Amicus Curiae Brief — Beck v. Prupis

No. 98-1480

IN THE

Supreme Court of the United States

ROBERT A. BECK, II,

Petitioner,

Vv.

RONALD M. PRUPIS, ET AL.

Respondents.

On Writ of Certiorari to the

United States Court of Appeals

for the Eleventh Circuit

BRIEF OF THE AMERICAN TORT REFORM

ASSOCIATION AND HEALTH INSURANCE

ASSOCIATION OF AMERICA AS AMICI CURIAE IN

SUPPORT OF RESPONDENTS LEONARD

BELLEZA, ERNEST J. SABATO, WILLIAM

PAULUS, JR., AND HARRY OLSTEIN

Of Counsel Victor E. Schwartz*

Sherman Joyce Mark A. Behrens

AMERICAN TORT Christopher J. McGuire

REFORM ASSOCIATION CROWELL & MORING LLP

1850 M Street, N.W., 1001 Pennsylvania Ave.,N.W.

Suite 1095 Washington, D.C. 20004

Washington, D.C. 20036 (202) 624-2500

(202) 682-1163

Jeffrey L. Gabardi Attorneys For Amici Curiae

HEALTH INSURANCE

ASSOCIATION OF AMERICA

555 Thirteenth Street, N.W. * Counsel of Record

Washington, D.C. 20004

(202) 824-1600

BEST AVAILABLE

QUESTION PRESENTED

Whether Congress intended to federalize

traditional state law breach of contract and wrongful

termination claims by allowing a plaintiff to

maintain a civil Racketeer Influenced and Corrupt

Organizations Act (RICO) conspiracy claim for treble

damages despite the lack of any evidence that

plaintiffs alleged harm was proximately caused by a

pattern of racketeering.

(i)

TABLE OF CONTENTS

TABLE OF AUTHORITIES .............--ccccssseeceeseeeeee

INTEREST OF AMICI CURIAE............0c00c00cces0e00e

STATEMENT OF THE CASE..............c-ccscseseeseeees

I. BOTH THE INTENT AND PLAIN

MEANING OF RICO ARE BEST

SERVED BY AFFIRMING THE

COURT OF APPEALS’ DECISION

THAT PETITIONER FAILED TO

ESTABLISH A CIVIL RICO

CONSPIRACY CLAIM .........cccccceceeeeeeeeees

Be Inconsistent With The

B. Requiring Injury Proximately

C. Petitioner Failed To Prove Injury

Proximately Resulting From A

Pattern Of Racketeering ......................

(iii)

Il. FINDING THAT RICO COVERS

PETITIONER’S CLAIM WOULD

CREATE A NEW FEDERAL TORT

FOR EMPLOYMENT-BASED

DISPUTES THAT ARE GOVERNED

BY STATE LAW AS WELL AS

INTRODUCE A MAJOR NEW

FACTOR INTO EMPLOYMENT

AND LABOR RELATIONS ................-...++ 9

A. Congress Did Not Intend To

C. An Expansive Reading of RICO

Il. THE COURT SHOULD DEFER TO

CONGRESS AS THE APPROPRIATE

BRANCH TO CONSIDER ANY

EXPANSION OF RICO'S REACH............. 14

COB ICI ABO nccccccseccccesccsccecscescossscnsovccssnsnvsssorases 15

(iv)

TABLE OF AUTHORITIES

CASES Page

Associated Contractors of California

v. California State Council of

Carpenters, 459 U.S. 519 (1983) ...........000000.... 7,9

Beck v. Prupis,

162 F.3d 1090 (11th Cir. 1998),

cert. granted, 119 S. Ct. 2046 (1999) ............... passim

Bowman v. Western Auto Supply Co.,

985 F.2d 383 (8th Cir.),

cert. denied, 508 U.S. 957 (1993) ..................... 5

Coats v. Penrod Drilling Corp..,

61 F.3d 1113 (Sth Cir. 1995)........................00+. 14

Department of Revenue of Oregon

v. ACF Industries, Inc.,

RLS ane ore ae 10

Halcyon Lines v. Haenn Ship Ceiling

& Refitting Corp., 342 U.S. 282 (1951)............ 14

Hecht v. Commerce Clearing House, Inc.,

897 F.2d 21 (2d Cir. 1990) ...................cccccceeeees 5, 8

Holmes v. Securities Investor Protection

Corp., 503 U.S. 258 (1992) ................ccceeeeeeeeeeee passim

Miranda v. Ponce Federal Bank,

948 F.2d 41 (1st Cir. 1991) ................ccceceeceeeeee 5

ve vii

Morast v. Lance, Raymond P. Green, The Application

807 F.2d 926 (11th Cir. 1987) ..........ssse-ssesseee0es 5 of RICO to Labor-Management and

: Employment Disputes,

Ones See 7 St. Thom. L. Rev. 309 (1995) .....-ccccsv

ee ne es ND A are rat rs ope =

cert. denied, 496 U.S. 926 (1990) ................0000 5 Thomas F. Harrison,

Look Who's Using RICO,

Reddy v. Litton Industries, Inc., 75 A.B.A. J. 56 (Feb. 1989) ..........eeccccceoe

enn One eee we A ern ce ae yee ee

cert. denied, 502 U.S. 921 (1991) ..............00000 5 W. Page Keeton ¢t ai.,

| Prosser and Keeton on the Law Of Torts

Salinas v. United States, | GeO Te cccrerteeresectesinatinsinsnitineienctnnianininies

UE, Be CI ccsececrncticcncensewsateetereininnininns eee oS) SR eee aa on ae ey

Wayne R. LaFave &

Austin W. Scott, Jr.,

Criminal Law (2d ed. 1986)...........ccccccc0000------....

STATUTORY MATERIALS ’

| Restatement (Second) of Torts § 491...

ST.) 6 |

18 U.S.C. § 1962(a)-(d)..........cccccccerrereeeeeresenneennennnes passim |

18 UBA.C. $ 19B41C).......ccecceececcrecccceccossoseggeorosrssssseces passim

Ue Fo, 13

PUBLICATIONS

Roger S. Fine, A Personal Perspective

from the “Manufacturer,” |

55 Brook. L. Rev. 899 (1989) ..............seeceseeeeeeeenees 14 |

Laura Ginger, Employers’ RICO

Liability for the Wrongful Discharge

of Their Employees,

68 Neb. L. Rev. 673 (1989) ..........cccc-eesereeeeeereeenneees 12

—

No. 98-1480

IN THE

Supreme Court of the United States

ROBERT A. BECK, I,

Petitioner,

Vv.

RONALD M. PRUPIS, ET AL.

Respondents.

On Writ of Certiorari to the

United States Court of Appeals

for the Eleventh Circuit

INTEREST OF AMICI CURIAE*

The American Tort Reform Association (““ATRA”),

founded in 1986 and based in Washington, D.C., is a

broad-based coalition of more than 300 businesses,

corporations, municipalities, associations, and

professional firms who have pooled their resources to

promote reform of the civil justice system with the

goal of er suring fairness, balance, and predictability

* Pursuant to Rule 37, letters of consent from the parties

have been filed with the Clerk of the Court. In accordance

with Rule 37.6, amici state that no counsel for either party

has authored this brief in whole or in part, and no persons

or entities, other than the amici, have made a monetary

contribution to preparation or submission of this brief.

2

in civil litigation. For over a decade, ATRA has filed

principal amicus curiae briefs in cases before this

Court that have addressed important liability issues,

including the Court’s recent “expert opinion”

decisions in A umho Tire Co. v. Carmichael, 119 S.

Ct. 1167 (1999), and Daubert v. Merrell Dow

Pharmaceuticals, Inc., 509 U.S. 579 (1993), the

Court’s rejection of medical monitoring claims in

Metro-North Commuter R.R. Co. v. Buckley, 521 U.S.

424 (1997), the landmark punitive damages decision

in BMW of North America, Inc. v. Gore, 517 U.S. 559

(1996), and the Court’s decision in Medtronic, Inc. v.

Lohr, 518 U.S. 470 (1996), regarding federal

preemption of state tort law.

The Health Insurance Association of America

(“HIAA”), based in Washington, D.C., is one of the

largest associations of health insurance companies in

the world. HIAA is a leading advocate for the

private, market-based health insurance system. Its

more than 260 members provide medical expense

and supplemental insurance, as well as long-term

care insurance and disability income protection to

more than 123 million people — one out of two non-

elderly Americans. HIAA develops and advocates

federal and state policies which build upon our

health care system’s quality, affordability,

accessibility, and responsiveness.

ee

3

Amici submit this brief to indicate their strong

support for the holdings of the majority of the federal

courts of appeals, including the Eleventh Circuit

Court of Appeals in the instant case, which have

wisely held that a plaintiff alleging a civil Racketeer

Influenced and Corrupt Organizations Act (RICO)

conspiracy claim under must show that his or her

injury proximately resulted from a pattern of

racketeering. Amici are concerned that the minority

position, which Petitioner asks this Court to adopt,

would create a new and unfair “federal tort” with

potential treble damages liability for garden-variety

breach of contract and wrongful termination claims

that should be a matter of state law and have been

since the time of the Founding Fathers. Finally, as a

matter of public policy, this approach flies in the face

of —- of federalism and respect for States’

rights.

Petitioner’s construction goes far beyond what

Congress has authorized under RICO and is

inconsistent with the Court’s prior rulings. This

Court does not need to adopt Petitioner’s

construction of RICO either to deter racketeering

activity or to compensate persons for harms

allegedly incurred as a result. See Holmes v.

a Investor Protection Corp., 503 U.S. 258

1992).

For these reasons, amici urge this Court to affirm

the decision of the Eleventh Circuit Court of

Appeals.

4

STATEMENT OF THE CASE

Amici adopt Respondents’ summary of the

dispute in question.

INTRODUCTION AND

SUMMARY OF THE ARGUMENT

itting civil RICO conspiracy claims despite

ss aan aie a plaintiff has been harmed as the

proximate result of a pattern of racketeering would

create a new federal cause of action: (1) inconsistent

with Congressional intent; (2) inconsistent with vo

Court’s prior rulings; (3) that violates principles o

federalism and States’ rights; and (4) that would be

both unsound and unnecessary. This Court should

not rewrite the RICO statute to provide remedies

that are not grounded in the statute itself; it should”

be left to Congress, if it desires to do so, to change

the law.

ARGUMENT

I. BOTH THE INTENT AND PLAIN MEANING

OF RICO ARE BEST SERVED BY

AFFIRMING THE COURT OF APPEALS

DECISION THAT PETITIONER FAILED TO

ESTABLISH A CIVIL RICO CONSPIRACY

CLAIM.

Congress intended for plaintiffs alleging civil

Racketeer Influenced and Corrupt Organizations Act

(RICO) conspiracy claims to prove that their vs

were proximately caused by a pattern 0

racketeering. See 18 U.S.C. 1964(c) (permitting

recovery for injury “by reason of a violation of section

5

1962”). This conclusion is supported by a majority of

the federal courts of appeal that have ruled on the

issue. See Bowman v. Western Auto Supply Co., 985

F.2d 383, 388 (8th Cir.), cert. denied, 508 U.S. 957

(1993); Miranda v. Ponce Federal Bank, 948 F.2d 41,

48 (1st Cir. 1991); Reddy v. Litton Industries, Inc.,

912 F.2d 291, 294-95 (9th Cir. 1990), cert. denied,

502 U.S. 921 (1991); Hecht v. Commerce Clearing

House, Inc., 897 F.2d 21, 25 (2d Cir. 1990); Morast v.

Lance, 807 F.2d 926, 933 (11th Cir. 1987); O'Malley

v. O’Neill, 887 F.2d 1557, 1561-62 (11th Cir. 1989),

cert. denied, 496 U.S. 926 (1990). As set out below,

there is sound support for this conclusion.

A.A Contrary Reading Would’ Be

Inconsistent With The Court’s Prior

Rulings.

Section 1964(c) of RICO creates a federal private

right of action and the potential recovery of treble

damages for anyone injured “by reason of a violation

-of section 1962.” Section 1962 consists of three

substantive subsections, 18 U.S.C. § 1962(a)-(c),! and

a subsection concern:ng conspiracy to violate any of

the three substantive provisions, 18 U.S.C.

§ 1962(d).

1

Section 1962(a) prohibits the investment of proceeds

derived from a pattern of racketeering activity in any

enterprise involving interstate commerce. Section 1962(b)

prohibits acquisition through a pattern of racketeering

activity of any interest in an enterprise involving interstate

commerce. Section 1962(c) prohibits participation in the

conduct of an enterprise involving interstate commerce

through a pattern of racketeering activity.

6

To prove a RICO violation under any of the three

substantive provisions, a plaintiff must show that he

or she suffered injury as a result of a “pattern of

racketeering activity.” 18 U.S.C. § 1961(5) (defining

“pattern” as at least two acts of racketeering activity

within ten years of one another). To prove a

violation of the conspiracy provision requires only

proof of an agreement to violate a substantive

section of 1962; there is no separate overt act

requirement. See Salinas v. United States, 522 US.

52 (1997).

In Holmes v. Securities Investor Protection Corp.,

503 U.S. 258 (1992), the Court established a

limitation upon civil RICO recoveries under 18

U.S.C. § 1964(c). The case concerned the claim of a

federally created corporation, the Secu: ities Investor

Protection Corp. (“SIPC”), which was acting to

protect the rights of customers of a brokerage firm

who suffered indirect harm as a result of a stock-

manipulation scheme directed against the firm.

The Court in Holmes said that, while a literal

reading of the statute would permit a recovery based

on mere “but for” factual causation, that construction

was “hardly compelled.” Jd. at 266. The Court found

that it was very unlikely that this was the result

intended by Congress. Jd. Consequently, the Court

held that the phrase “by reason of” in Section 1964(c)

of RICO meant not merely factual causation, but

also imposed the additional requirement of

proximate cause stemming from a violation of

7

section 1962. Jd. at 268.2 The Court then ruled that

the losses for which the SIPC sought recovery were

too remote. See id. at 270. The proximate cause

requirement is a significant barrier that prevents a

deluge of claims by parties potentially indirectly

injured in a wide variety of circumstances (e.g.,

stockholders, policyholders, union members,

customers, and employees).

B. Requiring Injury Proximately Resulting

From A “Pattern of Racketeering” Is

Proper In Civil RICO Cases.

The effect of the Salinas decision on cases such as

Petitioner's case is that a mere agreement to

conspire to violate one of the substantive provisions

of 18 U.S.C. § 1962 constituves « RICO violation. A

different agreement, such as an agreement to

discharge an employee, is not in itself a conspiracy to

violate one of the three substantive provisions and,

therefore, is not a RICO violation.

The Court’s holding in Salinas impacts criminal

and civil cases differently. In criminal law cases,

where the purpose of the conspiracy charge is to

punish the act of agreement itself, the prosecutor

does not need to prove that the agreement to engage

in criminal activity resulted in an injury-causing

2 The Court was guided by the fact that the federal antitrust

statutes which served as a model for RICO had been read

to incorporate common law principles of causation. See

Associated Contractors of Calif. v. California State Council

of Carpenters, 459 U.S. 519 (1983).

8

event. See Wayne R. LaFave & Austin W. Scott, Jr.,

Criminal Law § 6.4(d) (2d ed. 1986).

For example, if a group of individuals takes steps

to commit a bank robbery that is foiled by police

before the robbery is committed, the would-be bank

robbers are subject to prosecution for conspiracy to

commit bank robbery. The agreement is punishable

as a crime by itself, because of “the special danger [to

society] incident to group activity.” Id. at § 6.4(c).

In a civil context, however, as Holmes makes

clear, a mere agreement “in the air” to conspire does

not proximately cause any direct injury. Thus, in

the example, while the would-be bank robbers could

be subject to criminal prosecution for conspiring to

rob the bank, they could not be subject to a civil

conspiracy claim by the bank, because it never

suffered a direct harm. See Hecht v. Commerce

Clearing House, Inc., 897 F.2d 21, 25 (2d Cir. 1990)

(recognizing the break in the chain of causation

flowing from a mere agreement in the context of

RICO).

This distinction reflects a fundamental difference

between traditional tort law and criminal law. Tort

law requires that the plaintiff suffered a harm

proximately caused by a defendant’s conduct;

criminal law requires a wrongful act that has been

deemed by a legislature to be against public policy.

See generally W. Page Keeton et al., Prosser and

Keeton on the Law Of Torts § 46 (5th ed. 1984);

Restatement (Second) of Torts § 491.

mg 3 a ‘

Consequently, plaintiffs such as Petitioner canno

establish proximate cause as required by Holmes,

9

because their injuries are too remote. The civil

RICO conspiracy claim still serves a purpose,

however, because claimants that can prove direct

injury through one of RICO’s substantive provisions

may hold any one of the alleged conspirators jointly

liable for the entire harm.

C. Petitioner Failed To Prove Injury

Proximately Resulting From A Pattern

Of Racketeering.

Petitioner has resorted to trying to prove a

violation of RICO’s conspiracy provision because he

has failed in his effort to prove a violation of one of

RICO’s three substantive provisions. See Beck v.

Prupis, 162 F.3d 1090 (11th Cir. 1998), cert. granted,

119 S. Ci. 2046 (1999). He is left arguing conspiracy

“in the a.” His claim should be barred based on

remoteness. See Holmes v. Securities Investor

Protection Corp., 503 U.S. 258 (1992). Cf. Associated

Contractors of Calif. v. California State Council of

Carpenters, 459 U.S. 519 (1983).

Il. FINDING THAT RICO COVERS

PETITIONER’S CLAIM WOULD CREATE A

NEW FEDERAL TORT FOR EMPLOYMENT-

BASED DISPUTES THAT ARE GOVERNED

BY STATE LAW AS WELL AS INTRODUCE

A MAJOR NEW _ FACTOR INTO

EMPLOYMENT AND LABOR RELATIONS.

A. Congress Did Not Intend To Federalize

Well-Established State Law Remedies.

Petitioner's construction of the civil RICO

conspiracy provision would create a new federal tort

10

with potential treble damages liability for many

ordinary state breach of contract, wrongful

termination, and fraud claims.

It also would allow plaintiffs to circumvent the

requirements of the three substantive subsections of

RICO, see 18 U.S.C. § 1962(a)-(c), simply by alleging

a conspiracy. Congress could not have intended to

create such a gaping loophole. While Congress may

have wanted the RICO statute to be liberally

construed to effectuate its remedial purposes — i.e.,

to address the influences of organized crime and acts

of racketeering — this Court itself has recognized the

key practical difference between liberally construing

the RICO statute and giving it a content that was

never intended by Congress. See Holmes v.

Securities Inv. Protection Corp., 503 U.S. 258 (1992).

If Congress had intended to enact a statutory

scheme that would, in effect, largely displace an area

of law that has been left to the States, one would

find evidence of that intent. Cf. Department of

Revenue of Oregon v. ACF Industries, Inc., 510 U.S.

332, 333 (1994) (“Principles of federalism compel this

view, for a statute is interpreted to pre-empt

traditional state powers only if that result is the

clear and manifest purpose of Congress.”). There is

no such meaningful evidence in the statute or

RICO’s legislative history.

This is not surprising. As a general matter, it

has been ATRA’s experience, for more than two

decades of direct work on federal liability reform

initiatives that Congress is very hesitant to

“federalize” state tort law unless there is a

11

compelling justification to do so. That justificati

does not exist in the present case. . ge

B. Petitioner’s Construction Is Unnecessary.

Permitting recovery through the civil RICO

conspiracy provision for claims such as Petitioner’s is

unnecessary. As the Supreme Court noted in

Holmes, recoveries by directly injured plaintiffs

provide adequate deterrence against harmful

conduct. See Holmes, 503 U.S. at 269-70. There is

also the possibility of criminal liability, if the

requisite elements are met.

The circuit courts have been a good laboratory i

. . . . ry n

this regard. Racketeering activity has not notably

increased in the circuits that are in accord with the

Eleventh Circuit’s decision below.

Furthermore, with respect to persons such as

Petitioner, who allege indirect harm as a result of a

conspiracy resulting in direct harm to others, a

federal cause of action is not needed. State statutory

and common law tort and other claims are generally

available to such plaintiffs and have been used both

prior to and after RICO’s enactment.

12

C. An Expansive Reading of RICO Will Only

Aggravate RICO’s Deleterious Impact On

The Legislatively-Established Balance

Governing Labor And Employment Issues.

With its expansive growth and encroachment

upon traditional areas of labor and employment

relations, the developing RICO jurisprudence poses a

distinct threat to the delicate balance of factors that

state legislatures and Congress have established.

Commentators have noted that as a consequence of

broader-than-broad interpretations by the courts,

“RICO is upsetting the rules of the game in the areas

of labor and employment law.” Thomas F. Harrison,

Look Who’s Using RICO, 75 A.B.A. J. 56, 56 (Feb.

1989).

Petitioner's claims are representative of a

particular class of these cases. Indeed, the area of

employee discharges has been identified as the one

most affected by the trend of RICO jurisprudence.

See Laura Ginger, Employers’ RICO Liability for the

Wrongful Discharge of Their Employees, 68 Neb. L.

Rev. 673, 673 (1989). The possibility of treble

damages provides a strong incentive for discharged

employees to convert simple employment disputes

into allegations that aggressive business practices

constitute racketeering activity for RICO purposes,

significantly raising the nuisance value of such suits.

The terminated worker’s employer is then faced with

the decision to defend a much more expensive suit

with the potentially significant reputation-damaging

publicity that accompanies racketeering accusations,

or to accede to an aggrieved former employee's

demand for settlement.

13

As time has passed, sweeping interpretations of

RICO have even become an unwelcome factor in the

more structured area of labor-management relations.

See Raymond P. Green, The Application of RICO to

Labor-Management and Employment Disputes, 7 St.

Thom. L. Rev. 309, 309 (1995) (noting that RICO

“has disrupted the labor-management relationship”

and can now be used “to upset the tenuous balance of

power that is the hallmark of labor-management

relations”).

For example, in the area of labor-management

relations, Congress has already specifically designed

a framework to address such issues in the National

Labor Relations Act, 29 U.S.C. §§ 141 et seg., and

related statutes. Through the expansive growth of

RICO, plaintiffs from both sides of the labor-

management equation are now attempting to bring

issues related to striking and picketing or plant

closures and corporate reorganizations under RICO’s

hammer as opposed to resorting to the statutory

devices already in place to address these matters.

Novel or strained interpretations of RICO thus

promote the abuse of RICO as a bargaining tool and

pose the risk of causing significant and

unpredictable shifts in the carefully established

balance of labor and employment interests under

existing legislative schemes. The presence of these

additional consequences flowing from an expansive

reading of RICO in the context of this case counsels

against resorting to such a reading unnecessarily.

14

Il THE COURT SHOULD DEFER TO

CONGRESS AS THE APPROPRIATE

BRANCH TO CONSIDER ANY

EXPANSION OF RICO'S REACH.

Petitioner's desire to obtain a new federal tort

remedy that is not grounded in the RICO statute

should be addressed by Congress, not judicially

created by courts. This is particularly the case

where, as here, the cause of action is not a

development of the common law but is statutorily-

based. See generally Roger S. Fine, A Personal

Perspective from the “Manufacturer,” 55 Brook. L.

Rev. 899, 903 (1989) (“[L]et us go back to the days

when there was a real difference between the

yzdicial and legislative branches. When a court is

faced with a problem that is a social one rather than

a legal one, we defer to the legislature, which has far

more flexibility and power to mold solutions that

match our problems”).

As this Court has stated, when “[mJany groups of

persons with varying interests are vitally concerned .

We think that legislative consideration and

action can best bring about a fair accommodation of

the diverse but related interests of these groups.”

Halcyon Lines v. Haenn Ship Ceiling & Refitting

Corp., 342 U.S. 282, 286 (1951). See also Coats v.

Penrod Drilling Corp., 61 F.3d 1113, 1138 (5th Cir.

1995) (“[T]he Congress is in a better position than a

court to evaluate various policy objectives. We are

persuaded that deferring to congressional action

here is the wiser course.”).

15

CONCLUSION

For these reasons, the decision of the Eleventh

Circuit Court of Appeals should be affirmed.

Respectfully submitted,

Victor E. Schwartz*

Mark A. Behrens

Christopher J. McGuire

CROWELL & MORING LLP

1001 Pennsylvania Avenue, N.W.

Washington, D.C. 20004

(202) 624-2500

Attorneys for Amici Curiae

* Counsel of Record

Dated: September 17, 1999 ’