once the dealership submitted an application with his signature. T: ¶ 45. Plaintiffs do not contend that this statement was false; indeed, although the complaint is not entirely clear in this regard, it appears that Tuhin left the dealership with the car he purchased on June 22, 2013, and had thus been in possession of the vehicle for two days when he asked M&T Bank not to fund his loan. T: ¶¶ 25-26. These circumstances suggest that the bank’s hands might well have been tied. Moreover, when Tuhin complained to M&T Bank about having been defrauded, the M&T Bank representative suggested that Tuhin contact the office of the New York State Attorney General. T: ¶ 45. A representative of M&T Bank who spoke to Chowdhury’s son similarly suggested that Chowdhury hire an attorney to pursue her claims against NYMG. C: ¶ 114. Suggestions like these hardly give rise to a strong inference of fraudulent intent.

Plaintiffs are also unable to point to anything about the Tuhin, Gabrys or Chowdhury retail installment contracts that would have alerted someone reviewing them that they were fraudulent. Although plaintiffs allege that the value of the cars sold was not consistent with the sales prices charged, they do not allege that personnel at M&T Bank were familiar with used car values or were called upon to verify them before approving loan documents. Moreover, to the extent the value of collateral would be of interest to a lender, the lender’s concern would no doubt be with the value of the collateral relative to the amount financed rather than the purchase price. There is similarly no reason to infer that the “add-on charges” also pointed to by plaintiffs would have alerted anyone at M&T Bank that the loan transactions were fraudulent.

Finally, the fact that the six transactions giving rise to these related lawsuits were financed by three different lending institutions further undermines any inference that mere participation as a lender in transactions conducted by NYMG is enough to suggest fraudulent intent. Had there been a corrupt understanding or relationship between NYMG and M&T Bank, it is unlikely that the dealership defendants would have steered purchasers to other banks to obtain financing.

Plaintiffs invoke the well-settled principle that “deliberate disregard” for the truth may satisfy the scienter requirement for fraud. See United States v. Precision Medical Laboratories, Inc., 593 F.2d 434, 443-44 (2d Cir. 1978); United States v. Sarantos, 455 F.2d 877, 880-81 (2d Cir. 1972). The facts alleged in plaintiffs’ complaint, though, fail to demonstrate that M&T Bank deliberately disregarded earmarks of fraud or had any authority or responsibility to intervene on plaintiffs’ behalf.

Plaintiffs’ RICO claims against M&T Bank fail for a second, related reason: the role in the fraud attributed to M&T Bank in plaintiffs’ complaints does not rise to the level of participating in the conduct of the affairs of an enterprise.[9] In Reves v. Ernst & Young, 507 U.S. 170 (1993), defendants were accountants who drafted misleading financial statements and were subsequently sued under both the securities laws and RICO. The district court granted summary judgment to defendants on RICO on the grounds that the accountants’ conduct did not amount to participation in the operation or management of the claimed enterprise. The remaining securities fraud claims proceeded to trial, and the jury found for plaintiffs. Despite the jury’s finding that defendants had committed intentional fraud, the Supreme Court upheld the grant of summary judgment in favor of the accountants on plaintiffs’ RICO claim, holding that the mere drafting of statements based on misinformation supplied by the defendants’ clients did not rise to the level of directing the enterprise’s affairs and therefore did not constitute sufficient participation in the operation or management of the enterprise for RICO liability.

Reves involved a motion for summary judgment, and courts differ on the degree to which Reves applies to a motion to dismiss. Compare City of New York v. FedEx Ground Package System, Inc., 2015 WL 1013386, at *8 (S.D.N.Y. Mar. 9, 2015) (noting that, “[i]n this Circuit, the operation or management test typically has proven to be a relatively low hurdle for plaintiffs to clear, especially at the pleading stage.” (citations omitted)) with Zhu v. First Atlantic Bank, 2005 WL 2757536, at *5 (S.D.N.Y. Oct. 25, 2005) (stating, in the course of deciding a motion to dismiss, that “[t]he `operation and management’ [sic] test set forth by the Supreme Court in Reves is a very difficult test to satisfy,” and holding that providing banking services is insufficient to state a claim under Section 1962(c)) (citation omitted)).

Regardless of the test applied, plaintiffs’ allegations are insufficient. Pleadings asserting RICO claims against outside service professionals like banks, law firms, and accounting firms have been held sufficient after Reves only when they have alleged more substantial involvement by the outsider defendant in the charged racketeering activity than plaintiffs attribute to M&T Bank here. For example, in Ifill v. West, 1999 WL 690144, at *8 (E.D.N.Y. Aug. 24, 1999), the Court held that defendant bank employees provided services that were more than merely incidental to the fraudulent scheme when they recruited prospective victims by distributing brochures and conducting seminars the victims attended. Similarly, in Burke v. Dowling, 944 F. Supp. 1036, 1055 (E.D.N.Y. 1995), the Court declined to dismiss a RICO claim against a bank because of allegations that the bank helped initiate the alleged fraudulent syndication scheme and took advantage of the fact that other defendants owed money to the bank to exercise control over them.[10] See also Dep’t of Econ. Dev. v. Arthur Anderson & Co. (U.S.A.), 924 F. Supp. 449, 466 (S.D.N.Y. 1996) (noting that “[m]any other courts faced with post-Reves § 1962(c) claims against outside professionals have agreed that providing important services to a racketeering enterprise is not the same as directing the affairs of the enterprise”).

Here, plaintiffs allege that M&T Bank’s participation in the racketeering affairs of the enterprise consisted only of summarily granting the loan applications created by the dealership defendants, failing to investigate the plaintiffs’ claims of fraud, and collecting the payments due under the allegedly fraudulent loans. Although plaintiffs allege the funding was an integral part of the enterprise, these acts fall short of satisfying the “operation and management” test. See Burke, 944 F. Supp. at 1055 (noting that even a bank that knowingly received diverted funds or assisted in preparing a private placement memorandum did not operate or manage the enterprise). Rather, the allegations against M&T Bank made by plaintiffs are analogous to those described as inadequate in Arthur Anderson:

An accountant’s audit reports, or a lawyer’s opinion letters, are always “integral to the continuing operation” of the enterprise in the sense that professional services are essential to the continued existence of a business. But so is the electricity supplied to the enterprises’ offices, and it would be absurd to say that the public utility that provides the electricity participates in the operation or management of the enterprise. . . . [T]he rule, uniformly applied by the lower courts that have reached the issue, [is] that the provision of services — even essential services — to a RICO enterprise is not the same as controlling the enterprise’s affairs.

924 F. Supp. at 467-68 (citations omitted).

For all these reasons, I conclude that the allegations against M&T Bank are insufficient to give rise to a strong inference of knowing and intentional participation in a fraudulent scheme or to establish M&T Bank’s participation in the conduct of the affairs of an enterprise through a pattern of racketeering. I therefore recommend that the § 1962(c) claims against M&T Bank be dismissed.

1. Relatedness and Continuity of Pattern

To constitute a pattern of racketeering activity, predicate acts must be “related” and “amount to or pose a threat of continued activity.” Cofacrèdit, 187 F.3d at 242 (emphasis omitted); see also United States v. Daidone, 471 F.3d 371, 375 (2d Cir. 2006). The continuity requirement may be satisfied by showing either close-ended continuity or open-ended continuity. Cofacrèdit, 187 F.3d at 242. Defendants challenge the relatedness of the predicate acts, M&T Bank Mem. at 10, and argue that plaintiffs have failed to establish continuity, NYMG Mem. at 9-12, M&T Bank Mem. at 12-15.

1. Relatedness

A plaintiff must demonstrate that predicate acts are related both horizontally and vertically. Daidone, 471 F.3d at 375. Horizontal relatedness describes the relationship between the predicate acts themselves, while vertical relatedness describes the relationship between the predicate acts and the overall RICO enterprise. Id. In practice, these tests may be satisfied with a single showing that each individual predicate act is related to the RICO enterprise. Id. Here, the alleged predicate acts of mail fraud and wire fraud concern the sale of used cars and the financing arrangements made in connection with those sales. The enterprises are comprised of the used car dealerships that made the sales and the banks that provided the financing. The predicate acts are thus each related to the RICO enterprises described in the complaints, and plaintiffs therefore satisfy RICO’s relatedness requirement.

2. Close-Ended Continuity

To demonstrate “close-ended continuity, the plaintiff must prove `a series of related predicates extending over a substantial period of time.'” Cofacrèdit, 187 F.3d at 242 (quoting H.J. Inc., 492 U.S. at 242). “Although close-ended continuity is primarily a temporal concept, other factors such as the number and variety of predicate acts, the number of both participants and victims, and the presence of separate schemes are also relevant in determining whether close-ended continuity exists.” Cofacrèdit, 187 F.3d at 242 (quoting GICC Capital Corp. v. Tech. Fin. Group. Inc., 67 F.3d 463, 467-68 (2d Cir. 1995)). Since the Supreme Court’s decision in H.J. Inc., the Second Circuit “has never held a period of less than two years to constitute a substantial period of time.” Cofacrèdit, 187 F.3d at 242; Spool, 520 F.3d at 184 (finding a sixteen-month period to be insufficient to establish close-ended continuity); DeFalco, 244 F.3d at 321-22. The relevant period when evaluating continuity “is the time during which RICO predicate activity occurred, not the time during which the underlying scheme operated or the underlying dispute took place.” Spool, 520 at 184 (citations omitted).

Plaintiffs allege that the association-in-fact enterprise was operating since at least 2012, Gabrys ¶ 40. However, time for purposes of close-ended continuity is calculated based upon when defendants committed predicate acts. See Cofacrèdit, 187 F.3d at 243; Delgado v. Ocwen Loan Servicing, 2014 WL 4773991, at *21 (E.D.N.Y. Sept. 24, 2014). Accordingly, the relevant time period here must begin in December of 2012, the date of the earliest alleged Internet advertisement. A: ¶ 34. Because the most recent of these related cases was filed in May 2014, only seventeen months after that advertisement, plaintiffs have failed to allege a pattern of racketeering activity occurring over a period of more than two years, and the allegations of their complaints thus fail to demonstrate close-ended continuity.

3. Open-Ended Continuity

Plaintiffs do, however, plead facts supporting a finding of open-ended continuity. Openended continuity requires “a threat of continuing criminal activity beyond the period during which the predicate acts were performed.” Cofacrèdit, 187 F.3d at 242 (citation omitted); see also, GICC Capital, 67 F.3d at 466 (describing open-ended continuity as “past criminal conduct coupled with a threat of future criminal conduct”). In considering whether a continuing threat exists, a court looks at the nature of the enterprise and of the predicate acts. Cofacrèdit, 187 F.3d at 242. “Where the enterprise is engaged primarily in racketeering activity, and the predicate acts are inherently unlawful,” a threat of continued criminal activity is presumed. Id.; see also, Spool, 520 F.3d at 185. However, where an enterprise is primarily engaged in legitimate business practices, there is no such presumption, and courts look to “other external factors” to determine whether a threat of continued criminal activity exists. GICC Capital Corp., 67 F.3d at 466. In such cases, “there must be some evidence from which it may be inferred that the predicate acts were the regular way of operating that business, or that the nature of the predicate acts themselves implies a threat of continued criminal activity.” Spool, 520 F.3d at 185 (quoting Cofacrèdit, 187 F.3d at 243).

Whether predicate acts pose a threat of future conduct is evaluated as of the time the acts are committed. See United States v. Aulicino, 44 F.3d 1102, 1110-14 (2d Cir. 1995) (finding open-ended continuity despite the fact that scheme ended before any prosecution was commenced). Open-ended continuity may be shown if, “at the time of occurrence,” the racketeering activity threatens future criminal activity. City of New York v. LaserShip, Inc., 33 F. Supp. 3d 303, 311 (S.D.N.Y. 2014) (quoting Morrow v. Black, 742 F. Supp. 1199, 1207 (E.D.N.Y. 1990)). Only if an activity has an “inherently terminable” goal, such as a sale of land, is a threat of continued activity negated as a matter of law. DeFalco, 244 F. 3d at 324; Azrielli v. Cohen Law Offices, 21 F.3d 512, 521 (2d. Cir. 1994) (series of fraudulent sales of securities over at least one year, coupled with evidence that defendants were trying to continue to sell securities, permitted a jury to find a RICO pattern).

The fraudulent scheme alleged by plaintiffs had no obvious ending point. The dealerships were ongoing businesses that advertised used cars on the Internet to a virtually endless supply of consumers. In this regard, they are similar to the defendants in Liberty Mut. Ins. Co. v. Blessinger, 2007 WL 951905 (E.D.N.Y. Mar. 27, 2007). Defendants in Blessinger owned and operated taxi and limousine companies that were alleged to have made misrepresentations to their insurance carrier to obtain coverage without paying applicable premiums. The Court held that plaintiff, the allegedly defrauded insurance company, established open-ended continuity because defendants’ businesses had an ongoing need for insurance, and concluded that “the nature of the predicate acts alleged weighs in favor of a finding of openended continuity as they suggest a threat of repetition continuing into the future.” Id. at *13. Similarly, defendants here continue to operate dealerships, sell used cars to customers, and arrange financing for them. The threat of repetition into the future therefore establishes openended continuity.

Although defendants argue that continuity is defeated by Estrada’s indictment, this argument fails. First, as noted above, whether predicate acts pose a threat of future conduct is evaluated as of the time the acts are committed. Moreover, while Estrada was certainly a key player in the fraudulent scheme, he did not act alone. Plaintiffs make numerous allegations of fraudulent behavior by other employees of the dealerships. See, e.g., T: ¶¶ 18, 47-48, 56-57, 61, 65, 138(a), 138(f), 138(j), 138(k). Plaintiffs also allege that Mamdoh Eltouby continues to conduct the affairs of the enterprise as the president of non-party dealership Hillside Motors at an address formerly associated with Planet Motor Cars, the dealership that appeared on the plaintiffs’ service contracts. T: ¶ 127.

1. Conclusion With Respect to RICO

For the reasons stated above, I respectfully recommend that plaintiffs be permitted leave to amend their claims under RICO against all defendants other than M&T Bank, and that the RICO claims against M&T Bank be dismissed.

III. Plaintiffs’ Truth in Lending Act Claims

Plaintiffs Gabrys and Tuhin assert claims against New York Motor Group and M&T Bank pursuant to the Truth in Lending Act (“TILA”). T: ¶¶ 151-69; G: ¶¶ 132-42. Tuhin and Gabrys claim they entered into consumer credit agreements but were not provided the disclosures required by law. Each seeks statutory damages, costs and attorney’s fees, and Tuhin also seeks rescission of his sales contract and voiding of any security interests in his car. G: ¶ 142; T: ¶ 169.

M&T Bank moves to dismiss the TILA claims against it, arguing that the statute applies only to creditors, a term defined by statute, and that it is not a creditor as defined by 15 U.S.C. § 1602(g) and Part 226 of Title 12 of the C.F.R., commonly known as Regulation Z.[11] M&T Bank Mem. at 16-17; see 12 C.F.R. § 226.1 (“Regulation Z . . . is issued by the Board of Governors of the Federal Reserve System to implement the federal Truth in Lending Act.”); Murphy v. Empire of Am., FSA, 746 F.2d 931, 933 (2d Cir. 1984).

M&T Bank relies upon Vincent v. Money Store, LLP, 736 F.3d 88 (2d Cir. 2013), to support its position. In Money Store, the Court of Appeals for the Second Circuit noted that TILA imposes general liability only on creditors and “greatly circumscribes the liability of assignees” such as M&T. 736 F.3d at 105. The Court stressed the statute’s definition of a creditor as

a person who both (1) regularly extends, whether in connection with loans, sales of property or services, or otherwise, consumer credit which is payable by agreement in more than four installments or for which the payment of a finance charge is or may be required, and (2) is the person to whom the debt arising from the consumer credit transaction is initially payable on the face of the evidence of indebtedness or, if there is no such evidence of indebtedness, by agreement.

15 U.S.C. §1602. The Court also relied on Regulation Z, which “interprets the second prong of this definition `as applying to only “[a] person . . . to whom the obligation is initially payable, either on the face of the note or contract, or by agreement when there is no note or contract.'” 736 F.3d at 105 (quoting 12 C.F.R. § 226.2(a)(17)(i)).

The question in Money Store was whether the assignee of a mortgage could be held liable as a creditor within the meaning of 14 U.S.C. § 1602. The Court of Appeals affirmed the lower court’s decision to dismiss the TILA claim against the assignee on summary judgment and held that, even when the initial payment on a loan is made to the assignee, or even when a loan is assigned before funds are disbursed, the assignee is not exposed to the general liability reserved for the entity that appears on the face of the loan agreement. Id. at 107. The Court reasoned that TILA is primarily concerned with disclosures by the initial creditor, although it also noted that consumers could, under the statute, exercise their rights to rescission against assignees. Id. at 108. Liability may be imposed directly on an assignee, however, “only if the [TILA] violation . . . is apparent on the face of the disclosure statement.” Id. at 107 (quoting Taylor v. Quality Hyundai, Inc., 150 F.3d 689, 692 (7th Cir. 1998)); see also 15 U.S.C. § 1641 (“[A] violation apparent on the face of the disclosure statement includes, but is not limited to a . . . disclosure which can be determined to be incomplete or inaccurate from the face of the disclosure statement or other documents assigned. . . .”).

In reaching its holding, the Second Circuit in Money Store relied on a decision with facts similar to those presented here. In Riviere v. Baner Chevrolet, Inc., 184 F.3d 457 (5th Cir. 1999), plaintiff purchased a car from a dealer. Financing was arranged at the time of purchase, and the dealer assigned its interest in the loan to the financing entity. The Court held that, despite financing having been arranged at the time of purchase and the immediate assignment of the loan, the dealer was the creditor obligated to make the disclosures required by TILA and the only party that could be held liable for failing to make those disclosures. 184 F.3d at 460. Riviere relied in turn upon the following commentary of the Federal Reserve Board:

If an obligation is initially payable to one person, that person is the creditor even if the obligation by its terms is simultaneously assigned to another person. For example: An auto dealer and a bank have a business relationship in which the bank supplies the dealer with credit sale contracts that are initially made payable to the dealer and provide for immediate assignment of the obligation to the bank. The dealer and purchaser execute the contract only after the bank approves the creditworthiness of the purchaser. Because the obligation is initially payable on its face to the dealer, the dealer is the only creditor in the transaction.

12 C.F.R. pt. 226, supp. I, subpt. A, cmt. 2(a)(17)(i)(2) (emphasis added).

The example in the Federal Reserve Board commentary applies to the facts presented here. Indeed, Gabrys and Tuhin do not contend that their loan documents indicated that their debts were initially payable to M&T Bank. Instead, they argue that M&T Bank may be held liable because the TILA violations they allege were apparent on the face of their loan documents. Pls. Reply at 15. The only violation plaintiffs point to in support of this contention, however, is their claim that the purchase price exceeded the advertised price or fair market value of their cars. Pls. Reply at 16. As discussed above in connection with plaintiffs’ RICO claims, though, plaintiffs do not allege facts suggesting that any discrepancy between the purchase price and the advertised price or fair value of the cars they purchased would be apparent to persons at M&T Bank examining the loan documents. See Taylor, 150 F.3d at 694 (holding that “[o]nly violations that a reasonable person can spot on the face of the disclosure statement or other assigned documents will make [an] assignee liable under the TILA”).

For all these reasons, M&T Bank’s motion to dismiss the TILA claims asserted against it should be granted to the extent plaintiffs seek damages and attorney’s fees, but denied to the extent plaintiffs seek rescission. Although only Tuhin explicitly seeks rescission as a remedy for the TILA violations he alleges, Gabrys seeks “further relief as the Court deems appropriate,” G: ¶ 142, and should be afforded an opportunity to clarify whether or not he seeks rescission as a remedy.

1. Tuhin’s Magnuson-Moss Warranty Act Claim

Plaintiff Tuhin contends the car he was sold was not fit to drive. Based on this contention, he asserts a claim under the Magnuson-Moss Warranty Act (“MMWA”) against NYMG and M&T Bank. M&T Bank argues that Tuhin has not adequately stated a claim under the MMWA because he fails to allege a covered form of warranty, fails to establish a breach of the implied warranty of merchantability, and fails to meet the statutory dollar amount threshold under 15 U.S.C. § 2310(d)(3)(B). M&T Bank Mem. at 22-25. Because I conclude that Tuhin has failed to meet the statute’s monetary threshold, I do not reach the other arguments raised by M&T Bank.[12]

The Magnuson-Moss Warranty Act authorizes consumers to sue warrantors who fail to comply with any written or implied warranty “for damages and other legal and equitable relief.” 15 U.S.C. § 2310(d)(1). A claim under the Act may be brought either in state or federal court. 15 U.S.C. § 2310(d) (1)(A)-(B). However, “[n]o claim shall be cognizable [in federal court] . . . if the amount in controversy is less than the sum or value of $50,000 (exclusive of interests and costs).” 15 U.S.C. § 2310(d)(3)(B). Tuhin paid substantially less than $50,000 for his car. T: ¶ 35. It would seem, therefore, that Tuhin’s MMWA claim does not meet the statute’s amount-in-controversy requirement.

Tuhin argues that his MMWA claim should proceed for two reasons. First, Tuhin contends that his claim for punitive damages brings the amount in controversy over the statutory threshold. Generally, however, punitive damages are not recoverable under the MMWA; “[i]n breach of warranty suits, which is all that the MMWA permits, damages ordinarily are limited to the difference between the value of the goods accepted and the value they would have had if they had been as warranted.” Lieb v. Am. Motors Corp., 538 F. Supp. 127, 133 (S.D.N.Y. 1982). Moreover, Tuhin does not assert a claim for punitive damages under the MMWA in his Proposed Amended Complaint. T: ¶ 180.

Second, Tuhin argues that the statute’s $50,000 threshold must be satisfied only when the MMWA provides the sole basis for federal court jurisdiction. Tuhin’s RICO and TILA claims give rise to federal question jurisdiction. See 28 U.S.C. § 1331. Tuhin argues that this Court may therefore exercise supplemental jurisdiction over his MMWA claim pursuant to 28 U.S.C. § 1367 even if he cannot satisfy the statute’s dollar amount threshold.

Federal courts considering whether they may hear MMWA claims involving less than $50,000 pursuant to their supplemental jurisdiction have come to different results. Most courts in this Circuit, however, have held that, “[i]n enacting Magnuson-Moss, Congress implicitly negated pendent jurisdiction of claims made under the statute that amount to less than $50,000.” Lieb, 538 F. Supp. at 140; see also Jager v. Boston Road Auto Mall, 2015 WL 235342, at *4 (S.D.N.Y. Jan. 16, 2015) (concluding that, “by enacting the specific jurisdictional limitations for Magnuson-Moss claims in federal court, Congress foreclosed the exercise of supplemental jurisdiction” over MMWA claims for less than $50,000). But see Diaz v. Paragon Motors of Woodside, Inc., 424 F. Supp. 2d 519, 527 (E.D.N.Y. 2006) (concluding, albeit without analysis, that supplemental jurisdiction could be exercised over MMWA claim that did not involve more than $50,000); Barnes v. West, Inc., 249 F. Supp. 2d 737, 739 (E.D. Va. 2003) (holding that “MMWA claims that cannot independently be heard in federal court owing to the absence of the requisite amount in controversy, can still be heard in federal court in circumstances where supplemental jurisdiction is properly exercised under 28 U.S.C. § 1367”); Samuels v. American Motors Sales Corp., 1989 WL 95787, at *2-3 (N.D. Ill. Aug. 9, 1989).

I find the cases holding that supplemental jurisdiction is not available to be more convincing, at least in part because 28 U.S.C. § 1367 itself provides for supplemental jurisdiction “[e]xcept . . . as expressly provided otherwise by Federal statute.” Here, a federal statute expressly provides otherwise, and Tuhin’s MMWA claim should therefore be dismissed.

1. Plaintiffs’ State Law Claims and Remaining Proposed Amendments

1. Usury

Tuhin seeks to add a civil usury claim on the grounds that the loan created with NYMG and assigned to M&T Bank provided for interest at a rate higher than the legal limit. Plaintiffs’ Memorandum of Law in Support of Motion to Amend (“Pls. Mem.”), Docket Entry 72, at 22. This would conform Tuhin’s complaint to those filed by the plaintiffs in the related cases, each of whom other than Dong asserts a usury claim. Like Tuhin, plaintiffs Gabrys and Chowdhury obtained loans through NYMG that were assigned to M&T Bank, and each asserts a usury claim against M&T Bank as well as NYMG. M&T Bank moves to dismiss each of the usury claims pending against it. NYMG has not made a similar motion.

New York’s usury statute bars loans carrying annual interest rates of more than sixteen percent, subject to limited exceptions not relevant here. N.Y. Gen. Oblig. Law § 5-501; N.Y. Banking Law § 14-a(1). A usurious debt “shall be void.” N.Y. Gen. Oblig. Law § 5-511. See Gerstle v. Nat’l Credit Adjusters, LLC, 2015 WL 72789, at *6 (S.D.N.Y. Jan. 6, 2015). To determine whether a transaction is usurious, a court “looks not to its form, but its substance, or `real character.'” O’Donovan v. Galinski, 62 A.D.3d 769, 769 (N.Y. App. Div. 2009) (citations omitted). While the interest rate stated in the loan documents may be dispositive of whether a loan is usurious, see Concord Fin. Corp. v. Wing Fook, Inc., 1997 WL 375679, at *5 (S.D.N.Y. July 7, 1997), a court may properly consider whether a lender is extracting a usurious rate of interest through deceptive means, such as by imposing excessive fees or inflating the loan’s principal amount, see Hillair Capital Investments, L.P. v. Integrated Freight Corp., 963 F. Supp. 2d 336, 339 (S.D.N.Y. 2013).

M&T Bank contends that plaintiffs’ usury claims must be dismissed because each of the relevant RICs provides for interest at a rate below sixteen percent and because there is “NO substantive evidence submitted that M&T Bank has violated [New York’s usury law].” M&T Bank Mem. at 21 (emphasis in original). Plaintiffs do not dispute M&T Bank’s contention that the interest rates appearing on the RICs are below sixteen percent. Pls. Reply at 14. Plaintiffs contend, however, that the RICs obscure the actual rate of interest charged because they are based on higher sales prices for the purchased vehicles than agreed to and because they impose fees for unwanted products and services that functioned in reality as additional finance charges. T: ¶¶ 227-29; G: ¶¶ 218-20; C: ¶¶ 225-27.

Regarding fees, a lender may charge reasonable expenses “attendant on a loan without rendering the loan usurious,” provided that the expenses charged are not “a pretext for higher interest.” Lloyd Corp. v. Henchar, Inc., 80 N.Y.2d 124, 127 (1992). Reasonable expenses may include, for example, attorney’s fees associated with making the loan. Durante Bros. & Sons, Inc. v. Flushing Nat. Bank, 652 F. Supp. 101, 105 (E.D.N.Y. 1986). However, when fees do not in fact reimburse a lender for expenses incurred in extending a loan but are instead “a disguised loan payment,” the fees are appropriately considered when determining the effective interest rate. Hillair, 963 F. Supp. 2d at 339 (denying summary judgment on usury defense because, among other things, purpose of fee payments was unclear).

A court may also question the principal indicated in a loan agreement to determine whether the loan is usurious. In Durante, the court examined a loan with a disputed principal amount and granted summary judgment dismissing a usury claim only after concluding that the interest charged did not reach a usurious level even under the borrower’s calculation of the principal amount. 652 F. Supp. at 104; see also Hillair, 963 F. Supp. 2d at 339 (denying summary judgment on usury defense because, among other things, borrowers asserted that principal amount of loans was artificially inflated).

Here, plaintiffs argue that the difference between the prices they agreed to pay and the principal amounts that appear on their RICs should be counted as interest in determining whether their loans are usurious. Plaintiffs argue in addition that products and services that were purportedly required for financing were in reality disguised loan payments that should also be calculated as interest. If plaintiffs’ contentions are accepted, the figures that appear in plaintiffs’ pleadings yield rates far above those that appear on their respective RICs, and far above sixteen per cent per year. Tuhin, for example, claims that he agreed to purchase a car for $12,000, made a $2,000 down payment, and agreed to borrow $10,000 over six years. T: ¶¶ 18, 23, 26, 29-30. NYMG, however, had Tuhin sign a retail installment contract for $26,209. T: ¶ 35. Gabrys alleges that he agreed to pay $19,000 for his car, putting down $10,000 in cash and financing the remainder over five years. G: ¶¶ 48-49, 55. The RIC prepared by NYMG, however, listed a cash price of $30,895 and a total sales price of $34,966.48. G: ¶¶ 65, 67. Finally, Chowdhury agreed to a purchase price of $13,500 and made a down payment of $10,000. C: ¶¶ 55-57. Unlike Tuhin and Gabrys, Chowdhury orally agreed to a short-term loan. C: ¶ 67. NYMG nevertheless obligated her to a RIC with a cash price of $24,471 and an amount financed of $14,911.99. C: ¶ 77.

Clearly, if the allegedly undisclosed increases in purchase prices and fees for services and products are considered interest, each plaintiff was charged an annual rate far greater than sixteen per cent.[13] For these reasons, I recommend that M&T Bank’s motion to dismiss the usury claims asserted by Tuhin, Gabrys and Chowdhury against it be denied.

1. New York General Business Law Section 349

Plaintiffs Chowdhury and Tuhin assert claims under Section 349 of New York’s General Business Law against NYMG and M&T Bank. Plaintiff Gabrys seeks to add a claim against M&T Bank under this statute, and Tuhin seeks to clarify the basis upon which he asserts M&T Bank’s direct liability for his pending Section 349 claim. Pls. Mem. at 19. M&T Bank opposes leave to amend and cross-moves to dismiss each of the Section 349 claims asserted against it. M&T Bank Mem. at 21-22.

Section 349 prohibits “[d]eceptive acts or practices in the conduct of any business, trade, or commerce or in the furnishing of any service.” N.Y. Gen. Bus. Law § 349(a). “To state a claim under § 349, a plaintiff must allege: (1) the act or practice was consumer-oriented; (2) the act or practice was misleading in a material respect; and (3) the plaintiff was injured as a result.” Spagnola v. Chubb Corp., 574 F.3d 64, 74 (2d Cir. 2009) (citing Maurizio v. Goldsmith, 230 F.3d 518, 521 (2d Cir. 2000) (per curiam)). Section 349 claims are not subject to Rule 9(b)’s heightened pleading standard. Ackerman v. Coca-Cola Co., 2010 WL 2925955, at *22 (E.D.N.Y. July 21, 2010) (citing Pelman ex rel. Pelman v. McDonald’s Corp., 396 F.3d 508, 511 (2d Cir. 2005)).

Plaintiffs allege that M&T Bank is liable under Section 349 because it claimed it could not undo the fraudulent transactions plaintiffs entered into with NYMG, promised an investigation it never conducted, and continued to collect on plaintiffs’ loans even after hearing plaintiffs’ complaints of fraud. T: ¶ 192; G: ¶¶ 258-60; C: ¶¶ 263-65. Although M&T Bank’s bases for challenging plaintiffs’ Section 349 claims are not articulated clearly in its submissions, M&T Bank apparently contends that plaintiffs fail to allege that its actions were materially misleading or that any actions it took were consumer-oriented. M&T Bank Mem. at 21-22; M&T Bank Reply at 12.

The New York Court of Appeals considered whether certain conduct was consumeroriented and therefore within the scope of Section 349 in Oswego Laborers’ Local 214 Pension Fund v. Marine Midland Bank, 85 N.Y.2d 20 (1995). The court held that

Consumer-oriented conduct does not require a repetition or pattern of deceptive behavior. The statute itself does not require recurring conduct. Moreover, the legislative history makes plain that this law was intended to “afford a practical means of halting consumer frauds at their incipiency without the necessity to wait for the development of persistent frauds” (see, Mem. of Governor Rockefeller, 1970 N.Y. Legis. Ann., at 472-73). Plaintiff, thus, need not show that the defendant committed the complained-of acts repeatedly — either to the same plaintiff or to other consumers — but instead must demonstrate that the acts or practices have a broader impact on consumers at large. Private contract disputes, unique to the parties, for example, would not fall within the ambit of the statute.

85 N.Y.2d at 25. The test is whether the actions complained of “potentially affect similarly situated consumers.” Id. at 26-27; see also, Wilson v. Nw. Mut. Ins. Co., 625 F.3d 54, 64 (2d Cir. 2010); MaGee v. Paul Revere Life Ins. Co., 954 F. Supp. 582, 586 (E.D.N.Y. 1997) (“[T]he injury must be to the public generally as distinguished from the plaintiff alone.” (citations omitted)).

Plaintiffs in Oswego were union pension funds that opened accounts with the defendant bank. Plaintiffs complained that the bank failed to pay appropriate interest on the balances in their accounts. Although plaintiffs were pension funds and not individuals or consumers as that term is typically used, the Court of Appeals held that plaintiffs satisfied the “consumer-oriented” element of Section 349, reasoning that “defendant Bank dealt with plaintiffs’ representative as any customer entering the bank to open a savings account, furnishing the [plaintiff] Funds with standard documents presented to customers upon the opening of accounts.” 85 N.Y.2d at 26. M&T Bank, it seems, likewise dealt with Tuhin, Gabrys and Chowdhury just like it would any other customer seeking a car loan; indeed, M&T Bank argues in opposition to plaintiffs’ other claims, at least implicitly, that there was nothing unusual about the RICs assigned to it by NYMG that should have raised a red flag. See M&T Bank Mem. at 15. Moreover, the ordinary meaning of the term “consumer” more clearly applies to plaintiffs here than to the pension funds in Oswego. Finally, the fact that M&T Bank treated all three plaintiffs in a similar manner lends further support to the conclusion that the “consumer-oriented” prong of a Section 349 claim has been sufficiently alleged. See Riordan v. Nationwide Mut. Fire Ins. Co, 977 F.2d 47, 53 (2d Cir. 1992) (holding that evidence of defendant insurance company’s similar practices in its dealings with other policyholders satisfied Section 349’s consumer-oriented element).

Plaintiffs fare less well, though, in their efforts to allege that M&T Bank engaged in materially misleading conduct that caused them injury. An act or practice is materially misleading if it is “likely to mislead a reasonable consumer acting reasonably under the circumstances.” Oswego, 85 N.Y.2d at 26. Proof of scienter, though, is not required. Id.; Watts v. Jackson Hewitt Tax Serv. Inc., 579 F. Supp. 2d 334, 346 (E.D.N.Y. 2008). In addition to establishing having been misled, “a plaintiff must prove `actual’ injury . . ., though not necessarily pecuniary harm.” Stutman v. Chem. Bank, 95 N.Y.2d 24, 29 (2000) (citing Oswego, 85 N.Y. 2d at 26).

Plaintiffs fail to allege facts demonstrating that M&T Bank misled them or caused them injury. As noted above, plaintiffs first contend it was misleading for M&T Bank to claim that it could not cancel their loans based upon their complaints and to continue to collect payments from them despite those complaints. However, plaintiffs neither explain why, nor provide precedent establishing that, a consumer who is fraudulently induced by a retailer to make a purchase, and who finances that purchase with a loan assigned to a bank, is entitled to cease making loan payments prior to or while seeking legal redress from the retailer. Plaintiffs do not allege that M&T Bank sought to hinder their attempts to pursue legal remedies that could result in the rescission of their loans, and in fact acknowledge that M&T Bank suggested that plaintiffs might consult a lawyer or report NYMG to the New York State Attorney General.

M&T Bank’s representations about investigating plaintiffs’ complaints may or may not have been accurate, but in either case plaintiffs fail to identify any injury they suffered as a result of those representations. Plaintiffs do not point to any authority suggesting that M&T Bank owed them a duty to investigate. Nor do they contend that, in reliance on M&T Bank’s representations, they put off taking action to protect their rights, or if they did, that they were as a result hindered in any way in asserting their rights later.

For all these reasons, Gabrys’ motion for leave to amend to add a Section 349 claim against M&T Bank should be denied, and M&T Bank’s motion to dismiss the Section 349 claims brought against it by Tuhin and Chowdhury should be granted.

1. Negligent Hiring

Plaintiff Tuhin moves for leave to add a negligent hiring claim against NYMG and Mamdoh Eltouby. Pls. Mem. at 23; T: ¶¶ 245-97. The other plaintiffs also seek to assert negligent hiring claims. A: ¶¶ 194-203; F: ¶¶ 301-09; G: ¶¶ 289-97; D: ¶¶ 272-80; C: ¶¶ 291-99. A claim for negligent hiring requires a showing that “the employer knew or should have known of the employee’s propensity for the conduct which caused the injury.” Dewitt v. Home Depot U.S.A., Inc., 2012 WL 4049805, at *6 (E.D.N.Y. Sept. 12, 2012) (quotation marks and citations omitted).

Mamdoh Eltouby opposes the motion on the ground that personal liability for corporate acts requires proof that the individual engaged in wrongdoing, and that plaintiffs fail to allege facts suggesting any malfeasance on his part. NYMG Reply at 3. Plaintiffs, however, do allege facts giving rise to a plausible inference that Mamdoh Eltouby knew of Estrada’s propensity for fraud, hired him anyway, and refused to consider complaints made against him. As discussed above in connection with plaintiffs’ RICO claims, Mamdoh Eltouby is alleged to have owned and operated NNYMG at the time plaintiffs’ transactions took place, attempted to assault customers complaining about having being defrauded, and hired Estrada after he had been indicted and arrested for defrauding customers while working at other used car dealerships. It is plausible to infer that an individual who owns a used car dealership would be aware that someone working in the same field had been indicted for fraud in connection with the sale of used cars. Indeed, plaintiffs allege that Eltouby hired Estrada despite a public announcement from the Queens County District Attorney that Estrada had defrauded more than 23 consumers out of more than $115,000 with the promise that they could return to him to refinance their high interest loans after six months of timely payments. T: ¶ 80.

This aspect of plaintiffs’ motion should therefore be granted, and plaintiffs should be permitted to pursue their negligent hiring claims against NYMG and Mamdoh Eltouby.

1. Remaining Issues

Tuhin seeks to add a negligence claim against M&T Bank based on information he obtained after filing his complaint. Pls. Mem. at 24-25. Additionally, Tuhin, Gabrys, and Chowdhury seek leave to identify properly as Manufacturers and Traders Trust Company the entity they incorrectly sued as “M&T Bank Corporation.” Pls. Mem. at 24. M&T Bank has not submitted any opposition to either of these applications, and these aspects of plaintiffs’ motion should therefore be granted.

CONCLUSION

Plaintiffs’ motion for leave to amend their complaints is granted except with respect to those claims I recommend be dismissed. For all the reasons stated above, I respectfully recommend that defendants’ motions to dismiss be denied, except that the following claims be dismissed:

1) Plaintiffs’ RICO claims against M&T Bank;

2) Plaintiffs’ TILA claims for damages (but not rescission) against M&T Bank;

3) Plaintiff Tuhin’s Magnuson-Moss Warranty Act claim; and

4) Plaintiffs’ New York General Business Law claims against M&T Bank.

Any objections to the recommendations made in this Report must be filed within fourteen days of this Report and Recommendation and, in any event, on or before June 22, 2015. Failure to file timely objections may waive the right to appeal the District Court’s Order. See 28 U.S.C. § 636(b)(1); Fed. R. Civ. P. 72; Small v. Sec’y of Health & Human Servs., 892 F.2d 15, 16 (2d Cir. 1989).

[1] Unless otherwise indicated, all docket entry numbers listed in the text refer to docket entries in the first of these related cases to be filed, Alkhatib v. New York Motor Group, LLC, et al., 13-cv-2337.

[2] Defendants Santander Consumer USA and Capital One Auto Finance, Inc. have settled with plaintiffs and have not submitted any motions or briefing. Dealership defendants have not submitted any briefing on the pending motions in the Tuhin matter and did not submit a letter joining in the other arguments submitted by M&T Bank or by the dealership defendants in the other cases.

[3] Although NYMG does not oppose amendment or seek dismissal of plaintiffs’ non-RICO claims, individual defendants Mamdoh and Nada Eltouby challenge plaintiffs’ contention that they may be held personally liable on several of plaintiffs’ claims. NYMG Mem. at 14-15. Plaintiffs have indicated that they do not seek personal liability of these defendants on their claims under TILA, the New York Motor Vehicle Retail Installment Sales Act, New York General Business Law and New York’s usury law, or their common law claims for fraud, breach of contract or rescission. Pls. Reply at 23.

[4] Paragraphs from Alkhatib’s PAC, Docket Entry 73-1, are referred to herein as A: ¶ __. The PACs filed on behalf of the remaining plaintiffs, other than Tuhin, are similarly referenced: the Freire PAC, Docket Entry 73-2, as F: ¶ __; the Gabrys PAC, Docket Entry 73-3, as G: ¶ __; the Dong PAC, Docket Entry 73-4, as D: ¶ __; and the Chowdhury PAC, Docket Entry 73-5, as C: ¶ __. Tuhin submitted a revised PAC after oral argument together with a letter brief stating that all plaintiffs intend to file similarly revised proposed amended pleadings if permitted to do so. This Tuhin PAC, Docket Entry 70-1 in 13-cv-5643, is referenced as T: ¶ __. When a single complaint is cited, the Tuhin PAC is used because it is the most complete and most recently submitted complaint.

[5] Freire and Miriam Osario, an unmarried couple, are both named as plaintiffs, but there are no facts specifically involving Osario relevant to the pending motions.

[6] To establish a RICO conspiracy pursuant to Section 1962(d), a plaintiff must prove that a defendant entered into an agreement to form a RICO enterprise and violate RICO’s substantive provisions. See United States v. Applins, 637 F.3d. 59, 74 (2d Cir. 2011). Defendants do not raise any arguments directed specifically to plaintiffs’ RICO conspiracy claims, and I therefore do not separately address those claims here.

[7] Although the wording they use is slightly different, the other complaints include similar enterprise allegations. A: ¶ 105, F: ¶ 173, G: ¶ 178, D: ¶ 169, C: ¶ 180.

[8] The Alkhatib PAC appears to name the dealership entities as defendants alongside the natural persons in violation of Kushner. I do not dwell on this deficiency because, if leave to amend is granted, the Alkhatib Amended Complaint will be revised to conform to the most recent Tuhin PAC. This PAC, attached to the plaintiffs’ letter submitted after oral argument, names the defendants in a manner consistent with Kushner.

[9] Plaintiffs’ complaints define the relevant enterprise as comprised of M&T Bank and NYMG. M&T Bank of course participated in the conduct of the affairs of M&T Bank, and therefore may be said to have participated in the conduct of the affairs of the associated entities M&T Bank and NYMG. But Section 1962(c) requires that a defendant participate in the conduct of the affairs of an enterprise through a pattern of racketeering activity, and M&T Bank’s alleged role in the racketeering activity is too indirect to amount to participation in the conduct of the affairs of the M&T enterprise.

[10] These cases may be further distinguished by their reliance on the pleading standard that prevailed before Iqbal and Twombly were decided.

[11] Although M&T Bank moves to dismiss TILA claims brought by both Gabrys and Tuhin, Docket Entry 60 in 13cv-5643, M&T Bank addresses only Tuhin’s claim in its memorandum. As mentioned above, the dealership defendants have not submitted any motions in the Tuhin matter and NYMG does not move to dismiss Gabrys’ TILA claim. Docket Entry 79.

[12] NYMG has not moved to dismiss Tuhin’s MMWA claim. Because the deficiency in Tuhin’s claim identified by M&T Bank applies as well to NYMG, though, I conclude that his MMWA claim should be dismissed in its entirety.

[13] The total interest owed on Tuhin’s $10,000 loan would be $5,198.68 if amortized over five years at 16%. Similarly, the total interest owed on Gabrys’ $9,000 loan would be $3,827.91 if amortized over six years at 16%. The interest payments at 16% amount to only a fraction of each plaintiff’s agreed upon principal. Given that the fees, interest, and difference in principal on the RICs require the plaintiffs to pay a figure more than double the amounts financed, it is clear that the loans exceed 16%. As stated above, Chowdhury differs from Tuhin and Gabrys in that she did not orally agree to a multi-year loan and arranged for only $3,500 in financing. However, it is equally clear that the loan she received was usurious since the “amount financed” on the RIC, $14,911.99, is quadruple the amount she actually agreed to borrow.

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Agency Holding Corp v. Malley- Duff, 483 U.S. 143 (1987)
The Court determined that a 4 year statute of limitations applies to RICO claims.

___________________

AGENCY HOLDING CORP. ET AL.
v.
MALLEY-DUFF & ASSOCIATES, INC.

No. 86-497.

Supreme Court of United States.

Argued April 21, 1987

Decided June 22, 1987[*]
CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT
144*144 Robert L. Frantz argued the cause for petitioners in No. 86-531. With him on the briefs were Alexander Black and Daniel E. Wille. John H. Bingler, Jr., argued the cause for petitioners in No. 86-497. With him on the briefs was Michael R. Bucci, Jr.

Harry Woodruff Turner argued the cause for respondent in both cases. With him on the brief were David A. Borkovic and Stephen H. Kaufman.[†]

Briefs of amici curiae urging affirmance were filed for A. J. Cunningham Packing Corp. et al. by Michael D. Fishbein and Michael P. Malakoff; and for HMK Corporation by James G. Harrison, Lawrence D. Diehl, Robert A. Blackwood, and G. Robert Blakey.

JUSTICE O’CONNOR delivered the opinion of the Court.

At issue in these consolidated cases is the appropriate statute of limitations for civil enforcement actions under the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U. S. C. § 1964 (1982 ed. and Supp. III).

145*145 I

Petitioner Crown Life Insurance Company (Crown Life) is a Canadian corporation engaged in the business of selling life, health, and casualty insurance policies. Respondent Malley-Duff & Associates, Inc. (Malley-Duff), was an agent of Crown Life for a territory in the Pittsburgh area. Crown Life terminated Malley-Duff’s agency on February 13, 1978, after Malley-Duff failed to satisfy a production quota. This case is the second of two actions brought by Malley-Duff following that termination.

In April 1978, Malley-Duff filed its first suit (Malley-Duff I) against the petitioners in the United States District Court for the Western District of Pennsylvania, alleging violations of the federal antitrust laws and a state law claim for tortious interference with contract. See 734 F. 2d 133 (CA3 1984). Before the antitrust action was brought to trial, however, on March 20, 1981, Malley-Duff brought this action (Malley-Duff II) in the same court, alleging causes of action under RICO, 42 U. S. C. § 1985, and state civil conspiracy law. Initially, Malley-Duff II was consolidated with Malley-Duff I, but the two cases were severed before trial. Only the RICO claim of Malley-Duff II is at issue before this Court.

The RICO claim arose out of two alleged incidents. First, Malley-Duff alleges that Crown Life, together with several Crown Life employees and petitioner Agency Holding Corporation formed an enterprise whose purpose was to acquire by false and fraudulent means and pretenses various Crown Life agencies that had lucrative territories. This enterprise allegedly acquired Malley-Duff’s agency by imposing an impossibly high annual production quota on Malley-Duff nine months into fiscal year 1977 and then terminating the agency when Malley-Duff failed to meet this quota. Malley-Duff further alleges that the petitioners used a similar scheme to acquire Crown Life agencies in other cities. Second, Malley-Duff alleges that the petitioners obstructed justice during the course of discovery in Malley-Duff I.

146*146 On July 29, 1982, the petitioners filed a motion for summary judgment. The District Court granted this motion and entered judgment for the petitioners on all counts. The District Court dismissed Malley-Duff’s RICO claims on the ground that they were barred by Pennsylvania’s 2-year statute of limitations period for fraud, 42 Pa. Cons. Stat. § 5524(7) (1982), concluding that this was the best state law analogy for Malley-Duff’s claims. The Court of Appeals for the Third Circuit reversed. In its view, under Wilson v. Garcia, 471 U. S. 261 (1985), Pennsylvania’s “catchall” 6-year residual statute of limitations, § 5527, was the appropriate statute of limitations for all RICO claims arising in Pennsylvania. 792 F. 2d 341 (1986). We granted certiorari, 479 U. S. 983 (1986), to resolve the important question of the appropriate statute of limitations for civil enforcement actions brought under RICO.

II

As is sometimes the case with federal statutes, RICO does not provide an express statute of limitations for actions brought under its civil enforcement provision. Although it has been suggested that federal courts always should apply the state statute of limitations most analogous to each individual case whenever a federal statute is silent on the proper limitations period, see Wilson v. Garcia, supra, at 280 (dissent); DelCostello v. Teamsters, 462 U. S. 151, 174 (1983) (O’CONNOR, J., dissenting), a clear majority of the Court rejected such a single path. Instead, the Court has stated:

“In such situations we do not ordinarily assume that Congress intended that there be no time limit on actions at all; rather, our task is to `borrow’ the most suitable statute or other rule of timeliness from some other source. We have generally concluded that Congress intended that the courts apply the most closely analogous statute of limitations under state law. `The implied absorption of State statutes of limitation within the interstices of the federal enactments is a phase of fashioning 147*147 remedial details where Congress has not spoken but left matters for judicial determination within the general framework of familiar legal principles.’ ” DelCostello v. Teamsters, supra, at 158-159, quoting Holmberg v. Armbrecht, 327 U. S. 392, 395 (1946).

The characterization of a federal claim for purposes of selecting the appropriate statute of limitations is generally a question of federal law, Wilson v. Garcia, supra, at 269-270, and in determining the appropriate statute of limitations, the initial inquiry is whether all claims arising out of the federal statute “should be characterized in the same way, or whether they should be evaluated differently depending upon the varying factual circumstances and legal theories presented in each individual case.” 471 U. S., at 268. Once this characterization is made, the next inquiry is whether a federal or state statute of limitations should be used. We have held that the Rules of Decision Act, 28 U. S. C. § 1652, requires application of state statutes of limitations unless “a timeliness rule drawn from elsewhere in federal law should be applied.” DelCostello v. Teamsters, 462 U. S., at 159, n. 13; see also id., at 174, n. 1 (O’CONNOR, J., dissenting). Given our longstanding practice of borrowing state law, and the congressional awareness of this practice, we can generally assume that Congress intends by its silence that we borrow state law. In some limited circumstances, however, our characterization of a federal claim has led the Court to conclude that “state statutes of limitations can be unsatisfactory vehicles for the enforcement of federal law. In those instances, it may be inappropriate to conclude that Congress would choose to adopt state rules at odds with the purpose or operation of federal substantive law.” DelCostello v. Teamsters, supra, at 161. While the mere fact that state law fails to provide a perfect analogy to the federal cause of action is never itself sufficient to justify the use of a federal statute of limitations, in some circumstances the Court has found it 148*148 more appropriate to borrow limitation periods found in other federal, rather than state, statutes:

“[A]s the courts have often discovered, there is not always an obvious state-law choice for application to a given federal cause of action; yet resort to state law remains the norm for borrowing of limitations periods. Nevertheless, when a rule from elsewhere in federal law clearly provides a closer analogy than available state statutes, and when the federal policies at stake and the practicalities of litigation make that rule a significantly more appropriate vehicle for interstitial lawmaking, we have not hesitated to turn away from state law.” DelCostello v. Teamsters, supra, at 171-172.

See also Occidental Life Ins. Co. of Cal. v. EEOC, 432 U. S. 355 (1977) (adopting federal statute of limitations for Equal Employment Opportunity Commission enforcement actions); McAllister v. Magnolia Petroleum Co., 357 U. S. 221 (1958) (federal limitations period applied to unseaworthiness action under general admiralty law); Holmberg v. Armbrecht, supra (refusing to apply state limitations period to action to enforce federally created equitable right).

Federal courts have not adopted a consistent approach to the problem of selecting the most appropriate statute of limitations for civil RICO claims. Indeed, an American Bar Association task force described the current state of the law regarding the applicable statute of limitations for civil RICO claims as “confused, inconsistent, and unpredictable.” Report of the Ad Hoc Civil RICO Task Force of the ABA Section of Corporation, Banking and Business Law 391 (1985) (hereinafter ABA Report). Some courts have simply used the state limitations period most similar to the predicate offenses alleged in the particular RICO claim. See, e. g., Silverberg v. Thomson McKinnon Securities, Inc., 787 F. 2d 1079 (CA6 1986); Burns v. Ersek, 591 F. Supp. 837 (Minn. 1984). Others, such as the Court of Appeals in this case, have chosen a uniform statute of limitations applicable to all 149*149 civil RICO actions brought within a given State. See, e. g., Tellis v. United States Fidelity & Guaranty Co., 805 F. 2d 741 (CA7 1986); Compton v. Ide, 732 F. 2d 1429 (CA9 1984); Teltronics Services, Inc. v. Anaconda-Ericsson, Inc., 587 F. Supp. 724 (EDNY 1984). The courts, however, have uniformly looked to state statutes of limitations rather than a federal uniform statute of limitations. See ABA Report 387.

We agree with the Court of Appeals that, for reasons similar to those expressed in Wilson v. Garcia, 471 U. S., at 272-275, a uniform statute of limitations should be selected in RICO cases. As Judge Sloviter aptly observed:

“RICO is similar to [42 U. S. C.] § 1983 in that both `encompass numerous and diverse topics and subtopics.’ [Wilson v. Garcia, supra, at 273.] Many civil RICO actions have alleged wire and mail fraud as predicate acts, but 18 U. S. C. § 1961 defines `racketeering activity’ to include nine state law felonies and violations of over 25 federal statutes, including those prohibiting bribery, counterfeiting, embezzlement of pension funds, gambling offenses, obstruction of justice, interstate transportation of stolen property, and labor crimes.” A. J. Cunningham Packing Corp. v. Congress Financial Corp., 792 F. 2d 330, 337 (CA3 1986) (concurring in judgment).

Although the large majority of civil RICO complaints use mail fraud, wire fraud or securities fraud as the required predicate offenses, a not insignificant number of complaints allege criminal activity of a type generally associated with professional criminals such as arson, bribery, theft and political corruption. ABA Report 56-57. As the Court of Appeals noted, “[e]ven RICO claims based on `garden variety’ business disputes might be analogized to breach of contract, fraud, conversion, tortious interference with business relations, misappropriation of trade secrets, unfair competition, usury, disparagement, etc., with a multiplicity of applicable limitations periods.” 792 F. 2d, at 348. Moreover, RICO is designed to remedy injury caused by a pattern of racketeering, 150*150 and “[c]oncepts such as RICO `enterprise’ and `pattern of racketeering activity’ were simply unknown to common law.” Ibid.

Under these circumstances, therefore, as with § 1983, a uniform statute of limitations is required to avoid intolerable “uncertainty and time-consuming litigation.” Wilson v. Garcia, 471 U. S., at 272. This uncertainty has real-world consequences to both plaintiffs and defendants in RICO actions. “Plaintiffs may be denied their just remedy if they delay in filing their claims, having wrongly postulated that the courts would apply a longer statute. Defendants cannot calculate their contingent liabilities, not knowing with confidence when their delicts lie in repose.” Id., at 275, n. 34. It is not surprising, therefore, that the petitioners no less than the respondent support the adoption of a uniform statute of limitations. See Brief for Petitioners in No. 86-497, p. 17; Brief for Petitioners in No. 86-531, p. 12.

Unlike § 1983, however, we believe that it is a federal statute that offers the closest analogy to civil RICO. The Clayton Act, 38 Stat. 731, as amended, 15 U. S. C. § 15, offers a far closer analogy to RICO than any state law alternative. Even a cursory comparison of the two statutes reveals that the civil action provision of RICO was patterned after the Clayton Act. The Clayton Act provides:

“Any person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws may sue therefor in any district court of the United States . . . and shall recover threefold the damages by him sustained, and the cost of suit including a reasonable attorney’s fee.” 15 U. S. C. § 15(a).

RICO’s civil enforcement provision provides:

“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 and 151*151 the cost of the suit, including a reasonable attorney’s fee.” 18 U. S. C. § 1964(c).

Both RICO and the Clayton Act are designed to remedy economic injury by providing for the recovery of treble damages, costs, and attorney’s fees. Both statutes bring to bear the pressure of “private attorneys general” on a serious national problem for which public prosecutorial resources are deemed inadequate; the mechanism chosen to reach the objective in both the Clayton Act and RICO is the carrot of treble damages. Moreover, both statutes aim to compensate the same type of injury; each requires that a plaintiff show injury “in his business or property by reason of” a violation.

The close similarity of the two provisions is no accident. The “clearest current” in the legislative history of RICO “is the reliance on the Clayton Act model.” Sedima, S. P. R. L. v. Imrex Co., 473 U. S. 479, 489 (1985). As early as 1967, Senator Hruska had proposed bills that would use “the novel approach of adapting antitrust concepts to thwart organized crime.” ABA Report 78. As Senator Hruska explained:

“The antitrust laws now provide a well established vehicle for attacking anticompetitive activity of all kinds. They contain broad discovery provisions as well as civil and criminal sanctions. These extraordinarily broad and flexible remedies ought to be used more extensively against the `legitimate’ business activities of organized crime.” 113 Cong. Rec. 17999 (1967).

The American Bar Association’s Antitrust Section agreed that “[t]he time tested machinery of the antitrust laws contains several useful and workable features which are appropriate for use against organized crime,” including the use of treble-damages remedies. 115 Cong. Rec. 6995 (1969).

The use of an antitrust model for the development of remedies against organized crime was unquestionably at work when Congress later considered the bill that eventually became 152*152 RICO. That bill, introduced by Senators McClellan and Hruska in 1969, did not, in its initial form, include a private civil enforcement provision. Representative Steiger, however, proposed the addition of a private treble-damages action “similar to the private damage remedy found in the anti-trust laws.” Hearings on S. 30, and Related Proposals, before Subcommittee No. 5 of the House Committee on the Judiciary, 91st Cong., 2d Sess., 520 (1970). During these same hearings, the American Bar Association proposed an amendment “to include the additional civil remedy of authorizing private damage suits based upon the concept of Section 4 of the Clayton Act” that would adopt a treble-damages civil remedy. Id., at 543-544. The Committee approved the amendment, and the full House approved a bill that included the civil enforcement remedy. During the House debates, the bill’s sponsor described the civil enforcement remedy as “another example of the antitrust remedy being adapted for use against organized criminality,” 116 Cong. Rec. 35295 (1970), and Representative Steiger stated that he viewed the RICO civil enforcement remedy as a “parallel private. . . remed[y]” to the Clayton Act. Id., at 27739 (letter to House Judiciary Committee).

Together with the similarities in purpose and structure between RICO and the Clayton Act, the clear legislative intent to pattern RICO’s civil enforcement provision on the Clayton Act strongly counsels in favor of application of the 4-year statute of limitations used for Clayton Act claims. 15 U. S. C. § 15b. This is especially true given the lack of any satisfactory state law analogue to RICO. While “[t]he atrocities” that led Congress to enact 42 U. S. C. § 1983 “plainly sounded in tort,” Wilson v. Garcia, 471 U. S., at 277, there is no comparable single state law analogue to RICO. As noted above, the predicate acts that may establish racketeering activity under RICO are far ranging, and unlike § 1983, cannot be reduced to a single generic characterization. The Court of Appeals, therefore, selected Pennsylvania’s “catchall” 153*153 statute of limitations. In Wilson v. Garcia, supra, at 278, we rejected the use of a “catchall” statute of limitations because we concluded that it was unlikely that Congress would have intended such a statute of limitations to apply. Furthermore, not all States have a “catchall” statute of limitations, see ABA Report 391, and the absence of such a statute in some States “distinguishes the RICO choice from the § 1983 choice made in Wilson v. Garcia.” A. J. Cunningham Packing Corp. v. Congress Financial Corp., 792 F. 2d, at 339 (Sloviter, J., concurring in judgment). While we concluded in Wilson v. Garcia that characterization of all § 1983 actions as personal injury claims minimized the risk that the choice of a state limitations period “would not fairly serve the federal interests vindicated by § 1983,” 471 U. S., at 279, “a similar statement could not be made with confidence about RICO and state statutory `catch alls.’ ” A. J. Cunningham Packing Corp. v. Congress Financial Corp., 792 F. 2d, at 339. Any selection of a state statute of limitations in those States without a catchall statute would be wholly at odds with the Court of Appeals’ recognition of the sui generis nature of RICO. Ibid.

The federal policies at stake and the practicalities of litigation strongly suggest that the limitations period of the Clayton Act is a significantly more appropriate statute of limitations than any state limitations period. JUSTICE SCALIA recognizes that under his preferred approach to the question before us a federal statute “may be sufficient to pre-empt a state statute that discriminates against federal rights or is too short to permit the federal right to be vindicated.” Post, at 162. In our view the practicalities of RICO litigation present equally compelling reasons for federal pre-emption of otherwise available state statutes of limitations even under JUSTICE SCALIA’S approach. As this case itself illustrates, RICO cases commonly involve interstate transactions, and conceivably the statute of limitations of several States could govern any given RICO claim. Indeed, some nexus to interstate 154*154 or foreign commerce is required as a jurisdictional element of a civil RICO claim, 18 U. S. C. §§ 1962(b) and (c), and the heart of any RICO complaint is the allegation of a pattern of racketeering. Thus, predicate acts will often occur in several States. This is in marked contrast to the typical § 1983 suit, in which there need not be any nexus to interstate commerce, and which most commonly involves a dispute wholly within one State. The multistate nature of RICO indicates the desirability of a uniform federal statute of limitations. With the possibility of multiple state limitations, the use of state statutes would present the danger of forum shopping and, at the very least, would “virtually guarante[e]. . . complex and expensive litigation over what should be a straightforward matter.” ABA Report 392. Moreover, application of a uniform federal limitations period avoids the possibility of the application of unduly short state statutes of limitations that would thwart the legislative purpose of creating an effective remedy. Ibid.; see also DelCostello v. Teamsters, 462 U. S., at 166, 167-168 (concluding that the federal statute of limitations was appropriate because state limitation periods were too short).

The petitioners, however, suggest that the legislative history reveals that Congress specifically considered and rejected a uniform federal limitations period. The petitioners note that Representative Steiger offered a comprehensive amendment that, together with six other provisions, included a proposed 5-year statute of limitations. 116 Cong. Rec. 35346 (1970). Congress did not “reject” this proposal, however. Instead, Representative Steiger voluntarily withdrew the proposed amendment immediately after it was introduced so that it could be referred to the House Judiciary Committee for study. Id., at 35346-35347. The reason for the reference to the House Judiciary Committee had absolutely nothing to do with the proposed statute of limitations. Instead, the amendment had included yet another civil remedy, and Representative Poff observed that “prudence would dictate 155*155 that the Judiciary Committee very carefully explore the potential consequences that this new remedy might have.” Id., at 35346. Under these circumstances, we are unable to find any congressional intent opposing a uniform federal statute of limitations. The petitioners also point to the fact that a predecessor bill to RICO introduced by Senator Hruska, S. 1623, included a 4-year statute of limitations. 115 Cong. Rec. 6996 (1969). Senator Hruska, however, dropped his support for this bill in order to introduce with Senator McClellan the bill that eventually became RICO. See ABA Report 87. The reason that this new bill did not include a statute of limitations is simple, and in no way even remotely suggests the rejection of a uniform federal statute of limitations: the new bill included no private treble-damages remedy, and thus obviously had no need for a limitations period. Id., at 88. Finally, the petitioners cite the inclusion of a statute of limitations provision in S. 16, the Civil Remedies for Victims of Racketeering Activity and Theft Act of 1972, which would have amended § 1964 of RICO but was not enacted. 118 Cong. Rec. 29368 (1972). This proposed bill, however, was not focused on the addition of a statute of limitations. Instead, the purpose of the bill was to broaden even further the remedies available under RICO. In particular, it would have authorized the United States itself to sue for damages and to intervene in private damages actions, and it would have further permitted private actions for injunctive relief. Congress’ failure to enact this proposal, therefore, cannot be read as a rejection of a uniform federal statute of limitations.

We recognize that there is also available the 5-year statute of limitations for criminal prosecutions under RICO. See 18 U. S. C. § 3282. This statute of limitations, however, is the general “catchall” federal criminal statute of limitations. RICO itself includes no express statute of limitations for either civil or criminal remedies, and the 5-year statute of limitations applies to criminal RICO prosecutions only because 156*156 Congress has provided such a criminal limitations period when no other period is specified. Thus, the 5-year statute of limitations for criminal RICO actions does not reflect any congressional balancing of the competing equities unique to civil RICO actions or, indeed, any other federal civil remedy. In our view, therefore, the Clayton Act offers the better federal law analogy.

JUSTICE SCALIA accepts our conclusion that state statutes of limitations are inappropriate for civil RICO claims, but concludes that if state codes fail to furnish an appropriate limitations period, there is none to apply. Post, at 170. As this Court observed in Wilson v. Garcia, 471 U. S., at 271, however:

“A federal cause of action `brought at any distance of time’ would be `utterly repugnant to the genius of our laws.’ Adams v. Woods, 2 Cranch 336, 342 (1805). Just determinations of fact cannot be made when, because of the passage of time, the memories of witnesses have faded or evidence is lost. In compelling circumstances, even wrongdoers are entitled to assume that their sins may be forgotten.”

In sum, we conclude that there is a need for a uniform statute of limitations for civil RICO, that the Clayton Act clearly provides a far closer analogy than any available state statute, and that the federal policies that lie behind RICO and the practicalities of RICO litigation make the selection of the 4-year statute of limitations for Clayton Act actions, 15 U. S. C. § 15b, the most appropriate limitations period for RICO actions.

This litigation was filed on March 20, 1981, less than four years after the earliest time Malley-Duff’s RICO action could have accrued — i. e., the date of Malley-Duff’s termination on February 13, 1978. Accordingly the litigation was timely brought. Because it is clear that Malley-Duff’s RICO claims accrued within four years of the time the complaint was filed, 157*157 we have no occasion to decide the appropriate time of accrual for a RICO claim.

The judgment of the Court of Appeals is

Affirmed.

JUSTICE SCALIA, concurring in the judgment.

The Court today continues on the course adopted in DelCostello v. Teamsters, 462 U. S. 151 (1983), and concludes that although Congress has enacted no federal limitations period for civil actions for damages brought under the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U. S. C. § 1964 (1982 ed. and Supp. III), it will supply one by “borrowing” the 4-year statute of limitations applicable to suits under the Clayton Act. 15 U. S. C. § 15b. While at first glance it may seem a small step from the familiar practice of borrowing state statutes of limitations to today’s decision to borrow a federal one, in my view it turns out to be a giant leap into the realm of legislative judgments. I therefore cannot join the Court’s opinion.

I

The issue presented by this case cannot arise with respect to federal criminal statutes, as every federal offense is governed by an express limitations period. If no statute specifically defines a limitations period (or prescribes the absence of a limitations period, see 18 U. S. C. § 3281) for a particular offense, a “catchall” statute operates to forbid prosecution, trial, or punishment “unless the indictment is found or the information is instituted within five years next after such offense shall have been committed.” § 3282. Congress has not provided that kind of a default limitations period, however, for federal civil suits; and since it has long been enacting civil statutes without express limitations periods, courts have long been wrestling with the problem of determining what, if any, limitations periods to apply. Prior to DelCostello, the virtually uniform practice was to look to applicable state statutes of limitations. Indeed, we departed 158*158 from that practice only when the applicable state limitations period would have frustrated the policy of the federal statute, concluding that in such a case no limitations period governs the suit. See Occidental Life Ins. Co. of Cal. v. EEOC, 432 U. S. 355, 361, 366-372 (1977). Until DelCostello, we never responded to legislative silence by applying a limitations period drawn from a different federal statute.

To understand why this new practice differs from — and is less legitimate than — the practice of borrowing state statutes, it is necessary to understand the two-phase history through which the earlier practice developed. It is in turn essential to that understanding to recognize that certain common conceptions about the borrowing of state limitations statutes are mistaken. As Part I-A explains in more detail, the very label used to describe that practice — “borrowing” — is misleading. In its original form, during what I term the “first phase” of the borrowing doctrine, our practice of applying state law in reality involved no borrowing at all; rather, we applied state limitations periods to federal causes of action because we believed that those state statutes applied of their own force, unless pre-empted by federal law. In the “second phase” of our development of the borrowing doctrine, we approached the issue rather differently. Whereas we had originally focused on the federal statute creating the cause of action only for purposes of our pre-emption inquiry — i. e., in order to ascertain whether the otherwise applicable state statute of limitations conflicted with the federal statute’s terms or purposes — we later came to believe that the federal statute itself was the source of our obligation to apply state law. That is, instead of treating Congress’ silence on the limitations question as a failure to pre-empt state law, we came to treat it as an affirmative directive to borrow state law. In my view, that deviation from the “first phase” approach was an analytical error. It has led in turn to the further error the Court commits (or compounds) today in deciding to treat congressional silence as a directive to borrow a 159*159 limitations period from a different federal statute. Today’s error is by far the more serious of the two. As the history outlined above (and discussed in detail below) suggests, the borrowing of state statutes on the erroneous ground of congressional intent has a basis in, and to a reasonable degree approximates the results of, the approach that I think is correct as an original matter. The same cannot be said for the borrowing of federal statutes.

A

The analysis representing the “first phase” of the borrowing doctrine is exemplified by McCluny v. Silliman, 3 Pet. 270 (1830), the first case presenting the question of what limitations period, if any, applies to a claim having its source in federal law when federal law does not specify the applicable time limit. Plaintiff-in-error McCluny had sought to purchase land under a federal statute providing for the sale of lands owned by the United States, but the register, a federal officer, had refused his tendered payment. McCluny then brought an action for trespass on the case in the Circuit Court for the District of Ohio, arguing that the register had wrongfully withheld the land, causing him $50,000 in damages. The register prevailed below on the ground that the Ohio statute of limitations governing actions for trespass on the case barred plaintiff’s suit. McCluny argued that the Circuit Court had erred. The Ohio limitations statute, he contended, had no application in a suit brought in federal court against a federal officer for violation of a right conferred by an Act of Congress, not because Congress did not intend so (an issue raised by neither party to the dispute) but because the Ohio Legislature did not intend so. Id., at 270-274. We agreed with McCluny that the issue was whether the statute applied as a matter of Ohio law, see id., at 276 (“The decision in this cause depends upon the construction of the statute of Ohio”), but agreed with the register that under Ohio law, the statute applied. We reasoned that while it 160*160 was doubtless true that Ohio had not contemplated that its statute would govern such actions, by framing it to apply to all actions for trespass on the case the legislature had designed the statute to cover numerous torts not specifically within its contemplation. Id., at 277-278. At no point did we even question Ohio’s power to enact statutes of limitations applicable to federal rights, so long as Congress had not provided otherwise. Rather, we simply noted that it was “well settled” that such statutes are “the law of the forum, and operat[e] upon all who submit themselves to its jurisdiction.” Id., at 276-277. In the course of our opinion, we also mentioned the Rules of Decision Act, which provides:

“[T]he laws of the several states, except where the constitution, treaties, or statutes of the United States shall otherwise require or provide, shall be regarded as rules of decision in trials at common law in the courts of the United States in cases where they apply.” § 34, Judiciary Act of 1789, 1 Stat. 92, codified, as amended, at 28 U. S. C. § 1652.

But we discussed that statute not as the source of Ohio’s power, but as confirmation of it where “no special provision had been made by congress,” 3 Pet., at 277.

McCluny is an odd case to modern ears, because although a federal statute was clearly the source of McCluny’s claim of right, it did not expressly create his cause of action. Yet neither the parties nor the Court raised the question we would certainly ask today: whether the federal statute gave him an “implied right” to sue. Instead McCluny simply brought an action seeking a common-law writ of trespass on the case. That feature of the case leaves open the argument that our acceptance of Ohio’s power to pass limitations periods applicable to federal rights was based on the fact that the cause of action itself came from the common law rather than a federal statute.

That argument, however, was rejected in Campbell v. Haverhill, 155 U. S. 610 (1895), where we were faced with the 161*161 question whether to apply to a suit for patent infringement a Massachusetts statute of limitations requiring actions for tort to be brought within six years. In patent infringement suits, both the right and the cause of action were created by congressional legislation, and the federal courts had exclusive jurisdiction. Accordingly, it was argued that “the States, having no power to create the right or enforce the remedy, have no power to limit such remedy or to legislate in any manner with respect to the subject matter.” Id., at 615. We replied that “this is rather to assert a distinction than to point out a difference,” ibid., and that in the absence of congressional provision to the contrary, the States had the power to pass statutes of limitations that apply neutrally to federal rights, id., at 614-615, 618-620 (although they might not have the power to enact statutes that discriminated against federal rights or provided excessively short time periods for bringing suit, id., at 614-615).[1]

B

These early cases provide the foundation for a reasonably coherent theory about the application of state statutes of limitations to federal statutory causes of action. First, state statutes of limitations whose terms appear to cover federal statutory causes of action apply as a matter of state law to such claims, even though the state legislature that enacted the statutes did not have those claims in mind. McCluny, supra, at 277-278. Second, imposition of limitations periods on federal causes of action is within the States’ powers, if not pre-empted by Congress. Campbell v. Haverhill, supra, at 162*162 614-615, 618-620; McCluny, 3 Pet., at 276-277. Third, the obligation to apply state statutes of limitations does not spring from Congress’ intent in enacting the federal statute; rather, that intent is relevant only to the question whether the state limitations period had been pre-empted by Congress’ failure to provide one. Campbell v. Haverhill, supra, at 616. Fourth, congressional silence on the limitations issue is ordinarily insufficient to pre-empt state statutes; “special provision” by Congress is required to do that. Ibid.; McCluny, supra, at 277. Fifth, the federal statute — its substantive provisions rather than its mere silence — may be sufficient to pre-empt a state statute that discriminates against federal rights or is too short to permit the federal right to be vindicated. Campbell v. Haverhill, supra, at 614-615.

As to the role of the Rules of Decision Act: Although Campbell v. Haverhill in particular is not clear on the question, the Rules of Decision Act plays no role in deriving the first two principles stated above. It directs federal courts to follow state laws only “in cases where they apply,” which federal courts would be required to do even in the absence of the Act. That is clear not only from the borrowing cases, but also from other early opinions of this Court displaying the clear understanding that the Act did not make state laws applicable to any new classes of cases. See Hawkins v. Barney’s Lessee, 5 Pet. 457, 464 (1831) (the Rules of Decision Act “has been uniformly held to be no more than a declaration of what the law would have been without it: to wit, that the lex loci must be the governing rule of private right, under whatever jurisdiction private right comes to be examined”); Bank of Hamilton v. Dudley’s Lessee, 2 Pet. 492, 525-526 (1829) (“The laws of the states . . . would be . . . regarded [as rules of decision in the courts of the United States] independent of that special enactment”); Hill, The Erie Doctrine in Bankruptcy, 66 Harv. L. Rev. 1013, 1026, 1035 (1953); see also Jackson v. Chew, 12 Wheat. 153, 162 (1827) (holding that the Supreme Court would follow rules of property law settled 163*163 by state-court decisions without mentioning the Rules of Decision Act); Shelby v. Guy, 11 Wheat. 361, 367 (1826) (holding that the Court was required to follow state statutes and their construction by state courts because of its duty to administer the laws of the respective States, without mentioning the Rules of Decision Act). In fact, because the Act required application of future state laws as well as those in effect at the time of its passage, it would have been considered open to serious constitutional challenge as an improper delegation of congressional legislative power to the States had it been anything other than declaratory on that point. See Wayman v. Southard, 10 Wheat. 1, 47-48 (1825).

Thus, the Act changes the analysis of the question whether a federal court should look to state law only insofar as it provides the basis for the fourth principle. Its directive to federal courts to apply state law unless federal law otherwise “requires or provides” creates a presumption against implicit pre-emption which must be rebutted by affirmative congressional action, except for the implicit preclusion of state statutes that discriminate against federal claims or provide too short a limitations period to permit vindication of the federal right.

II

So understood, the borrowing doctrine involves no borrowing at all. Instead, it only requires us to engage in two everyday interpretive exercises: the determination of which state statute of limitations applies to a federal claim as a matter of state law, and the determination of whether the federal statute creating the cause of action pre-empts that state limitations period. We need not embark on a quest for an “appropriate” statute of limitations except to the limited extent that making those determinations may entail judgments as to which statute the State would believe “appropriate” and as to whether federal policy nevertheless makes that statute “inappropriate.” Finally, if we determine that the state limitations period that would apply under state law is pre-empted 164*164 because it is inconsistent with the federal statute, that is the end of the matter, and there is no limitation on the federal cause of action.

In my view, that is the best approach to the question before us, and if a different historical practice had not intervened I would adhere to it. See also DelCostello v. Teamsters, 462 U. S., at 172-174 (STEVENS, J., dissenting). For many years, however, we have used a different analysis. In the second phase of development of the borrowing doctrine, perhaps forgetting its origins, the Court adopted the view that we borrow the “appropriate” state statute of limitations when Congress fails to provide one because that is Congress’ directive, implied by its silence on the subject. See Automobile Workers v. Hoosier Cardinal Corp., 383 U. S. 696, 706 (1966); Holmberg v. Armbrecht, 327 U. S. 392, 395 (1946).[2] As an original matter, that is not a very plausible interpretation of congressional silence. If one did not believe that state limitations periods applied of their own force, the most natural intention to impute to a Congress that enacted no limitations period would be that it wished none. However, after a century and a half of the Court’s reacting to congressional silence by applying state statutes — first for the right 165*165 reason, then for the wrong one — by now at least it is reasonable to say that such a result is what Congress must expect, and hence intend, by its silence. The approach therefore has some legitimacy, and in any event generally produces the same results as the one I believe to be correct.[3]

III

As JUSTICE O’CONNOR pointed out in her dissent in DelCostello, however, if we are serious about this “congressional intent” justification for the borrowing doctrine, we should at least require some evidence of actual alternation of that intent before departing from it. See 462 U. S., at 174-175 (O’CONNOR, J., dissenting). For if the basis of the rule is, in some form, that Congress knows that we will borrow state statutes of limitations unless it directs otherwise, it also knows that it 166*166 has to direct otherwise if it wants us to do something else. In addition, as under our former approach, should we discover that there is no appropriate state statute to borrow, because all the available ones run afoul of federal policy, we ought to conclude that there is no limitations period.

In the case before us, however, the Court does not require any showing of actual congressional intent at all before departing from our practice of borrowing state statutes, prowling hungrily through the Statutes at Large for an appetizing federal limitations period, and pouncing on the Clayton Act. Of course, a showing of actual congressional intent that we depart from tradition and borrow a federal statute is quite impossible. Under ordinary principles of construction, the very identity between the language and structure of the Clayton Act’s and RICO’s private civil-remedy provisions relied on by the Court as arguments for borrowing 15 U. S. C. § 15b, would, when coupled with Congress’ enactment of a limitations period for the former and failure to enact one for the latter, demonstrate — if any intent to depart from the state borrowing rule — a desire for no limitations period at all. The same is suggested by the legislative history discussed by the Court, showing that Congress has passed up several opportunities to impose a federal limitations period on civil RICO claims, ante, at 154-155. The Court avoids the troublesome requirement of finding a congressional intent to depart from state borrowing by the simple expedient of reformulating the rule, transforming it from a presumption that congressional silence means that we should apply the appropriate state limitations period into a presumption that congressional silence means we should apply the appropriate limitations period, state or federal. I cannot go along with this, for two reasons.

First, I can find no legitimate source for the new rule. Whereas our prior practice provides some basis for arguing that when Congress creates a civil cause of action without a limitations period, it expects and intends application of an 167*167 appropriate state statute, there is no basis whatsoever for arguing that its silence signifies that the most appropriate statute, state or federal, should be borrowed. To the contrary, all available evidence indicates that when Congress intends a federal limitations period for a civil cause of action, it enacts one — for example, 15 U. S. C. § 15b itself. The possibility of borrowing a federal statute of limitations did not occur to any of the parties in this litigation until it was suggested by a concurring judge in the Court of Appeals, see 792 F. 2d 341, 356 (CA3 1986), and all of the Federal Courts of Appeals that have passed on the issue of the appropriate RICO limitations period have applied state statutes. See 792 F. 2d 341 (1986) (case below); Cullen v. Margiotta, 811 F. 2d 698 (CA2 1987); La Porte Construction Co. v. Bayshore National Bank, 805 F. 2d 1254 (CA5 1986); Silverberg v. Thomson McKinnon Securities, Inc., 787 F. 2d 1079 (CA6 1986); Tellis v. United States Fidelity & Guaranty Co., 805 F. 2d 741 (CA7 1986); Alexander v. Perkin Elmer Corp., 729 F. 2d 576 (CA8 1984); Compton v. Ide, 732 F. 2d 1429 (CA9 1984); Hunt v. American Bank & Trust Co., 783 F. 2d 1011 (CA11 1986). It is extremely unlikely that Congress expected anything different. Moreover, had our prior rule been that a federal statute should be borrowed if appropriate, the considerations the Court advances as to why that is the right course here — that it will promote uniformity and avoid litigation, and that there are differences between the federal action and the actions covered by state statutes — would have been sufficient to warrant selection of a federal limitations period for almost any federal statute, a conclusion plainly inconsistent with the results of our cases.[4]

168*168 Second, as the case before us demonstrates, the new rule involves us in a very different kind of enterprise from that required when we borrow state law. In general, the type of decision we face in the latter context is how to choose among various statutes of limitations, each of which was intended by the state legislature to apply to a whole category of causes of action. Federal statutes of limitations, on the other hand, are almost invariably tied to specific causes of action. The first consequence of this distinction is that in practice the inquiry as to which state statute to select will be very close to the traditional kind of classification question courts deal with all the time. Thus, for example, if a federal statute creates a cause of action that has elements of tort and contract, we may frame the question of which statute to apply as whether it is more “appropriate” to apply the State’s tort or contract limitations period. In reality, however, rather than examine whether the policies of the federal statute are better served by one limitations period than the other, we will generally answer 169*169 that question by determining whether the federal cause of action should be classified as sounding in tort or contract. See, e. g., Goodman v. Lukens Steel Co., 482 U. S. 656, 662 (1987) (42 U. S. C. § 1981 actions sound in tort); id., at 670 (BRENNAN, J., dissenting) (§ 1981 actions sound in contract). In deciding whether to borrow a federal statute that clearly does not apply by its terms, however, we genuinely will have to determine whether, for example, the Clayton Act’s limitations period will better serve the policies underlying civil actions under RICO than the limitations period covering criminal actions under RICO, or whether either will do the job better than state limitations upon actions for economic injury. That seems to me to be quintessentially the kind of judgment to be made by a legislature. See generally Wilcox v. Fitch, 20 Johns. *472, *475 (N. Y. 1823) (limitations are creatures of statute, and did not exist at common law); Wall v. Robson, 2 Nott & McCord 498, 499 (S. C. 1820) (same); 2 E. Coke, Institutes 95 (6the ed. 1680).

The second consequence of the generality of state statutes of limitations versus the particularity of federal ones is that in applying a state statute, we do not really have to make a new legislative judgment. The state legislature will already have made the judgment that, for example, in contract actions, a certain balance should be struck between “protecting valid claims . . . [and] prohibiting the prosecution of stale ones.” Johnson v. Railway Express Agency, 421 U. S. 454, 464 (1975). That judgment will have been made in the knowledge that it will apply to a broad range of contractual matters, some of which the legislature has not specifically contemplated. That is not true of a federal statute enacted with reference to a particular cause of action, such as the one for the Clayton Act. The Court is clearly aware of this difficulty. It declines to apply 18 U. S. C. § 3282, the general 5-year criminal statute of limitations, on the ground that it “does not reflect any congressional balancing of the competing equities unique to civil RICO actions.” Ante, at 156. 170*170 That objection should also, however, lead it to reject a 4-year limitations period, which clearly reflects only the balance of equities Congress deemed appropriate to the Clayton Act.

* * *

Thus, while I can accept the reasons the Court gives for refusing to apply state statutes of limitations to the civil RICO claim at issue here, ante, at 152-154, they lead me to a very different conclusion from that reached by the Court. I would hold that if state codes do not furnish an “appropriate” limitations period, there is none to apply. Such an approach would promote uniformity as effectively as the borrowing of a federal statute, and would do a better job of avoiding litigation over limitations issues than the Court’s approach. That was the view we took in Occidental Life Ins. Co. of Cal. v. EEOC, 432 U. S. 355 (1977), as to Title VII civil enforcement actions, unmoved by the fear that that conclusion might prove ” ` “repugnant to the genius of our laws.” ‘ ” Ante, at 156, quoting Wilson v. Garcia, 471 U. S. 261, 271 (1985), in turn quoting Adams v. Woods, 2 Cranch 336, 342 (1805).[5] See also 18 U. S. C. § 3281 (no limitations period for federal capital offenses). Indeed, it might even prompt Congress to enact a limitations period that it believes “appropriate,” a judgment far more within its competence than ours.

[*] Together with No. 86-531, Crown Life Insurance Co. et al. v. Malley-Duff & Associates, Inc., also on certiorari to the same court.

[†] David P. Bruton and Eric A. Schaffer filed a brief for Congress Financial Corporation et al. as amici curiae urging reversal.

[1] Although the opinion states that the Rules of Decision Act requires us to apply state statutes, 155 U. S., at 614, and therefore appears to suggest that the Act rather than the state laws themselves was the source of our obligation to do so, a careful reading of the opinion belies that interpretation. Because the Act directs the federal courts to regard state laws as rules of decision only “in cases where they apply,” the parties and the Court treated the questions of the applicability of the Act and the applicability of state law of its own force as interchangeable.

[2] Thus, although we did not squarely reject our earlier approach until DelCostello v. Teamsters, 462 U. S. 151 (1983), the Court correctly argued in that case that our way of analyzing the issue had changed before then. Id., at 159-160, n. 13. Contrary to the DelCostello Court’s claim, however, neither our decision in Erie R. Co. v. Tompkins, 304 U. S. 64 (1938), nor the Rules of Decision Act scholarship underlying it in any way required that change. Neither remotely established that that statute applies only in diversity cases. See Hill, The Erie Doctrine in Bankruptcy, 66 Harv. L. Rev. 1013, 1033-1034 (1953); see also DelCostello v. Teamsters, supra, at 173, n. 1 (STEVENS, J., dissenting) (noting that ” `the [Act] itself neither contains nor suggests . . . a distinction’ ” between diversity and federal-question cases, quoting Campbell v. Haverhill, 155 U. S. 610, 616 (1895)); Friendly, In Praise of Erie — And of the New Federal Common Law, 39 N. Y. U. L. Rev. 383, 408, n. 122 (1964) (characterizing the view that Erie requires application of state law only in diversity cases as an “oftencountered heresy”).

[3] It need not always produce the same results, because the implicit directive attributed to Congress is not (as the old approach provided) that the courts apply the statute of limitations that the State deemed appropriate, but rather that the courts instead determine which state limitations period will best serve the policies of the federal statute. See, e. g., Automobile Workers v. Hoosier Cardinal Corp., 383 U. S. 696, 706 (1966); cf. Wilson v. Garcia, 471 U. S. 261, 268-269 (1985). Imagine, for example, a federal statute with no limitations period creating a cause of action in favor of handicapped persons discriminated against in the making of contracts. If a State had two statutes of limitations, one covering tortious personal injury, and one covering tortious economic injury, under the old approach the question would have been whether the federal statutory cause of action was an action for personal or economic injury. Under the new approach the question, at least in theory, is whether application of the personal injury or economic injury statute best serves the policies of the federal Act.

Second, even before conducting pre-emption analysis, the old approach can lead to the conclusion that state law supplies no statute of limitations. For example, that would be true in the case of our hypothetical federal statute if a State had limitations periods only for assault and battery. The new approach, however, should never lead to that conclusion, because we have already made the determination that federal law directs us to borrow some limitations period, and the only question is which one.

In fact, however, our analysis under the new approach has not been ruthlessly faithful to its logic, so that it has turned out in practice to be almost indistinguishable from the old approach. See infra, at 168-169.

[4] Even DelCostello does not fully support the Court’s reformulation in the present opinion. It specifically noted that “our holding today should not be taken as a departure from prior practice in borrowing limitations periods for federal causes of action” and that it did “not mean to suggest that federal courts should eschew use of state limitations periods anytime state law fails to provide a perfect analogy.” 462 U. S., at 171. It also involved borrowing a federal statute that was arguably applicable by its own terms. Id., at 170. In any event, to the extent our decision here rests on our interpretation of congressional intent, the Court’s conclusion in that case that Congress intended § 10(b) of the National Labor Relations Act, 29 U. S. C. § 160(b), to be borrowed for suits claiming breach of the duty of fair representation tells us nothing as to what Congress intended in enacting RICO.

Because we claimed in DelCostello not to have abandoned our prior practice, that decision did not place Congress on notice that henceforth we would interpret its silence as a directive to borrow federal statutes of limitations. Any decision that the lower federal courts, whose regular task involves interpreting our opinions, did not understand to have worked a change in the law, see supra, at 167, is certainly not clear enough to form the basis for a presumption that Congress’ expectations were transformed. In any event, even if that decision had announced a general change of approach, to which it could be expected that Congress would adapt, it would only be appropriate to make the assumption that it had done so with respect to statutes passed after the decision came down. RICO was passed in 1970, well before our opinion in DelCostello. Pub. L. 91-452, 84 Stat. 943, 18 U. S. C. § 1963.

[5] In Adams v. Woods, that argument was advanced not as a reason why the Court should apply a clearly inapplicable statute of limitations, but as a reason why it should interpret an arguably ambiguous one to apply to the claim at issue. 2 Cranch, at 341-342.