The opinion of the court was delivered by: Judge Ronald A. Guzmán
MEMORANDUM OPINION AND ORDER
Plaintiffs have sued defendants for their alleged violations of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1962, breach of fiduciary duty and negligence. Defendants have filed a Federal Rule of Civil Procedure ("Rule") 12(b)(6) motion to dismiss. For the reasons set forth below, the Court grants the motion as to the RICO claims and declines to exercise supplemental jurisdiction over the state law claims.
Plaintiffs are the former owners of thirty percent of the stock of Vita Food Products, Inc. (Second Am. Compl. ¶¶ 1, 4.)
In 2006, Vita needed capital to stay in business, which it raised by borrowing from banks and selling stock to plaintiff Stephen Rubin ("Rubin"), Chairman of Vita's Board of Directors, plaintiff Seramur, a member of the Board, and defendant Bedford, who then became a Board member. (Id. ¶¶ 18-22.) Vita's 2006 losses were so great that it had to take a write down of goodwill on its financial reports. (Id. ¶¶ 23-24.)
In August 18, 2006, at Bedford's urging, the Vita Board replaced Rubin with defendant Bolen as Vita's President and CEO. Rubin, however, remained the company's largest stockholder and the Chairman of its Board. (Id. ¶¶ 26-28.)
In 2007, because of Vita's large bank debt, Rubin began looking for a buyer for the company. (Id. ¶ 28.) Rubin approached Trident Seafood Corporation, which said it would be willing to pay up to $25 million for Vita and assume its debt. (Id. ¶¶ 29-31.) When Rubin told Bedford about the offer, Bedford said he would not support any sale for less than $40 million plus the assumption of debt. (Id. ¶ 37.)
Subsequently, Bedford offered to invest $3 million in Vita, if Rubin gave him an irrevocable proxy to vote Rubin's stock and an option to buy 2,650,000 additional shares of Vita at $1.25 to $1.75 per share. (Id. ¶ 41.) Having no other alternative, Rubin agreed. (Id. ¶ 42.)
When the terms of Vita Directors Seramur, Glen Morris and Steven Rothstein expired, Bedford replaced them with defendants Lipson, Allen, Bolen and Dolanski. (Id. ¶ 46.)
Thereafter, Bedford lowered the market price of Vita stock by: (1) "reducing the publicly reported . . . operating profits by approximately $1 [million] in one year"; (2) "suppressing information of valuable co-packing rights which Vita was very near [to] obtaining"; and (3) "preventing information about favorable Vita developments" from being disseminated. (Id. ¶ 47.) As a result, defendants were able to buy Vita shares for less than $1.00 per share. (Id. ¶ 48.)
On May 31, 2008, Bedford replaced Rubin with Lipson as Board Chairman. (Id. ¶ 49.) Rubin, however, remained on the Board and continued to look for buyers for the company. (Id. ¶ 50.) Bedford rejected all of the proposals Rubin presented. (Id. ¶¶ 50-51.)
On November 24, 2008, Bedford mailed to Board Chairman Lipson an offer to buy the minority shareholders' stock at $.30 a share. (Id. ¶ 53.) On December 1, 2008, Bedford and Lipson formed a special committee of the Vita Board, composed of defendants Bolen, Lipson, Dolanski, Douglas and Allen, to consider Bedford's offer. (Id. ¶¶ 57-59.) On December 9, 2008, the committee rejected it. (Id. ¶ 65.)
On December 15, 2008, Bedford submitted a second offer, increasing the per share price to $1.00. (Id. ¶ 67.) On January 27, 2009, the special committee agreed to a purchase price of $1.05 per share. (Id. ¶ 74.) Thereafter, the Board unanimously approved the price and recommended it to the shareholders. (Id. ¶ 79.)
The transaction was structured as a merger of Vita into VFP, a company wholly-owned by MDB II, which is wholly-owned by Bedford. (Id. ¶ 88.) On February 27, 2009, Bedford, for himself, and Lipson, on behalf ...