The opinion of the court was delivered by: Joan Humphrey Lefkow United States District Judge
MEMORANDUM OPINION AND ORDER
Plaintiffs The Cancer Foundation, Morton M. Lapides, Sr., MML, Inc., Transcolor Corp., Valley Rivet Company, Inc., VR Holdings, Inc., Charles Amera, Anne Amera, Sharon Boerger, Dorothy Brooks, Sue D. Burmester, Larry Feine, Gilbert Graham, Nancy L. Graham, James E. Heitkamp, Michael J. Heitkamp, Virginia Heitkamp Holland, Eugene M. Hitchcock, Florence E. Hitchcock, Robert Hummel, Kenneth L. Kluesner, Vernon Lyons, Ruth Lyons, Cecil E. Metz, Marilyn J. Munz, Anthony Spina, and Anita Spina (collectively, "plaintiffs") have filed an amended complaint against defendants Cerberus Capital Management, L.P., Madeleine, LLC, Gordon Brothers Group, the Third Avenue Value Fund, Warren Feder, Stephen Feinberg, and Martin J. Whitman (collectively, "defendants") alleging six counts: (1) fraudulent concealment, (2) breach of contract, (3) Civil RICO under 18 U.S.C. § 1961 et seq., (4) conspiracy to engage in a pattern of a racketeering enterprise under the same statute, (5) tortious interference with an economic relationship, and (6) civil conspiracy.
Defendants now move for Rule 11 sanctions against plaintiffs or for dismissal of plaintiffs' amended complaint under Federal Rule of Civil Procedure 12(b)(6). For the following reasons, defendants' motion [#41] is granted in part and denied in part. This case will be dismissed with prejudice.
These facts are taken from plaintiffs' amended complaint and are presumed true for the purpose of resolving the pending motions. Plaintiff MML, Inc. is the parent company of plaintiff Transcolor, a company that printed and sold screen-printed t-shirts. Amended Complaint ("AC") ¶¶ 5, 19. Transcolor's shirts were produced at its two plants. AC ¶ 20. From 1994 through 1996, Transcolor lost significant business because many of its customers were installing their own printing presses. AC ¶ 22. As a result, its plants were operating at approximately 20% of their capacity. AC ¶ 22.
Transcolor is the parent company of plaintiff Valley Rivet. AC ¶ 8. At some point during the time period relevant to plaintiffs' claims, plaintiff VR Holdings became the parent company of MML. AC ¶ 7. Plaintiff Morton M. Lapides is an individual who held an ownership interest in VR Holdings, MML, Transcolor, and Valley Rivet. AC ¶ 9.*fn1
Winterland Concessions Company was a company that at one time held approximately 300 licenses that allowed it to print images on t-shirts authorized by numerous significant entertainers and sold at concerts and other locations. AC ¶ 23. In 1996, it was discovered that Winterland's primary plant contained a significant amount of asbestos. AC ¶ 24. Winterland's parent, Music Corporation of America ("MCA"), decided to sell Winterland instead of relocating or constructing a new plant. AC ¶ 24. Carl Kampel is an individual who was the Chief Financial Officer of Winterland and a member of its board of directors. AC ¶ 17. John Woods was general counsel of Winterland. AC ¶ 18.
In March 1996, MML began negotiations with MCA to purchase Winterland. AC ¶ 25. MML intended to purchase Winterland through a six-month term bridge loan and then consolidate Winterland with Transcolor. AC ¶ 26. On August 14, 1996, defendants Gordon Brothers Capital Corporation ("GBCC"),*fn2 Cerberus Capital Management, LLC ("Cerberus"), and Madeleine, LLC agreed to extend Winterland a $23 million short-term line of credit due in February 1997. AC ¶ 32. The line of credit transaction was secured by Winterland's receiveables, inventory, fixed assets, artist licenses, 100% of its stock, and guarantees from Lapides and MML. AC ¶ 32. MML and Kampel agreed that Kampel would stay on as Winterland's Chief Financial Officer and a member of its Board of Directors. AC ¶ 30. As part of MML's purchase of Winterland, Transcolor sold its inventory and leased its buildings and machinery to Winterland. AC ¶ 28.
Defendant Warren Feder is an individual who was the president of GBCC at all times relevant to the complaint. AC ¶ 13. Defendant Stephen A. Feinberg is an individual who was president of Cerberus at all times relevant to the complaint. AC ¶ 14.
In late November or early December 1996, with the unpaid portions of the line of credit coming due in February 1997, Winterland's financial situation became precarious. AC ¶ 36. Its relationships with some of its suppliers deteriorated. AC ¶ 38. A long-term line of credit was needed in order to keep Winterland operating and to satisfy the short-term line of credit with GBCC, Cerberus, and Madeleine. AC ¶ 38. Accordingly, Winterland management aggressively sought to secure long-term financing. AC ¶ 38.
Sometime between November 1996 and January 1997, Kampel, in violation of his contractual and fiduciary duties as an officer and director of Winterland, schemed to secretly assist GBCC and Cerberus in wresting control and ownership of Winterland from MML and to acquire a personal ownership stake in Winterland. AC ¶ 36. Specifically, Kampel secretly entered into an agreement with Feder and Feinberg that if GBCC took over Winterland, Kampel would continue as Chief Financial Officer and personally receive Winterland stock for an investment of $50,000. AC ¶ 43. In furtherance of this scheme, Kampel disobeyed directives from Lapides and refused to pursue potential sources of long-term financing in order to prevent Winterland from refinancing its short-term line of credit and force it to sell to GBCC and Cerberus. AC ¶¶ 39-41.
Winterland did enter into an agreement with Capital Factors, Inc. for a $1 million factor guaranty and/or letter of credit. AC ¶ 46. Capital Factors also issued a letter of intent to provide Winterland with receiveable-based financing for the purpose of replacing Winterland's line of credit with GBCC. AC ¶ 46. In late February 1997, however, Feder orally exposed the conspiracy by informing Capital Factors that Kampel was on GBCC's "team." AC ¶ 47. As a result, Capital Factors concluded that there was a battle for control of Winterland and decided not to replace Winterland's short-term line of credit. AC ¶ 48.
Kampel was ordered by Winterland management to negotiate alternative long-term financing with defendants GBCC, Cerberus, and an additional company: defendant Third Avenue Value Fund, which was introduced as an alternative lender. AC ¶ 49.*fn3 Kampel was instructed that before he agreed to accept any long-term financing from GBCC and Cerberus that would result in MML's losing control of Winterland, Winterland would need sufficient notice to secure long-term financing from another source. AC ¶ 49. Kampel disobeyed Winterland's order and entered into an agreement calling for a March 15, 1997 closing date with GBCC and Cerberus, foreclosing alternative long-term financing with a third party. AC ¶ 50.
In late February 1997, Lapides and Woods learned from Capital Factors that Kampel and Feder had arrived at some sort of agreement. AC ¶ 53. On March 4, 1997, Lapides and Woods confronted Kampel and asked him if he was cooperating with GBCC and Cerberus to take over Winterland. AC ¶ 53. Kampel confessed that he and Feder had agreed that if Winterland were taken over by GBCC, Kampel would receive Winterland stock on favorable terms not generally available to others. AC ¶ 53. As a result of the March 4 meeting and Kampel's confession to acts of disloyalty and self-dealing, Kampel was removed from Winterland's board of directors and was barred from entering Winterland's premises or contacting any of its employees. AC ¶ 54. MML subsequently filed suit against Kampel for breach of fiduciary duty and related counts seeking recovery of the damage Kampel had caused to Winterland. AC ¶ 62.*fn4
On April 11, 1997, GBCC and Cerberus (through Madeleine) entered into a Shareholder and Settlement Agreement whereby (1) GBCC and Cerberus became 80% owners of Winterland and MML was relegated to a 20% ownership of Winterland; (2) MML agreed to dismiss its lawsuit against Kampel; (3) GBCC and Cerberus agreed not to re-hire Kampel; (4) GBCC and Cerberus agreed to extend the maturity dates for the short-term line of credit by twenty-four months from the Agreement execution date; (5) for a one year period extending from April 11, 1997 to April 10, 1998, GBCC and Cerberus agreed to consider in good faith any offer by MML to repurchase the stock that was being transferred to GBCC and Cerberus; (6) during the same time frame, if GBCC or Cerberus received an offer for the shares subject to the agreement, Lapides and MML would be given the right of first refusal at the offered price; (7) the parties agreed that each would "do and perform ... all such further acts and things and shall execute and deliver all such other agreements, certificates, instruments, and documents as any other party ... reasonably may request in order to ...