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United States District Court, S.D. New York.

Thomas ZITO et aI., Plaintiffs, v. LEASECOMM CORPORATION, Microfinancial Incorporated, Cardservice International, Inc., E-Commerce Exchange, Inc., On -Line Exchange, Richard Karn Wilson a/kJa Richard Karn, Patrick Rettew, Peter R. Von Bleyleben, Richard F. Latour, Carol Salvo, Paul Schneider, Medtrak Corporation, Charles Burtzloff aIk/a Chuck Burtzloff, John Doe and Eddy Roe, the last two being ficitious names, the real names of said Defendants being presently unknown to Plaintiffs, said fictitious names being intended to designate persons who are acting in concert with the Defendants, Defendants.

No. 02 Civ.8074 GEL.

Sept. 30, 2004.

John C. Klotz, New York, NY, for Plaintiffs Thomas Zito et al.

Andrew P. Fishkin, Charles W. Stotter, Edwards & Angell, LLP, New York, NY, for Defendants Leasecomm Corporation, Microfinancial, Incorporated, Peter R. Von Bleyleben, Richard F. Latour, and Carol Salvo.

Steven M. Bierman, James D. Arden, Mark E. Walli, Sidley Austin Brown & Wood, LLP, New York, NY; Richard J. Grad, Jennifer Altfeld Landau, Sidley Austin Brown & Wood, LLP, Los Angeles, CA, for Defendant Cardservice International, Inc.

Kenneth King, Jason Chue, Patterson, Belknap, Webb & Tyler LLP, New York, NY, for Defendant ECommerce Exchange, Inc.

James A. Saville, Jr., Hill Rivkins & Hayden LLP, New York, NY, for Defendants On-Line Exchange and Paul Schneider.

Kevin S. Reed, Quinn Emanuel Urquhart Oliver & Hedges, LLP, New York, NY, for Defendant Richard Karn Wilson.

Martin Glenn, John T. Hammer, O'Melveny & Myers LLP, New York, NY, for Defendant Charles Burtzloff.

OPINION AND ORDER

LYNCH,J.

In this civil RICO action, numerous plaintiffs sue Leasecomm Corporation and its parent Microfinancial Inc.

("MFI"), three of its officers (Peter R. Von Bleyleben, Richard F. Latour, and Carol Salvo) (the "MFI Officers"), three of its alleged "dealers and vendors" (Compl._ 39) (Cardservice International, E!,Commerce Exchange, and On-line Exchange), and several shareholders of those or other dealers (Patrick Rettew and Richard Karn Wilson, shareholders

of non-defendant Themeware, Inc.; Medtrak Corporation, a shareholder of defendant On-Line Exchange; and Paul Schneider, the principal shareholder of Medtrak), for damages arising from alleged fraudulent schemes involving the

leasing of e-commerce services and products. On defendants' motion, the original complaint was dismissed in September 2003 for failure to state a claim, with leave to replead. See Zito v. Leasecomm Corp., No. 02 Civ. 8074, 2003 WL 22251352 (S.D.N.Y. Sept. 30, 2003) ("Zito 1"). Plaintiffs filed an Amended Complaint in November 2003.

All defendants except Rettew md Medtrak (who have not responded to the complaint) have once again moved to

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dismiss for failure to state claim under the Racketeer Influenced and Corrupt Organizations statute, commonly known

as "RICO." 18 U .S.C. § § 1961-1964. They also challenge the sufficiency of plaintiffs' state law claims. Finally, defendants Karn, On-line Exchange, and Schneider argue for dismissal based on lack of in personam jurisdiction. In response, plaintiffs have once again sought leave to amend the complaint. Defendants' motions will be granted in part and denied in part; plaintiffs' motion to amend will be granted in part.

BACKGROUND

The facts summarized below are taken from the Amended Complaint, the allegations of which must be assumed true for purposes cf these motions to dismiss. The crux of the Amended Complaint is that Leasecomm formed an enterprise with various dealers who used unscrupulous and deceptive marketing tactics to lure unsuspecting victims into signing contracts with Leasecomm. These contracts contained unconscionable terms that allowed members of the enterprise to "reap unconscionable profits" through extreme collection tactics. (__ 73-- 74, 122--147.)

These central allegations have not changed significantly from those outlined in plaintiffs' original complaint.

However, in response to the Court's Opinion in Zito I, plaintiffs have attempted to clarify the various schemes alleged, which predicate acts were committed in furtherance of which of them, and by which defendants. Toward this end, plaintiffs have described what they refer to as the "Master Scheme" of the Leasecomm enterprise, as well as various "Implementing Schemes."

I. The Leasecomm Enterprise

A. General Purpose of Enterprise

MFI is a "financial intermediary" which "finances activities of third parties through various contracts and legal arrangements which it calls leases." (_ 45.) MFI conducts "almost all" of its business through defendant Leasecomm. (Id.) Prior to 1998, MFIILeasecomm was engaged in the business of leasing or financing the purchase of "tangible business machine products including credit P_S [point of sale] swipe machines." (_ 57.) Those products were actually marketed by other entities, including defendant Cardservice International ("Cardservice"). (d.) In 1998, MFIILeasecomm began a program in which it began to lease e-commerce services, "such as web sites, P_S software,

and merchant accounts." (__ 48,58.) These products were marketed "as a part of proffered business ventures" by, among others, defendants ECommerce Exchange ("ECX"), Cardservice, and On-line Exchange ("OX"). (_ 59.) MFI/Leasecomm entered into "strategic alliances" with these entities, which plaintiffs refer to alternately as MFI/Leascomm's "dealers" or "the Leasecomm Associates." (__ 32,54--55.)

The Amended Complaint, like the original complaint, focuses on two kinds of conduct by the defendants. The first is the deceptive marketing practices of the MFI/Leasecomm dealers, who plaintiffs allege used deceptive advertising, misrepresentations, and unfair "bait and switch" tactics to corral vulnerable customers into leasing their overpriced and ineffective products. The dealers, however, did not themselves execute the lease agreements with the customers; rather, by prior arrangement with MFIILeasecomm, they had the customers sign a form contract provided by

MFIILeasecomm, which MFI/Leasecomm later executed. The contracts executing these leases were non-negotiable and contained numerous deceptive terms, which the dealers are alleged to have concealed or misrepresented. The

second type of conduct is the aggressive, and allegedly fraudulent and extortionate, enforcement tactics subsequently used by MFIILeasecomm against defaulting lessees --tactics enabled in part by the leases' allegedly one-sided, unconscionable terms. These collection tactics formed a central and publicly acknowledged part of MFI/Leasecomm's business plan that "distinguish[ ed] MFI from its competitors and other leasing companies." (__ 122-124.)

The complaint alleges that the dealers and MFIILeasecomm constituted a single "enterprise" by virtue of an arrangement between the dealers and MFIILeasecomm under which the dealers would market Leasecomm products

through various "heavy-handed, high-powered mass marketing" techniques, in exchange for a one-time payment of between forty and sixty percent of the face value of the leases from MFI/Leasecomm, while Leasecomm would finance these marketing efforts and the cost of the products offered. (__ 45-70.)

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B. Master Scheme and Leasecomm Leases

The form-lease that customers were asked to sign in purchasing products financed by Leasecomm leases 5 headed "Non Cancellable Lease Agreement" and states, in bold capitals, that "NEITHER SUPPLIER NOR ANY SALESPERSON IS AN AGENT OF LESSOR NOR ARE THEY AUTHORIZED TO WAIVE OR ALTER THE TERMS OF THIS LEASE." (Am.CompLEx. C.) Yet the dealer defendants, according to the complaint, regularly told customers that "the contracts were cancelable." (, 112(h).) The complaint alleges that the dealer defendants pressured plaintiffs to sign the leases using illusory inducements such as "waiver of usual fees and rebate coupons for the usual fees ." (, 113 & Ex. E.)

The lease includes a space for filling in the lessee's bank account information to permit automatic withdrawals. (Am.CompLEx. C.) In smaller type, the lease permits Leasecomm not only to automatically debit the lease charges, but also to charge an additional $5.00 per month if it becomes "necessary to switch to statement billing due to insufficient funds," to continue the lease on a month-to-month basis if the lessee fails to notifY Leasecomm sixty days

prior to its expiration that he or she opts to terminate the lease, to charge a late fee of fifteen percent of any amount past due, and to charge collection costs (including charges for collection letters and phone calls). (/d.) The lease states that lessee "fully recognize[s] [Leasecomm's] right to enforce the lease free from any defenses, offsets [or]

counterclaims," that lessee has not received any express or implied warranties for the products leased, and has "unconditionally waive[d] any claims ... against Leasecomm." It also provides for "the exclusive jurisdiction of the Courts of ... Massachusetts" and waives "any objection to venue" there. (fd.) Plaintiffs allege improprieties in the execution of the leases, including forging of some lessees' signatures, the use of "witnesses" who did not in fact witness lessees' signatures, failure to fill out essential terms of the lease, and failure to provide copies of leases to lessees. (" 112, 117.)

Finally, plaintiffs allege that Leasecomm used extortionate means to collect on the leases, such as

insulting, harassing, and intentionally harmful rhetoric including disparaging personal remarks, embarrassing messages left with third parties about sending debtors to jail, taunting debtors about their credit and threatening to destroy their credit unless payment was made without objection for each and every charge including unjustified credit fee charges.

(, 133.) They allege that Leasecomm made unauthorized withdrawals from plaintiffs' bank accounts and that

Leasecomm inflated its charges by (I) making "frequent, duplicative contacts" such as multiple collection calls on the

same day, and then "charging for each contact" (, 136 & Ex. H), and (2) presenting bad checks for payment multiple times on the same day, (, 137). Plaintiffs also allege that Leasecomm "obtained thousands of default judgements [sic ] in Massachusetts and ... sought enforcement of the same." (, 139.) The complaint includes a financial presentation made by MFI at an investor conference touting the centrality of its "persistent and innovative collection effort" to its business plan. (Am.CompLEx. D.)

C./mplementing Schemes

I. The Internet Tool Box Scheme: Themeware, Cardservice, and the "Karn Infomercial"

Plaintiffs have outlined several "implementing schemes" that they claim were used to further the master enterprise of

luring unsuspecting victims into signing Leasecomm leases. The most involved of these, and the one outlined in the most detail, is the "Internet Tool Box" scheme (the "ITS" scheme). This campaign was conducted by non-defendant Themeware, whose shareholders include defendants Richard Karn Wilson (generally referred to in the complaint, and therefore in this Opinion, as "Karn") and Patrick Rettew. Karn is also described as Themeware's "principal

spokesman." (, 21.)

In 1997, Themeware began marketing, through a television "infomercial" hosted by Karn, a group of products sold together, called the "Internet Tool Box," at a price of $49.95. (, _ 167-182.) The infomercial referred to the product as the "Internet Business Tool Box," and led the viewer "to believe that [it] contained software and services worth as much as $800" which would "give them the facility to accept credit cards on their web pages" and enable them to "get

[ ] onto the web in thirty minutes and mak[e] money instantly." (_, 189.) It promised a "30 day money back guarantee." (/d.) The Tool Box actually consisted of items "many of [which] were readily available for no or nominal charge." (_ 189(c).) It did not permit purchasers to accept credit cards on their web pages without purchasing

additional services from Cardservice "at costs of many thousands of dollars." (_ 189(t).) Furthermore, the internet connection provided as part of the Tool Box software "specifically stated it was for non-commercial use[ ]." (_ 189(h).) The Tool Box infomercial was widely broadcast as a part of the Leasecomm Enterprise's "bait and switch" tactics to lure customers into purchasing ineffective and overpriced products, and lock them into Leasecomm contracts. (__ 186--187.)

2. Other Implementing Schemes

Plaintiffs describe various other "implementing schemes" carried out by various defendants in furtherance of the Master Scheme, detailing the manner in which each defendant marketed Leasecomm contracts. Briefly, these are as follows:

a. Cardservice

Plaintiffs allege that it was Cardservice's practice to "make telephone marketing calls to individuals in order to induce them to purchase both virtual terminals financed by Leasecomm and merchant accounts from Cardservice." (_ 199.) In those calls, "it was represented that the goods and services being sold were fit and appropriate for use by the

customers and that the contracts could be cancelled if the customer was dissatisfied." (_ 200.) When a customer expressed interest, Cardservice would send them a "slick brochure" making various representations about the company that plaintiffs allege are false, and would subject them to "persistent, high-pressure telemarketing harangues that continued to falsely promise money back guarantees and concealed and obfuscated the unfair and deceptive

provisions of the Leasecomm contract." (__ 204--208.)

Cardservice also marketed products financed by Leasecomm contracts at "business opportunity seminars and

conferences," which were themselves advertised by infomercials. (__ 210, 215.) At these conferences, Cardservice representatives would make product presentations, introduced by conference "trainers" as offering a "special opportunity" for web-based businesses. (__ 217--218.) Using high-pressure tactics, they would push Cardservice products that "could not be purchased unless other products financed by Leasecomm contracts were purchased." (__ 219--220.) The same representations were made that the contracts for these products were cancelable, and "the unfair and deceptive provisions ofthe Leasecomm contract were concealed." (_ 222.)

b. "ECX/OX Scheme" and "ECX Seminar Scheme"

The iITplementing scheme allegedly executed by ECX, OX (which is controlled by Medtrak), and non-defendant National Entrepreneur Support Association ("NESA"), is somewhat more complicated. Plaintiffs allege that in 1999, ECX and Leasecomm entered a "strategic alliance" whereby Leasecomm agreed to finance the sale ofECX's products,

which primarily consisted of "merchant accounts and related services." (__ 224,231.) ECX, Medtrack, and Schneider agreed that ECX would in turn finance OX to sell its merchant accounts. (_ 225.) OX then hired non-defendant NESA

to market these merchant accounts; this it did primarily through the circulation of a videotape of a seminar conducted in January 2000, which was itself promoted by a direct-mail campaign. (__ 229, 230, 233.) The products offered in

the video consisted of "distributorships" which granted "exclusive territories" to purchasers of ECX merchant accounts. (_ 233(t).) Those who purchased this option would be entitled to training and "commissions on all business OX did in the distributor's area" as well as the benefit of "extensive" marketing, through infomercials and other promotional activities. (_ 233(f}m.).

The video was allegedly deceptive in that it promised that distributors could, with minimal time commitment, skills, or risk, earn a "positive cash flow" (_ 223(b» and revenues in the "hundreds of thousands [of] dollars." (_ 223(e).) The investment necessary was "either $1450 for a one time payment or $89.95 a month for four years." (_ 223(e).) These payments were to be made to Leasecomm, under the same form-lease that was used in the Master Scheme. Those who received the video were allegedly subjected to the same "high-pressure" sales calls which made the same false representations about the nature of the Leasecomm contracts. (_ 235.)

ECX is also alleged to have "sponsored or participated in business opportunity seminars and conferences at which it sold products financed by Leasecomm contracts." (_ 237.) Like the Cardservice Seminar Scheme, the ECX seminars involved a "vendor of ECX products" presenting a "special business opportunity" and using high-pressure tactics to

close the deal, while giving false assurances that the contracts were cancellable and concealing their unfair provisions.

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(" 239--240.) While plaintiffs allege generally that they were "caused to purchase over-valued defective goods and services" by the ECX seminars (, 241), they do not aIlege describe specific defects or identify particular false representations about the products, as they do with respect to Cardservice. [FN 1]

FNI. Under the heading "Miscellaneous Schemes," plaintiffs also assert a vague allegation of "numerous other sub-schemes by dozens of other dealers who user ] ... similar misrepresentations and obfuscation to sell their products." (, 242.) This appears to be an effort to assert future, unspecified claims against additional defendants. Taken alone, this allegation is insufficient, as it fails to specify the identities of the entities involved or the nature of these purported schemes. Of course any effort to add defendants would at this point require the approval of the Court. See infra Part V.B. However, the insufficiency is immaterial to the present motions in all other respects in light of the finding that plaintiffs more particular allegations against the individual defendants are sufficient to survive the motions to dismiss.

DISCUSSION

l. Legal Standards

A. Dismissal under Rule 12(b)(6)

On a motion to dismiss under Fed.R.Civ.P. 12(b)(6), the Court must accept "as true the facts alleged in the

complaint," Jackson Natrl Life Ins. Co. v. Merrill Lynch & Co., 32 F.3d 697, 699--700 (2d Cir.1994), and may grant the motion only if "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Thomas v.. City of New York, 143 F.3d 31,36 (2d Cir.1998) (citations omitted); see also

Bernheim v. Litt, 79 F.3d 318, 321 (2d Cir.1996) (when adjudicating motion to dismiss under Fed.R.Civ.P. 12(b)(6), the "issue is not whether a plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to

support the claims" (internal quotation marks and citations omitted)). When deciding a motion to dismiss pursuant to Rule 12(b)(6), the Court may consider documents attached to the complaint as exhibits or incorporated in it by reference. Brass v. Am. Film Techs., Inc., 987 F.2d 142, 150 (2d Cir.1993). All reasonable inferences are to be drawn in the plaintiffs favor, which often makes it "difficult to resolve [certain questions] as a matter of law." In re Independent Energy Holdings PLC, 154 F.Supp.2d 741, 748 (S.D.N.Y.2001).

B. Civil RICO

Plaintiffs RICO claim, the only federal claim and therefore the basis of federal jurisdiction for the case, is based on 18 U.S.C. § 1962(c), which makes it unlawful for "any person employed by or associated with any [interstate]

enterprise ... to conduct or participate, directly or indirectly, in the conduct of such enterprise's affairs through a pattern of racketeering activity," and 18 U.S.c. § 1962(d), which penalizes conspiracy to violate, inter alia, § 1962(c).

In order to state a substantive cause of action under § 1962(c), the plaintiff must allege that a defendant engaged in "(I) conduct, (2) of an enterprise, (3) through a pattern (4) of racketeering activity" (5) resulting in (6) injury to business or property. Anatian v. Coutts Bank (Switzerland) Ltd., 193 F.3d 85, 89 (2d Cir. I 999), quoting Sedima. S.P.R.L. v. 1m rex Co., 473 U.S. 479, 496 (1985).

A RICO "enterprise" can be "any individual, partnership, corporation, association, or other legal entity, [or] any union or group of individuals associated in fact although not a legal entity." 18 U .S.c. § 1961 (4). The enterprise cannot, however, be the very defendant that is itself charged with being the "person ... associated with" and "participat[ing] in the conduct of' the enterprise; that is, the enterprise must be distinct from each of the "persons" conducting it. Riverwoods Chappaqua CO/po v. Marine Midland Bank, N.A., 30 F.3d 339, 343--44 (2d Cir.1994). Here, plaintiffs allege an "association in fact" consisting ofThemeware, Cardservice, OX, ECX, and MFI/Leasecomm.

The "pattern of racketeering activity" must consist of at least two "predicate acts" of racketeering activity within ten years, § 1961 (5), where the "acts" are certain violations of state or federal law as set forth in § 1961 (I). Plaintiffs here allege predicate acts consisting of wire fraud, 18 U.S.c. § 1343, mail fraud, 18 U.S.c. § 1341, and violations of

the Hobbs Act, 18 U.S.c. § 1951. ("          325--332.)

In order to demonstrate that defendants "conduct[ed] or participate[d], directly or indirectly, in the conduct of' an enterprise, plaintiffs must allege more than mere participation in the enterprise, since to "conduct" the affairs of an enterprise "one must have some part in directing those affairs." Reves v. Ernst & Young, 507 U.S. 170, 179 (1993). Plaintiffs must therefore allege facts indicating that each defendant participated in the management of the enterprise. [d. The plaintiff must allege facts supporting an inference that each defendant "was aware of the general nature of the conspiracy and that the conspiracy extended beyond the defendant's individual role." United States v. Zichettello, 208 F.3d 72, 100 (2d Cir.2000) (quoting trial court's jury instructions). In other words, the general structure of the conspiracy alleged must suggest that the alleged participant "knew what the other conspirators 'were up to' or [that] the situation would bgically lead an alleged conspirator 'to suspect he was part of a larger enterprise." , [d. at 99, quoting United States v. Viola, 35 F.3d 37, 44--45 (2d Cir.1994).

Courts in this district, in agreement with the holdings of several Courts of Appeals, have carefully scrutinized civil RICO claims at the dismissal stage, since the statute was "enacted expressly, as set forth in the preamble to the Act, 'to seek the eradication of organized crime in the United States" , and therefore "mere assertion of a RICO claim ... has an almost inevitable stigmatizing effect on those named as defendants." Katzman v. Victoria's Secret Catalogue, 167 F.R.D. 649, 654--55 (S.D.N.Y.1996) (quoting Figueroa Ruiz v. Alegria, 896 F.2d 645, 650 (1 st Cir.1990»; see also Goldfine v. Sichenzia, 118 F.Supp.2d 392, 397 (S.D.N.Y.2000) (stating that "[t]his Court looks with particular

scrutiny at Civil RICO claims to ensure that the Statute is used for the purposes intended by Congress" and dismissing RICO claim); Schmidt v. Fleet Bank, 16 F.Supp.2d 340,346--49 (S.D.N.Y.1998) (citing Katzman and dismissing RICO claims).

II. Plaintiffs' RICO Claims

In dismissing plaintiffs' first Complaint, this Court remarked upon the complexity and abstraction of the RICO statute, noting that these characteristics "render[ed] it difficult for plaintiffs to plead the elements of a cause of action with clarity and concision." Zito [ at . The Court furthernoted that "the broad-brush, imprecise approach to pleading exemplified by this complaint challenges the defendants' ability to understand what they are being sued for, the

Court's ability to understand the plaintiffs' theories, and the plaintiffs' ability to survive judicial scrutiny that may misperceive the plaintiffs' true intentions." [d. at 6. While the plaintiffs' Amended Complaint is still far from a model of clarity, they have sufficiently cured the prima ry defects previously identified by the Court. Although the Amended

Complaint does not materially alter plaintiffs' central allegations, it does "spell out more clearly the nature of the enterprise alleged, the specific predicate acts that constitute the rattern of racketeering, and the persons who are alleged to have committed each of those predicate acts." [d. The Amended Complaint therefore survives the instant motions to dismiss.

Although defendants filed their motions to dismiss separately, there is significant overlap in the arguments they have presented. For example, defendants have focused on the sufficiency of a few elements of plaintiffs' RICO claims, namely whether plaintiffs have alleged an enterprise, whether they have attributed predicate acts to each defendant,

whether such acts are sufficient to constitute a "pattern" of racketeering activity, and whether they have sufficiently alleged that each defendant "conducted" the enterprise. [FN2] Thus, before addressing the sufficiency of plaintiffs' specific allegations with respect to each defendant, a few general observations are in order.

FN2. Zito [held that plaintiffs had adequately alleged injury and causation, and defendants do not renew their challenge to these elements. See Zito [ at * 18--* 20.

A. The Enterprise

The Amended Complaint alleges that an enterprise existed consisting of MFIILeasecomm and its dealers, namely ECX, Cardservice, and OX. [FN3] As this Court noted in addressing plaintiffs' previous complaint, in construing the

concept of an "association in fact," courts have attempted to balance the realities of the sometimes amorphous structure of criminal associations with the risk that the statute might be improperly employed to "str[ing] together" predicate acts by unconnected defendants. Zito [at *7, citing Nasik Breeding & Research Farm Ltd. v. Merck & Co.,

165 F .Supp.2d 514, 539 (S.D.N.Y .2001). The hallmarks of an "association in fact" enterprise are that the group of

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alleged malefactors must be "associated together for a common purpose of engaging in a course of conduct," and must show "evidence of an ongoing organization, formal or informal, and ... evidence that the various associates function as a continuing unit." United States v. Turkette, 452 U.S. 576, 583 (1981). While the question of whether a group of individuals or corporations exhibit such organization and common purpose is ordinarily one of fact, the complaint must allege facts that permit an inference that such an association exists.

FN3. In Zito /, the Court expressed doubt as to whether plaintiff could plead a violation of RICO based on an enterprise consisting of MFI/Leasecomm itself. See Zito / at *6. Plaintiffs have apparently abandoned reliance on any such theory, focusing instead on clarirying the structure of the broader alleged enterprise.

...In the Amended Complaint, plaintiffs have alleged a hierarchical "hub and spoke" type structure, whereby Leasecomm carefully vetted and supervised its dealers, each of which.. obtained customers for Leasecomm "through heavy-handed, high-powered mass marketing" (__ 50--52, 61), that these dealers in turn joined in the goal of the

enterprise "to obtain money from the purchasers of the Leasecomm contracts ... through trick, deceit, chicane and overreaching" (_ 71), and that they "were aware that [their] products were being sold through fraudulent marketing practices and that [Leasecomm's] contracts were unconscionable, unfair and deceptive." (_ 82.) They further allege that this scheme lasted "for a period beginning no later than 1998 and continuing until October 2002." (_ 83.)

Cardservice and ECX once again challenge the sufficiency of plaintiffs' pleadings, arguing not only that plaintiffs have failed to speciry their participation in the enterprise, but also that they have failed to allege that an enterprise

existed at all. In support of their position, they argue that: (1) plaintiffs have insufficiently spelled out "the continuity, structure, organization, or personnel of this group" (Cardservice Mem. 15; see a/so ECX Mem. 12), (2) plaintiffs have not alleged facts "indicat[ing] that Themeware and Cardservice, on the one hand, had any involvement in or ever communicated with OX or ECX, on the other hand" (Cardservice Mem. 15), and (3) "business competition between ECX and Cardservice clouds the existence of any 'common purpose' allegedly shared by the participants in the alleged Master Scheme" (ECX Mem. 12).

With respect to the first argument, the Court specifically found in its prior opinion that plaintiffs had adequately alleged that an enterprise existed for purposes of asserting a RICO violation. Specifically, the Court found that the original complaint had adequately alleged "that MFI/Leasecomm's primary customers were marketers of dubious

products by fraudulent means, and that the supposedly independent businesses defendants reference in their argument functioned as an integrated system for fleecing the unwary." Zito fat *7. What remained to be more clearly alIeged

was the role of each defendant in that enterprise. The Amended Complaint describes in detail the structure of the enterprise alIeged, in which Leasecomm chose and supervised dealers who were known to prey on vulnerable

consumers with poor credit ratings, and in which the dealers were aware of and misrepresented or concealed the unfair terms of Leasecomm contracts. It was Leasecomm's financing that permitted the dealers to continue marketing their deficient products, and that financing in turn depended upon the dealers' marketing efforts and Leasecomm's own collection activities. Each therefore had a stake in the success of the other. Plaintiffs have thus alleged facts sufficient to support a finding that the parties identified were "associated together for a common purpose," and have sufficiently outlined the structure, duration, and goals of that association.

The argument that plaintiffs have not alleged interaction between Themeware/Cardservice and ECX and OX, or that ECX and Cardservice were in fact in competition, does not bear on whether or not an enterprise existed. As the

Court noted in its prior opinion, "[i]t is commonplace in RICO enterprises for the members of the enterprise to engage

in separate schemes or conspiracies, not all of which involve all of the participants in the enterprise." Zito / at *8, citing United States v. Mauro, 80 F.3d 73, 77 (2d Cir.1996); United States v. Coonan, 938 F.2d 1553, 1560--61 (2d Cir.1