Opposition Brief — HMK Corp. v. Walsey
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i y Supreme Court, U.S,
No. 87-788 a eae BD
IN THE DES 16 B87
Supreme Court of the United Sete
F. SPANIOL, JR,
CLERK
OCTOBER TERM, 1987
HMK CorPorATION,
Petitioner,
JOHN C. WALSEY, ef al,
Respondents.
On Petition for Writ of Certiorari to the
United States Court of Appeals for the Fourth Circuit
BRIEF OF RESPONDENTS IN OPPOSITION TO THE
PETITION FOR WRIT OF CERTIORARI
CHARLES F. WITTHOEFFT
(Counsel of Record)
MICHAEL P. FALZONE
DANA B. SYKES
HIRSCHLER, FLEISCHER,
WEINBERG Cox & ALLEN
629 East Main Street
Post Office Box 1Q
Richmond, VA 23202
(804) 771-9500
Of Counsel:
EDWARD E. WILLEY, JR.
WILLEY & HALL, P.C.
1001 Chinaberry Boulevard
Richmond, VA 23225
(804) 323-0600
STEVEN L. MICAS
County Attorney
JEFFREY L. MINCKS
Senior Assistant
County Attorney
Post Office Box 40
Chesterfield, VA 23832
(804) 748-149]
Mary SUE TERRY
Attorney General
of Virginia
JOHN J. BEALL, JR.
Senior Assistant
Attorney General
CAROLINE L. LOCKERBY
Assistant Attorney
General
101 North Eighth Street
Richmond, VA 23219
(804) 786-1129
EDITOR'S NOTE
THE FOLLOWING PAGES WERE POOR HARD COPY
AT THE TIME OF FILMING, IF AND WHEN A
BETLER COPY CAN BE OBTAINED, A NEW FICHE
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1
QUESTION PRESENTED
Whether this Court should reconsider the unanimous deci-
sion of the District Court and the Court of Appeals that a local
land use dispute involving a single development opportunity did
not constitute a “pattern of racketeering activity” under 18
U.S.C. § 1964(c).
PARENTS, SUBSIDIARIES AND AFFILIATES
Sigma CJ Associates is a Virginia limited partnership which
has no parents, subsidiaries or affiliates. Petula Associates, Ltd.
is an lowa corporation which is a wholly owned subsidiary of
Principal Financial Group, Inc. Principal Financial Group, Inc.
is a wholly owned subsidiary of Principal Mutual Life Insurance
Company. Principal Mutual Life Insurance Company also owns
Principal Life Insurance Company and Principal National Life
Insurance Company.!
' The following entities are affiliates of Petula Associates, Ltd.: Princor
Financial Services Corporation; Patrician Associates, Inc.; Principal Develop-
ment Associates, Inc.; Principal CMO International, Inc.; Invista Capital
Management, Inc.; The Principal Financial Group, Inc.; Principal Marketing
Services, Inc.; Healthcare Preferred, Inc.; Principal Health Care, Inc.; Principal
Casualty Insurance Company; Principal Financial Advisors, Inc.; Delaware
Charter Guarantee & Trust Company; EGT Financial Corporation; HMO
lowa, Inc.; and Principal Residential Advisors, Inc.
3
TABLE OF CONTENTS
Page
QUESTION PRESENTED ..........:s:ssesssseesseeensesenenenseneees i
TABLE OF AUTHORITIES ..........:csecssssssssessesensseenenennens iii
STATEMENT OF THE CASE.........:sscsssssssesseseeseesneneneees i
SUMMARY OF THE ARGUMENT .........c.ccsceeessesseneees 7
REASONS FOR DENYING THE WRIT .......----:e+-se000 7
I. The Circuit Courts Are Uniformly Applying This
Court’s Interpretation Of “Pattern” UnderRICO 7
II. Legislation Currently Pending In Congress Will
Codify Sedima’s “Continuity Plus Relationship”
Test For A RICO “Pattern” ...........cccseesssseeeeseeees 11
III. This Case Presents a Factual Setting Which Is
Uncharacteristic of Most RICO Litigation and Is
Unsuitable to Review the Concept of “Pattern”
Contained in Sedimg ...........ccccccecsceseseceeeesseesessenees 12
CONIC IRIN wcceccccsscsnsensscsasacccsasssccnsnasessnsacsensoneacs ae 15
APPENDIX ........ccccccccscccsccsccscccsscscccccsesccccccssscssccccssssecnsees la
dee i on wh +
TABLE OF AUTHORITIES
CASES:
Albery v. Reddig,-718 F.2d 245 (7th Cir. 1983) ..........
Bank of America National Trust & Savings Association
v. Touche Ross & Co., 782 F.2d 966 (11th Cir.
ti eianienasashadbichinemishtenincsdnencdeevsesaccoceresacesees
Barticheck v. Fidelity Union Bank/First National
FS ee LD yp Sn
Creative Environments, Inc. v. Estabrook, 680 F.2d
822 (1st Cir.), cert. denied, 459 U.S. 989 (1982) ...
Eastern Publishing and Advertising, Inc. v. Chesapeake
Publishing and Advertising, Inc., No. 87-1520 (4th
i eiittisetinacsediensantvescesecesccsenscanssees
H.J. Inc. v. Northwestern Bell Telephone Co., 829
I EEF oacncscsdenccesescnsccscccnsetsccnsscceee
HMK Corp. v. County of Chesterfield, No. 84-0170-R
i a 5 omaeeasevnscccases
HMK Corp. v. Walsey, 828 F.2d 1071 (4th Cir. 1987)
HMK Corp. v. Walsey, 637 F.Supp. 710 (E.D. Va.
i iinniintinkanaditesnsentiisneonccneseovecenssoness
International Data Bank, Ltd. v. Zepkin, 812 F.2d
IE ETE a casansstnatsinsiwnsnkedendsntevasocersonnses
Layne & Bowler Corp. v. Western Weill Works, Inc.,
BD ovis cc risbscacennsnesecosessencesivesvocccses
Montesano v. Seafirst Commercial Corp., 818 F.2d 423
ae siieinccussbsdntssciragnsssecensscutsssonsosoccess
Morgan v. Bank of Waukegan, 804 F.2d 970 (7th Cir.
ESE sn RSLS ee
Naked City, Inc. v. Aregood, 667 F.Supp 1246 (N.D.
9 SEINE ES ESTER ESE er OPTIC ODEO
Papai v. Cremosnik, 635 F.Supp. 1402 (N.D. IIL.
AEs thbaictldantidnuieindindtessiuschabinnssscdiseovscoscseeeces
R.A.G.S. Couture, Inc. v. Hyatt, 774 F.2d 1350 (Sth
ec setinctesenccensconees
Raskiewicz v. Town of New Boston, 754 F.2d 38 ( \st
Cir.), cert. denied, 474 U.S. 845 (1985) ......0......0..
Rice v. Sioux City Cemetery, 349 U.S. 70 (1955) .......
Roeder v. Alpha Industries, Inc., 814 F.2d 22 (1st Cir.
aM cia bic iccdllnsadpabueasesscinckensoanacecdsévsesierees
13,14
iV
Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479 (1985).
Sun Savings & Loan Association v. Oberdorff, 825
ce Be © HR NG IED cetichscecdsssetsinnnciointiaianlansanntnnee
Superior Oil Co. v. Fulmer, 785 F.2d 252 (8th Cir.
PTE F <etsbvionssicadiesnsiianssspisniilantainhuhasiilionsedipsiitidaaieniiiidswiiiasines
SET Pisisessscnsiesietesionnnassisibinentiaiaanshdsimseishibiesnidanintsinbitininsiionae
Town of Kearny v. Hudson Meadows Urban Renewal
Corp., 829 F.2d 1263 (3d Cir. 1987) ..............00000....
United States v. Ianiello, 808 F.2d 184 (2d Cir. 1986),
cert. denied, 107 S.Ct. 3229 (1987) ........ecececeeeeeeeeee
United States Magnet & Alloy Corp. v. Yardley Bor-
ough, No. 86-2898 (E.D. Pa. Dec. 11, 1986) ..........
| erges v. Babovich, No. 86-2382 (E.D. La. Nov. 28,
PF sites seveedceelaesndiiabshacilannad eles aiiiigpesdbiaabdaasinennniiiasenese
Village of Arlington Heights v. Metropolitan Housing
Development Corp., 429 U.S. 252 (1977) wu...
Village of Belle Terre v. Boraas, 416 U.S. 1, 12 (1974)
FEDERAL STATUTES AND RULES:
Cf AE SERRE EUS EERO ne oC oe
acini
RE nee a eae
IP cia eile aha ct ninlbinmammian
I cacti ahiasscichinisesninaiaibediottinamassindbannipiinanniniacous
ee aE ec
SU hee
LEGISLATIVE MATERIALS:
133 Cong. Rec. 7406 (daily ed. Oct. 9, 1987) (H.R.
| ERE ERR SS a a
MISCELLANEOUS:
Report of the Ad Hoc Civil RICO Task Force of the
ABA Section of Corporation, Banking and Business
AT TEE FD sieiincenncsnicsesultnsdagiedialicstiadisiacins
RICO Revisited: An Advance Seminar on the Latest
Techniques in Civil Suits 172-73 (A. Mathews Ed.,
Prentice Hall Law & Business 1987 )..............:cc000000.
Page
3,7,8,11
9
10
9
13
8
13
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14
14
1]
1]
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IN THE
Supreme Court of the United States
OCTOBER TERM, 1987
No. 87-788
HMK CorPorATION,
Petitioner,
Vv.
JOHN C. WALSEY, et al.,
Respondents.
On Petition for Writ of Certiorari to the
United States Court of Appeals for the Fourth Circuit
BRIEF OF RESPONDENTS IN OPPOSITION TO THE
PETITION FOR WRIT OF CERTIORARI
Respondents, John C. Walsey, Barry S. Blumberg, Sigma
CJ Associates, Petula Associates, Ltd., Stanley R. Balderson, Jr.,
Richard L. Hedrick, Harold S. King and Jack S. Hodge, by
counsel, respectfully pray that petitioner’s request for a writ of
certiorari to review the judgment of the United States Court of
Appeals for the Fourth Circuit, entered on September 17, 1987,
be denied.
STATEMENT OF THE CASE
HMK Corporation (“‘HMK”’) filed this action pursuant to
18 U.S.C. § 1961, et seg. (“RICO”) in the United States District
Court for the Eastern District of Virginia against administrative
officials of the County of Chesterfield, Virginia (a political
subdivision of the Commonwealth of Virginia, “County”, offi-
cials of the Virginia Department of Highways and Transportation
(an agency of the Commonwealth of Virginia responsible for
2
the design, construction and maintenance of public roads,
“VDH&T”’), and two land development companies and certain
of the companies’ officers (collectively referred to as the “Boul-
ders Developers”). In its Complaint, HMK alleged that respon-
dents engaged in a single “Scheme to Defraud” the County, the
Commonwealth of Virginia and HMK arising out of a dispute
over HMK’s development plan for a unified area of property in
the County (referred to as the “Jahnke-Chippenham Develop-
ment Area” or “JCDA”). Specifically, HMK alleged that
respondents, through the County’s local rezoning process, con-
spired to grant the Boulders Developers certain development
advantages which impeded HMK’s development plans for its
adjacent property in the JCDA. Although this action was the
tirst RICO case brought by HMK relating to the rezoning of the
JCDA, it was the thirteenth lawsuit pursued by HMK, or its
predecessor corporations, against respondents in which HMK
claimed a.conspiracy to thwart the public rezoning process so as
to interfere with HMK’s development opportunity in the JCDA. 2
In response to HMK’s RICO Complaint, respondents filed
motions to dismiss and/or motions for summary judgment
pursuant to Rules 12(b){6) and 56 of the Federal Rules of Civil
Procedure. Respondents’ motions raised numerous defenses
to HMK’s broadly-stated assertions of fraud and conspiracy,
including the preclusive effect of HMK’s prior lawsuits and the
fact that the case involved a single land use dispute between
competing developers which could not satisfy RICO’s “pattern
of racketeering activity” requirement. 18 U.S.C. § 1961(5).
Respondents also filed witness affidavits detailing the facts
surrounding the rezoning of the JCDA and numerous exhibits
including judicial decisions and factual findings from HMK’s
previously unsuccessful litigation efforts which had concluded
that the majority of the allegations in HMK’s Complaint were
without factual foundation.
2 The Court of Appeals apparently treated six of HMK’s previous state
lawsuits contesting the validity of the rezoning of the JCDA as a single lawsuit
since the six suits were ultimately consolidated for trial before the Circuit Court
of Chesterfield County. HMK Corp v. Walsey, 828 F.2d 1071, 1072 ( 4th Cir.
1987). The thirteen lawsuits are graphically summarized at Resp. App. la-
3a.
——an
3
Respondents’ motions were argued before the District Court
on May 6, 1986. Based on the voluminous factual record and
the application of those facts to the legal principles governing
civil RICO claims after Sedima, S.P.R.L. v. Imrex Co., 473 US.
479 (1985), the court granted summary judgment and dismissed -
the action, holding, in part, that: (1) HMK was precluded,
under the doctrines of res judicata and collateral esioppel, from
using RICO to relitigate claims and issues already decided
against it in previous state and federal lawsuits, and (2) since
the land use dispute between the parties over the JCDA consti-
tuted only “isolated behavior”, under the principles articulated
in Sedima, “the entire course of conduct between HMK and the
defendants does not constitute a RICO pattern,” HMK Corp. v.
Walsey, 637 F.Supp, 710, 712 n.2 (E.D. Va. 1986).
Although HMK asserts in its petition that this case was
decided by the District Court in a factual vacuum, the court
made numerous factual findings based on the affidavits and
exhibits submitted by the parties and applied these findings to
HMK’s RICO claim to reach its decision granting summary
judgment. The trial court’s recitation of the facts underlying
HMK’s RICO claim examines in detail the entire history of the
rezoning of the JCDA and the prior lawsuits filed by HMK in
which HMK contested each aspect of the JCDA rezoning by
claiming a widespread conspiracy by respondents to interfere in
the County’s rezoning process. Jd. at 711-14. The District Court
noted that in the lawsuits filed by HMK in the Circuit Court of
Chesterfield County, the state court, after trial and after “liberal
and exhaustive pre-trial discovery,” held that the JCDA rezoning
decisions were reasonable in all respects and that “the evidence
at trial failed to show any impropriety and partiality by the
[County’s governing body] in rendering its decision.” Jd. at
715. The District Court then found that accusations raised by
HMK in its RICO Complaint relating to the rezoning of the
JCDA, the acquisition of right-of-way for a public road through
the JCDA and the development of a transportation system to
serve the JCDA had been raised and decided in prior federal
litigation filed by HMK. After its exhaustive review of the facts
underlying HMK’s RICO action, the District Court concluded
that:
|
... HMK only turned to RICO after failing to obtain
favorable decisions in other forums and actions. In-
deed, Congress intended civil RICO to be an extraordi-
nary remedy in the fight against organized crime. It
was never intended to be a sword of Damocies, held
in abeyance until aggressive litigants, having failed in
conventional actions, unsheathed the RICO sword in
their arsenal for use in yet another lawsuit.
Id. at 724.
Finally, the trial court examined the facts underlying HMK’s
RICO claim in light of the “pattern of racketeering activity”
requirement of RICO. The court first found that regardless
of HMK’S conclusory allegations of a broad and continuing
conspiracy among respondents, the case involved, at most,
isolated behavior concerning a single land use controversy:
Although the parties have filed voluminous briefs and
exhibits detailing the history of this case, the Court
finds the case extraordinarily simple. Two developers
have crossed swords over a unified section of land so
that the advantages given one hamper the aspirations
of the other.
Id. at 711. Next, the court adopted the suggestion of this Court
in Sedima that any meaningful concept of pattern must include
the elements of “continuity plus relationship” and concluded
that this isolated dispute between two developers battling over
a single development opportunity in a unified area of the County
could not satisfy the RICO pattern requirement. Accordingly,
the court held that HMK’s Complaint failed to state a cognizable
claim for relief under RICO. 3
> The court also noted that despite HMK's complaints about mistreatment,
the County had actually granted HMK a favorable level of rezoning ( allowing
densiues dramaucally higher than those granted the adjacent properties within
the JCDA ) and had approved an amendment to the County’s general land use
plan so as to accommodate HMK's proposed development and transportation
access plan. /d. at 720. By order entered October 30, 1986 in HMK Corp. v.
County of Chesterfield, No. 84-0170-R (E.D. Va 1986), the District Court
specifically held that the rezoning of HMK’s property was favorable to HMK.
Resp. App. 4a.
5
On appeal, the Fourth Circuit Court of Appeals, affirming
the District Court, held that “HMK’s allegations in their entirety
do not amount to a pattern of racketeering activity.” HMK
Corp. v. Walsey, 828 F.2d 1071, 1073 (4th Cir. 1987). In
reaching its decision, the Court of Appeals engaged in a detailed
analysis of the RICO pattern requirement after Sedima.. In
particular, the court examined how the concept of pattern in
RICO should be applied to the unique factual context of a mixed
commercial and political dispute such as the one presented by
this case.
Consistent with the approach adopted by other appellate
courts analyzing RICO’s “pattern of racketeering activity” re-
quirement, the Court of Appeals first addressed this Court’s
suggestion in Sedima that the lower courts “develop a meaningful
concept of ‘pattern’ ” in an effort to curb “[t}he ‘extraordinary’
uses to which civil RICO has been put.” Jd. Citing various
appellate decisions examining how the pattern concept should
be applied, the court recognized the need to place the pattern
concept within the context of all of the circumstances presented
in a given case, concentrating on the “nature of the underlying
offenses” and the “ ‘criminal dimension and degree’ of the
alleged misconduct.” Jd. at 1073-74. The court then examined
the facts of the present case and, consistent with the findings of
the District Court, found that HMK’s Complaint related “merely
to the allocation of burdens and benefits in the development of
two adjoining properties,” and that notwithstanding HMK’s
attempt to inflate a single local land use dispute into a controversy —
of RICO proportions, “[n]othing in HMK’s allegations sets
this development dispute above any other dog-fight between
developers.” Jd. at 1075.4
4 In a transparent attempt to force this local land use dispute into
the statutory “pattern” requirement of RICO, HMK has now attempted to
transform the single “Scheme to Defraud” originally pled in its Complaint
into “schemes”, “six distinct episodes”, “eleven governmental decisions” and
“multi-episodic schemes”. Pet. App. 4, 5, 8. HMK’s new characterization of
the nature of its case directly conflicts with the findings, supported by the
record, of both the District Court and the Court of Appeals, that the case
involves nothing more than a dispute between developers over a single
development opportunity.
6
Finally, the Court of Appeals dissected the allegations
constituting HMK’s “Scheme to Defraud” in the context of the
facts surrounding this local land use controversy. Noting that,
under the legislative history of RICO, the statute was not
designed to target the isolated offender or to apply to sporadic
instances of criminal activity, the court analyzed the totality of
the dispute to determine whether HMK’s compilation of alleged
predicate acts was indicative of wide-spread, pervasive criminal
conduct or merely described a single isolated episode whose
duration was a function of the manner in which land use decisions
are customarily made at tue local level. First, the court found
that land use decisions necessarily “require the involvement of
many governmental decisionmakers at various stages of the
approval process” who are required to address “numerous,
important, and often competing, interests and concerns.” Jd. at
1074-75. Second, the court noted that public zoning bodies
“often proceed deliberately” and that the zoning approval pro-
cess involves “multiple hearings and opportunity for public
comment” which “serve to inform public officials, provide a
forum for public cpinion, and permit landowners adversely
affected by the proposed changes to voice their opposition.” Jd.
at 1075. Finally, while the court found that the complexity of
local land use procedures “inevitably leads to a protraction of
the administrative process,” it concluded that such protraction
‘is a worthwhile price for the benefits of due process and accurate
decisionmaking.” Id.
With these factors in mind, and consistent with the findings
of the District Court, the Court of Appeals concluded that
HMK’s Complaint, despite alleging improper actions by various
Officials over a period of time, in reality involved nothing more
than a routine local zoning dispute between two developers over
a single area of land. HMK’s attempted elevation of this land
use dispute into a RICO controversy by alleging scores of acts
committed by public officials was a function of the complexity
of the process itself, not a function of “pervasive involvement
by a developer in the political process through widespread
racketeering activity.” Jd.5 Since this case involved a dispute
5 Significantly, the court recognized that HMK had not alleged that
respondents had ever interfered in the County’s planning process before the
JCDA rezoning dispute or had done so since. Jd. Nor has HMK ever alleged
that respondents engaged in any other “Scheme to Defraud” in other locations
in the County or in conjunction with other developments.
>
between developers over a single development opportunity, the
court concluded that “the element of ‘continuity’ necessary for
a pattern of racketeering activity under RICO” was lacking and
affirmed the District Court’s decision granting the respondents’
motion for summary judgment. Jd. In reaching its decision, the
Court of Appeals, consistent with the unanimous practice of
federal trial and appellate courts since Sedima, specifically
adopted the “continuity plus relationship” test for establishing
a “‘pattern of racketeering activity” suggested by this Court in
Sedima. Because this case involved only isolated activity with
no threat of the continuing criminal activity RICO was designed
to eliminate, the Court of Appeals properly affirmed the District
Court’s decision.
SUMMARY OF THE ARGUMENT
This Court should deny the petition for a wnit of certiorari
in the present case. The District Court and the Fourth Circuit
appropniately applied the “pattern” concept contained in Sedima
to properly dismiss a localized zoning dispute. The circuit courts
are consistently following this Court’s directive in Sedima and
are formulating a meaningful definition of pattern using the
concepts of continuity and relatedness. Certioran is inappropni-
ate when, as here, a consensus is continuing to develop among
the circuits regarding the application of the pattern definition in
Sedima. Moreover, there is legislation now pending which will
codify the pattern test set forth in Sedima. The pendency of
such legislation enhances the risk that a review of the pattern
issue at the present time will be supplanted by subsequent
legislative enactment. Finally, the present case serves as an
undesirable vehicle to further consider RICO’s pattern require-
ment because the case involves a uniquely mixed political and
commercial land use dispute which could limit the applicability
of any Supreme Court holding to the peculiar facts of this case.
REASONS FOR DENYING THE WRIT
I. The Circuit Courts Are Uniformly Applying This Court’s
Interpretation Of “Pattern” Under RICO.
In Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 496 n.14
(1985), this Court stated that the term “pattern” under RICO
means something more than two acts of racketeering activity.
8
This Court noted that the legislative history of RICO supports
the view that activity which is both isolated and sporadic does
not constitute a pattern. This Court also directed lower courts,
in deciding whether a pattern of racketeering activity exists,
to focus on numerous factors, including whether the activity
“* ‘embraces criminal acts that have the same or similar purposes,
results, participants, victims, or methods of commission, or
otherwise are interrelated by distinguishing characteristics and
are not isolated events.’ ” Id. quoting 18 U.S.C. § 3575(e). This
Court concluded that in order to establish a RICO pattern, the
plaintiff must demonstrate that the factor of “continuity plus
relationship” combines to produce the pattern of racketeering
activity underlying its RICO claim.
Since Sedima, the lower courts have uniformly applied the
test of “continuity plus relationship” to determine whether a
pattern has been pled.® Because acts of racketeering activity
are typically related, most courts have focused on the “continu-
ity” aspect of the Sedima test. Those “[c]ourts generally agree
that to make an adequate showing of continuity under Sedima,
a plaintiff must demonstrate some facts from which at least a
threat of ongoing illegal conduct may be inferred.” Torwest
DBC, Inc. v. Dick, 810 F.2d 925, 928 (10th Cir. 1987).
A review of the circuit court decisions since Sedima reveals
that the courts are analyzing the facts of each particular case to
distinguish those cases involving only isolated or sporadic crimi-
nal activity from those raising a legitimate inference of continuing
criminal conduct. For instance, the Seventh Circuit has adopted
a factually-oriented standard which focuses on the ongoing
nature of the predicate acts. Morgan v. Bank of Waukegan, 804
F.2d 970 (7th Cir. 1986). The First, Second, Third, Ninth and
Tenth Circuits follow a similar approach. Roeder v. Alpha
Industries, Inc., 814 F.2d 22 (1st Cir. 1987); United States v.
Ianiello, 808 F.2d 184 (2d Cir. 1986), cert. denied, 107 S.Ct.
3229 (1987); Barticheck v. Fidelity Union Bank/ First National
6 Contrary to petitioner’s suggestion that, since RICO’s pattern require-
ment was not central to the Sedima decision, this Court has offered little insight
into how that term should be interpreted, Pet. 10 n.5, the lower courts have
unhesitatingly adopted Sedima’s analysis to decide pattern questions.
9
State, 832 F.2d 36 (3d Cir. 1987); Sun Savings & Loan Associa-
tion v. Oberdorff, 825 F.2d 187 (9th Cir. 1987); Torwest DBC,
Inc. v. Dick, 810 F.2d 925 (10th Cir. 1987).7 Consistent with
this approach, the Fourth Circuit has “elaborated a case-by-case
standard akin to that announced by the Seventh Circuit in
Morgan.” HMK Corp. v. Walsey, 828 F.2d 1071, 1073 ( 4th Cir.
1987). The existence of a RICO pattern, observed the court, is
‘“‘a matter of criminal dimension and degree” which cannot be
determined by a “mechanical test.” International Data Bank,
Ltd. v. Zepkin, 812 F.2d 149, 155 (4th Cir. 1987).* The focal
point for making that determination is “the threat of continuity
of racketeering activity.” Eastern Publishing & Advertising, Inc.
v. Chesapeake Publishing & Advertising, Inc., No. 87-1520 (4th
Cir. October 16, 1987).
An analysis of the circuit court decisions which have ad-
dressed RICO’s pattern requirement illustrates that the federal
appellate courts are uniformly applying the “continuity plus
relationship” test announced in Sedima and found in the legisla-
tive history of RICO.° Guided by Sedima, the circuit sourts are
examining the facts of each RICO case and are determining
whether those facts fit within Sedima’s directive that the acts of
racketeering activity be continuous and related.
Some of the courts have articulated Sedima’s pattern re-
quirement using different terms, but not in such a manner as to
create the type of “real and embarrassing conflict of opinion
and authority between the circuit courts of appeal” that warrants
a grant of certiorari. Layne & Bowler Corp. v. Western Well
Works, Inc., 261 U.S. 387, 393 (1923). For instance, the Fifth
and Eleventh Circuits have found a pattern upon a showing of
two or more separate but related predicate acts. R.A.G.S.
? The District of Columbia and Sixth Circuits have not yet addressed the
pattern issue.
8 As the Seventh Circuit noted in Morgan, a factually-oriented standard
is perhaps the fairest and most logical way to apply complex facts to Sedima’s
“continuity plus relationship” test. Morgan v. Bank of Waukegan, 804 F.2d
at 977.
9 Nothing in the record, or in petitioner’s brief, supports petitioner’s
contention that the lower courts have had difficulty applying the Sedima test
in criminal cases. Moreover, petitioner’s concern that Sedima’s pattern analysis
cannot be applied to an 18 U.S.C. § 1962(b) “takeover” claim is unfounded.
See, e.g., Papai v. Cremosnik, 635 F.Supp. 1402 (N.D. Ill. 1986).
10
Couture, Inc. v. Hyatt, 774 F.2d 1350 (Sth Cir. 1985); Bank of
America Nationai Trust & Savings Association v. Touche Ross
& Co., 782 F.2d 966 (lith Cir. 1986). The Eighth Circuit
requires proof that the defendant has engaged in similar activity
in the past or is engaged in other criminal activity elsewhere.
Superior Oil Co. v. Fulmer, 785 F.2d 252 (8th Cir. 1986).
However, these decisions merely represent diverse applications
of the same principle—that alleged criminal activity must show
some degree of continuity to support a RICO claim. Even if
these articulations could be construed to be at variance with
those of other circuit courts, issuance of certiorari would still be
inappropriate at the present time since both the Fifth and Eighth
Circuits are considering a re-examination of the pattern issue
and the adoption of the fact-oriented standard applied generally
in the circuits. Montesano v. Seafirst Commercial Corp., 818
F.2d 423, 426 (Sth Cir. 1987); HJ. Inc. v. Northwestern Bell
Telephone Co., 829 F.2d 648, 650-51 ( 8th Cir. 1987) (McMillan
and Gibson, JJ., concurring ).!°
Regardless of how petitioner chooses to characterize the
definition of pattern, the circuit courts are consistently following
Sedima’s directive that RICO’s pattern requirement be analyzed
in terms of continuity and relatedness. The Fourth Circuit
concluded that the dispute in this case did not allege the type of
continuous activity sufficient to create a pattern of racketeering
activity under RICO. This view is consistent with the consensus
that is continuing to emerge among the circuits in considering
the application of the pattern concept to RICO claims. Accord-
ingly, this Court should not grant certiorari to review the Fourth
Circuit’s appropriate analysis of the pattern concept and its
conclusion that petitioner failed to allege a valid RICO claim in
this case.
10 The articulation of the pattern concept by the circuits is a function of
the judicious application of the facts of each case to the Sedima test and does
not present the type of obvious conflict necessarily involved when two courts
choose different statutes of limitation or when one court decides that a claim
is subject to arbitration and the other decides that it is not.
1]
II. Legislation Currently Pending In Congress Will Codify
Sedima’s “Continuity Plus Relationship” Test For A RICO
“Pattern”.
HMkK asserts in its petition that Congress has no legislation
pending which addresses the pattern issue. Pet. 10-11 n.5.
Contrary to this assertion, on October 9, 1987, Representative
John Conyers ( D-Mich ) introduced legislation that would clarify
the “pattern” requirement of RICO. 133 Cong. Rec. 7406 ( daily
ed. Oct. 9, 1987 (H.R. 3240) ). Bill No. 3240, which was referred
the same day to the House Judiciary Committee, is currently
awaiting hearings before that Committee’s Subcommittee on
Criminal Justice. Bill 3240 defines ‘pattern’ as:
[A]t least two acts of racketeering activity or fraudulent
activity, or both, one of which occurred after the effective
date of this chapter and the last of which occurred within
ten years (including any period of imprsonment) after
the commission of a prior act of racketeering activity or
fraudulent activity, or both, that are:
(A) under subsection 1962(c) of this chapter, related
to the affairs of an enterprise;
(B) not isolated, but they need not be part of a
common scheme or plan; and
(C) except under Section 1962(b) ofthis chapter, not
so closely related to each other and connected in
point of time and place that the acts constitute
a single episode involving only one victim so
that they do not in themselves, in light of the
purpose for which they were committed, with
reference to the enterprise, or otherwise, give
rise to an inference of the possibility of continuity
of activity.
H.R. 3240, 100th Cong., Ist Sess. ( 1987).!!
Bill 3240’s requirement of “multiple episodes” giving mise
to ‘‘an inference of continuity of activity” will legislatively codify
the continuity and relatedness factors discussed by this Court in
1! Bill 3240 is reproduced in its entirety at Resp. App. 5a.
12
Sedima and will provide the “meaningful concept of pattern”
which the Court found lacking at the time that Sedima was
decided. Sedima, S.P.R.L. v. Imrex Co., 473 U.S. at 500 (1985).
Professor Blakey recently addressed the constitutionality and
necessity of the courts redrafting legislation in the context of the
RICO pattern requirement. According to Professor Blakey,
“Congress, too, is being pressed both to retain and to circum-
scribe civil RICO. No indication exists that Congress is unable
to fulfill its constitutional role.” Rico Revisited; An Advance
Seminar on the Latest Techniques in Civil Suits, 172-73 (1987).
Accordingly, Congress should be given an opportunity to correct
any perceived problems associated with the term “pattern.”
Review on wnit of certiorari is a matter of judicial discretion,
not of nght. Sup. Ct. R. 17.1. “Special and important” reasons
are required before a writ of certiorari should be granted. Jd.
Although an alleged conflict among the circuit courts or lack of
guidance for lower courts may be considered to be such reasons,
these reasons decrease in importance when the enactment of
legislation would alleviate the perceived problem. Rice v. Sioux
City Cemetery, 349 U.S. 70 (1955). The pendency of legislation
raises the issue of the appropriateness of the expenditure of this
Court’s time and resources to decide an issue which the legislature
is already taking steps to address. Accordingly, the Court
“should not risk inconclusive and divisive disposition of a case
when time may further eliminate or completely outmode the
issues in dispute”. Jd. at 77. Im the present case, as in
Rice, legislation is currently pending which could eliminate any
perceived problem with the term “pattern.” Since any decision
rendered by this Court on the pattern issue could be rendered
moot by Congressional action, this case should not be accepted
for review.
III. This Case Presents A Factual Setting Which Is Uncharac-
teristic Of Most RICO Litigation And Is Unsuitable To
Review The Concept of “Pattern” Contained In Sedima.
Since the adoption of RICO in 1970, civil RICO litigation
has largely involved commercial and securities-related disputes
between private parties. Of the 270 district court RICO decisions
reported prior to 1984, 77% involved fraud in commercial,
Pubs Scat
13
business or securities settings. Report of the Ad Hoc Civil Rico
Task Force of the ABA Section of Corporation, Banking and
Business Law 19 (1985). In contrast, less than one-third of one
percent of all civil RICO litigation has involved mixed political
and commercial controversies similar to the land use dispute
involved in the present case.
According to statistics compiled by the Administrative Office
of the United States Courts, a total of 1,709 civil RICO cases
were filed in federal court from November, 1985 through June
30, 1987. Yet, the respondents have identified only six civil
RICO cases, decided during approximately the same period,
which allege fraudulent interference with public processes in a
land use or zoning setting. HMK Corp. v. Walsey, 828 F.2d
1071 (4th Cir. 1987); Town of Kearny v. Hudson Meadows Urban
Renewal Corp., 829 F.2d 1263 (3d Cir. 1987); Raskiewicz v.
Town of New Boston, 754 F.2d 38 (1st Cir.), cert. denied, 474
U.S. 845 (1985); Naked City, Inc. v. Aregood, 667 F.Supp. 1246
(N.D. Ind. 1987); United States Magnet & Alloy Corp. v. Yardley
Borough, No. 86-2898 (E.D. Pa. December 11, 1986); Verges
v. Babovich, No. 86-2382 (E.D. La. November 28, 1986). Of
these six cases, three bear no factuai resemblance to the present
case since they involve issues unrelated to the public rezoning
process or contain allegations of bribery. Naked City, Inc. v.
Aregood (alleged improper enforcement of a zoning ordinance );
Verges v. Babovich (alleged misuse of campaign proceeds by a
local legislator with a peripheral claim of zoning impropriety );
Town of Kearny v. Hudson Meadows (bribery of public officials
in land development and flood control schemes).!2_ These six
cases together constitute a mere 0.35% of the RICO actions filed
and decided after November 1985, hardly representative of the
civil RICO litigation customarily considered by the federal
courts. As discussed above, federal courts are increasingly
deciding the issue of pattern in reference to the totality of facts
and circumstances surrounding a dispute, and are applying the
“continuity plus relationship” test of Sedima in a decidedly fact-
oriented manner. Accordingly, any consideration of pattern in
12 In contrast to the “typical” public corruption case, HMK has never
alleged, and the record contains no facts to support, even an inference of
bribery of public officials.
ee
the context of the atypical facts presented here—a local zoning
fight of importance solely to the parties in this case—would have
limited value when applied by lower courts to the usual “garden
variety” RICO action involving commercial or securities
disputes.
In addition, further judicial review of this land use contro-
versy conflicts with the principle that federal courts do not sit as
“super zoning boards of appeals.” Creative Environments, Inc.
v. Estabrook, 680 F.2d 822 ( Ist Cir.), cert. denied, 459 ¥J.S. 989
(1982) quoting Village of Belle Terre v. Boraas, 416 U.S. 1, 12
(1974) (Marshall, J. dissenting). Raskiewicz v. Town of New
Boston, supra; Albery v. Reddig, 718 F.2d 245, 249 n.7 (7th Cir.
1983). As determined by the Court of Appeals in the present
case, the suit filed by HMK, despite its RICO label, is in fact
nothing more than a collateral attack on legislative decisions
that rezoned a developing area of the County and that have
already been judicially determined to be appropriate. As such,
the court, citing Village of Arlington Heights v. Metropolitan
Housing Development Corp., 429 U.S. 252, 265 (1977), held
that it was inappropriate for a federal court 10 delve into the
County’s rezoning decisions, and that doing so would “effect the
wholesale transfer of that most basic of local controversies into
a federal forum.” HMK Corp. v. Walsey, 828 F.2d 1071, 1076
(4th Cir. 1987). Given the understandable reluctance of federal
courts to become involved in local land use disputes and the
fact that respondents’ actions relating to the JCDA rezoning
controversy have already been examined in depth in multiple
lawsuits filed by HMK, this case is not appropriate for further
judicial review.
SAN ahhh ANAL a anes Chieti Soult De
15
CONCLUSION
For each of the foregoing reasons, respondents, John C.
Walsey, Barry S. Blumberg, Sigma CJ Associates, Petula Associ-
ates, Ltd., Stanley R. Balderson, Jr., Richard L. Hedrick, Harold
S. King and Jack S. Hodge, by counsel, respectfully request that
the Petition for Writ of Certiorari be denied.
Of Counsel:
MICHAEL P. FALZONE
Dana B. SYKES
HIRSCHLER, FLEISCHER,
WEINBERG, Cox & ALLEN
629 East Main Street
Post Office Box 1Q
Richmond, VA 23202
(804) 771-9500
EpwarbD E. WILLEY, Jr.
WILLEY & HALL, P.C.
1001 Chinaberry Boulevard
Richmond, VA 23225
(804) 323-0600
JEFFREY L. MINCKS
Senior Assistant County
Attorney
Post Office Box 40
Chesterfield, VA 23832
(804) 748-1491
Respect
submitted,
CHARLES F. WITTHOEFFT
HIRSCHLER, FLEISCHER,
WEINBERG, Cox & ALLEN
629 East Main Street
Post Office Box 1Q
Richmond, VA 23202
( 71-9500
po eT
STEVEN L. MICAS
County Attorney
Post Office Box 40
Chesterfield, VA 23832
(804) "7 1491 ’ af
FF SUE —
Attorney General of Virginia
101 North Eighth Street
Richmond, VA 23219
(804) 786-1129
JOHN J. BEALL, Jr.
Senior Assistant Attorney
General
CAROLINE L. LOCKERBY
Assistant Attorney
General
101 North Eighth Street
Richmond, VA 23219
(804) 786-1129
LASSER an
APPENDIX
\SE
JURT
\TE
LED
_AIM
ISPOSITION
la
HISTORY OF
HMK LITIGATION
INVOLVING JCDA
Dunning MLK. Realty P.H. Corp. ROD Corp. ROD Corp.
and ROD Corp. and and
M.K. Realty and HMK Corp. HMK Corp.
HMK Corp.
¥. v. v. v. v.
Board of Board of Board of Board of Board of
Supervisors Supervisors, Supervisors Supervisors, Supervisors
Boulders Planning and Planning and
Commission, Boulders Commission, Boulders
Baiderson, Balderson,
Micas Micas
and and
Boulders Boulders
State State State State
November August August August
1982 1983 1983 1983
Challenged Alleged a Challenged Alleged
Call tract conspiracy amendment conspiracy
rezoning to adopt to zoning to approve
asa General
zoning Plan 2000 i Pian 2000
amendment for ICDA of for JCDA
in JCDA Chesterfield to favor
Village Boulders
Apartments at ex
in JCDA of HMK
Challenged
first Sigma
amendment
to favor
ulders at
MK’s
expense
Damage Damage Damage Damage
alleged alleged alleged alleged
Judgment Judgment Judgment Non-suit
in favor in favor in favor Apnil
of all of all of all 1984
defendants defendants defendants
June, 1984; June, 1984; June, 1984
appeal to appeal to appeal to
Virginia Virginia Virginia
Supreme Ct. Supreme Supreme
denied Court Court
October denied denied Continued
1985 October 1985 | October on next
1985 page
CASE
COURT
DATE
FILED
(LAIM
DISPOSITION
2a
HISTORY OF
HMK LITIGATION
INVOLVING JCDA
ROD Corp. HMK Corp. P.H. Corp. P.H. Corp. HMK CORP.
v. v. v. v. v.
Board of Board of Balderson, Balderson, Board of
Supervisors Supervisors Hodder, & Hodder & Supervisors
and Prudential Forge-
Boulders O’Connell
Properties
State State State State
November November March April
1983 1983 1985 1985
Challenged Challenged Challenged Challenged
Sigma II denial of conditions Fidelity
zoning lst HMK of Pru-Care Building
in JCDA CUPD zoning as being
application in JCDA in
in JCDA violation
of zoning
in JCDA
Damage Damage Damage Damage
alleged alleged alleged alleged
Judgment Judgment in Non-suit Non-suit
in favor favor December December
of all of all 1985 1985
defendants defendants
June, 1984; June, 1984;
appeal to appeal to
Virginia Virginia
Supreme Supreme
Court Court
denied denied Continued
October October on next
1985 1985 page
SPOSI-
3a
HISTORY OF
HMK LITIGATION
INVOLVING JCDA
HMK Corp. Common- HMK Corp. HMK Corp. HMK Corp.
wealth of
Virginia
v. v. v. v. v.
Board of HMK, Board of County of Boulders,
Supervisors et al. Supervisors Chester- Hedrick,
and field and Balderson,
Hedrick King King and
Hodge
State State Federal Federal Federal
April April April November Jan
1985 1985 1984 1984 1986
Challenged VDH&T Challenged Alleged a RICO claim;
conditions sought conditions conspiracy racketeering
imposed on acquisition in to condemn actiwities
HMK office of proposed HMK property | inveiving
rezoning property contract for private development
south of for road with use of decisions
Jahnke Rd. purposes County Boulders affecting
in JCDA through to design and to property
eminent alternate thwart of Boulders
domain access normal in JCDA
: road for zoning
HMK claims HMK’s procedure
condemna- property in in JCDA
tion as JCDA
culmination
of
conspiracy
Damage Damage Damage Damage Damage
alleged alleged alleged alleged alleged
Non-suit Continuance Contract Case Summary
1985 obtained provision dismissed judgment
by HMK declared by Court granted
pending invalid; August on behalf
result of damages 1985 on of
federal awarded grounds of defendants
litigation of $4,911 ripeness
with County and inability
County & to claim
Boulders conspiracy
damages
Affirmed
by Fourth
Circuit Court
of Appeals
4a
In THE
Unrrep StraTes Districr Court
For THE EASTERN Distreicr OF VIRGINIA
Richmond Division
Civil Action No. 84-0170-R
HMK CorpPoraTION
Plaintiff,
vs
COUNTY OF CHESTERFIELD,
Defendant.
FINAL ORDER
( Filed October 30,1986)
This matter is before the Court on the defendant’s motion
for summary judgment on plaintiff HMK’s “phasing” damages
claim. Based on Judge Warriner’s March 29, 1985 opinion
and the plaintiffs acknowledgment therein that if it received
favorable zoning there would be no damages, the Court
GRANTS defendant’s motion for summary judgment. Since
HMK did receive favorable zoning, even though not to the
extent desired, under the law of the case as established by Judge
Warminer, there can be no damages. Plaintiff HMK’s claim
for damages is hereby DISMISSED WITH PREJUDICE and
JUDGMENT IS ENTERED for the defendant as to the “phas-
ing” damages issue, the sole remaining claim in the case.
While the plaintiff cannot show phasing damages, HMK is
the prevailing party for purposes of recovering its costs in this
action, based on Judge Warriner’s previous rulings. Therefore,
the Clerk is DIRECTED to assess against the defendant the
plainuff’s costs of action.
Let the Clerk send a copy of this order to all counsel of
record.
October 30,1986 /s/ RICHARD L. WILLIAMS
DATE UNITED STATES DISTRICT JUDGE
Sa
100TH CONGRESS te
lst SESSION
H. R. 3240
To amend chapter 96 of title 18, United States Code, relating to
racketeering influenced and corrupt organizations, to create a
new Offense for fraudulent activity, and to restructure the civil
claims procedures.
IN THE HOUSE OF REPRESENTATIVES
SEPTEMBER 9, 1987
Mr. Conyers ( for himself and Mr. Epwarps of California )
introduced the following bill; which was referred to the
Committee on the Judiciary
A BILL
To amend chapter 96 of title 18, United States Code, relating
to racketeering influenced and corrupt organizations, to create
a new Offense for fraudulent activity, and to restructure the
civil claims procedures.
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the “Racketeer Influenced and
Corrupt Organizations Act of 1987”.
SEC. 2. NEW OFFENSE FOR FRAUDULENT ACTIVITY.
(a) NEW PREDICATE OFFENSES.—Section 1961 of title 18,
United States Code, is amended by striking out paragraph (| )
and inserting in lieu thereof the following:
“( 1) ‘racketeering activity’ means (A) any act involv-
ing murder, kidnapping, prostitution involving minors, gam-
bling, arson, robbery, bribery, extortion, dealing in obscene
ele
6a
matter, or dealing in narcotic or other dangerous drugs,
which is chargeable under State law and punishable by
imprisonment for more than one year; (B) any act which
is indictable under any of the following provisions of title
18, United States Code: chapter 51 ( homicide), chapter 73
(obstruction of justice), and chapter 110 (sexual exploita-
tion of children), section 32 (relating to destruction of
aircraft facilities), section 81 (relating to arson), section
112 (relating to protection of foreign officials and other
persons ), section 115 (relating to assaults and other acts
against Federal and other persons), section 201 (relating
to bribery), section 215 (relating to bank bribery), section
224 (relating to sports bribery), section 373 (relating to
solicitation to commit a crime of violence ), sections 471, 472,
and 473 ( relating to counterfeiting ), section 511 (relating to
forgery of State and other securities ), section 659 ( relating
to theft from interstate shipment) if the act indictable
under section 659 is a felony, section 664 (relating to
embezzlement from pension and welfare funds), section
666 (relating to theft or bribery in benefit programs),
section 831 (relating to prohibited transactions involving
nuclear material ), section 844 (relating to explosive materi-
als), section 875 (relating to interstate communications ),
section 876 (relating to mailing threatening communica-
tions ), section 877 (relating to mailing threatening commu-
nications from foreign countries), section 878 (relating to
threats), section 891-894 (relating to extortionate credit
transactions ), section 929 (relating to restricted ammuni-
tion ), section 1084 ( relating to the transmission of gambling
information ), section 1203 (involving hostage taking ), sec-
tion 1362 (relating to communications lines), section 1363
(relating to buildings), section 1364 (relating to foreign
commerce ), section 1365 (relating to energy facility) sec-
tions 1461-1465 (relating to obscene matter), section 1951
(relating to interference with commerce, robbery, or extor-
tion ), section 1952 ( relating to racketeering ), section 1952A
(relating to murder-for-hire), section 1952B (relating to
violent crime in aid of racketeering ), section 1953 (relating
to interstate transportation of wagerng paraphernalia),
7a
section 1954 (relating to unlawful welfare fund payments ),
section 1955 (relating to the prohibition of illegal gambling
businesses ), section 1992 (relating to trains), section 2277
(relating to vessels), sections 2314 and 2315 (relating to
interstate transportation of stolen property) except for an
act indictable under the second undesignated paragraph of
section 2314, sections 2318 and 2320 ( relating to counterfeit
materials), section 2320 (relating to trafficking in certain
motor vehicles or motor vehicle parts ), sections 2341-2346
(relating to trafficking in contraband cigarettes), sections
2421-24 (relating to white slave traffic); (C) any act which
is indictable under title 29, United States Code, section 186
(dealing with restrictions on payments and loans to labor
organizations ) or section 501(c) (relating to embezzlement
from union funds); (D) any act which is indictable under
the Controlled Substances Act (21 U.S.C. 951 et seq.) or
the Controlled Substances Import and Export Act (21
U.S.C. 801 et seq. ); or (E) any act which is indictable under
the Currency and Foreign Transactions Reporting Act;”’.
(b) DEFINITION OF FRAUDULENT ACTIVITY.—Section 1961
is further amended by—
(1) redesignating paragraphs (2) through (10) as
paragraphs (3) through (11), respectively; and
(2) inserting after paragraph (1) the following:
“(2) ‘fraudulent activity’ means (A) any act
which is indictable under any of the following provi-
sions of title 18, United States Code: section 510 ( relat-
ing to fraud of the Treasury or other securities ), section
1029 (relating to fraud in connection with access de-
vices), section 1030 (relating to fraud in connection
with computers ), section 1341 (relating to mail fraud ),
section 1343 (relating to wire fraud), section 1344
(relating to bonds fraud), the second undesignated
paragraph of section 2314 (relating to scheme to de-
fraud involving transportation of stolen goods and
other items ); (B) any act which is indictable involving
fraud under title 11 (relating to bankruptcy); or (C)
any act which is indictable involving fraud under the
a
8a
Securities Act of 1933 (15 U.S.C. 77x), the Securities
Exchange Act of 1934 (15 U.S.C. 78ff), the Public
Utility Holding Company Act of 1935 (15 U.S.C.
79z-3), the Trust Indenture Act of 1939 (15 U.S.C.
77yyy), the Investment Company Act of 1940 (15
U.S.C. 80a-49 and 80b-17), the Commodity Exchange
Act (7 U.S.C. 13), or Truth in Lending Act (15 U.S.C.
§ 1644):”.
(c) MODIFICATION OF PROHIBITED ACTIVITIES.—Section
1962 of title 18, United States Code, is amended—
(1) in subsection (a)—
(A) in the first sentence by striking out “or” after
“racketeering activity” and inserting in lieu thereof
“or a pattern of fraudulent activity, or both, or”;
(B) in the second sentence by striking out “any
pattern or racketeering activity or” and inserting in lieu
thereof “any pattern of racketeering activity or any
pattern of fraudulent activity, or both, or”;
(2) in subsection (b) by striking out “or” after “racke-
teering activity” and inserting in lieu thereof “or a pattern
of fraudulent activity, or both, or”; and
(3) in subsection (c) by striking out “or” after “‘racke-
teering activity” and inserting in lieu thereof “or a pattern
of fraudulent activity, or both, or”.
(d) CRIMINAL PENALTIES.—Section 1963 of title 18, United
States Code, is amended in paragraph (a)(3) by inserting after
“racketeering activity” the following: “or fraudulent activity, or
both,”.
SEC. 3. DEFINITION OF PATTERN.
Paragraph (6) of section 1961 of title 18, United States
Code, as redesignated by section 2(b) of this Act, is amended
to read as follows:
“‘(6) ‘pattern’ means at least two acts of racketeering
activity or fraudulent activity, or both, one of which occurred
9a
after the effective date of this chapter and the last of
which occurred within ten years (excluding any period
of imprisonment) after the commission of a prior act of
racketeering activity or fraudulent activity, or both, that
are—
“(A) under subsection 1962(c) of this chapter,
related to the affairs of an enterprise;
“(B) not isolated, but they need not be part of a
common scheme or plan; and
““(C) except under section 1962(b) of this chapter,
not so closely related to each other and connected in
point of time and place that the acts constitute a single
episode involving only one victim so that they do not
in themselves, in light of the purpose for which they
were committed, with reference to the enterprise, or
otherwise, give rise to an inference of the possibility of
continuity of activity;”’.
SEC. 4. CRIMINAL AND CIVIL SANCTIONS.
(a) CRIMINAL SANCTIONS.—Section 1963 of title 18, United
States Code, is amended by striking out “both,” and inserting
| in lieu thereof “‘both; if death results, any term of years or for
| ute;”:
(b) Crvm Remepres.—Section 1964 of title 18, United
States Code, is amended to read as follows:
Ҥ 1964. Civil remedies
“(a) In any civil action or proceeding instituted under
this section, the district courts of the United States shall have
jurisdiction to prevent and restrain violations of section 1962 of
this chapter, shown by a preponderance of evidence, by render-
ing an appropnate judgment or decree, including—
“(1) ordering any person to divest himself of any
interest, direct or indirect, in any enterprise;
““(2) imposing reasonable restrictions on the future
activities or investments of any person, including prohibiting
ll
10a
any person from engaging in the same type of endeavor as
the enterprise engaged in or the activities of which affect
interstate or foreign commerce;
“(3) ordering dissolution or reorganization of any
enterprise, making the due provision for the nghts of inno-
cent persons; or : |
“(4) taking such other action as may be just.
“(b)(1) The Attorney General may institute a proceeding
under subsection (a) of this section.
““(2) Pending final determination of a proceeding instituted
by the Attorney General under subsection (a) of this section,
the court may at any time enter such restraining orders or
prohibitions, or take such other actions, including the acceptance
of satisfactory performance bonds, as might be just.
“(c)(1) Any person may institute a proceeding under
subsection (a) of this section.
“(2) In any proceeding brought by any person under
subsection (a) of this section, relief shall be granted in
conformity with the principles which govern the granting of
injunctive relief from threatened loss or damage, including the
possibility that any judgment for money damages might be
difficult to execute, in other cases, but no showing of special or
irreparable injury shall have to be made.
““(3) Upon the execution, in the discretion of the court, of
a proper bond against damages for an injunction improvidently
granted, a temporary restraining order and a preliminary injunc-
tion may be issued in any proceeding under subsection (a) of
this section before a final determination of it upon its merits.
Such undertaking shall not be required when the applicant is a
State or territory of the United States.
“*( 4) If the person who brings a proceeding under subsection
(a) of this section substantially prevails, his recovery shall
include the costs of the action, including a reasonable attorney’s
fee in the trial and appellate courts.
‘““(d) Whenever the United States is, directly or indirectly,
injured in its business or property by reason of any violation of
lla
section 1962 of this chapter, the Attorney General may bring a
civil action in an appropriate United States district court and
shall recover threefold the actual damages, shown by a prepon-
derance of evidence, sustained by it, and if the United States
substantially prevails, the costs of the action, including the costs
of investigations and litigation.
““(e)( 1) Any person who is, directly or indirectly, injured —
““(A) in his person by a crime of violence, or
“(B) in his business or property by reason of any
violation of section 1962 of this chapter, may bring a civil
action in an appropriate United States district court and
shall recover threefold the actual damages, shown by a
preponderance of evidence, sustained by him, and if the
person who brings the action under this subsection substan-
tially prevails, the costs of the action, including a reasonable
attorney’s fee in the trial and appellate courts.
“*(2) Damages recovered under this subsection shall not be
limited to competitive or distinct injury.
““( f) If the court determines that the filing of any pleading,
motion, or paper under subsection (c) or (e) of this section was
frivolous or that any action or proceeding was brought or
continued under subsection (c) or (e) of this section in bad
faith, vexatiously, wantonly, or for an improper or oppressive
reason, it shall award treble the actual costs of the action or
proceeding including a reasonable attorney’s fee in the trial and
appellate courts, unless the court finds that special circumstances,
including the relative economic position of the parties, make
such an award unjust.
““(g) Upon the filing of a civil action or proceeding under
subsection (c) or (e) of this section, the person filing the action
or proceeding shall immediately notify the Attorney General in
such manner as the Attorney General shall direct by regulations.
The United States may, upon timely application, intervene in
any civil action or proceeding brought under subsection (c) or
(e) of this section, if the proceeding is of general public impor-
tance. In such action or proceeding, the United States shall be
12a
entitled to the same relief as if it had instituted the action or
proceeding.
“(h)( 1) Notwithstanding any other provision of law pro-
viding a shorter period of limitation, any civil action or proceed-
ing under subsection (c) or (e) of this section, shall be barred
unless it is commenced within five years after the unlawful
conduct terminated or the cause of action otherwise accrued,
whichever is later.
**(2) Whenever any civil action or criminal action or pro-
ceeding is brought or intervened in by the United States to
prevent, restrain, sanction, or punish any violation of section
1962 of this chapter, the running of the period of limitations
provided in this subsection with respect to any cause of action
arising under subsection (c) or (e) of this section, which is based
in whole or in part on any matter complained of in such action
or proceeding by the United States, shall be suspended during
the pendency of such action or proceeding by the United States
and for two years after the pendency of such action.
“*(i)(1) Notwithstanding any other provision of law, any
civil action or proceeding brought under subsection (c) or (e)
of this section, the underlying elements of which constitute
fraudulent activity, by any person, other than any attorney
general under subsection (1) of this section or a State or unit of
local government, shall be subject to the procedures of chapter
1 of title 9 (relating to arbitration ).
““(2) Any claim resolved under the procedures of chapter
1 of title 9 (relating to arbitration) under this subsection shall
preclude the parties to such claim as to issues and claims decided
in such arbitration if—
“(A) the party seeking to use issue or claim preclusion
could not have jointed the previous proceedings;
“(B) the party against whom issue or claim preclusion
would apply had incentive to fully litigate the issue in the
prior proceeding;
“(C) there have been no inconsistent rulings on the
issue in prior actions or proceedings; and
l3a
“(D) there are no new procedural opportunities avail-
able to the precluded party in the second action or proceed-
ing or, if there are, they are not likely to cause a result
different from that of the first action or proceeding.
“(j)(1) No action or proceeding may be brought under
subsection (c) or (e) of this section by a person, if the elements
of the pattern of fraudulent activity involve primarily—
“(AY domestic relations;
“(B) products liability;
““(C) decedents estates; or
“(D) a landlord-tenant dispute.
““(2) No action or proceeding may be brought under sub-
section (c) or (e) of this section by a person in connection with
and during a labor dispute.
“‘(3) For the purposes of this subsection—
“(A) ‘domestic relations’ means divorce, separation,
custody, support, or adoption;
“( B) ‘products liability’ means the liability of manufac-
turers or sellers to compensate buyers, users, or others
for any damages suffered because of manufacturing or
packaging defects in goods sold;
“(C) ‘labor disputes’ means any controversy concern-
ing the terms or conditions of employment or concerning
the association or representation of persons in negotiating,
fixing, maintaining, changing, or seeking to arrange the
terms or conditions of employment, regardless of whether
or not the disputants stand in the proximate relation of
employer and employee;
“(D) ‘decedents estates’ means will, bank account
trusts, testamentary trusts, revocable trusts that become
irrevocable upon death of grantor, or intestate succession;
and
“(E) ‘landlord-tenant disputes’ means any dispute
concerning the terms of fulfillment of a contract arising out
l4a
of the relation where one person occupies the premises of
another with his permission in subordination to the other’s
interest in the premises.
“(k)( 1) Notwithstanding any other provision of law, any
pleading, motion, or other paper filed by a person in connection
with an action or proceeding under subsection (c) or (e) of this
section shall be verified. Where the person is represented by an
attorney, the pleading, motion, or other paper shall be signed
by at least one attorney of record in his individual name, whose
address shall be stated. Where such pleading, motion, or
other paper includes an averment of fraud, coercion, agency,
respondent superior, accomplice, or conspiratorial liability, it
shall state, insofar as practicable, the circumstances with
particulanty.
““(2) The verification by a person and the signature by an
attorney required by this subsection shall constitute a certification
by the person or attorney that he has carefully read the pleading,
motion, or other paper and, based on a reasonable inquiry,
believes that—
“(A) it is well grounded in fact;
“(B) it is warranted by existing law, or a good faith
argument for the extension, modification, or reversal of
existing law; and
“(C) it is not made for any bad faith, vexatious,
wanton, improper or oppressive reason, including to harass,
to cause unnecessary delay, to impose a needless increase
in the cost of litigation, or to force an unjust settlement
through the serious character of the averment.
“(3) If a pleading, motion, or other paper is verified or
signed in violation of the certification provisions of this subsec-
tion, the court, upon motion or upon its Own initiative, shall,
after a hearing and appropriate nadings of fact, impose upon
the person who verified it or the attorney who signed it, or both,
a fit and proper sanction, including treble the actual costs of the
proceeding or action under subsection (f) of this section.
“(1)(1) Notwithstanding the provisions of subparagraphs
(A), (B), (C), and (D) of paragraph (1) of subsection (j) of
lSa
this section, any attorney general of a State may bring an action
or proceeding under subsection (c) or (e) of this section in the
name of the State, as parens patriae, on behalf of individuals
residing in the State, in an appropriate United States district
court. The court shall exclude from the amount of monetary
relief awarded in the action or proceeding any amount of
monetary relief—
“(A) which duplicates amounts which have been
awarded for the same claim; or
“(B) which is properly allocable to natural persons
who have excluded their claims pursuant to this subsection
and any business entity.
“(2)(A) In any action or proceeding brought under this
subsection, the State attorney general shall, at such times, in
such manner, and with such content as the court may direct,
cause notice of it to be given by publication. If the court finds
that notice given solely by publication would deny due process
of law to any person, the court may direct further notice to such
person according to the circumstances of the case.
“(B) Any person on whose behalf an action or proceeding
is brought under this subsection may elect to exclude from
adjudication the portion of the State claim for monetary or other
relief attributable to him by filing notice of such time as specified
in the notice given under this subsection.
“(C) Any final judgment or decree in any action or pro-
ceeding under this subsection shall preclude any issue or claim
under subsection (c) or (e) of this section by any person on
behalf of whom such action was brought and who fails to give
such notice within the period specified in the notice given under
this subsection.
“(3) Any action or proceeding under this subsection shall
not be dismissed or compromised without the approval of the
court, and notice of any proposed dismissal or compromise shall
be given in such manner as the court directs.
“(4) In any action or proceeding under this subsection—-
“(A) the amount of the plainti?fs’ attorney’s fee, if
any, shall be determined by the court; and
l6a
“(B) the court may, in its discretion, award a reason-
able attorney’s fee to a prevailing defendant upon a finding
that the State attorney general has acted in bad faith,
frivolously, vexatiously, wantonly, or for an improper or
oppressive reason.
(5) For purposes of this subsection, the term ‘state attor-
ney general’ means the chief legal officer of a State, or any other
person authomnzed by State law to bring actions under subsection
(c) or (e) of this section and includes the Corporation Counsel
of the District of Columbia, except that such term does not
include any person employed or retained on—
“(A) a contingency fee based on a percentage of the
monetary relief awarded under this subsection; and
“(B) any other contingency fee basis, unless the
amount of the award of a reasonable attorney’s fee to a
prevailing plaintiff is determined by the court under this
subsection.
“(m) A final judgment or decree rendered in favor of the
United States in any civil action or criminal action or proceeding
in favor of the United States or any plaintiff or a defendant in
any civil action or proceeding shall preclude the plaintiff or
defendant in any subsequent civil action or proceeding as to all
issues or claims respecting which the judgment or decree would
preclude an issue or claim between the parties to it.
““(n)(1) The court may award under this section, upon the
motion made after verdict, simple interest on actual damages
for the period beginning on the date of service of the pleading
setting forth a cause of action under this section and ending on
the date of verdict, or for any shorter period, if the court finds
that the award or interest for the period is just.
(2) In determining whether an award of interest under
this section for any period is just the court shall consider—
“(A) whether the opposing party, or either party’s
representative, filed pleadings, made motions, or filed other
papers so lacking in merit as to show that such party or
representative acted in bad faith, vexatiously, wantonly, or
for an improper or oppressive reason;
17a
““(B) whether, in the course of the proceeding or action
involved, the opposing party, or either party’s representa-
tive, violated any applicable rule, statute or court order
providing for sanctions for dilatory behavior or otherwise
providing for expeditious proceedings;
“(C) whether the opposiag party, or either party’s
representative engaged in conduct primarily for the purpose
of delaying the litigation or increasing the cost of the
litigation; and
“(D) whether the award of such interest is necessary
to compensate the opposing party for the injury sustained
by him.
“(o)(1) An action or proceeding under this section shall
not abate on the death of the plaintiff or defendant, but shall
survive and be enforceable by and against his estate and by and
against surviving plaintiffs or defendants.
“*(2) An action or proceeding under this section shall survive
and be enforceable against a receiver in bankruptcy, but only to
the extent of actual damages or other relief.”
(c) VENUE AND PrRoceEss.—Section 1965 of title 18, United
States Code, is amended—
(1) in subsection (b), by striking out “residing in any
other district”;
(2) in subsection (b), by striking out “in any judicial
district of the United States by the marshall thereof.” and
inserting in lieu thereof “anywhere the party may be
found”;
(3) in subsection (c), by striking out “in any other
judicial district” and inserting in lieu thereof ‘anywhere the
witness is found”;
(4) in subsection (c), by striking out “in another
district”; and
(5) in subsection (d), by striking out “in any judicial
district in which” and inserting in lieu thereof ‘“‘where”’.
18a
SEC. 5. COSTS OF PROSECUTION AND INVESTIGATION.
Section 1918 of title 28, United States Code, is amended by
adding at the end thereof the following new subsection:
““(c)( 1) Upon conviction in a court of the United States
for an offense in chapter 96 of title 18, the court may order
the defendant pay the costs of investigation and prosecution.
Amounts collected under the preceding sentence shall be covered
into miscellaneous receipts of the Treasury.
““(2) As used in this subsection, the term ‘costs of investiga-
uon’ includes—
“(A) attorney, investigator, and auditor salaries and
expenses;
““(B) special contract costs and special purchases;
“(C) travel costs and witness fees; and
“(D) grand jury fees and other related costs of
investigation.”
SEC. 6. SENSE OF CONGRESS.
It is the sense of the Congress that the National Association
of Attorneys General form a State RICO committee that will
promulgate advisory guidelines on the use of section 1964 of
title 18, United States Code, by State and local units of govern-
ment that will seek to assure, among other relevant factors, that
it—
(1) is used—
(A) with restraint;
(B) selectively;
(C) uniformly;
(D) only where necessary adequately to reflect or
reach the nature and extent of the unlawful activity
involved; and
(E) with due regard for limited Federal judicial
resources; and
19a
(2) is not used—
(A) routinely; or
(B) to create a bargain tool where its use would
otherwise be inappropriate.
SEC. 7. CONSTRUCTION DIRECTIVES.
Chapter 96 of title 19, United States Code, shall not be
construed — .
(1) to prohibit a person from constituting an enter-
prise, or a part thereof, and a defendant in the same count
of an indictment or a complaint;
(2) to require in a criminal or civil proceeding or
action the showing of economically motivated conduct or a-
mercenary motive;
(3) to confer jurisdiction to hear a criminal or civil
proceeding or action under its provisions on a judicial or
other forum of a State or local unit of government;
(4) to permit the showing of an enterprise by no more
than a showing of a pattern of racketeering or fraudulent
, activity, or both;
(5) to require a showing that each person named as
a defendant in a criminal or civil proceeding or action
commit, or agree to commit, personally the minimum mum-
ber of acts required to constitute a pattern; or
(6) to permit a showing of criminal responsibility or
civil liability without a showing of a state of mind other
than that required for the offenses included in the pattern
of racketeering or fraudulent activity, or both.
| SEC. 8. CONFORMING AMENDMENTS.
(a) The analysis of chapter 96 of title 18, United States
Code, is amended by striking out the item for section 1962 and
| inserting in lieu thereof the following:
(b) Section 1962(d) of title 18, United States Code, is
amended by striking out “subsections” and inserting in lieu
thereof “subsection”.
I il
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.