Reply Brief — Townley v. Clark

Gitice - Supreme Court, U.S.

FILED

(4 eal er ) WeG

ALEXANDER i. STEVAS.

CLERK

*

No. 84-604 |

i

IN THE

Supreme Court of the United States

Octoser Term, 1984

Martin J. JoEL, JR., Harvey Suet, Everarp M. C. Stamm,

Rosert C. Stamm,

Petitioners,

v.

JoHN Crrrito, Harotp 8. Coteman, Joun A. MILueEr,

Franots G. Rea, Perer M. Tocozex, A. J. Yorks,

Respondents.

REPLY BRIEF IN SUPPORT OF

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

SEYMouR SHAINSWIT

(Counsel of Record)

KronisH, Lies, SHAINSWIT,

Werner & HELLMAN

1345 Avenue of the Americas

New York, New York 10105

(212) 841-6000

Attorneys for Petitioners

BEST AVAILABLE COPY

TABLE OF CONTENTS

PAGE

pT gg SOA ke RRR ATW RIERA SAS Teh CME il

The Conflict Concededly Generated by the /laroco

RR bly REDS ALR Lee nko aah, REISS a PgR NESTE TC SE 1

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TABLE OF AUTHORITIES

I. Cases:

Il.

Alexander v. Gardner-Denver Co., 415 U.S. 36

ERIEI inccidiscpicpasttdssidgannialiaestisticuRiceiestenee sande a

American Safety Equipment Corp. v. J. P. Ma-

guire & Co., 391 F.2d 821 (2d Cir. 1968) _........

Bankers Trust Co. v. Rhoades, 741 F.2d 511 (2d

et | Recent RCENGRNENN Worn ee Sane e CTH ARP

Beckman Instruments, Inc. v. Technical Develop-

ment Corp., 483 F.2d 55 (7th Cir. 1970), cert.

demoed, 401 US. GIG (UGTT) nn... cnccsvsesceescscsese.

Diematic Mfg. Corp. v. Packaging Industries,

Inc., 381 F. Supp. 1057 (S.D.N.Y. 1974), ap-

peal dismissed, 516 F.2d 975 (2d Cir. 1975),

cert. dented, 423 U.S. 913 (1975) 000.

Furman v. Cirrito, 741 F.2d 524 (2d Cir. 1984) ....

Hanes Corp. v. Millard, 531 F.2d 585 (D.C. Cir.

III hid nid clgcnsciins acces atdiseieiig acaba aaae lacs

Haroco, Inc. v. American National Bank and

Trust Co. of Chicago, No. 83-2529 (7th Cir.

UNE Githicesicieetikennaddanaiakaaien ae eee einen

Hunt v. Mobil Oil Corp., 444 F. Supp. 68 (S.D.

aaa ED sores tat scicusigcihaeailsaiammalcabbaabtane aac les ag

S. A. Mineracao Da Trindade-Samitri v. Utah In-

ternational, Inc., Nos. 1370, 1504 (2d Cir. 1984)

Sedima S.P.R.L. v. Imrex Co., Inc., 741 F.2d 482

Be * Seen ee re ern Nee NYT! Gomnnes

Wertheim & Co. v. Halpert, 48 N.Y.2d 681 (1979)

Legislative History:

Congressional Record:

130 Cong. Ree. $13349-50 (October 5, 1984) ....

PAGE

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2,3

ili

Ill. Articles: PAGE

Note, Sovereign Immunity in the Supreme Court:

Using the Certiorari Process to Avoid Decision

Making, 16 Va. J. Int’] L. 908 (1976) .....000........ 3

Sterk, Enforceability of Agreement to Arbitrate:

An Examination of the Public Policy Defense,

2 Cardozo L. Rev. 481 (1981) ........00..00 4

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Supreme Court of the United States

Octoser ‘T'erm, 1984

No. 84-604

Martin J. JoEL, Jk., Harvey SHerp, Everarp M. C. Stamm,

Rosert C. StamM,

Petitioners,

v.

JoHN Crrrito, Harotp 8. CotemMan, JoHN A. MILLER,

Franois G. Rea, Peter M. Toczex, A. J. Yorke,

Respondents.

REPLY BRIEF IN SUPPORT OF

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

The Conflict Concededly Generated by the Haroco Case

Our Petition for Writ of Certiorari was filed on October

15, 1984. Four days later, on October 19, 1984, the Court

of Appeals for the Seventh Circuit decided Haroco, Inc.

v. American National Bank and Trust Co. of Chicago, No.

83-2529. That decision unmistakably, unambiguously and

emphatically rejected and contradicted every salient point

on which were based the Second UCireuit’s trilogy of Sedima

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

Bankers Trust Co. v. Rhoades, 741 F.2d 511 (2d Cir. 1984),

and Furman v. Cirrito, 741 F.2d 524 (2d Cir. 1984). We

thus have a conflict among the Circuits which cannot be

swept away by any semantic obfuscation. The respondents

in our case have acknowledged this conflict (Respondents’

Brief, p. 7), but have tried to dilute the significance of this

2

conflict by submitting a melange of “reasons” for denying °

the writ (Respondents’ Brief, p. 7, et seq.).

Each “reason” is spurious. And, compounding the in-

sufficiency of the “reasons”, respondents have miscited or

misused authorities, or omitted those that they should have

cited. Thus:

1, Respondents urge that this Court should leave the

Cireuit Courts and the District Courts in a welter of con-

fusion and chaos because, at some remote time, in some re-

mote fashion, Congress might re-examine the RICO statute.

And, after hearings in the unknown future, a Committee of

the Congress might decide to recommend that the RICO

statute should be modified, clarified or left unchanged. The

respondents have built a thesis, based on wholesale un-

certainty, that this Court should not resolve a question of

first impression and of undeniable importance to literally

hundreds of courts and to the public at large. It is self-

evident that to have years elapse, while we await con-

jectural legislative action which might solve nothing, would

be only to perpetuate the existing confusion among the

courts which cries out for an authoritative resolution by

our Highest Court.

Respondents, at page 8 of their Brief, purport to quote

from the Congressional Record. However, they have de-

leted with asterisks the portions of 130 Cong. Rec. S13349-

50 (October 5, 1984) which reveal the existence of the

split in the Circuits in requiring a condition precedent for

standing to sue under civil RICO. In the portion omitted

by respondents, Senator Thurmond emphasized: “as a re-

sult of the varying judicial interpretations of RICO,...

[t]hese questions and uncertainties have undermined the

effectiveness of this weapon and must be resolved.” In its

entire context, it is aggressive advocacy for respondents to

imply that the congressional action that they envisage

would per force eviscerate civil RICO. Quite the contrary,

civil RICO might even be strengtliened. Or, civil RICO

might remain unchanged. Indeed, immediately after Sena-

——

S=

3

tor Thurmond’s remarks, Senator DeConcini, at 130 Cong.

Rec. $13350, contributed his own observations of the range

of possible congressional action, saying:

These hearings will provide the forum to determine

whether or not the Civil RICO language needs to be

modified, clarified or left unchanged.

Against this backdrop of speculation and conjecture, re-

spondents then go on to assert that this Court has de-

clined to review “even important questions of state in the

expectation of congressional or executive action. See Note,

Sovereign Immunity in the Supreme Court: Using the

Certiorart Process to Avoid Decision Making, 16 Va. J.

Int’! L. 908, 922-23 (1976).” (Respondents’ Brief, pp. 8-9).

The Virginia Journal of International Law says the direct

opposite for what it is cited:

[T]he relative inflexibility of any statutory approach

and the confusion which resulted from the Court’s in-

action support the position that an earlier Supreme

Court resolution of the problem would have been pref-

erable to the belated congressional action. In any

event, the Court has never indicated that its certiorari

decisions were dictated by a deference to the legislative

branch. The decision in Duniill, for example, evi-

denced disagreement about the sovereign immunity

doctrine but no desire to leave the resolution of that

disagreement to Congress.

Note, Sovereign Immunity in the Supreme Court: Using

the Certtorart Process to Avoid Decision Making, 16 Va.

J. Int'l L. 903, 922-23 (1976) (footnote omitted).

2. Respondents have also interlarded their brief with

sporadic commentary that this Court should deny Cer-

tiorari because the RICO claim can be arbitrated. The

arbitrability of a RICO claim is not a question presented

in our Petition for Certiorari. Furthermore, in throwing

up their smokescreen, candor should have at least com-

4

pelled the respondents to disclose to the Court that on

October 1, 1984, the Court of Appeals for the Second Cir-

cuit, in S. A. Mineracao Da Trindade-Samitri v. Utah In-

ternational, Inc., Nos. 1370, 1504, squarely indicated that

a RICO claim is not arbitrable.. Decisions to preclude

arbitration based on public concern have come in a wide

variety of other areas: antitrust claims (see, e.g., Amert-

can Safety Equipment Corp. v. J. P. Maguire & Co., 391

F.2d 821, 826-27 (2d Cir. 1968); Hunt v. Mobil Oi Corp.,

444 F’. Supp. 68, 69 (S.D.N.Y. 1977)); patent validity and

infringement claims (see, e.g., Hanes Corp. v. Millard, 531

F.2d 585, 593-95 (D.C. Cir. 1976); Beckman Instruments,

Inc. v. Technical Development Corp., 433 F.2d 55, 62-63

(7th Cir. 1970), cert. denied, 401 U.S. 976 (1971) ; Diemattc

Mfg. Corp. v. Packaging Industries, Inc., 381 F. Supp.

1057, 1061-62 (S.D.N.Y. 1974), appeal dismissed, 516 F.2d

975 (2d Cir. 1975), cert. denied, 423 U.S. 913 (1975)); and

civil rights discrimination cases (see, e.g., Alexander v.

Gardner-Denver Co., 415 U.S. 36, 56-59 (1974); Wertheim

& Co. v. Halpert, 48 N.Y.2d 681, 683 (1979)). See generally,

Sterk, Enforceability of Agreements to Arbitrate: An

Examination of the Public Policy Defense, 2 Cardozo L.

Rev. 481 (1981).

Given the broad purposes of RICO and that the enforce-

ment of civil RICO involves concerns touching upon vital

national interests, it cannot be seriously argued that Con-

gress intended to entrust the enforeement of RICO to ar-

bitrators. The overriding public policy in favor of judicial

resolution of RICO claims makes unnecessary any inquiry

into whether the parties had actually agreed to arbitrate

the fraudulent scheme underlying the RICO count. We

have made these observations solely for the purpose of

dispelling the confusion which respondents have sought

to generate with their tangential reference to the irrele-

vant subject of arbitration.

3. Respondents persist in seeking to trade upon the

Justice Department’s RICO guidelines for criminal prose-

4)

cution. (Respondents’ Brief, p. 15). As we did below, we

once again point out that these guidelines create no safety

hatch for respondents; they do not construe the RICO

statute. They were not published under any regulatory

authority. They have no force of law, nor could a defen-

dant rely on them to preclude prosecution. And, capping

everything, they “provide only internal Department of

Justice Guidelines. They are not intended, do not, and

may not be relied upon to create any rights, substantive

or procedural, enforceable at law by any party in any mat-

ter civil or criminal.” (Appellees’ Brief below, Addendum

B, pp. B-1 to B-2) (emphasis supplied). And, if more

need be said, RICO’s private remedy is specifically de-

signed as an additional enforcement tool—to supplement

its criminal enforcement provisions. To use these guide-

lines to limit actions brought by private attorneys-general

would actually defeat one of the major purposes of the

civil RICO remedy.

All in all, respondents’ brief, and their headlong flight

from the Petitioners’ reasons for granting the Writ, have

corroborated the compelling need for this Court to review

the basis for the Judgment below, which has made civil

RICO an empty shell.

CONCLUSION

For the foregoing reasons, it is respectfully submitted

that the Petition for a Writ of Certiorari should be granted.

SEYMOUR SHAINSWIT

Attorney for Petitioners

Martin J. Jcel, Jr.. Harvey Sheid,

Everard M.C. Stamm and

Robert C. Stamm

November 30, 1984