21-847 Petroff Amshen LLP v. Alfa Rehab PT PC

UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT

SUMMARY ORDER RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION “SUMMARY ORDER”). A PARTY CITING TO A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.

1 At a stated term of the United States Court of Appeals for the Second Circuit, 2 held at the Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of 3 New York, on the 17th day of February, two thousand twenty-two. 4 5 PRESENT: 6 MICHAEL H. PARK, 7 BETH ROBINSON, 8 Circuit Judges, 9 JED S. RAKOFF, * 10 District Judge. 11 _____________________________________ 12 13 PETROFF AMSHEN LLP, 14 15 Plaintiff-Appellant, 16 17 v. 21-847 18 19 ALFA REHAB PT PC, BRUNSWICK BANK & 20 TRUST COMPANY, JAMES CHENG, CHUNG 21 KWONG YAU, CAI FENG TAN, THE 22 SAMANTHA LEE FAMILY TRUST, 23 ADVANCED REHAB CARE PT PC, 24 JOSEPHINE BELLONI, ANNAROSE 25 ROTONDI TRUST, AGYAL PHYSICAL 26 THERAPY PLLC, WEI JI LI, ASSEM 27 PHYSICAL THERAPY PC, AMRO 28 MAHMOUD SHOKRY BARAKAT, WISDOM 29 PHYSICAL THERAPY PC, HATEM E. 30 ABOUHASSAN, KISHORE KANDURI, AKA 31 KISHORE K. KANDURI, RADWA PT PC,

* Judge Jed S. Rakoff, of the United States District Court for the Southern District of New York, sitting by designation. 1 MOHAMED M. ELMANDOUH, MD, 2 ULTIMATE CARE CHIROPRACTIC PC, 3 GRAIG GRANOVSKY, GRAIG GRANOVSKY 4 CHIROPRACTIC PC, THIRD AVENUE 5 CHIROPRACTIC CARE PC, NATHANIEL 6 MAZZA, THERAKINEMATICE PT PC, 7 LEGASPI MADELINE, PHYSIO SOLUTIONS 8 PT PC, REHAB CONCEPTS PT PC, 9 SIGNIFICANT CARE PT PC, SAYED F. 10 SAYED, NBC HEALTH PHYSICAL 11 THERAPY PC, NATHANIEL BREX ROA 12 CAYETUNA, LITE CARE REHAB PT PC, 13 ISLAM BEKHET, EXTENSIVE CARE PT PC, 14 ANNA MEYERZON, MMA PHYSICAL 15 THERAPY PT PC, MAZED ABDEL MAGID, 16 MD, JMP REHAB CARE PT, HARKIRTAN 17 SINGH, DALBIR KAUR, HOWARD 18 KESSLER, MD, FIRST HAND PHYSICAL 19 THERAPY PC, ABDELHAMID ABOURYA, 20 AKA ABDELHAMID MAHMOUD ABOURYA, 21 EYE ON WELL-BEING ACUPUNCTURE PC, 22 OATES DEVAN, CORE BASICS PC, KHALED 23 NASR, COMMUNITY WELLNESS 24 PHARMACY INC., RAKMIN ILYABAYEV, 25 COMFORT TOUCH PT PC, FERRIN 26 MANUEL, CANARSIE WELLNESS 27 PHARMACY INC., BODY ACUPUNCTURE 28 CARE PC, OKSANA PODHAYETSKA, 29 BRIGHT STAR REHAB PT PC, MOHAMED Y 30 EL SAIDY, BL HEALTHY LIFE 31 ACUPUNCTURE PC, ZENON 32 KURKAREWICZ, BRONX CHIROPRACTIC 33 REHABILITATION, P.C., SEAN DIAMOND, 34 D.C., BEST TOUCH PT PC, MOTAZ M. 35 EBEIDO, VITAL MERIDIAN 36 ACUPUNCTURE PC, LUDMILA 37 BOBCHYNSKA, MD, MEDS4DAYS 38 PHARMACY INC., BRITTNEY COLEMAN, 39 PHYSICAL THERAPY REHAB PC, 40 ACUPUNCTURE HEALTHCARE PLAZA I 41 PC, LAW OFFICES OF DOMINICK W. 42 LAVELLE PC, DOMINICK LAVELLE, AKA 43 DOMINICK W. LAVELLE, ELSANAA PT PC, 44 MAHMOUD ELSANAA, ZHONG SU, LIBING 45 SU, MANHATTAN'S HANDS OF HOPE PT 46 PC, JOHN DOE #1-10, JEREMY JAMES

2 1 SCHIES, BARAKAT PT PC, DANIMARK 2 PHYSICAL THERAPY PC, CAMBRIDGE 3 CLARENDON FINANCIAL SERVICES LLC, 4 5 Defendants-Appellees. † 6 ____________________________________ 7 8 FOR PLAINTIFF-APPELLANT: DANIEL GINZBURG, The Ginzburg Law 9 Firm, P.C., Old Bridge, NJ (Steven Amshen, 10 Petroff Amshen LLP, Brooklyn, NY, on the 11 brief). 12 13 FOR DEFENDANTS-APPELLEES: DONALD JAY POLS, Belis & Pols, LLP, 14 Brooklyn, NY. 15 16 WESLEY MEAD, The Mead Law Firm, P.C., 17 Astoria, NY. 18 19 LLOYD M. EISENBERG, Eisenberg & Carton, 20 Uniondale, NY. 21 22 GALINA FELDSHEROVA, Kopelevich & 23 Feldsherova, P.C., Brooklyn, NY. 24 25 Appeal from a judgment of the United States District Court for the Eastern District of New

26 York (Brodie, J.).

27 UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED, AND

28 DECREED that the judgment of the district court is AFFIRMED.

29 Petroff Amshen LLP (“Petroff Amshen”), a law firm based in Brooklyn, alleges that dozens

30 of chiropractors, physical therapists, and acupuncturists engaged in a tax evasion scheme

31 implicating the firm. As alleged, individual Defendants, acting through corporate entities

32 (“practices”) under their control, wrote over 120 checks worth at least $600,000 made out to

33 Petroff Amshen as the payee, often with memos of “legal fees” or “legal services.” But Petroff

34 Amshen never performed any legal services for Defendants and had no knowledge of the checks.

† The Clerk is respectfully directed to amend the caption accordingly.

3 1 Rather, Defendants forged Petroff Amshen’s endorsement on the checks and created fake W-9

2 forms, purportedly issued by Petroff Amshen, to write off the transactions as business expenses.

3 With the help of Cambridge Clarendon Financial Services, LLC (“Cambridge Clarendon”), a

4 check casher in New Jersey, and Brunswick Bank & Trust Company (“Brunswick Bank”), a

5 nearby bank, Defendants then cashed the checks for themselves, converting pretax money in their

6 corporate accounts into post-tax assets. Cambridge Clarendon, “[u]pon information and belief . . .

7 was aware of the scheme,” “received remuneration and compensation for its role,” and neglected

8 to verify the (false) employer identification number on the W-9 or to call Petroff Amshen for

9 verification. Compl. ¶¶ 7–9. The number of checks written by each firm varies from one to

10 nineteen checks. The Complaint appends copies of checks allegedly written by Defendant firms,

11 and many of the checks bear a stamp from Cambridge Clarendon.

12 Petroff Amshen sued each practice and the individual Defendants affiliated with it, along

13 with Cambridge Clarendon and Brunswick Bank, in the United States District Court for the Eastern

14 District of New York. Against each set of Defendants affiliated with a given practice, Plaintiff

15 brought a claim under the Racketeer Influenced and Corrupt Organizations Act (“RICO”), a claim

16 for common-law fraud, and a claim for unjust enrichment. Plaintiff also requested declaratory

17 relief to the effect that Petroff Amshen itself was not involved in Defendants’ scheme. As to the

18 RICO claim, Plaintiff alleged that each corporate Defendant was a RICO “enterprise,” but also

19 alleged that “[t]he criminal enterprise was comprised of all of the Defendants,” corporate and

20 individual, acting as a single organization. Compl. ¶ 11. For each corporate Defendant, all

21 affiliated individuals are alleged to have “knowingly conducted and/or participated, directly or

22 indirectly,” in its conduct “through a pattern of racketeering activity” involving violations of 18

(mail fraud), 1343 (wire fraud), and 1956 (money laundering). E.g., Compl. ¶ 138.

4 1 As for damages, Petroff Amshen alleges injury to the firm’s reputation via the use of its name in a

2 fraudulent scheme. The firm also alleges that it will face tax penalties of an unspecified nature.

3 The district court dismissed all RICO counts for failure to state a claim and declined to

4 exercise supplemental jurisdiction over Petroff Amshen’s state-law claims. Petroff Amshen

5 appealed, arguing that it has plausibly alleged RICO claims and that, in the alternative, it should

6 be granted leave to amend. 1 We review a motion to dismiss for failure to state a claim de novo.

7 Darby v. Greenman,

(2d Cir. 2021). We review denial of leave to amend for

8 abuse of discretion. ATSI Commc’ns, Inc. v. Shaar Fund, Ltd.,

(2d Cir. 2007).

9 We assume the parties’ familiarity with the underlying facts, procedural history, and issues on

10 appeal.

11 First, we agree with the district court that Petroff Amshen failed to state plausible RICO

12 claims. RICO provides a cause of action to parties who are “injured in [their] business or property

13 by reason of a violation of [

].”

(c). To satisfy that requirement,

14 a RICO plaintiff must show that the defendants’ violation was the “proximate cause” of the injury.

15 D’Addario v. D’Addario,

(2d Cir. 2018). “[P]roximate cause requires . . . some

16 direct relation between the injury asserted and the injurious conduct alleged, and excludes . . . those

17 links that are too remote, purely contingent, or indirect.”

(quoting Ideal Steel Supply Corp. v.

18 Anza,

(2d Cir. 2011)). Plaintiff’s sole factual allegations in the Complaint

19 relating to damages are:

20 130. Upon information and belief, Petroff Amshen will face, as proximate cause of 21 the Defendants’ criminal action, significant tax penalties, in an amount to be 22 determined in the future and during discovery, unless the Court grants the relief 23 sought herein.

1 Petroff Amshen does not appeal the district court’s dismissal of its state-law claims.

5 1 131. Upon information and belief, Petroff Amshen will suffer substantial injury to 2 its reputation as a result of the Defendants’ conduct in which the name, business 3 reputation and identity of Petroff Amshen was used to conduct a fraudulent scheme. 4 Compl. ¶¶ 130–131. On appeal, Plaintiff abandons its theory of damages based on tax penalties

5 and presses only its theory based on reputational damage. Plaintiff contends that it plausibly

6 alleged monetary loss resulting from harm to its reputation and that these damages are not “general

7 or speculative” because the Complaint asserts that Petroff Amshen “will suffer substantial injury

8 to its reputation.” Compl. ¶ 131 (emphasis added). But that assertion, a mere recitation of an

9 element of a RICO claim, is a legal conclusion, not a factual allegation, so it is not entitled to a

10 presumption of truth. See Ashcroft v. Iqbal,

(2009). But even if we presumed

11 it to be true, the risk of lost profits in the future is insufficient to establish standing under the RICO

12 statute. See Denney v. Deutsche Bank AG,

(2d Cir. 2006) (“RICO standing is

13 a more rigorous matter than standing under Article III. A RICO plaintiff only has standing. . .

14 when his or her actual loss [has] become[] clear and definite.” (cleaned up)); Kimm v. Chang Hoon

15 Lee & Champ, Inc.,

(2d Cir. 2006) (“[T]he generalized reputational harms

16 alleged, including the risk of future lost business commissions, are too speculative to constitute an

17 injury to business or property.”). Petroff Amshen thus failed to state plausible claims for relief

18 under RICO.

19 Second, we decline to vacate the district court’s judgment to allow Petroff Amshen to

20 amend its complaint. Plaintiff concedes that it never moved to replead below. We have previously

21 characterized as “frivolous” “the contention that the District Court abused its discretion in not

22 permitting an amendment that was never requested.” Williams v. Citigroup Inc.,

,

23 212 (2d Cir. 2011) (cleaned up). Vacatur of the judgment on appeal would thus be inappropriate.

24 In any event, the submission of a new complaint would likely be futile. Among other

6 1 deficiencies, Petroff Amshen has made no showing that any lost business, even if concretely

2 alleged, would be a proximate result of Defendants’ alleged scheme. See D’Addario,

96. The connection from Defendants’ conduct to Petroff Amshen’s reputational harm to

4 consequential damages in the form of lost business is too attenuated to satisfy the proximate cause

5 requirement. See Hemi Grp., LLC v. City of New York,

(2010) (in defining

6 proximate cause for RICO purposes, explaining that the “general tendency” is “not to go beyond

7 the first step” of the causal chain (quoting Holmes v. Sec. Inv. Protection Corp.,

,

8 271–72 (1992)); In re Am. Exp. Co. S’holder Litig.,

(2d Cir. 1994) (denying

9 RICO standing to those who are “neither the target of the racketeering enterprise nor the

10 competitors nor the customers of the racketeer” (citation omitted)). Petroff Amshen also conceded

11 at argument that it would allege no new racketeering activity by Defendants. Given that concession

12 and the tenuous nature of Petroff Amshen’s asserted chain of causation, we cannot conclude that

13 the district court abused its discretion in declining a request for leave to amend that Petroff Amshen

14 never made. 2

15 We have considered the remainder of Petroff Amshen’s arguments and find them to be

16 without merit. For the foregoing reasons, we affirm the judgment of the district court.

17 FOR THE COURT: 18 Catherine O’Hagan Wolfe, Clerk of Court

2 For the first time on reply, Petroff Amshen argues that its complaint should have been dismissed without prejudice, rather than with prejudice, if the only proper ground for dismissal was statutory standing. We ordinarily do not consider arguments first raised in a reply brief. See JP Morgan Chase Bank v. Altos Hornos de Mexico, S.A. de C.V.,

(2d Cir. 2005). We decline to do so here, in part for the reasons above—namely, that Petroff Amshen has made no showing that any new complaint would state a plausible claim for relief.

7