Amicus Curiae Brief — Sedima, S. P. R. L. v. Imrex Co.

[ ottice-supreme Court, US.

rLED

No. 84-648 | FEB 28 1985

TREEXANBDEAHe STEVAS,

IN THE ne

SUPREME COURT OF THE UNITED STATES ;

October Term, 1984

SEDIMA, S.P.R.L.,

Petitioner,

-Vv.-

IMREX COMPANY, INC.,, et aL,

Respondents,

On Writ of Certiorari to the United States Court of

Appeals for the Second Circuit

BRIEF FOR THE CITIES OF NEW YORK, CHICAGO

AND PHILADELPHIA, AMICI CURIAE

FREDERICK A.O, SCHWARZ, Jr.

Corporation Counsel of the

City of New York, Amicus Curiae.

100 Church Street

New York, NY 10007

(212) 566-4501 or 4338

LEONARD KOERNER,

MICHAEL D, YOUNG,

WALTER A, KRETZ, JR.,

MARTIN C, ARONCHICK,

Of Counsel

JAMES MONTGOMERY BARBARA W. MATHER

Corporation Counsel of City Solicitor, City of

City of Chicago, Philadelphia, Amicus

Amicus Curiae. Curiae.

121 North Lasalle St. 1520 Muni. Servs. Bldg.

Chicago, IL 60602 Philadelphia, PA 19102

(312) 744-6900 (215) 686-5233

MATTHEW J, PIERS, HANDSEL B. MINYARD,

WILLIAM JAEGER, DENISE COLLIERS,

Of Counsel. Of Counsel.

a

TABLE OF CONTENTS

Page

Table of Contents........cccccccccsscseceeceeeccsereee I

Table of Authorities..........ccccccsccoccscescereeeee il

Interest of Amici Curiae.........cccccesceceseeeere |

Summary Of Argument.......cccccccsccecssesereeesere 7

Point I - The Prior Conviction

Requirement Should

Be Rejected....... eeanecnscesccesees 8

Point Il - The Racketeering Injury

Doctrine Should

Be Rejected........cccccccsccssceees 16

IIIT, «0 saniuiicerieieameetenemenaneoussessssoenesee 2 l

TABLE OF AUTHORITIES

Cases: Page

Alcorn County v. U.S. Interstate

upp es Inc., 731 F.2d 1160

th r. ia ccisccenns 4

Bankers Trust Co. v. Rhoade

741 F.2d 511 (2d Cir. 1984)........ 18

Barker v. Underwriters at Lloyd's

London, 564 F. Supp. 357 E D.

ae 8

Bennett v. Berg, 685 F.2d 1053,

aff'd en banc, 710 F.2d

1361 (8th Cir. 1982), cert.

denied, 104 S.Ct.

527 (1983) EEE 19

Bunker Ramo Corp. v. United

Business Forms, Inc., 713

. 2d 1272 (7th Cir. 1983).......... 8

City of Chicago v. North Austin

Revi talization Corp. No.

85 0441 oO oe ’

filed Jan. 18, 1985)...........seeeeeee 6

City of Milwaukee v. Hansen,

Civ. No. 77-246 (E.D. Wis.

| an 7,18

City of New York v. Arnmart

Wholesale Beer Distributors,

ne, 83 Vv. 9263 — — ~ a

filed Dec.21, 1983)........sseseeseees 4-5, 13-14,19

-ji-

Cases: Page

City of of New ork v. Rat dotene v. Bandolene

= ne. Inc., 81 Civ. 1240.

(E.D.N. Y., filed

April 24, 198 1)... Seeeeecocesceceseeeseses 5

City of New York v. Liberman,

ndex No. 40339/85 (Sup.

Ct. of New York, filed

Feb.8, 1985).....cccccsseee spcossonccsese 5, 14-15

City of New York v. Sitzer,

81 Civ. 7116 (S.D.N.Y.,

settled March 12, 1984)............ 5

City of Philadelphia

v. Modern Tra rtation, Inc.

85 Civ. 2052

(E.D. Pa., settled Feb. 13, 1985)......... 6

County of Cook v. Lynch,

560 F. Supp. 136 (N.D.

e TLL, 1982). ..ccccccccccccccccscccccccccccees 4

County of Suffolk v. Wals

81 Civ. 0257 (E.D.N.Y.,

filed Jan. 27, 1981)........ssceeeeeees 4

Farmers Bank v. Bell Mortage

a? 52 F. Supp. 1278

= fe EN -

Gerace v. Utica Veal Co.

580 F. Supp. 1465

(N.D.N.Y. 1984)....ccccceereeccereesees 4

In re ee 583 F. Supp.

1388 (E.D. Pa. 1984).........cceeesees 18

In re Longhorn Securities

Litigation 573 F. Supp.

255 (W.D. Okla. 1983)..........00000+ 8

-iii-

Cases: Page

Kleiner v. First Nat'l Bank

526 F. Supp. 1019

(N.D. Ga. 1981),

overruled on other

grou Morosani v.

_ F.2d. 1220 (11th Cir.

EES Seeeeresesceseseeseece y

Maryland v. Buzz Berg Wrecking

0., 496 upp. 245

(D. Md. 1980)........ tT 4

Mauriber “ Shearson/A merican

~ Express, Inc., 546 F. Su upp.

391 iG A x

Moore v. Margiotta, 83 Civ. 2036

(E.D.N.Y., ied

May 19, 1983)....cccccccesessesscesceees 4

Moss v. Mo Stanley, Inc.,

719 F. 2d 5 (2d Ci 1983),

cert, denied, sub nom.

Moss v. Napman, 104 104 S.

t. 2 4 eeeeene seeeceeceeseeeceeseee 8, 19

Municipality of Anchorage v.

itachi Cable, Ltd., 547 F.

upp. 633 (D. Alaska 1982)......... 4

New York v. O'H

83 Civ. 1440 (W.D.N.Y., filed

December 21, 1983).........cecceceeee 4

Parnes v. Heinold Commoditi

Inc., 487 F. — 645 whion D.

TL 1980)..css.0+-0.. a

Ralston v. Capper, 569 F. Supp.

1575 (E.D. Mich. 1983)........0000+. 18

Cases: Page

Sedima, S.P.R.L. v. Imrex Co.,

741 F.2d 482 (2d Grr. 1984)........ passim

State Farm Fire & Cas. Co.

Sutliff, Inc. v. Donovan Cos.

727 F. 2d 648 (7th Cir.

United States v. Cappetto, 502

F.2d 1351 (7th Cir. 1974),

cert. denied, 420 U.S.

925 1975 SSCOSSOSOSESEESEEEEOSESESEESEE SES x

United States v. One Assortment

of 89 Firear 52 U.S.L.W.

4228 (Feb. Bile BOE Dicccccccccceceess ll, 12

United States v. Turkette, 452

> UW Clee iicccesscccccccscascecccce 10, 16, 17

United States v. Ward, 448

< e 1l, 12

USACO Coa! Corp. v.

Carbomin =ne

T 689 F.2d a

ne,

(6th Cir, 1982)......ccccccsssesesceeeee 8

Cases:

Van Schaick v. Church of

ciento 935 F.Supp.

1125 (D. Mass, 1982)..........e0000

Statutes:

The Racketeer Influenced and

Corrupt Organizations Act,

18 U.S.C, §§1961-1968.............

City of Philadelphia Home Rule

Charter $4-400.........ccccccccocsees

1970 Illinois Constitution, Art.

Waly Wensesetnnndicesnenineninteniniiemaneniiessanes

New York City Charter, §394.............

Other Authorities:

Note, Government Corruption and

Civil RICO: Providing

Compensation for Intangible

Losses 58 N.Y.U. L. i.

15

Page

I Clee Pascrsasensccessscsscesesccccees 3

Tannenbaum & Molo, State and

Local Governments’ Use of

the Treble Dam es

Rem Under Civil RICO:

eans of Redressing the

Economic Effects ~

Unlawful Conduc

35 Baylor L. Rev. 1 (1983).........

116 Cong. Rec. 18,945 (1970).............

116 Cong. Rec. 35,344 (1970)..........00.

-vi-

17

16

No. 84-648

IN THE

SUPREME COURT OF THE UNITED STATES

October Term, 1984

SEDIMA, S.P.R.L.,

Petitioner,

- V. —

IMREX COMPANY, INC.,, et aL,

Respondents.

BRIEF OF THE CITIES OF NEW YORK, CHICAGO,

AND PHILADELPHIA, AMICI CURIAE

INTEREST OF AMICI CURIAE

The Cities of New York, Chicago and

Philadelphia ("the Cities") submit this amici curiae

brief in support of the positions of the petitioner in

Sedima, S.P.R.L. v. Imrex Co., 741 F.2d 482 (1984).

This decision threatens the vitality and

effectiveness of a statutory remedy used by the

Cities and other local or state governments to

combat systematic fraud and governmental

corruption.

Local law charges each of the Cities with the

responsibility of representing and protecting the

public interest and the rights of its citizens. Each

of the Cities is also charged with the institutional

responsibility of protecting its capability for

delivering honest, efficient, impartial and effective

governmental services to all its citizens, See New .

York City Charter § 394; 1970 Illinois Constitution,

Art. VII, § 6; City of Philadelphia Home Rule

Charter § 4-400.

In fulfilling its obligations, each of the Cities,

as well as other localities, must confront the

persistent challenges and dangers, as well as the

corrupting influence, posed by Systematic criminal

frauds. Tax evasion or public contractor frauds

cause massive economic loss to cities. Bribery and

kickback schemes injure the public fise and impair

the integrity of government. Public benefits

programs are repeatedly targeted by malefactors

who defraud the government and the intended

beneficiaries. Organized drug trafficking and arson

for profit schemes create extraordinary demands on

police and other governmental services and diminish

the quality of life in cities.

These criminal activities are often

accomplished through sophisticated means, by

criminal enterprises which systematically commit

multiple criminal acts. Ordinary civil and criminal

remedies available to penalize specific criminal acts

and offer recompense to cities are insufficient to

eradicate the widespread problems caused by the

Systematic misconduct of criminal enterprises,

Extraordinary remedies are needed.

The Cities have found that the civil remedy

provision in the Racketeer Influenced and Corrupt

Organizations Act, 18 U.S.C. §§ 196 1-1968

("RICO"), is an effective weapon for deterring these

various criminal schemes and protecting the public

interest, the public fise and the institutions of local

government. * Specifically, the Cities have

° The Cities’ view is shared by commentators.

See Note, Government C tion and Civil RICO:

Providing Compensation Tor Tntangib le Losses, 58

-2.U. L. Rev. 1530 (1983); Tannenbaum & Molo,

State and Local Governments’ Use of the Treble

Damages Remedy Under Civil RICO: A Means of

edr the Economic ects of Unlawful

Conduct, 35 Baylor L. Rev. | (1983).

3

employed the civil remedy provision in RICO to

attack fraudulent tax evasion, bribery and illegal

bidding schemes.* In City of New York v. Arnmart

° Civil RICO actions have also been employed

by or on behalf of state or other local governments

to recover the loss flowing from complex and far-

reaching frauds, often accompanied by bribery or

some other form of corruption. See New York v.

O'Hara, 83 Civ. 1440 (W.D.N.Y., filed December 21,

1983) (bribery and overcharges in connection with

toxie waste disposal contract); County of Suffolk v.

Walsh, 81 Civ. 0257 (E.D.N.Y., filed Jan. 27,

1981) (bribery and bid rigging in connection with

sewer construction project); Moore v. Margiotta. 83

Civ. 2036 (E.D.N.Y., filed May 19, 1983) iad

civil RICO action arising from political slush fund

payoffs, kickbacks, and money laundering scheme);

Alcorn County v. U.S. Interstate Supplies Inc.. 731

F.2d 1160 (5th Cir. 1984) (bribery and fraudulent

billing by office supply company); Gerace v. Utica

Veal __Co, 980 F.Supp. 1465 (N.D.N.Y.

1984) (fraudulent underreporting by stockyard of

weight and grade of ranchers' livestock, causing

higher reimbursement payments to ranchers by

State); County of Cook v. Lynch, 560 F.Supp. 136

(N.D. IIL 1982) (bribery in return for real estate tax

assessment reductions); Muncipality of Anchorage v.

Hitachi Cable, Ltd., 547 Supp. 533 (D. Alaska

1982) (bribery and bid rigging in connection with

telephone cable contracts); Maryland v. Buzz Be

Wrecking Co., 496 F.Supp. 245 (D.Md. 1980) (bid

rigging and bribery in connection with demolition

work for urban renewal project).

Wholesale Beer Distributors, Ine., 83 Civ. 9263

(S.D.N.Y., filed Dee. 21, 1983), New York sued

eleven beer cistributors and their principal officers

for their participation in an elaborate series of

schemes — described in greater detail, infra — to

evade the City's beer excise and general corporation

taxes. In City of New York v. Liberman, Index No.

40339/85 (Supreme Court of New York, filed

February 8, 1985), the City of New York sued its

former chief lease negotiator due to his

participation in a scheme to defraud the City in

connection with the City's leases of various

properties. In City of New York v. Sitzer, 81 Civ.

7116 (S.D.N.Y., settled March 12, 1984), New York

sued the operators of a group of massage parlors

who systematically laundered their revenues,

committed bribery and evaded City taxes. In City

of New York v. Bandolene Fuels, Inc., 81 Civ. 1240

(E.D.N.Y., filed April 24, 1981), New York sued a

fuel oil company and its principal officer for the

damages flowing from a fraudulent bidding and

overbilling scheme. In City of Chicago v. North

Austin Revitalization Corp., No. 85C-0441 (N.D. IL,

filed Jan. 18, 1985), the City of Chicago sued one of

its former attorneys for using his position in the

City Law Department to allow a corporation in

which he was an officer and employee to reap

excess profits from participation in a public housing

program which funded the purchase, rehabititation

and sale of abandoned buildings. In City of

Philadelphia y._ Modern Transportation, Inc., 84 Civ.

2052 (E.D.Pa., settled Feb. 13, 1985), the City of

Philadelphia sued eleven corporations due to their

participation in an intricate scheme to defraud the

City in connection with sludge removal contracts.

In addition, the Cities have explored the possibility

of civil RICO actions to recover the losses arising

from extraordinary demands on local governmental

services and diminution of the quality of life caused

by the systematic misconduct vf criminal

enterprises, *

SUMMARY OF ARGUMENT

The Second Circuit departs from principled

analysis of the RICO statute in creating the prior

conviction and racketeering injury requirements in

Sedima.** There is no basis in the language or the

policy of the statute for the prior conviction and

racketeering injury requirements created by the

Second Circuit. The Second Circuit read into the

Statute requirements which simply do not appear

there,

e : : .

Compare City of Milwaukee v. Hansen, Civ.

No. 77-246, slip op. at 3-4 (E.D. Wis. Jan. 13,

1981) (arsonists liable for treble the cost of fighting

fires).

** The Second Circuit followed this inappropriate

course apparently because of its dissatisfaction that

RICO has "led to claims against such respected

‘enterprises’ as the American Express Company, E.F.

Hutton & Co., Lloyd's of London, Bear Stearns &

Co., and Merrill Lynch." Sedima, supra, 741 F.2d at

487.

POINT I

THE PRIOR CONVICTION REQUIRE-

MENT SHOULD BE REJECTED.

The prior conviction requirement created in

Sedima, supra, 741 F.2d at 496-504, has no basis in

the RICO statute. There is no ambiguity in the

Statute — it plainly and clearly does not require

prior convictions. In light of this clear language,

virtually every court which has considered the issue

has rejected the argument that prior convictions are

required. * The Second Circuit's criticism in

* See Bunker Ramo Corp. v. United Business

Forms, Ine., 713 F.2d 1272, 1286-87 (7th Cir. 1983);

USACO Coal Corp. v. Carbomin Ene Inc., 689

-2d 94, 95 n.1 (6th Cir. 1982); United States v.

Cappetto, 502 F.2d 1351, 1356-57 (7th Cir. 1974),

- cert, denied, 420 U.S. 925 (1975); In re Longhorn

Securities Litigation, 573 F.Supp. 255, 270-71 Gib,

Okla. 198 F Barker v. Underwriters at Llovd'

London, 564 F.Supp. 352, 356 (E.D. Mich. TOF

auriber v. Shearson /American Expr Inc., 546

F.Supp. 391, 396 (S.D.N.Y. 1982); State Farm Fire &

Cas, Co, v. Estate of Caton, 540 F. upp. 673, 675-76

(N.D. Ind. 1982); Parnes v. Heinold Commoditie

Inc., 487 F.Supp. 645, 646-47 (N.D. IIL 980}

Farmers Bank v. Bell Mor e Corp., 452 F.Supp.

1278, 1280 (D. Del. 1978). Se also Moss v. Morgan

Stanley, Inc., 719 F.2d 5, 19 n.15 (2d Cir. 1983),

cert, denied, sub nom. Moss v. Newman, 104 S.Ct.

oonote continues on next page)

Sedima, supra, 741 F.2d at 496-98, that these

decisions are poorly reasoned because they contain

little discussion of this argument, ignores the

obvious explanation that little discussion is

necessary — no requirement of prior convictions

appears in the statute,

The analysis by which the Second Circuit

imposed a prior conviction requirement in civil

RICO actions is flawed. There is no ambiguity in

the definition of the predicate acts as certain acts

"indictable" under federal law, "chargeable" under

State law, or constituting "offense[s]" under federal

securities, bankruptcy or drug laws. See 18 U.S.C.

$ 1961(1). This language means only that the

elements of these state or federal crimes are the

elements of the predicate acts in a civil RICO

(footnote from previous page)

1280 (1984),

Only two known reported opinions uphold (in

dicta) such a requirement. See Van Schaick v.

Church of Scientology, 535 F.Supp. 1125, 1137 n.12

D. Mass. 1982) and Kleiner v. First Nat'l Bank, 526

F.Supp. 1019, 1022 n.2 (N.D. Ga. 198 » Overruled

on other Morosani v. First Nat'l Bank. 703

F.2d 1220 Tiith Cir. 1983).

action. There is nothing in the Statutory language

which requires a conviction for the predicate acts.

Similarly, there is no ambiguity in the fact that the

RICO civil remedy may only be invoked where a

"violation" of RICO has occurred. See 18 U.S.C,

§ 1964(c). There is nothing in the word "violation"

necessarily or even implicitly incorporating a prior

conviction requirement.

This straightforward analysis of the language

of the statute should be Sufficient to require

rejection of the prior conviction argument, since the

RICO statute, like any Statute, should be

interpreted according to its plain meaning. Russello

v._United States, 104 S. Ct. 296, 299 (1983); United

States v. Turkette, 452 U.S. 576, 580 (1981). Only

in a limited class of cases, where there is "clear

evidence" of a contrary legislative intent, will this

rule not be applied. United States v. Apfelbaum,

445 U.S. 115, 121 (1980).

There is no legislative history regarding a

doctrine which Congress neither considered nor

adopted as part of the statute. The Second Circuit

10

filled this void by Stating a "plausible" view — its

view — of the intent Congress would have had and

of the language Congress would have used had it

considered the issue. See Sedima, Supra, 741 F.2d at

498, 500-01, 503.* The very least of the criticisms

which may be made of this result-oriented analysis

is that it most certainly is not "clear evidence" of a

legislative intent inconsistent with the plain

language of RICO — which contains no prior

conviction requirement. **

a The Second Circuit Suggested that since the

predicate acts "speek along criminal rather than

civil lines," the civil RICO remedy applies only to

conduct already determined to be criminal. See

Sedima, supra, 741 F.2d at 499-501. This analysis

ignored that "Congress may impose both a criminal

and civil sanction in respect to the same act or

omission," United States v. One Assortment of 89

Firearms, 52 U.S.L.W. 4228, 423 eb. 22, 1984);

United States v. W 448 U.S. 242, 250 (1980), and

create a statutory scheme in which either sanction

may be pursued completely independently of the

other.

** The Second Circuit justified its creation of a

prior conviction requirement by its view that such a

holding avoided the necessity of determining

whether the constitutional protections of the

criminal law are applicable in a civil RICO action.

(footnote continues on next page)

11

The prior conviction requirement will bar

many actions contemplated by Congress when it

enacted the civil remedy provision in RICO. The

prior conviction requirement makes local and state

government civil RICO suits subject both to a

prosecutor's prior exercise of discretion to

(footnote from previous page)

See Sedima, supra, 741 F.2d at 500 n.49. This

justification is wed in two crucial respects,

First, enhanced procedural protections, such as

those available to criminal defendants, are not

required in proceedings in connection with a statute

expressly denominated as civil unless the statute is

So punitive in purpose or effect as to negate the

appropriateness of the "civil" label. See United

States_v. One Assortment of 89 Firearms, 52

U.S.L.W. 4228, 4230-31 (Feb. 22, 1984); United

States v. Ward, 448 U.S. 242, 248-49 (1980). The

civil treble damages remedy created in the RICO

Statute is primarily remedial and compensatory, as

demonstrated by Judge Cardamone in his dissenting

opinion in Sedima, 741 F.2d at 506-08;

therefore, civil RICO” defendants have no

constitutional entitlement to the enhanced

procedural protections of the criminal law.

Moreover, the Second Circuit's perceived need to

avoid this question is simply inconsistent with the

analysis of the Supreme Court in 89 Firearms, War

and other similar cases in which the Supreme Court

has chosen not a course of "avoidance" thr

Strained statutory construction, but instead has

forthrightly determined whether or not the claimed

constitutio:ial procedural protections are applicable.

12

commence a criminal action, and to the prosecutor's

prior success in the criminal action. Thus, the prior

conviction requirement deprives local and state

governments of independent use of an effective civil

remedy against corruption, large-scale frauds and

other broad-based criminal schemes,

It is unfortunately all too easy to chart the

disastrous effect which the prior conviction

requirement will have on meritorious civil RICO

Suits. For example, in City of New York v. Arnmart

Wholesale Beer Distributors, Inc., Supra, eleven beer

distributing companies evaded excise taxes on

wholesale beer purchased in New York City by

fraudulently representing sales of beer to be sales of

soda; laundering beer sales through fictitious

purchasers residing outside the City; engaging in

off-the-books cash transactions; filing fraudulent

tax returns; and failing to file tax returns. This is

the kind of systematic criminal scheme which RICO

was designed to eliminate. The City of New York

decided to bring a civil RICO treble damages action

since treble damages would be most effective as a

13

deterrent and as a means of recovering losses,* Five

of the companies settled their liability with New

York City. Because there were ne prior convictions,

however, the remaining perpetrators of these

schemes will totally escape civil liability under

RICO — if the prior conviction requirement created

in Sedima is not overruled.

Similarly, the prior conviction requirement has

created an artificial and anomalous obstacle to the

City of New York's full employment of the civil

remedy in RICO in City of New York v. Liberman,

Supra. In that case, New York City's former chief

lease negotiator and ‘i number of landlords were

involved in a bribery scheme which defrauded New

York City in connection with the lease of space for

public agencies, The federal government decided to

focus a criminal prosecution on Mr. Liberman, and

. Referring a case to a criminal prosecutor does

not guarantee that there will be a criminal

prosecution, since the decision to do so is then

within the prosecutor's discretion, Prosecutorial

priorities may differ from a city’s priorities, and

prosecutorial resources are limited,

14

obtained a guilty plea from Mr. Liberman to a

criminal RICO violation based on, inter alia, bribe

receiving. The City of New York decided to target

not only Mr. Liberman, but also his fellow

wrongdoers — the landlords and various persons who

acted as intermediaries to launder the payoffs —and

sued all of them in state court under various

common law theories less far-reaching and effective

than RICO, The City of New York also included 4

civil RICO claim against Mr. Liberman in this

action. But the landlords could not be sued under

the civil RICO statute due to the Sedima prior

conviction requirement. Such a result is anomaious

— the City could sue the bribe-taker under civil

RICO, but not the bribe-giver.

These illustrations demonstrate that the prior

conviction requirement created in Sedima destroys

the efficacy of the civil remedy provision in RICO

and consequently the ability of local and state

governments to vindicate the public interest by

means of that statute.

15

POINT I

THE RACKETEERING INJURY

REQUIREMENT SHOULD BE REJECTED.

There is no basis in the RICO statute for a

special "racketeering injury" requirement. A fair

reading of Section 1964(c) of RICO, which gives

proper attention to Congress’ purpose in enacting

RICO, is inconsistent with the Second Circuit's

opinion in Sedima, supra, 741 F.2d at 494-96, in

which just such a requirement was created.

The purpose of RICO—the elimination of

organized criminalty, see United States v.

Turkette, supra, 452 U.S. at 591 — mandates a broad

construction of Section 1964(c), unfettered by any

"racketeering injury" requirement. Congress

prohibited the commission of organized criminality,

as defined in RICO, rather than proscribe "organized

crime" per se because "organized crime" is a

functional concept which cannot be defined in any

principled, legally satisfactory way. See 116

Cong. Rec. 35,344 (1970) (remarks of Congressman

Poff). Thus, Congress created a broad remedy

16

addressed to the kind of misconduct most often

engaged in by o-ganized criminals, but which would

reach beyond the shadowy boundaries of the

organized crime community and apply to anyone

engaging in the misconduct. See id.; 116 Cong. Rec.

18,945 (1970)(remarks of Senator McClellan);

United States v. Turkette, supra, 452 U.S. at 588-90;

Sutliff, Inc. v. Donovan Cos., 727 F.2d 648, 654 (7th

Cir. 1984).’

The Second Circuit undermined Congress’

purpose by imposing on the civil remedy provision a

racketeering injury requirement. The showing

necessary to demonstrate a racketeering injury,

which according to the Second Circuit consists of an

"injury different in kind from that occurring as a

result of the predicate acts themselves," Sedima,

Supra, 741 F.2d at 496, is a practical impossibility

17

except in rare cases.* See In re Catanella, 583

F.Supp. 1388, 1436-37 (E.D.Pa. 1984); Ralston v.

Capper, 569 F.Supp. 1575, 1580 (E.D. Mich. 1983).

Moreover, the Second Circuit's limitation of

the kind of activity which RICO was designed to

. The Second Circuit's analysis in Bankers Trust

Co. v. Rhoades, 741 F.2d 511 (1984), a companion

ease to Sedima, of how the civil remedy provision in

RICO would apply in a case of arson for profit

demonstrates that the "distinct RICO injury"

requirement deprives the civil remedy provision in

RICO of any practical significance. In Bankers

Trust, supra, 741 F.2d at 517, the Second Circuit

Stated that an example of a "distinct RICO injury"

could be found where a victim of multiple arsons

was denied fire insurance and thereafter was unable

to obtain reimbursement for innocent fire damage

(e.g., destruction caused by lightning). In contrast,

the Second Circuit seemed to indicate that the

victim of repeated arsons could not sue the arsonist

for fire damage directly resulting from fires set by

the arsonist. Plainly, such analysis destroys the

effectiveness of the civil remedy provision in RICO

as a method for combatting crime, and erodes the

doctrine established in City of Milwaukee v. Hansen,

=apta. that the damage directly resulting from arson

— in that case, municipal fire-fighting costs — is

compensable in a civil RICO suit. The Bankers

Trust analysis undermines the purposes of the civil

remedy provision in RICO — _ augmented

compensation to the victim for all of its losses

resulting from the criminal scheme, and the

economic destruction of the criminal enterprise.

18

deter to "systemic harm to competition and the

market" caused by "mobsters", Sedima, supra, 741

F.2d at 495-96, is not supported by reasoned or

principled analysis. The "mobster" requirement is a

resurrection of the discredited "organized crime"

requirement rejected by most courts which have

considered it, see, e.g., Bennett v. Berg, 685 F.2d

/ 1053, 1063, aff'd en banc in pertinent part, 710 F.2d

1361, 1364 (8th Cir. 1982), cert. denied, 104 S. Ct.

527 (1983), including a panel of the Second Circuit

in a recent decision, Moss v. Morgan Stanley, Inc.,

Supra, 719 F.2d at 21 & n.17. The mobster

requirement is either so vague or so limited as to

impose an insuperable obstacle to success in a civil

RICO suit. For example, the intricate tax-evasion

schemes of the beer distributors in City of New

York v. Arnmart Wholesale Beer Distributors, Inc.,

Supra, certainly constituted organized criminality;

but it is not so clear that the beer distributors were

"mobsters," as that term is used in common

parlance. The vagueness of the term "mobster" — if

19

it is a required element in a civil RICO action —

would make proof of this element a practical

impossibility, and would eliminate RICO liability for

categories of malefactors certainly intended by

Congress to fall within the reach of RICO.

20

CONCLUSION

FOR ALL THE FOREGOING REASONS, THE

DECISION OF THE COURT OF APPEALS SHOULD

BE REVERSED.

February 28, 1985.

Respectfully submitted,

FREDERICK A.O, SCHWARZ, JR.

Corporation Counsel of the

City of New York, Amicus Curiae.

LEONARD KOERNER,

MICHAEL D, YOUNG,

WALTER A, KRETZ, JR.,

MARTIN C, ARONCHICK,

Of Counsel.

JAMES D. MONTGOMERY

Corporation Counsel of the

City of Chicago, Amicus Curiae.

MATTHEW J. PIERS,

WILLIAM JAEGER,

Of Counsel,

BARBARA W. MATHER

City Solicitor, City -f

Philadelphia, Amicus Curiae.

HANDSEL B, MIN YARD,

DENISE COLLIERS,

Of Counsel.

21