Free Transcript - District Court of Connecticut - Connecticut

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UNITED STATES DISTRICT COURT DISTRICT OF CONNECTICUT BRIDGEPORT HARBOUR PLACE I, . . LLC, . . Plaintiff, . . v. . . JOSEPH P. GANIM, ET AL., . . Defendants. . . . . . . . . . . . . . . . . Case No. 3:01-CV-02162 (AHN)

Bridgeport, Connecticut July 14, 2003

ORAL ARGUMENT ON MOTION TO DISMISS BEFORE THE HONORABLE ALAN H. NEVAS SENIOR UNITED STATES DISTRICT JUDGE APPEARANCES: For the Plaintiff: Sweeney & Griffin By: WILLIAM J. SWEENEY, ESQ. 114 West Main Street P.O. Box 337 New Britain, CT 06050 Gallagher & Calistro By: WILLIAM F. GALLAGHER, ESQ. P.O. Box 1925 New Haven, CT 06509 For Defendant Ganim: Dechert By: MICHAEL J. GILBERT, ESQ. 30 Rockefeller Plaza New York, NY 10112

Proceedings recorded by electronic sound recording. Transcript prepared by transcription service. _______________________________________________________
B O W LE S R EP O R T IN G S E R V IC E P .O . B O X 607 G A LE S FE R R Y , C O N N E C T IC U T 06335 (860) 464-1083

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APPEARANCES (CONTINUED): For Defendants Lenoci, Sr.; Lenoci Jr.; United Prop, LTD; 815 Lafayette Center; United Investments; LLC; United Envir Development Co.: Jacobs, Grudberg, Belt & Dow, PC By: DAVID L. BELT, ESQ. IRA B. GRUDBERG, ESQ. 350 Orange Street P.O. Box 606 New Haven, CT 06503

For Defendants Cowdery, Ecker & Murphy Grimaldi and By: JAMES T. COWDERY, ESQ. Harbour Communications, 750 Main Street, Ste. 910 Inc.: Hartford, CT 06103 For Defendants Murphy and Freimuth: Robinson & Cole By: EDWARD J. HEATH, ESQ. 280 Trumbull Street Hartford, CT 06103 Pepe & Hazard By: HAROLD J. PICKERSTEIN, ESQ. 30 Jelliff Lane Southport, CT 06890 Santos & Seeley By: SANDRA SNADER, ESQ. 51 Russ Street Hartford, CT 06106 MS. MARIA CORRIETTE:

For Defendants Pinto: and Kasper Group, Inc.: For Defendants Willinger; Willinger, Willinger & Bucci:

Electronic Court Recorder Operator:

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(Proceedings commenced at 9:30 a.m.) THE COURT: COUNSEL: THE COURT: Morning. Morning, Your Honor. Before we start with the motion

to dismiss, there are some miscellaneous motions that are pending. Are any -- Can any of those be resolved? me just -UNIDENTIFIED SPEAKER: If Your Honor please, Let

on the most recent motion for default, I think most people had objected to those interrogatories. We had filed ours and Mr. Sweeney doesn't have it. I will send copies to all of the plaintiffs'

counsel, and if need be, I'll file a notice to that (unintelligible). MR. SWEENEY: William Sweeney. The only housekeeping issue that I'm aware of, on behalf of the plaintiffs, within the report of the parties that the Court entered as an order of -THE COURT: MR. SWEENEY: Yes. -- June 3rd, there was Number Your Honor, for the record,

4, Your Honor, was that all defendants will comply, in writing, within 20 days of the acceptance (unintelligible) the plaintiffs' request for production

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and request for interrogatories, both dated January 14th, 2003. And that, Your Honor, in general terms, was the insurance disclosure requirement, or request. THE COURT: MR. SWEENEY: Your Honor. THE COURT: MR. SWEENEY: Has not? Mr. Grudberg indicates to me I didn't have a record of Has that been complied with? It hasn't been complied with,

that he's filed something.

it, but if he's got a copy of it, or he's gonna file it, I mean, -MR. GRUDBERG: under the rules. I didn't file (unintelligible) I will sign

I sent you the original.

the one I've got and send it to you, -MR. SWEENEY: MR. GRUDBERG: MR. SWEENEY: Well, I --- and I'll file a notice. We look at this as purely a We're just trying to

housekeeping matter, Your Honor.

find out what's out there, as far as coverage, and we want each defendant on the record as to what it is -THE COURT: I understand that, and we talked

about that the last time we were here, and it was my understanding that that was going to be taken care of promptly.

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MR. SWEENEY:

Well, Your Honor, to -- I don't

have any compliance, Your Honor. I've had verbal indications but -THE COURT: insurance? Who -Your Honor, if I may, Sandra Well, who is the -- who has

MS. SNADER:

Snader from Santos & Seeley, for Charles Willinger and Willinger, Willinger & Bucci. We (unintelligible) insurance policy, and I am prepared to make a disclosure to Mr. Sweeney today. THE COURT: Well, why did we wait until today Why wasn't that done weeks

to make the disclosure? ago? Why -MS. SNADER:

I apologize, Your Honor, but I

just received the information and declarations page from my client. The information does go back a few years, and it took my client a little while to clear -- to figure out what the coverage was at the time. THE COURT: All right.

You want to make the disclosure now, please? MS. SNADER: Your Honor, I don't have I can

anything in writing with me at this point. verbally make a disclosure to Mr. Sweeney. THE COURT:

Well, put it on the record.

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MS. SNADER:

Our insurance coverage is three Let's see.

million for -- three million, five million. (Pause.) MS. SNADER: (unintelligible). THE COURT: Okay.

And the coverage is with

What about you, Mr. Grudberg? MR. GRUDBERG: have no coverage -THE COURT: You have no coverage? -- no coverage that would It was done in February. We

MR. GRUDBERG: cover RICO claims. THE COURT:

All right.

Anybody else that had to make a disclosure? UNIDENTIFIED SPEAKER: Yes, Your Honor, on We

behalf of Mr. Ganim, we also have no coverage.

haven't filed a formal response, and we'll do that promptly. THE COURT: But there's no coverage? Correct.

UNIDENTIFIED SPEAKER: THE COURT:

Mr. Pickerstein? On behalf of Mr. Pinto and

MR. PICKERSTEIN:

Kasper Group, Your Honor, I thought we had disclosed on the record last time, that we had no coverage. no coverage. We have

I'm more than happy to file a writing, if

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Mr. Sweeney wants one. THE COURT: MR. COWDERY: All right. James Cowdery on behalf of

Leonard Grimaldi and Harbour Communications. The last time in court I disclosed in open court that Mr. Grimaldi and Harbour Communications have no coverage, and again, if Mr. Sweeney needs a -THE COURT: MR. HEATH: All right. Your Honor, Edward Heath on

behalf of the City of Bridgeport defendants, Michael Freimuth and Dennis Murphy. I believed that we had responded, but on checking my file, we have not. responses to Mr. Sweeney today. THE COURT: is the -MR. HEATH: For the individual defendants I'm not certain of the And what are the response -- what I will get those

there is no insurance coverage. City's answer, at this time. THE COURT: All right.

Now, if you'll look at your report of the parties, dated May 28th, and go to -- starting with c. on the second page -- starting with d., excuse me, d., what about those motions? Putting aside the motions to

dismiss, of course, which we'll take up this morning,

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but the motion to join, is that still outstanding? MR. SWEENEY: I believe, Your Honor, we

submitted the revised complaint to Mr. Grudberg, and asked that he comply with the requirements with respect to waiver of service, and I -MR. GRUDBERG: I don't know whether he got a

-- an answer on his motion, but we did send the -- in the last few days, a new complaint which added Mr. Schinella. I have signed the thing. It will be in the

mail to Mr. Sweeney within a day or two. THE COURT: MR. SWEENEY: So that motion can be granted? I thought the Court already

granted it, Your Honor, but -THE COURT: MR. SWEENEY: THE COURT: outstanding. MR. SWEENEY: Well, it was at the time of the Well, I don't know. Well, -It shows on your report as It's --

report, Your Honor, but I think subsequently -- for whatever reasons, we've submitted the revised complaint to Mr. Grudberg, with a waiver of service -THE COURT: All right.

If it has not been granted, it can be granted? MR. SWEENEY: Yes, Your Honor.

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THE COURT:

Okay.

What about h.? MR. SWEENEY: That's been withdrawn, Your

I filed a withdrawal -THE COURT: j.? MR. SWEENEY: Your Honor, that would all be I think I I filed an Okay. h. has been withdrawn.

the same motion -- same motions to strike. filed -- There were original motions filed.

original motion to strike, and as each defendant incorporated or docketed, I filed a motion to strike, so the motions to strike are withdrawn. So the motions to strike are all withdrawn. THE COURT: Okay.

So j. is withdrawn. k., that, I take it, can be granted? MR. SWEENEY: That's granted, Your Honor.

That's what we're gonna argue today, I believe. THE COURT: MR. SWEENEY: Well, the motion to extend time. Right. Right. Yes, that's

THE COURT:

All right.

So k. can be granted? MR. SWEENEY: MR. GRUDBERG: Yes, Your Honor. If the Court please, going

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back to the motion concerning adding Mr. Schinella, in fact, the Court did grant that on June 12th. THE COURT: Okay, l.? MR. GRUDBERG: That, I think he's agreed to. Okay. Thank you.

That just had to do with the motion he had filed for default -MR. SWEENEY: That's correct, Your Honor.

The motions for -- the motion for default that I filed with respect to the motion -- The motion for default that, exclude -- excluding the last one, Your Honor, was addressed to answering the pleadings. That's when

it was withdrawn -- our motion for default was withdrawn. So his motion can be either granted or withdrawn. I -So l. -l. and m., I think, can be

THE COURT:

MR. GRUDBERG:

granted, if the Court pleases. THE COURT: MR. SWEENEY: l. would be granted, and m.? Well, Your Honor, again, I

guess we would withdraw our objection. THE COURT: All right.

So m. is withdrawn. MR. SWEENEY: Same thing is true with --

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THE COURT: MR. SWEENEY: THE COURT:

n.? n. Yes, Your Honor.

All right.

n. is withdrawn. o.? MR. SWEENEY: withdraw -THE COURT: p.? MR. SWEENEY: Your Honor. THE COURT: All right. Same -- We'll withdraw that, o. is withdrawn. Same thing, Your Honor. We'll

p. is withdrawn. q.? MR. SWEENEY: information. THE COURT: All right. If it That's the motion for insurance

Has that ever been acted on, q.?

MR. SWEENEY: THE COURT: MR. SWEENEY: THE COURT:

It has not been --- I should grant that. Thank you, Your Honor. All right.

q. is granted. r. should be granted, if it hasn't been.

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MR. SWEENEY:

That's -- We would have no

objection to that, Your Honor. THE COURT: MR. SWEENEY: All right. I think r. is the --

Willinger's adoption of the -THE COURT: MR. SWEENEY: Of the motion, right. -- of Ganim's motion, and then So we

s. would be their adoption of the Lenoci motion. have no objection. t. -THE COURT: MR. SWEENEY: THE COURT:

s. should be granted, as well. Correct, Your Honor. t.? t. is (unintelligible), if the

MR. GRUDBERG: Court please.

One is production, one is (Unintelligible.) They're the same request. One

interrogatories.

MR. SWEENEY:

was -- They're both related to the insurance -THE COURT: MR. SWEENEY: Okay. -- information, and so we would

ask that that be granted. THE COURT: u.? MR. PICKERSTEIN: That's with respect to I suppose that can t. is granted.

insurance information, Your Honor.

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be denied (unintelligible) moot on that. THE COURT: All right.

u. is denied. Same with v.? MR. COWDERY: v. and w. are the same, and

they can be denied as moot. THE COURT: Okay.

v. and w. are denied. x. the same? MR. SKLAIRE: same. THE COURT: MR. SKLAIRE: THE COURT: And y. also? Yes, Your Honor. All right. Yes, Your Honor, x. is the

x. and y. are denied. MR. SKLAIRE: the way through cc. THE COURT: Okay. In fact, Your Honor, it's all

So x through cc. on the third page, can all be denied. And then you've reached agreement as to the motions listed in Roman III. (The Court and the Clerk confer.) THE COURT: Okay.

That brings us to the motion to dismiss,

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unless there's anything else. MR. SWEENEY: No, Your Honor, nothing besides

the motions to dismiss, from the plaintiff's perspective. MR. SKLAIRE: the government. With the Court's permission, if I may be excused from the further proceedings today, as we have no -THE COURT: MR. SKLAIRE: THE COURT: Yes. Thank you. All right. Your Honor, Michael Sklaire for

Who's taking the lead on the motion to dismiss? MR. GILBERT: Ganim, Michael Gilbert. Your Honor, on behalf of Mr. I'll address the first three

counts of the complaint, the RICO allegations, and the Section 1983. As the Court knows, the plaintiff here alleges that it was unable to complete a proposed development project on the waterfront, allegedly as a result of the acts, of the defendants. The complaint

has got eight counts, names Joseph Ganim, the former mayor of Bridgeport, in six of those counts. I'm going to address, as I said, Counts One

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and Two, the RICO allegations; and Count Three, the Section 1983 allegation, although I note that Mr. Ganim has joined in the motion to dismiss the state court counts that's been filed by some of the other defendants. We raise three principal arguments in support of the motion to dismiss the RICO allegations. The first is that the plaintiff does not have standing because the complaint does not, and the plaintiff cannot satisfy the Supreme court test for proximate causation in the Holmes decision; second, the plaintiff's claim for a hundred million dollars in lost profits is far too speculative to support a RICO action; and third, the plaintiff has completely failed to plead the requisite predicate Rico acts. I'll start with the proximate causation argument, Your Honor. In order to have standing under RICO, and under the supreme court decision in Holmes, there must be a direct relation between the alleged RICO violation and a plaintiff's injuries, sufficient to satisfy the proximate causation requirement, and the plaintiff here cannot satisfy that requirement. The development project the plaintiff

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complains about, and alleges to have been denied the opportunity to complete, is -- based on the plaintiff's own allegations, it was merely a proposal, and it was only in its preliminary stages. Not one a shovelful of ground was ever broken on construction. The plaintiff never received a deed

to one inch of property, and a minefield of potential pitfalls would've had to have been navigated before this project could ever have gotten off the ground. was a project, really, of immense magnitude and complexity, and as we point out in our brief, innumerable factors, innumerable factors, having nothing at all to do with the alleged actions of the defendants, could have prevented this project from going forward, and certainly from being completed, and beyond that, from being profitable to the point of a hundred million dollars. Under these circumstances, the plaintiff cannot possibly satisfy Holmes. This is not a It

situation where you had buildings that had already been constructed, or businesses that were lined up, prepared to pay rents, and then there's some allegation that the project was purposely scuttled. This was a project

that everybody understood was in the early stages of what would have been a complicated, lengthy process

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going forward, and to assume that it would have been completed on time, or completed at all, and profitable, is really -- it's really just a matter of conjecture and speculation, and it cannot be the basis of a RICO allegation. If you look -- Your Honor, the plaintiff annexes to its complaint, the development agreement, as an exhibit, and if you look carefully at that document, which I believe is proper for you to do under a 12(b)(6) motion, since its annexed to the complaint, the document itself, it's very clear from reviewing it, that it's really a precursor to a series of additional documents that all the parties anticipated would have to be executed before this project would move forward. The Preamble, which is on page 3 of the development agreement, and I'll quote from it, says: "Whereas at such time as the amount of public funding has been more definitively ascertained, and at such time as the parties have achieved a more definite assessment of the precise cost of developing the project, and of other matters related to the project, this agreement shall be amended and restated, and the parties shall execute a plan disposition agreement."

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So, right up front, there is a recognition that this is a agreement to cover the planning stages. THE COURT: Is it your understanding that if

the plaintiff determined that the project was too expensive, they would have the right to simply say, "We're withdrawing"? MR. GILBERT: Yes, and I believe that there

is a specific reference in the development agreement. In fact, it's article 6.C.2., and I can quote from that one, which says that in the event the developer decides -- "In the event the developer/plaintiff decides to proceed with the project," and then provides certain further steps for the developer to take, but it's clear that in -- the agreement itself anticipates that the developer may decide not to go forward, and there's a termination clause in the agreement, that provides that the sole remedy for -- in the event of termination, is that the agreement itself will be nullified. But -- So the development agreement anticipates that there's going to be a whole series of future agreements that will need to be executed before the project can get off the ground, and one of them is this restated development agreement. There's no allegation in the complaint that the development agreement was ever restated. There's

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no allegation in the complaint that the land disposition agreement, which is anticipated to be part of this project, and part of the moving forward of the project, was ever executed. So, you have a precursor agreement that anticipates that there's going to be a series of other agreements, and there's no allegation that we ever reached the point that those agreements were even negotiated, never mind executed. And the second amendment to the development agreement, the agreement itself, putting aside that we never got to the point of completing these later agreements, the development agreement itself, which was executed, is replete with contingencies. It was amended, the second amendment, and I'll quote some of the language from that. It says: "All rights and obligations of the parties are expressly contingent upon, one, the party's ability to obtain full authorization from all necessary corporate, legislative, or regulatory bodies for the execution of the restated agreement, the city land disposition agreement, the port authority land disposition agreement, the United

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illuminating purchase and sale agreement for parcel one, the master maintenance and operations agreement, and all other necessary documents." And again, there's no allegation that any of those documents were ever executed. The -- Also looking at that second amendment, it's clear that another document that was anticipated as part of this project, was something called a "Commitment" from the developer, and not only was the commitment never executed, based on the allegations in the complaint, it appears that it just never advanced to that stage, but the second amendment to the development agreement extended the time for the developer to provide the agreement, and I'll quote from that. It says, "The developer is not prepared to issue its commitment, and has requested the extension until June 1st of 1999," which moved it, I believe, from March, and that document -- that clause in the second amendment also specifically states that the City -- acknowledges that the City of Bridgeport has performed all of its obligations under the agreement. Now, the termination provision, and I believe that there was an original termination

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agreement in the development agreement proper, and then it was altered in one of the two amendments, but if you look at the second amendment, it provides that: "Upon termination, the developer will have no further right, title, or any vested interest, in any way." So, all of these references that are found in the documents that the plaintiff has attached to its complaint, show that this project was in its early stages, it was a proposal, and throughout the entire time period of the complaint, you know, the parties understood from the outset that there are many contingencies, and many eventualities that might not allow the project to move forward. THE COURT: When this Agreement was entered

into, did the plaintiff put up any money? MR. GILBERT: There's no allegation to that

affect, Your Honor, in the complaint, and beyond the allegation in the complaint, I -- frankly, I just don't know the answer to it, but there certainly is no allegation in the complaint, and, you know, -THE COURT: you think? MR. GILBERT: Well, I think for purposes of a Would that make a difference, do

motion to dismiss, obviously if it's not in the

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complaint, it's not in the complaint, and to speculate about it, I don't know. There is an allegation that the plaintiff expended -- you know, there were out of pocket expenses that the plaintiff put in during the development phase and, you know, I -- the -- they're not enumerated, but -THE COURT: MR. GILBERT: Okay. -- I think that at the end of

the day it was anticipated in the beginning, by everybody, that it might well be that the plaintiff would expend funds in the planning stages, and then the project would not ultimately be built. So I can't

imagine how the plaintiff could satisfy the proximate causation requirement, even as to the out-of-pocket expenses. And in our brief, Your Honor, we cite a 2001 second circuit case called "Defalco," and it has -- it has a relatively similar set of facts, and the Court held there, that the plaintiff had not satisfied the proximate causation requirement. The plaintiff in Defalco, without getting into all of the details of the case, but essentially, the plaintiff there claimed that there -- that a RICO enterprise, made up of members of municipal government

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and others, threatened not to continue granting building permits to the plaintiff, which was a real estate developer, unless the plaintiff gave a piece of a deal, basically, to the defendants. In Defalco, the construction -- the project had already been going on, and Phase I of the project had already been completed. It is a multi-phase

project, and I'll quote from the district court opinion, which is 978 F.Supp. 499, says: "Common experience teaches that real estate developments are inherently speculative and that myriad factors, foreseen and unforeseen, can frustrate their completion." And the second circuit, which affirmed the district court, said: "The plaintiff's mere belief that the plaintiff would have completed the project, were it not for the defendant's actions, is not sufficient." And that's very similar to the situation we have here. Now, we recognize in the brief, and just to be clear, that Defalco was decided on post-trial motions. THE COURT: But is that the case -Judge

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Parker's case? MR. GILBERT: That's right, Your honor.

But again, you had a situation there, where you had an actual construction project underway, and it wasn't -- you didn't just have a precursor agreement for the planning stages, like we have here, you had actual construction, and where -- as in this case, where you're not even really -- you're nowhere near even starting. There's just simply no way that the

plaintiff can satisfy Holmes, and no amount of discovery, based on the allegations in the complaint, can change that. In its response papers, on the proximate causation argument, the plaintiff argues that because it can be deemed a direct target of racketeering, that somehow that exempts it from satisfying the proximate causation test, and establishing that the nexus between the alleged misconduct and the harm, and that simply is just -- it's not the case. There's a line of cases that holds that being a direct target under the RICO case law is a prerequisite, but cases do not hold that it's sufficient simply to show you're a direct target, and the Defalco case, which I was just discussing, proves that point, because there you have the, just like you

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have here, a plaintiff/real estate developer who claims that the defendant RICO enterprise is targeting it. Nevertheless, the Court held that it was unable to satisfy the proximate causation requirement of Holmes. So, given the preliminary nature of this project, the fact that we have numerous documents that were anticipated, but had never been executed, the fact that we never had construction beginning, that everybody understood from the beginning that this was a multi-year, complex project, fraught with potential pitfalls, under those circumstances, and under the supreme court case in Holmes, the plaintiffs simply cannot satisfy the proximate causation requirement, and that is sufficient basis to dismiss the RICO allegations. Now, more specifically focusing on the claim for $100 million in lost profit, that allegation, or that claim is far too speculative to support a RICO cause of action. Again, you know, you have a project that -it's simply a minefield, under the best of circumstances, standing between the planning stage and profitability, and to recover a hundred million dollars in lost profits, or any lost profits, the plaintiff would have to establish, at the very least, that all

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parties involved, and as you can tell from just some of the brief quotations from the development agreement, there were numerous parties that would have been involved, all of those parties would have had to satisfy all of the contingencies in the development agreement itself, and that presumably would include dealing with any type of community opposition, which is certainly not uncommon in a project of this size and scope, along with any other political pressures that might have been brought to bear. The restated development agreement, they would have to establish that it would have been restated and executed; a land disposition agreement would have been negotiated successfully, and executed, as long -- as well as all of the other agreements and requirements set forth in the development agreement; that the developer would have been provided the commitment that's referenced in the development agreement; that land would have been actually transferred or deeded to the plaintiff, ground would have been broken on the project; the first phase of the project would have been completed, the later phases would have been completed. The plaintiff alleges that the expenses on the project would have totaled $1 billion, so

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presumably, they would have to establish that those expenditures would have been recouped, and on top of that, it would've been a hundred million dollars in profits. It's sheer speculation. Its sheer

speculation. And as Judge McCasey stated, and this is another case we cite, First Nationwide, it's a 1992 case -- district court case: "The speculation required by these allegations is not, as the plaintiff asserts, simply supposition about computing damages. Civil RICO damages are unrecoverable if the fact of their accrual, or their amount and nature are unprovable." And that is exactly the situation here. In its response to our argument on lost profits, the plaintiff simply argues that the loss of the contract, the development agreement, was foreseeable, and that, therefore, it has injuries that are concrete enough under RICO, but the development agreement merely conferred rights on the plaintiff, to be involved in the planning stages of the deal, it did not entitle the plaintiff to profits. It did not

necessarily even entitle the plaintiff from allegations in the complaint and the attached documents, to be the

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developer, ultimately. And so, for those reasons, certainly the claim for a hundred million dollars in lost profits is far too speculative under the RICO case law, to support a cause of action. THE COURT: Supposing the claim was that they

would've made a million dollars in profits, would that -- I mean, is it the figure itself, or is it the concept of lost profits? MR. GILBERT: profits. It is the concept of lost

Even if it was one dollar, the argument would

be the same, that what you have to establish to get to the point of a dollar of profit, would really require a jury ultimately to -- just simply to speculate about how all of these events would have played out over a period of years, but the fact that the claim is $400 million simply highlights the speculative nature of requesting any lost profits. Turning to the specifics of the RICO allegations, the predicate racketeering acts, the plaintiff asserts 15 racketeering acts and, as we point out in our brief, Your Honor, seven of these have absolutely nothing to do with the plaintiff's business, as far as we can tell from the complaint. The plaintiff was not injured in its business

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or property, for purposes of the RICO statute or for any other purpose, as far as we can tell, from matters such as Racketeering Act 4, which is -- relates to demolition contracts; Racketeering Act 7, which relates to a baseball stadium; Racketeering Act 8 relates to a hockey arena. There's no allegation the plaintiff was

involved in any of these transactions or any of these projects, sewer lines in Racketeering Act 9; engineering work on a private home, Racketeering Acts 10, 11; and a private zoning appeal in Racketeering Act 12. So, those seven racketeering acts, from what we can tell from our review of the complaint, have -could not have possibly injured the plaintiff. So that leaves eight, and two of the eight alleged racketeering acts are violations of Title 18, Section 666, which is the federal programs bribery statute, and as we point out in our brief, and I believe the plaintiff has conceded, based on its reply, or its response, I should say, Section 666 is simply not a RICO predicate, and so there's no basis for those racketeering acts. So that these six remaining racketeering acts, and three of them are Hobbs Act allegations. That's Racketeering Acts 2, 13, and 14, and we point

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out in our brief, Racketeering Act 2, read on its face, it just -- it doesn't make sense. It's not -- It seems

like it might be a typographical error, and I don't need to harp on something of that nature, but it's impossible for us to determine, from that allegation, what exactly it is the plaintiff is alleging. The way it reads is the act -- the racketeering act never completes the phrase, "In order to effectuate the scheme to enrich themselves." It

seems to have left out language, so it's impossible for us to tell what it is that the plaintiff alleges the defendant -- or, in particular, the -- Defendant Ganim did, that could possibly constitute a Hobbs Act violation. Now, Racketeering Acts 13 and 14 are the other two Hobbs Act allegations, and they're basically identical allegations that take place on two separate dates, and as to Joseph Ganim, the allegation is that Ganim had knowledge of, and consented to Defendant Kasper suggesting that in order to gain Ganim's support, the plaintiffs should name a co-developer, the Lenocis, as one of the co-developers on the project. Well if you look -- if you read it carefully, first of all, there's no allegation that -- as to Ganim, that he did anything at all. I mean, the

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allegation, as required for a RICO predicate, has to be that the defendant participated in, or at least ordered or directed the act, and there's no allegation of that. The allegation as simply that Ganim knew and consented to another defendant making a suggestion to the plaintiff. So, as the Ganim, I -- we don't see how

they can possibly support a Hobbs act violation. Beyond that, to the extent the plaintiff here alleges that it was the victim of a Hobbs Act extortion under color of official right, under the case law, the plaintiff has to allege that they were -- it was placed in fear, or that it was required to make a payment of some kind, and there's no allegation that the plaintiff here, made a payment to Ganim, or to anyone else, for that matter. So, whatever the suggestion, whatever legal theory may apply to a suggestion to accept a codeveloper, from what we can see of the complaint, it certainly is not the stuff of Hobbs Act extortion, and it's for those reasons the Hobbs Act allegation should be dismissed, and so that leaves just the -Racketeering Acts 1 and 15, which are fraud allegations. And Racketeering Act 1, as we point out in the brief, and again, this -- it appears to simply be

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maybe a typographical error, or simply a mistake, but the way it's written, Racketeering Act 1 cites only Section 1346, the -- on the services provision, and that is not a crime, in an of itself. constitutional statute. It may not be a

I believe that's up in front

of the second circuit, but certainly standing alone, the statute simply reads -- simply defines what may be a violation of either the mail or wire fraud statutes, so it's insufficient simply to cite 1346. But assuming that what the plaintiff has intended to do is cite the mail fraud statute, it's -really, it's hard to figure out because if you look closely at the allegations, it enumerates certain documents that presumably would support a mail fraud theory, but then there are also telephone conversations listed there. So, it's unclear whether the plaintiff intends to pursue the mail fraud or wire fraud, or honest services, and for the purposes of a motion to dismiss, we should not have to speculate as to that. In any event, assuming that it's mail fraud, and those documents are listed there, there's no allegation here, that the plaintiff relied on any misrepresentations or omissions -- material omissions contained in any of those documents, and it's not clear

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from the complaint itself, what some of these documents are. It lists the number of documents that are not

attached to the complaint. The one document that's listed in the mail fraud allegation that is attached to the complaint, is the development agreement itself, and if you think about that, it's really inconceivable that the development agreement itself could have been transmitted in, I believe it's December of 1997, which is the allegation in the racketeering act, that it could have been transmitted in furtherance of the scheme to defraud the plaintiff, because at that point it was -- the only conceivable purpose of transmitting the development agreement to the plaintiff then, was to enter into a relationship with the City, not to thwart the plaintiff's ability to pursue that relationship, so that allegation certainly doesn't specify misrepresentations or omissions in the agreement, that the plaintiff presumably relied on and, on its face, it simply -- it doesn't really make any sense. With regard to Racketeering Act 3, that's the Connecticut bribery statute, and it alleges that Ganim committed multiple acts involving receiving bribes, and -- I mean, the problem here, other than the lack of specificity with the particular count, is really, it's

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-- the overall theory is that the plaintiff was somehow subject to reasonable conditions, which the plaintiff alleges throughout the course of this project, or at -starting at some point during the course of this project, but the plaintiff never specifies what those unreasonable conditions were, other than the one condition that it was asked to accept a co-developer which, according to the complaint, the plaintiff rejected the suggestion, but in any event, for bribery, the plaintiff doesn't come close to linking a payment of a thing of value to Ganim, to any specific act, or any specific condition that was put upon the plaintiff during the course of this proposal, and I think we cited in our brief, there are number cases that say that in addition to the Rule 9 requirement that fraud be pled with specificity, there is a heightened requirement in RICO allegations, that fraud be specified, and you can certainly see, in this case, why that should be. So, putting aside the larger proximate causation problems, the problem of the speculative nature of the lost profits they seek to recover, the plaintiff has not satisfied its requirement to plead to racketeering acts properly, and so that's an independent basis to dismiss the RICO counts, Counts

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One and Two. Turning to the Section 1983 allegation, Section 1983, plaintiff has to show it was deprived of a constitutional right under color of state law. In the complaint, the plaintiff makes a very broad statement that it was deprived of its right to property without due process, but the plaintiff never identifies, in the complaint, what property right it was supposedly deprived of. In its response papers, the plaintiff asserts, and I'll quote from it, it says: "The mutually explicit understanding that the development agreement would be continued." So it appears that there's some, maybe combination of a theory that it was the development agreement itself, or some understanding outside of the development agreement, that the plaintiff asserts is the property interest that it had, and under the case law, this is no doubt -- this simply does not rise to the level of a constitutionally-protected property interest. The development agreement itself doesn't

give rise to a property interest because of its -- all of the conditions in it. It does not -- I think the

phrase in the case law is, "The concreteness of entitlement," and it's not there.

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We cite a number of cases that -- for the proposition that all contracts, simply because you have a contract with a municipality, does not create a property interest for purposes of the Constitution. You may have a breach of contract case, and many of the courts have noted that one of the problems under RICO is that very often, what should be -- when it's truly a breach contract, becomes elevated to a RICO allegation, but for purposes of 1983, as well, the courts have held that not every commercial contract to which a government is a party, creates a property interest, for purposes of 1983. You need to show a concreteness, a

level of entitlement, and the case -- one of the cases that had similar facts that we cited, a second circuit case from 1988, Valentis, which also involved a real estate developer who had been granted conditional rights on a real estate project, also where later

agreements were anticipated, including there was a reference there, to a land disposition agreement that had been anticipated, but not executed, and the Court held that the plaintiff did not establish that it had a concreteness of entitlement under that development agreement, for purposes of 1983, and dismissed it. So here, where you have the development agreement, again, itself replete with contingencies, a

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project that is fraught with all sorts of potential pitfalls that have nothing to do with the acts alleged of the defendants, you have specific references to future agreements in the development agreement, you have a clause that says termination is the sole remedy. So I -- under these circumstances, they're just -- plaintiff cannot establish that it has a property interest, for purposes of Section 1983, sufficient to support that cause of action, and so both Counts One and Two, the RICO allegations, should be dismissed, as well as Count Three, which is the Section 1983 allegations. As I mentioned earlier, I'm going to defer to other counsel to argue the state court allegations in the complaint, but certainly, as we point out in our brief, if the Court determines that the federal causes of action are insufficient, and dismisses them, we would respectfully request the Court to exercise its discretion and dismiss the state court allegations, as well. Thank you, Your Honor. THE COURT: MR. HEATH: proceed on this? Anyone else? Your Honor, how do you wish to

Do you wish to take the RICO -- both

sides of the RICO argument first, and then the --

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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 counsel. do too.

THE COURT:

Yeah.

Does anyone else want to add to Mr. Gilbert's argument on the RICO issue? MR. GRUDBERG: MR. COWDERY: Just, sir, -I'm sorry. Just to put on the

record, James Cowdery on behalf of Leonard Grimaldi and Harbour Communications. We join in the arguments made by fellow counsel. THE COURT: All right.

I assume all counsel do so. MR. GRUDBERG: Good morning, Your Honor. I

Ira Grudberg on behalf of the so-called

"Lenoci" defendants. I have very little to add to Mr. Ganim's

A number of things that -- as I read the complaint, the lack of specificity creates a number of problems, which I suppose are factual. It's my

understanding -- Although we do not have the paperwork from the City of Bridgeport, it's my understanding that after having the agreement -- development agreement continued, and the termination put off and put off, that it, in fact, was terminated by the City of Bridgeport at the end -- initially, at the end of 1999.

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The allegation as to what -- As far as I can see, the allegation that the Lenocis, that they offered Pinto, for the mayor, allegedly, to raise half a million dollars for a gubernatorial race, and pay $450,000, again, there's no date in that, there's no date on the termination. It's my understanding that

that came a number of months after the initial termination, that after that, in fact, later, in 2000, the City of Bridgeport gave plaintiff another shot at seeing if he could put things together. Finally, and I don't know whether this is part of the record, it's all over the newspapers, it is now 5, 6 years afterward. The Lenoci people never Other

really got to be a possible developer on it. people have taken over. shovel lifted in anger.

There still has not been a This thing begins, quite

clearly, to appear, especially with problems of financing, from government financing and so forth, it will never go, and it just seems to me it's quite clear that Mayor Ganim is correct, that it's so speculative, you cannot base a RICO allegation or damages on it. So I have nothing further. THE COURT: All right.

Mr. Gallagher? MR. GALLAGHER: If it please Your Honor,

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William Gallagher for the plaintiff. (Unintelligible), Mr. Grudberg's remarks, the plaintiff became the exclusive, and obtained the exclusive development rights by contract, on November 18th, 1998, and he -- his termination was in March of 2001. The -- And I think that -- And the rights that

were granted under that initial contract are important. During that time frame, for example, the property in question was condemned. There was site work that was done. The complaint indicates that the plaintiff had incurred substantial expense, in the area of $5 million. Granted, the claim is for a hundred million, It was cleared.

and step back a minute, and the Court is aware that the legislature -- there was an authorization for two million dollars, as stated -- $200 million in State of Connecticut public financing, so they granted -- there were many contingencies, and in the course of this trial, we would have to prove, but we ought to be able to be afforded our opportunity to make that proof, and this goes to the proximate causation argument that counsel has raised. The Holmes case, as I understand that decision, the Court talks about the problems with indirect injury, and apportioning damages, and

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ascertaining and avoiding a claim for double damages, and so the rule is developed that you have to be directly injured, but here, the plaintiff was a direct target. As a matter of fact, in Count Ten, Count Ten of the criminal indictment against Ganim was a conspiracy on this very issue, on Steel Point, and he was convicted of that. So, it seems to us, Your Honor, that clearly, we were a direct target, and loss of profits, where you are a direct target, are permissible. Granted, the --

there are a lot of problems with proof here, but we're entitled to develop those, either -- through discovery and by expert testimony, and what the defendants don't want, is to be exposed to that trial at all. to us -THE COURT: Gallagher. What events would have had to have occurred for this project to move ahead? What were all the Let me ask you this, Mr. It seems

requirements that you had to meet? MR. GALLAGHER: Well, they're spelled out in

the contract that's attached to the complaint, and there were a host of requirements that we would've had to meet. We were deprived of the ability to meet any

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of these things. The complaint alleges that impossible time lines and time deadlines were -- and demands were made upon the plaintiff, and he lost -- the plaintiff lost his equity partners in this arrangement, and his -- his -- the contract was terminated, but we would have to prove though -- This is not a summary judgment motion. The Defalco case was decided after verdict. That case was fully tried, and as a matter of fact, this very same motion in the Defalco case was denied by the Court, so that the -- and I concede to you, up front, and we do concede, that there are a host of factual issues that we would've had, but these are contingencies, and the existence of the subsequent contingencies -THE COURT: How would you be able to prove

that you were going to meet the contingencies? MR. GALLAGHER: we -- we're -THE COURT: How? Tell me how? Well, the plaintiff has Oh, I think that we can prove

MR. GALLAGHER:

developed expert testimony with respect to his ability to obtain financing, had these unreasonable limitations not been applied. THE COURT: Did he have commitments?

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MR. GALLAGHER:

Well, he would have been able He had the equity --

-- He had commitments, yes.

equitable partners, he had commitments, but the demands became so unreasonable. I mean, there's a -- and to go outside the evidence, which we would produce, for example, in a motion for summary judgment, there is a telephone conversation, and Lenoci indicates that that he talked to the mayor and told Pinto that they were gonna come in on the deal, and they were going to get rid of Conroy and the plaintiff corporation. So that, you know, all of these things come in and come together. We -- At this stage, I concede

to you that we may have a problem with you on summary judgment here, but at this stage, on testing whether we have asserted a cause of action that is viable and can pass the-THE COURT: But my problem, Mr. Gallagher, is

how would you be able to prove that you would be able to satisfy all of the requirements at every step of these proceedings, that you'd get every permit, you'd get every loan, you'd get every equity partner, you'd overcome every organized opposition, you'd win every lawsuit that might be filed to block you along the way? How would you be able to prove that?

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MR. GALLAGHER:

Well, the -- we've been

denied the opportunity to even embark on that activity, and that itself is actionable. THE COURT: speculation? MR. GALLAGHER: No, it isn't. I mean, we But isn't that the very nature of

have an exclusive right to develop.

We spent $5

million in exercising that exclusive right, which was taken away as a result of the misconduct of the defendants. Now, as -- I concede to you that each one of those things becomes important. We have answers to

each one, but that's on a motion for summary judgment, and the evidence here, the question is -- our loss of profits were clearly a direct target of their activity, and loss of profits are permitted in a RICO action. So, it -- it's not an illusory contract, Your

THE COURT:

What were your profits? I beg your pardon?

MR. GALLAGHER: THE COURT:

What were your profits? Well, the claim is that the

MR. GALLAGHER:

profits would have been ten percent of the total cost of the project. THE COURT: How do you arrive at that?

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MR. GALLAGHER:

Well, because the total cost

of the project was estimated at a billion dollars, and the estimated profits are ten percent of that, a hundred million. That's the allegation. We're entitled

Now, that's the allegation. to make that allegation.

We may not be able to prove

it, and we may not even be able to get beyond summary judgment on those issues, but at least we have the opportunity to do that. THE COURT: Is that a commonly-accepted

standard in the real estate industry, that your profit is ten percent of what your expenses are? MR. GALLAGHER: that question. industry. In the development -- In the area of major development like this, the margin of profit can be substantially greater. THE COURT: But that assumes that you're The -- And I can't answer

I don't know, in the real estate

going to lease up every vacant space, that you're going to lease it up at going rates, that you won't have any vacancies, that you won't have any problems along the way, -MR. GALLAGHER: THE COURT: Well, these projections --

-- that there might be a business

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recession which would cause you to be unable to fill this space, -MR. GALLAGHER: THE COURT: withdraw. I mean, there's just so much that could -MR. GALLAGHER: How does that differ? But how does that differ? Well, how do those --

-- or that lenders might

If you have a quadriplegic

plaintiff who has a life care plan of hospitalization, and psychiatric and medical care, I mean, he -- the person may die, the doctor -- he may not need psychiatric treatment, he may not need hospitalization on a regular basis. That doesn't render it non-

compensable, and here, the fact that there are all those issues doesn't mean that Alex Conroy doesn't have a cause of action for his lost profit. Now, the question of what the lost profit may consist of is -- I concede to you, and you've raised, the issues of what has to develop here. It's not a

simple case, and it would take some time to develop, but that's the best we can do, Your Honor, under the circumstances. I can't be more specific on that issue.

The -- I'd just point out the Defalco case was a case that is interesting reading because it decided in favor of the defendant, after the fact, and

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the very motion, the motion to dismiss for those very reasons, that the plaintiff wasn't going to be able to sustain his burden of proof, was denied up front, and we have -- we know that we have $5 million in losses here, Your Honor, as a result of this loss of contact, and the loss of the exclusive development rights, and we believe that we can prove substantially more than that, and we ought to be given the opportunity to do so. The many contingencies that have been raised are no different than the example I gave you, and those contingencies, and what the law permits projected future economic losses to be in a catastrophic injury case, and granted, there are many of those things that we're going to have to project on, it's going to be the subject of some controversy and expert opinion -THE COURT: There was an issue raised, I

think it was in the defendant's brief, about concrete financial loss, that you have to allege concrete financial loss, and then -- And what you said in response was that your concrete financial loss were your lost profits, or potential lost profits. MR. GALLAGHER: THE COURT: Potential lost profits.

So, how can concrete financial Concrete

loss equate to potential lost profits?

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financial loss, at least it seems to me, to be money that's out of your pocket -MR. GALLAGHER: And we do -- There are That's

allegations that we've lost $5 million. concrete. THE COURT: All right.

That -- So that's your concrete loss, not your potential lost profits? MR. GALLAGHER: Well, the -- yes, I'm not

retreating from the claim that we do have that allegation, but I'm not retreating from the claim that potential lost profits here, are certainly an issue, and that the -- so long as we're the direct victim here, and we clearly are, it seems to us that potential of lost profits, subject to being developed on discovery, we have concrete direct potential lost profits. We have -- We know we have $5 million in losses. profits. So, I think we can survive the motion to dismiss on that basis, and then the claim -- Your Honor, their claim of speculative damages is that -it's the same argument that I have to give you, is that it's a question of fact, is that the key here is that We may have substantially more by way of lost

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there are no independent intervening causes.

In the

cases they cite, there are a host of subsequent developments and -- that are -- become intervening causes, and until you develop the evidence and these -in these subsequent events, and how -- what was more likely than not, which is the standard, and whether we could have surmounted those, I don't think we should be deprived of asserting the cause of action, and seeing what the evidence develops. THE COURT: I --

I asked Mr. Gilbert whether or

not the plaintiff could have withdrawn from this agreement at any point, and he said that in his opinion they could have. Do you agree with that? MR. GALLAGHER: Your Honor. No, I don't agree with that,

The plaintiff could not just walk away

from this thing, and not -- after having spent months preparing, and getting the contract from the City, the plaintiffs had -- and certainly implied constructive conditions of exchange to use good faith in completing his responsibilities. There were provisions in there, and indeed, the town -- the City did terminate this contract in March of 1991 for other reasons, but there were reasons which would have rendered it impossible for the

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plaintiff to perform, but he didn't exercise any of those. So it's not an illusory contract where that is

-- either one can walk away from it. The cases they cite are employment contracts, where the -- either party could terminate at will. This is not that kind of a case at all. walk away from this responsibility. He can't just

Had he done so,

there would've been a lawsuit by the City of Bridgeport against him, for its delay in time, among other things, and don't forget, they started and they condemned the property, and they cleared it with a view towards going on with this development which, according to the evidence that developed in a criminal trial, there was no subsequent contract in this case, because that proved too hot to deal with any further. The -- Your Honor, the predicate acts argument that counsel raised, if I can call Your Honor's attention to -- the -- first, it's paragraph -it's on page -- I'm sorry to say I've got an amended complaint with me, but it's Predicate Act 15, paragraph 95: "The defendants, who were public officials," I'm reading now, "sophisticated developers, real estate attorney, architects, engineers, knew that the delays, impossible demands and

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arbitrary and capricious conditions they were imposing, would force the plaintiff to lose financial backers, allowing the Lenocis individually, and/or companies, limited partnerships or other entities controlled by the Lenoci family, to take project." Now, we -- we've been able to -- we were only able, at the beginning, to alleged these things in broad, general form, but I think that that's sufficient. A complaint should be interpreted to

construe not only what it says, but what it reasonably implies here, and I think that we've set up allegations that are sufficient causation, connected to the predicate acts in this case, to set out a cause of action that survives this motion to dismiss. The -- I -- You know, rather than -- We've briefed these issues, and rather than go into each one of them, if I can rely on the brief and save some time, Your Honor. The civil rights argument is that we have --

and that's addressed on page 13 of 15 of my brief, and the key to the argument here, is that the -- we have a -- the question is whether we have a legitimate entitlement to a claim, and the case law reflects that a person (phonetic) interest in the benefit is a

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property interest for due process purposes, if there are such rules or mutually explicit understandings that support his claim of entitlement to the benefits, so that he can invoke the appropriate procedural protections. We submit that the existence of the contract that was signed in November of 1997 or `98, was sufficient to give him exclusive development rights, at least at that stage. That gave him -- He was the

exclusive developer, and granted, he had a lot to do to comply, and neither party had a right to terminate that at will, and it seems to us that he was entitled -that gave him an entitlement to the benefits of that bargain, and that's sufficient under a 1983, the state of the civil rights claim, and that's our argument on that. The -THE COURT: he have? MR. GALLAGHER: Well, he had a property Well, what property interest did

interest in the -- He had an exclusive development right, which is a property interest, it seems to us, and they took it away, his entitlement under that exclusive development right to future contracts, as they came up, and to have that not interfered with in

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the manner that it was. I mean, that's all he has. He has a

contract, as the exclusive developer, and it would seem to us that what the defendants are really saying is, "That's not enough because these developments are so complex and take so much time, that if that's all you got, when we take it away from you, it's okay, you don't have the RICO claim." circumstances where a jury -THE COURT: No, it's a 1983 claim. Excuse me, a 1983 claim, but A RICO claim in

MR. GALLAGHER:

they're based -- their argument is essentially the same on the RICO claim, is that -- and that's the 1983 issue, is that he had the exclusive development right. That's all he had under that contract. By the time it

was taken away, he had spent a fortune -- a small fortune. He had obtained public funding to the tune of The property was cleared. It was

$200 million. condemned.

The matter was going on until it was

decided that the cronies would take over, and the contract would be -- and this is the claim now, that the contract would be steered to the Lenocis, as a result of the imposing impossible deadlines, and make it impossible for Conroy to comply. He has a right, it seems to us, both under a

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1983 and the RICO statute, to attempt to prove his claims, and it may well be that, as a matter of fact, he will have some trouble on the causation issue, but it seems to us, as a matter of law, which we're talking about here, he has a viable cause of action for RICO, which is