Opposition Brief — Yellow Bus Lines, Inc. v. Drivers, Chauffeurs & Helpers Local Union 639
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JAN 2 1991
No. 90-872
IN THE
SUPREME COURT OF THE UNITED STATES
OCTOBER TERM, 1990
YELLOW BUS LINES, INC.,
Petitioner,
Vv.
DRIVERS, CHAUFFEURS AND HELPERS LOCAL
UNION NO. 639 a/w INTERNATIONAL
BROTHERHOOD OF TEAMSTERS, CHAUFFEURS,
WAREHOUSEMEN AND HELPERS OF AMERICA,
AFL-CIO, AND JAMES F. WOODWARD,
Respondents.
ON PETITION FOR A WRIT OF CERTIORARI TO THE
UNITED STATES COURT OF APPEALS
FOR THE DISTRICT OF COLUMBIA CIRCUIT
RESPONDENTS’ BRIEF IN OPPOSITION
HUGH J. BEINS JOHN R. MOONEY
Counsel of Record
Beins, Axelrod, Osborne & Mooney, P.C.
2033 K Street, N.W.
Suite 300
Washington, D.C. 20006-1002
(202) 429-1900
Attorneys for Respondents
QUESTIONS PRESENTED
1. Whether RICO Section 1962(c) requires that
the person engaging in the pattern of racketeering be
distinct from the requisite RICO enterprise.
2. Whether a labor organization’s lawful
recognitional strike constitutes participation in the conduct
of the affairs of the employer as an enterprise within the
meaning of the federal RICO statute.
> Whether the absence of a sufficient case or
controversy precludes the issuance of an advisory opinion
concerning the scope of a pattern of racketeering.
PARTIES BELOW AND AFFILIATES OF
RESPONDENT
Pursuant to Rule 29.1, Respondent Local 639 states
that it is affiliated with the International Brotherhood of
Teamsters, Chauffeurs, Warehousemen, and Helpers of
America, AFL-CIO.
il
TABLE OF CONTENTS
Page
QUESTIONS PRESEINNIED ... ccc ec cet e eae
PARTIES BELOW AND AFFILIATES OF
ear ane eae aera eee iil
py Pe er eee ee ee vil
Tees Oe POE 6 9 os 66 eee ee XI
OPINIONS BELGW ng cette ee wastds 3
STATUTORY PROVISIONS INVOLVED ....... 3
STATEMENT OF THE CASE ......0008%00. 4
A The Organizing Effort ..........ese008. 4
B. Wie Cs gk on ee ee ee a eee 5
REASONS FOR DENYING THE WRIT ........ 13
SUMMARY OF ARGUMENT .............. 13
pe 8: rer re aw ee en er 1s
I. THE REQUIRED DISTINCTION
BETWEEN A CHARGED PERSON AND
AN ENTERPRISE IS EMBODIED IIN
RICO SECTION 1962(c) .......... 15
Il. A LABOR ORGANIZATION’S LAWFUL
RECOGNITIONAL STRIKE DOES NOT
CONSTITUTE PARTICIPATION IN THE
AFFAIRS OF THE EMPLOYER AS AN
ENTERPRISE WITHIN THE MEANING
OF THE FEDERAL RICO STATUTE
III. THE ABSENCE OF A SUFFICIENT CASE
OR CONTROVERSY PRECLUDES AN
ADVISORY OPINION ON THE PATTERN
a Pree P ee ee eee re ee ee
CONCLUSION
+6. 2" £584 - 8. SO. £28: Bie 6s. eo Se Ye eS ee ue
v1
18
TABLE OF CASES
Agency Holding Corp. v. Malley-Duff
Assoc., 483 U.S. 143 (1987)
Alexander Grant & Co. v. Tiffany
Industries, Inc., 742 F.2d 408 (8th
Cir.), cert. denied, 469 U.S. 1205 (1984)
American Ship Building Co. v. NLRB,
380 U.S. 300 (1965)
Atkinson v. Anadarko Bank & Trust Co.,
808 F.2d 438 (Sth Cir.), cert. denied,
483 U.S. 1032 (1987)
B.F. Hirsch v. Enright Refining Co.,
751 F.2d 628 (3d Cir. 1984)
Bennett v. Berg, 685 F.2d 1053 (8th Cir.
1982), modified, 710 F.2d 1361 (en banc),
cert. denied sub nom. Prudential Ins. Co.
v. Bennett, 464 U.S. 1008 (1983)
Bennett v. United States Trust Co. of New
York, 770 F.2d 308 (2d Cir. 1985), cert.
denied, 474 U.S. 1058 (1986)
Bishop vy. Corbitt Marine Ways, Inc.,
802 F.2d 122 (Sth 4 ir. 1986)
Vil
i oe oo a a er
eS Oe Se ee: Oe Oe
Page
Brandenburg v. Seidel, 859 F.2d 1179
ee ee ee a ee 23
Crandon v. United States, 494 U.S. __,
gm Ge )|6 6h eee eee ee eee ee 21
Deakins v. Monaghan, 484 U.S. 193 (1988) ....... 23
Entre Computer Centers, Inc. v. FMG of
Kansas City, Inc., 819 F.2d 1279
Se ee a ce a ee eh ee 15
FCC v. American Broadcasting, Inc.,
eee Be Be Tt ee 21
Garkade v. Great Divide Mining & Milling
Corp. , 831 F.2d 212 (10th Cir. 1987)........... 15
General Building Contractors v.
Pennsylvania, 458 U.S. 375 (1982) ............ 19
Golden State Transit Corp. v. Los
Angeles, 475 U.S. G06 (1966) ............... 19
H.J. Inc. v. Northwestern Bell,
492 U.S. __, 106 L.Ed.2d 195 (1989) ....... 10, 21
Haroco v. American National Bank & Trust
Co., 747 F.2d 384 (7th Cir. 1984), aff'd
on other grounds, 473 U.S. 606 (1985) ....... 16, 23
Hughey v. United States, 495 U.S. ___,
ey Oe ee ee Cs es 6k ee ee 21
Vill
Tannelli v. United States, 420 U.S. 770 (1975) ..... 17
Iron Arrow Honor Society v. Heckler,
Ee CE nd oc aoe Soule e « 6 4 0-0 2 ee 24
Lewis v. Bank Corp., 494 U.S. _,
eR ere ee ee eee 24
Machinists v. Wisconsin Employment Relations
Commission, 427 U.S. 132 (1976) ............. 19
NLRB v. Brown, 380 U.S. 278 (1965) .......... 19
NLRB y. Insurance Agents, 361 U.S. 477 (1960) .... 19
Official Publication, Inc. v. Kable News
Ce., Get F.20 GOs G8 Ch. TSR) 2 ww ec ees 15
Oil Workers v. Missouri, 361 U.S. 363 (1960) ..... 24
Old Time Enterprises v. Int’l Coffee
Corp. , 862 F.2d 1213 Gth Cir. 1989)........... 15
Overnite Transportation Co. v. Local 705,
904 F.2d 391 (7th Cir. 1990) ........... 18, 20, 22
Paradise Hotel Corp. v. Bank of Nova
Scotia, G42 F.2d 47 (3d Cir. 19968) .......222-. 15
Russello v. United States, 464 U.S. 16 (1983) ...... 17
Saporito v. Combustion Engineering, Inc.,
843 F.2d 666 (3d Cir. 1988), vacated on
other grounds, 489 U.S. 1049 (1989) ......2022... 15
Schofield v. First Commodity Corp. of
Boston, 793 F.2d 28 (1st Cir. 1986).......... 15-17
Schreiber Distributing v. Serv-Well Furn-
iture Co., 806 F.2d 1393 (9th Cir. 1986)...... 15, 16
Sedima §.P.R.L. v. Imrex Co.,
ee ee ee ee 7, 23
Shearin v. E.F. Hutton Group, Inc.,
fe 8) oi fs A rere 23
Simon v. Eastern Kentucky Welfare Rights
a a eee 24
Teamsters v. Morton, 377 U.S. 252 (1964) ....... 20
Town of West Hartford v. Operation
po ee Lee fe A. 23
United Energy Owners Committee, Inc. v.
United States Energy Management Systems,
Inc., 837 F.2d 356 (9th Cir. 1988) ......... 15, 16
United States v. Benny, 786 F.2d 1410
(9th Cir. 1986), cert. denied,
I tas oo aa e uiw.6 wore ee 15
United States v. Cauble, 706 F.2d 1322
(Sth Cir. 1983), cert. denied,
ee a1, Z2
United States v. Computer Sciences Corp..,
689 F.2d 1181 (4th Cir. 1982), cert.
a a rr 16
United States v. Hartley, 678 F.2d 961
(lith Cir. 1982), cert. denied,
og Re 17, 18
United States v. Scotto, 641 F.2d 47
(2d Cir. 1980), cert. denied,
ee Re ee re ee eee 21, 22
United States v. Turkette, 452 U.S. 576 (1981) ..... 17
Whitmore v. Arkansas, 495 U.S. __,
oop & Bet ae ae er erar er 23
TABLE OF STATUTES
National Labor Relations Act, as amended, 29 U.S.C.
eS eevee re eee eee Cee eee ee Sf
Racketeer Influenced and Corrupt Organizations Act,
ee as er ee a nas oo ss se ee os passim
XI
ee nS a nee
-
No. 90-872
IN THE
SUPREME COURT OF THE UNITED STATES
OCTOBER TERM, 1990
YELLOW BUS LINES, INC.,
Petitioner,
v.
DRIVERS, CHAUFFEURS AND HELPERS LOCAL
UNION NO. 639 a/w INTERNATIONAL
BROTHERHOOD OF TEAMSTERS, CHAUFFEURS,
WAREHOUSEMEN AND HELPERS OF AMERICA,
AFL-CIO, AND JAMES F. WOODWARD,
Respondents.
ON PETITION FOR A WRIT OF CERTIORARI TO THE
UNITED STATES COURT OF APPEALS
FOR THE DISTRICT OF COLUMBIA CIRCUIT
RESPONDENTS’ BRIEF IN OPPOSITION
OPINIONS BELOW
In addition to the Opinions referred to in the
petition, the first decision of the court of appeals is
reported at 839 F.2d 782 and is reproduced in the
Appendix hereto at App. 1a-28a.
STATUTORY PROVISIONS INVOLVED
The Racketeer Influenced and Corrupt
Organizations provisions of the United States Code
("RICO"), 18 U.S.C. §§ 1961 et seg., provide in relevant
part:
Section 1961(5): “pattern of racketeering activity”
requires at least two acts of racketeering activity,
one of which occurred after the effective date of
this chapter [enacted Oct. 15, 1970] and the last of
which occurred within ten years (excluding any
period of imprisonment) after the commission of a
prior act of racketeering activity; ...
Section 1962(c): It shall be unlawful for any person
employed by or associated with any enterprise
engaged in, or the activities of which affect,
interstate or foreign commerce, to conduct or
participate, directly or indirectly, in the conduct of
such enterprise’s affairs through a pattern of
racketeering activity or collection of unlawful debt.
Section 1964(c): Any person injured in his business
or property by reason of a violation of section 1962
of this chapter may sue therefor in any appropriate
United States district court and shall recover
threefold the damages he sustains and the cost of
the suit, including a reasonable attorney’s fee.
STATEMENT OF THE CASE
A. The Organizing Effort
Yellow Bus Lines, Inc. ("Yellow Bus” or
"Company") was created in 1979 and, due to
undercapitalization, experienced financial difficulties from
its creation through its demise in 1984. Thé Company was
always delinquent in paying taxes, operated with antiquated
and dilapidated equipment, and paid its employees low
wages and no benefits. In response to their substandard
conditions, the employees of Yellow Bus contacted the
Union in October 1981 to discuss organizing for the
purpose of collectively bargaining. (App. 48, 61-62,
105-06, 110-111).
After a majority of the employees (eight of twelve)
designated Local 639 as their collective bargaining agent,
organizer James Woodward made a demand for
recognition. The Company refused to recognize or bargain
with the Union. Upon learning of the Company’s refusal,
the employees met and decided to strike in support of their
demand. A four day strike commenced on November 9,
1981. (App. 48, 61-62).
Although the eight strikers comprised a majority of
the Company’s drivers, Yellow Bus was able to operate
throughout the four day strike. According to Yellow Bus,
the strike was marred by threats and vandalism against
Company property. (App. 49, 105-06). The property
damage occurring during this time totalled approximately
$1,800. The Company claimed that Woodward had
threatened to burn Company property on the first morning
of the strike. Owner Triggs then contacted a police officer
and procured Woodward’s arrest. (App. 49, 106).
Soon after the strike, the Union filed a
representation petition with the National Labor Relations
Board ("NLRB"” or "Board"). An election was held in
December 1981 but was set aside by the Board because of
the Company’s misconduct. The Board also issued a
Complaint against Yellow Bus charging multiple violations
of Section 8(a)(1), (3) and (5) of the National Labor
Relations Act ("NLRA” or "Act"). 29 U.S.C. §
158(a)(1), (3) and (5). In settlement of the Complaint,
Yellow Bus agreed to a second election and reinstated with
full back pay an employee it had accused of vandalism
during the strike. The Union prevailed in the December
1982 election and was certified by the Board. Despite
months of bargaining, the parties never reached agreement
on a contract.
B. The Litigation
The federai court litigation began almost one year
after the strike. Initially, Woodward filed an action for
false arrest against the Company and its owners, as well as
the District of Columbia. His suit was based on the
discovery that police Officer Michael DiPalermo, who was
responsible for his arrest, was engaging in an illicit affair
with Company owner Triggs at the time of his arrest.
Yellow Bus and its owners counterclaimed for malicious
destruction of property, intentional interference with
contract, intentional infliction of emotional harm and abuse
of process. (App. 49-50, 106-07).
In April 1983 Yellow Bus and its owners initiated
their action against the Union and Woodward. In addition
to the common law tort claims, they charged Local 639
and Woodward with violations of the secondary boycott
prohibition contained in the NLRA, 29 U.S.C. §§158(b)(4)
and 187, and with violations of the Racketeer Influenced
and Corrupt Organizations Act ("RICO"), 18 U.S.C.
§ 1962(c) and (d). In essence, they claimed that the Union
was totally responsible for their business failures, including
their failure to remit payroll taxes to the Internal Revenue
Service. The Union was also allegedly responsible for
McKinnon’s departure from Yellow Bus.’ Inasmuch as
McKinnon was the only skilled mechanic Yellow Bus
could afford to retain, his abrupt departure caused a rapid
deterioration of the ancient equipment. (App. 62).
In June 1984 the district court dismissed the
racketeering and secondary boycott charges against Local
639. (App. 50, 106-07). The RICO claim was dismissed
on the grounds that Local 639 could not be both the
requisite enterprise and a culpable defendant under RICO
Section 1962(c). (App. 69). In October 1984, the
‘In 1982 McKinnon suffered a psychotic episode and experienced
delusions that he was the second coming of Christ. He repeatedly
threaiened the other owners with physical harm and attempted to
murder co-owner Westgate, his sister. After Westgate and Triggs
refused to buy out his one-third interest in Yellow Bus, he vandalized
one-third of the Company's buses. (App. 111).
6
racketeering charges against Woodward were dismissed
because Yellow Bus failed to allege a racketeering injury.’
By that time Woodward had received some $3,000 in
settlement of the false arrest suit with the District of
Columbia. He then dismissed his action. (App. 64).
Despite dismissal of all federal claims, the district
court elected to retain jurisdiction of the case. (App. 107).
The trial on the remaining charges began in February
1985. After three weeks of trial, the jury returned a
verdict in favor of Yellow Bus on three counts with
damages totalling $133,200. Yellow Bus was awarded
$1,280 against Woodward and $1,920 against the Union
for malicious destruction of property, and $40,000 against
Woodward and $60,000 against the Union for intentional
interference with contractual relations. The jury also
awarded Yellow Bus and its owners $15,000 from both
Woodward and the Union for abuse of process.
(App. 50-51).
In January 1986, the district court overturned all of
the jury’s findings except for the verdict concerning
Woodward’s liability for strike-related vandalism.
(App. 103). It then entered judgment against Woodward
for approximately $1,200.
In reviewing the factual background surrounding the
creation of Yellow Bus and the history of the litigation, the
trial court analyzed Yellow Bus’ claim that its business
demise was the responsibility of the Union and Woodward.
The district court issued its ruling dismissing the RICO claim
against Woodward prior to this Court’s decision in Sedima S.P.R.L. v.
Imrex Co., 473 U.S. 479 (1985).
In the first instance, the district court cited the undisputed
record evidence that Yellow Bus’ difficulties with the
Jewish Day School, its primary if not exclusive customer,
occurred one year after the strike. (App. 109). The court
then found that there were two reasons for the loss of the
contract: (1) the company’s failure to properly perform
under the contract and (2) its tax-related problems with the
Internal Revenue Service. “Neither of these arose from
[the Union or Woodward’s} activities." (App. 110). As to
the allegations concerning employees’ post-strike activities,
the court relied on the owners’ admissions in concluding
that there was no evidence that the Union or Woodward
bore any “responsibility for any of the drivers’
absenteeism, tardiness or maintenance problems."
(App. 111). The district court concluded that there was
"no proof, clear or otherwise, of a causal connection
between defendants’ alleged conduct” and the financial
demise of Yellow Bus. (App. 110).
The appellate panel substantially upheld the trial
court’s factual findings. In particular, it agreed with the
lower court that there was no proof of any connection
between the Union and Woodward’s activities and the loss
of Yellow Bus’ contract with the Jewish Day School.
(Resp. App. 9a-10a).? The panel noted that “the two
factors precipitating the cancellation - Yellow Bus’ tax
liabilities and inadequate service - had nothing to do with
[Defendants’] activities." (App. 9a). In upholding the
lower court’s decision to overturn the verdict on the issue
*Yellow Bus did not append the original court of appeals decision
to its petition. That ruling is appended hereto, and references to it are
indicated as “Resp. App. _.”
of interference with contracts,‘ the court of appeals stated
that:
Yellow Bus’ difficulties with the IRS
predated the Local’s involvement with the
company. Abundant testimony linked the
company’s poor performance to lax
employee discipline and the rapid
deterioration of the company’s stock of
antiquated buses after the departure of its
only skilled mechanic in the fall of 1982.
A number of Yellow Bus’ own witnesses
admitted that these difficulties were not
traceable to appellees’ efforts or actions.
(Resp. App. 9a-10a).
In addition to issues relating to the entry of
judgment notwithstanding the verdict, the panel reviewed
the dismissal of the racketeering claims. Although the
court of appeals agreed with the district court that the
Union could not be both the enterprise and a defendant, it
stated that Yellow Bus could properly designate itself as
the affected enterprise. (Resp. App. 13a-14a, 18a).
Moreover, the court ruled that solely as a result of the
lawful recognitional strike, the Union and Woodward
became sufficiently related to Yellow Bus’ business for it
“The appellate court also upheld the district court's ruling
overturning the verdict on the abuse of process claim. (Resp. App.
10a-lla). In addition, it reversed the tral judge’s decision to overturn
the claim against the Union concerning strike-related vandalism,
holding that, under settled agency principles, the Union is liable for
Woodward’s activities. (Resp. App. Sa-9a). The Union did not
contest this reversal.
to claim that they were participating in its affairs within
the meaning of Section 1962(c). (Resp. App. 24a-25a).
Finally, the panel held that the four alleged
incidents of threats or vandalism occurring during the
strike constituted a pattern of racketeering activity within
the statutory definition contained in Section 1961(5).
(Resp. App. 12a-13a, 25a).
The Union and Woodward subsequently filed a
petition for a writ of certiorari with this Court. Yellow
Bus and its owners also sought review of the panel’s
decision upholding the award of judgment notwithstanding
the verdict and the holding that there must be a distinction
between the charged defendant and the named enterprise
under Section 1962(c). The Court denied Yellow Bus’
petition on October 31, 1988, 488 U.S. 926 (1988), but
subsequently granted the Union’s and Woodward’s
petition, vacated the panel decision and remanded the case
to the appellate court with the instruction that the decision
be reconsidered in light of the Court’s ruling in H.J. Inc.
v. Northwestern Bell, 492 U.S. __, 106 L.Ed.2d 195
(1989). Drivers, Chauffeurs and Helpers Local Union No.
639 v. Yellow Bus Lines, Inc., 492 U.S. __, 106 L.Ed.2d
583 (1989).°
On remand, the panel essentially reissued its initial
decision and stated that its finding that four predicate acts
alleged to have occurred during the four day strike
*Justice Stevens would have denied certiorari.
10
constituted a pattern of racketeering.* (App. 96-98). The
entire court of appeals thereafter granted the Union’s and
Woodward’s petition for rehearing en banc.
In its unanimous decision reversing the panel on the
issue of participation under Section 1962(c), the court of
appeals affirmed all other portions of the panel decision.
(App. 8, 11, 13). Judge Sentelle, writing for the court,
stated that Section 1962(c) applies "when a defendant,
through a pattern of racketeering activity, exercises
significant control over or within an enterprise,
participating not merely in the enterprise’s affairs, but in
the conduct of the enterprise’s affairs." (App. 26)
(emphasis in original). Finding its decision to be faithful
to the plain language of the statute as well as the statute’s
goals, the court ruled that, under the facts of this case,
Local 639 could not participate in the conduct of Yellow
Bus’ affairs by engaging in a lawful recognitional strike.
(App. 35). Consequently, the court affirmed the district
court’s original dismissal of the Section 1962(c) claim
against Local 639. Even Judge Mikva, the author of both
panel decisions, concurred in the reversal. Begrudgingly
he concurred "in the judgment of the court because it
resolves this dispute as it ought to be resolved."
(App. 43).
*Judge Edwards concurred in the panel decision but admitted to
having “nagging doubts” ahout the holding that the Union’s and
Woodward's organizational activities were “affairs” of Yellow Bus.
(App. 101). Labeling such a result "strangely at odds with certain
fundamental precepts of labor law and collective bargaining,” he
concurred “albeit with pause.” (App. 101-02).
1]
eee
KRLASONS FOR DENYING THE WRIT
SUMMARY OF ARGUMENT
¥ Petitioners’ initial basis for seeking review,
the determination that RICO Section 1962(c)
requires that the culpable person be separate from
the requisite enterprise, is an insufficient basis for
granting the petition inasmuch as the court of
appeal’s decision is consistent with the
overwhelming weight of authority.
r Similarly, the requested review of the
unanimous en banc ruling that, by engaging in a
lawful recognitional strike, the Union did not
participate in the conduct of the employer
enterprise’s affairs, 1s also an inappropriate basis
for granting the writ. There is not a significant
split of authority that this Court must reconcile, and
the court of appeal’s decision is faithful to the plain
language of the statute as well as consistent with the
rulings of other courts. Moreover, despite the
varying approaches to this issue, the same result
would obtain regardless of the approach employed.
3. Finally, the Court should not address the
question concerning the scope of a pattern of
racketeering in this case because such an
examination would not affect the rights of the
litigants and could not provide petitioner with
additional relief. Consequently, it would constitute
an advisory opinion.
a
ARGUMENT
5 THE REQUIRED DISTINCTION
BETWEEN A CHARGED PERSON AND
AN ENTERPRISE IS EMBODIED IN
RICO SECTION 1962(c)
As conceded by petitioner, an overwhelming
majority of the lower courts have now construed RICO
Section 1962(c) to require that the "person" who engages
in the pattern of racketeering activity be separate and
distinct from the requisite "enterprise." Old Time
Enterprises v. Int’l Coffee Corp., 862 F.2d 1213, 1217
(Sth Cir. 1989); Official Publication, Inc. v. Kable News
Co., 884 F.2d 664, 668 (2d Cir. 1989); United Energy
Owners Committee, Inc. v. United States Energy
Management Systems, Inc., 837 F.2d 356, 364 (9th Cir.
1988); Saporito v. Combustion Engineering, Inc. , 843
F.2d 666, 678 (3d Cir. 1988), vacated on other grounds,
489 U.S. 1049 (1989); Paradise Hotel Corp. v. Bank of
Nova Scotia, 842 F.2d 47, 53 (3d Cir. 1988); Entre
Computer Centers, Inc. v. FMG of Kansas City, Inc. , 819
F.2d 1279, 1287 (4th Cir. 1987); Atkinson v. Anadarko
Bank & Trust Co., 808 F.2d 438, 440-41 (Sth Cir.), cert.
denied, 483 U.S. 1032 (1987); Garbade v. Great Divide
Mining & Milling Corp., 831 F.2d 212 (10th Cir. 1987);
Bishop v. Corbitt Marine Ways, Inc., 802 F.2d 122, 122-
123 (Sth Cir. 1986); Schreiber Distributing v. Serv-Well
Furniture Co., 806 F.2d 1393, 1396-98 (9th Cir. 1986);
United States v. Benny, 786 F.2d 1410, 1415-16 (9th Cir.
1986), cert. denied, 479 U.S. 1017 (1987); Schofield v.
First Commodity Corp. of Boston, 793 F.2d 28, 29-30 (ist
Cir. 1986); B.F. Hirsch v. Enright Refining Co., 751 F.2d
15
628, 633-34 (3d Cir. 1984); Bennett v. United States Trust
Co. of New York, 770 F.2d 308, 315 (2d Cir. 1985), cert.
denied, 474 U.S. 1058 (1986); Haroco v. American
National Bank & Trust Co., 747 F.2d 384, 401-02 (7th
Cir. 1984), aff'd on other grounds, 473 U.S. 606 (1985);
United States v. Computer Sciences Corp., 689 F.2d 1181,
1190 (4th Cir. 1982), cert. denied, 459 U.S. 1105 (1983);
Bennett v. Berg, 685 F.2d 1053, 1061-62 (8th Cir. 1982),
modified, 710 F.2d 1361 (en banc), cert. denied sub nom.
Prudential Ins. Co. v. Bennett, 464 U.S. 1008 (1983);
Alexander Grant & Co. v. Tiffany Industries, Inc..,
742 F.2d 408, 411, n.6 (8th Cir.), cert. denied, 469 U.S.
1205 (1984).
The position adopted by these courts is consistent
with both the plain language of the statute and the
legislative intent underlying the enactment of RICO.
Section 1962(c) prohibits any person employed by or
associated with an enterprise from conducting that
enterprise through a pattern of racketeering activity. The
provision clearly requires a relationship between a
“person” and an “enterprise” in order to state a claim.
Only the person employed by or associated with the
enterprise, not the enterprise itself, may violate Section
1962(c).’ "The enterprise is mentioned in the section only
as the instrument of the person doing the racketeering, and
’Conversely, Section 1962(a) contains no such limitation and,
accordingly, the courts have held that the defendant person and the
enterprise can be the same for purposes of Section 1962(a). United
Energy Owners Committee, Inc. v. United States Energy Management
Systems, Inc., 837 F.2d at 364; Schreiber Distributing Co. v. Serv-
Well Furniture Co. , 806 F.2d at 1396-98; Schofield v. First Commodity
Corp. , 793 F.2d at 31-32.
16
there is no suggestion that the enterprise also may be liable
..." Schofield v. First Commodity Corp., 793 F.2d at 30.
This position is consistent with the legislative intent
underlying the enactment of RICO. As this Court has
noted, the legislative history of RICO is replete with
references demonstrating that the primary purpose of RICO
was to thwart the infiltration of legitimate business.
United States v. Turkette, 452 U.S. 576, 591 (1981). See
also, Russello v. United States, 464 U.S. 16, 28 (1983)
(Congress viewed the RICO statute in large part as a
response to organized crime’s infiltration of legitimate
enterprises); /annelli v. United States, 420 U.S. 770, 787
n.19 (1975) (Title IX seeks to prevent infiltration of
legitimate business). Consequently, "it is logical that
Congress would have designed Section 1962(c) so that it
reached the criminal but protected the victimized enterprise
from liability." Schofield v. First Commodity Corp. , 793
F.2d at 31; B.F. Hirsch v. Enright Refining Co., 751
F.2d at 633-34; Bennett v. United States Trust Co. of New
York, 770 F.2d at 315.
The only authority contrary to the decisions cited
above is the ruling of the Eleventh Circuit Court of
Appeals in United States v. Hartley, 678 F.2d 961 (11th
Cir. 1982), cert. denied, 459 U.S. 1170 (1983). Candidly,
petitioner acknowledges that this single decision constitutes
"a minority of one.” (Pet. at 13). In Hartley, the court
acknowledged that it was presented with a case of first
impression (/d. at 988), and agreed with the government’s
suggestion, and the defendant’s concession, that the
problem would never have occurred had the government
merely reframed the indictment in that case. Id. at 989
("Had the government elected to charge the defendants in
17
this manner, it would certainly have alleviated this lengthy
discussion.”).
Subsequent to Hartley, the courts have consistently
rejected its rationale and holding. Rather than evidencing
a split among the lower courts, it represents an
idiosyncratic view of the statute at a time when the case
law was in its infancy. Inasmuch as the courts below are
in almost total agreement on this issue, it does not warrant
this Court’s review. Consistent with its denial of
petitioner’s prior request for review of this issue, the
instant request should be denied. Yellow Bus v. Local 639,
488 U.S. 926 (1988).
II. A LABOR ORGANIZATION’S LAWFUL
RECOGNITIONAL STRIKE DOES NOT
CONSTITUTE PARTICIPATION IN THE
AFFAIRS OF THE EMPLOYER AS AN
ENTERPRISE WITHIN THE MEANING
OF THE FEDERAL RICO STATUTE
In its decision, the court of appeals correctly ruled
that, by engaging in a lawful four day recognitional strike,
the Union did not participate in the affairs of the employer
for purposes of asserting jurisdiction under RICO Section
1962(c). The only other circuit court to address this issue,
involving the intersection of federal labor law and RICO
Section 1962(c), has likewise ruled that a union’s strike
activity did not establish a Section 1962(c) violation where
the employer was the denominated enterprise. Overnite
Transportation Co. v. Local 705, 904 F.2d 391 (7th Cir.
1990). This conclusion, premised upon the plain language
of the statute, is also consistent with national labor policy.
18
The decision below evidences the court’s
comprehension of the basic premises underlying federal
labor law. In enacting the National Labor Relations Act,
Congress created a system of labor relations where labor
and management are, by definition, diverse and
antagonistic to one another. As noted by Justice, now
Chief Justice, Rehnquist in General Building Contractors
v. Pennsylvania, 458 U.S. 375 (1982):
The entire process of collective bargaining is
structured and regulated on the assumption
that "[t]he parties - even granting the
modification of views that may come from a
realization of economic interdependence -
still proceed from a contrary and to an
extent antagonistic viewpoints and concepts
of self-interest." NLRB v. Insurance Agents,
361 U.S. 477, 488 (1660).
Id. at 394.
Although labor and management legitimately pursue
their self interests, they must do so within "the elaborate
web” of federal regulation pertaining to labor relations.
(App. 30). Moreover, "[f]ederal labor law has been
crafted to strike a delicate balance between labor and
management interests." (App. 31).* Permitting an
*The primary purpose of the Wagner Act was to redress the
imbalance of economic power between labor and management.
American Ship Building Co. v. NLRB, 380 U.S. 300, 312 (1965).
Having created this economic equilibrium, federal labor law has
carefully preserved this precarious balance. /d. at 316-17; NLRB v.
Brown, 380 U.S. 278, 283-4 (1965); Golden State Transit Corp. v.
Los Angeles, 475 U.S. 608, 618-20 (1986); Machinists v. Wisconsin
19
employer to convert lawful, and pro‘ected, activity under
the federal labor law into participation in its affairs for
purposes of the federal criminal racketeering provision
would undermine and disrupt the integrity of, and be
antithetical to, the system created by Congress and
protected by this Court. By necessary extension, pursuant
to such a reading of RICO, an employer would participate
in a union’s affairs by simply exercising its rights under
the law, or by committing garden variety unfair labor
practices. The court of appeals’ ruling, as well as that of
the Seventh Circuit in Overnite Transport Co., rejects this
unwarranted inversion of the established tenets of federal
labor policy. (See App. 31.)
The decision below is also consistent with the plain
language of the statute. Section 1962(c) prohibits a
person, employed or associated with an enterprise, from
participating "in the conduct of such enterprise’s affairs
through a pattern of racketeering activity ...." (emphasis
supplied). Recognizing that the statute clearly requires
more than merely participating in an enterprise’s affairs,
the court ruled that in order to give meaning to the
"conduct" requirement, 1962(c) should apply when "a
defendant, through a pattern of racketeering activity,
exercises significant control over or within an enterprise,
participating not merely in the enterprise’s affairs, but in
the conduct of the enterprise’s affairs." (App. 26,
emphasis in original). The Eighth Circuit has also
recognized the plain language of the statute and reached a
Employment Relations Commission, 427 U.S. 132, 143-46 (1976);
Teamsters v. Morton, 377 U.S. 252, 258-9 (1964).
20
similar result.’ Bennett, 710 F.2d at 1364. Such
contention "is not only faithful to the language of the
Statute; it is the interpretation consistent with the statute’s
goals.” (App. 27). See also p. 14, supra.
In addition, although other courts have articulated
the inquiry differently ir cases not involving traditional
union activity, the same conclusion as that reached below
would obtain regardless of the characterization of the
appropriate standard. For example, contrary to the
decision of the panel, United States v. Scotto, 641 F.2d 47
(2d Cir. 1980), cert. denied, 452 U.S. 961 (1981) and
United States v. Cauble, 706 F.2d 1322 (Sth Cir. 1983),
cert. denied, 465 U.S. 1005 (1984) do not support the
conclusion that Yellow Bus could establish a violation of
Section 1962(c). (App. 87-89).
*Petitioner suggests that the ruling below is inconsistent with the
statute’s liberal construction provision. (Pet. at 21). Such clause,
however, cannot override the plain language of the statute. Crandon
v. United States, 494 U.S. __, 108 L.Ed.2d 132, 141 (1990)
("Because construction of a criminal statute must be guided by the
need for fair warning, it is rare that legislative history or statutory
policies will support a construction of a statute broader than that
clearly warranted by the text."). Moreover, to the extent that the
statutory language is deemed ambiguous, RICO, regardless of its civil
context, must be interpreted so that it provides “the degree of certainty
required for criminal laws." H.J. Inc., 106 L.Ed.2d at 218 (Scalia,
J., concurring, citing FCC v. American Broadcasting, Inc., 347 U.S.
284, 396 (1954)). See also Hughey v. United States, 495 U.S. ___,
109 L.Ed.2d 408, 419 (1990)(longstanding principles of lenity
“preclude our resolution of the ambiguity against [defendant] on the
basis of general declarations of policy in statute and legislative
history.”).
21
\°
In both Scotto and Cauble, the defendant possessed
a controlling position in the named enterprise. Cauble was
the main partner in the partnership enterprise, 706 F.2d at
1331, and Scotto was the president of the union named as
the enterprise, 641 F.2d at 51. Each defendant used his
position in, and control over, the enterprise to commit the
requisite predicate acts. Indeed, the fact that, in Scotto,
the named enterprise was the local union and not, as in this
case, the employer, clearly undermines its application
here. Moreover, the Seventh Circuit, in Overnite
Transport Co., expressly. relied upon the analysis set forth
in Cauble to reach its conclusion that the striking union did
not participate in the conduct of the affairs of the named
employer enterprise. 904 F.2d at 393-94. Consequently,
regardless of the analysis employed, the conclusion
reached by the court of appeals, that the Union did not
participate in the conduct of Yellow Bus’ affairs, is not
appropriate for review.
III. THE ABSENCE OF A SUFFICIENT CASE
OR CONTROVERSY PRECLUDES AN
ADVISORY OPINION ON THE PATTERN
ISSUE
Petitioner also presents the question of whether
alleged predicate acts relating to entities other than Yellow
Bus can be included in determining whether or not the
“pattern” requirement is met. This issue, however, is
superfluous to the result in this case because, although the
court of appeals excluded certain alleged activity from the
determination of a pattern, it concluded that the pattern
requirement had nonetheless been satisfied. Review of the
pattern determination by this Court would therefore not
22
affect the rights of the litigants or afford any additional
relief to Yellow Bus.
Regardiess of the inclusion of one or a thousand
additional predicate acts involving entities other than
Yellow Bus, plaintiff's recovery is limited by the plain
language of Section 1964(c) to the injuries it, and only it,
may have suffered by reason of the alleged racketeering
activity. Sedima, S.P.R.L. v. Imrex, 479 U.S. at 496 ("a
defendant who violates section 1962 is not liable for treble
damages to everyone he might have injured by other
conduct, nor is the defendant liable to those who have not
been injured.") quoting Haroco Inc., 474 F.2d at 398;
Agency Holding Corp. v. Malley-Duff Assoc, 483 U.S.
143, 151 (1987) (both RICO and antitrust law require that
a plaintiff show injury “in his business or property by
reason of” a violation of the statute). See also Town of
West Hartford v. Operation Rescue, 915 F.2d 92, 103 (2d
Cir. 1990); Shearin v. E.F. Hutton Group, Inc., 885 F.2d
1162, 1167-68 (3d Cir. 1989); Brandenburg v. Seidel, 859
F.2d 1179, 1187 (4th Cir. 1988).
This Court’s exercise of it authority under Article
III of the Constitution is limited by the existence of an
actual, ongoing case or controversy. Deakins v.
Monaghan, 484 U.S. 193, 199 (1988). Judicial power
exists only to protect against injury to the complaining
litigant, even though a ruling may be of collateral benefit
or theoretical significance to others. A petitioner may
invoke this Court’s jurisdiction only when it has suffered
some threatened or actual injury resulting from the ruling
at issue. Whitmore v. Arkansas, 495 U.S. ___, 109
L.Ed.2d 135, 145 (1990). Article III does not provide
courts with the power to "’decide questions that cannot
23
OE
affect the rights of litigants in the case before them’ and
confines them to resolving ’real and substantial
controvers[ies] admitting of specific relief through a decree
on conclusive character, as distinguished from an opinion
advising what the law would be upon a hypothetical state
of facts.°" Lewis v. Bank Corp., 494 U.S. __, 108
L.Ed.2d 400, 411 (1990) (citations omitted).
A complaining party must also demonstrate an
injury to himself that is likely to be redressed by a
favorable decision. Iron Arrow Honor Society v. Heckler,
464 U.S. 67, 70 (1983); Simon v. Eastern Kentucky
Welfare Rights Org., 426 U.S. 26, 38 (1976). Seeking a
decision from this Court that would not provide any relief
to the prevailing party ignores the Constitutional mandate
"to decide actual controversies by a judgment which can be
carried into effect, and not to give opinions upon moot
questions or abstract propositions, or to declare principles
of law which cannot affect the matter in issue ...." Oil
Workers v. Missouri, 361 U.S. 363, 367 (1960)(citation
omitted). Because it has already been determined that the
facts are sufficient to establish a pattern, petitioner requests
review of precisely such a "principle of law which cannot
affect the matter in issue." The Court should accordingly
deny the petition for certiorari on this question.
24
CONCLUSION
For the reasons stated above, the petition for a writ
of certiorari should be denied.
January, 1991
Respectfully submitted,
Hugh J. Beins
Counsel of Record
John R. Mooney
Beins, Axelrod, Osborne
& Mooney, P.C.
2033 K Street, N.W.
Suite 300
Washington, D.C. 20006
(202) 429-1900
Attorneys for Respondents
25
APPENDIX
’ |
la
APPENDIX
UNITED STATES COURT OF APPEALS
FOR THE DISTRICT OF COLUMBIA CIRCUIT
No. 86-5135
YELLOW BUS LINES, INC.,
Appellant
. -
DRIVERS, CHAUFFEURS & HELPERS
LOCAL UNION 639, et al.
No. 86-5136
JAMES F. WOODWARD
v.
MICHAEL DIPALERMO, et al.,
MARIA TRIGGS Secretary/Treasurer,
YELLOW BUS LINES, et al.,
Appellants
Appeals from the United States District Court
for the District of Columbia
(Civil Action Nos. 83-01232 and 82-03154)
2a
Argued September 15, 1987
Decided February 12, 1988
Thomas G. Corcoran, Jr. for appellant.
John R. Mooney, with whom Hugh J. Beins was on the
brief for appellees.
Before: WALD, Chief Judge, MIKVA and EDWARDS,
Circuit Judges.
Opinion for the Court filed by Circuit Judge MIKVA.
Concurring statement filed by Circuit Judge
EDWARDS.
MIKVA, Circuit Judge: This litigation arises from
events surrounding a four day strike by employees of Yellow
Bus Lines, Inc. for recognition by the company of a union
local, Drivers, Chauffers, and Helpers Local 639 ("Local
639" or “the Local"); as their collective bargaining
representative. Believing that the union had engaged in a
campaign of violence to sabotage the company and obtain
labor concessions, Yellow Bus and three of its officers
("Yellow Bus” or “appellants") filed claims and
counterclaims in these consolidated cases against the Local
and its business agent and trustee James Woodward, accusing
them of engaging in a “pattern of racketeering activity” in
violation of §§ 1962(c) and (d) of the Racketeer Influenced
and Corrupt Organizations Act (RICO), 18 U.S.C. §§ 1961,
et seq. (1982) and alleging violations of tort law.
3a
After the judge dismissed the RICO charges, the
remaining counts were tried before ajury. The jury awarded
damages against the Local and Woodward on three tort
claims. Yellow Bus appeals from the district court judge’s
partial grant of appellees’ motion for judgment
notwithstanding the verdict (INOV) setting aside each verdict
except that against Woodward for malicious destruction of
property. Appellants also challenge various pretrial orders,
including denial of leave to amend the RICO complaint and
dismissal of the RICO counts. Because we find that the
RICO dismissal and the denial of leave to amend were error,
we reverse and remand on that ground. For reasons set forth
below, we also vacate the judgment notwithstanding the
verdict against the Local on malicious destruction of
property. In all other respects, we affirm the judgment of
the district court.
I. BACKGROUND
In 1979, appellants Maria Triggs, Paula Westgate, and
her brother Peter McKinnon created Yellow Bus Lines, Inc.,
a Virginia corporation located and operated in the District of
Columbia. In October 1981, a number of Yellow bus
employees met with Local 639 business director Woodward
for the purpose of organizing the company employees. Ajiter
Yellow Bus refused to recognize and bargain with the union,
a strike was called on November 9, 1981.
According to Yellow Bus, the strike was marred by
threats and violence against company property by Woodward
and other strikers. As a result of one incident in which
Woodward allegedly threatened to "burn the company
buses", Ms. Triggs called the police. Woodward was briefly
4a
arrested and charged in a three-count felony indictment for
threatening to damage the buses.
Proceedings in the court below were initiated one year
after the strike, when Woodward filed suit on November 4,
1982 against District of Columbia police officer Michael
DiPalermo, the city, and three officers of Yellow Bus
alleging abuse of process and false arrest. The defendants in
that action, Woodward v. DiPalmero, et al., Civ. No.
82-3.154, then counterclaimed, alleging malicious destruction
of property and intentional interference with contract as well
as intentional infliction of emotional distress. They also
charged Woodward and the Local with abuse of process
claiming that Woodward filed his false arrest claim to
discover information essential to his criminal defense and to
induce Yellow Bus to agree to the Local’s proposed contract
terms. In April 1983, Yellow Bus filed additional charges
against Woodward and the Local alleging violations of
RICO, 18 U.S.C. § 1962(c) and (d). By October 1984, the
district court had dismissed all the federal claims, but elected
to retain jurisdiction over the tort claims. In May 1984,
Woodward’s false arrest claim was dismissed after
Woodward reached a settlement with the District of
Columbia. The trial on the remaining counts began in
February 1985, and the jury returned a verdict in favor of
appellants on three counts, awarding a total of $133,200.
Yellow Bus was awarded $1,280 against Woodward and
$1,920 against Local 639 for malicious destruction of
property, and $40,000 against Woodward and $60,000
against the Local for intentional interference with contractual
relations. The jury also awarded the company and its three
officers $15,000 against Woodward and $15,000 against the
Local for abuse of process. In March 1985, the court
entered judgment for these amounts. In January 1986, the
Sa
court partially granted appellees’ JNOV motion and set aside
all except the $1,280 judgment against Woodward for
malicious destruction of property.
Il. JNOV ON MALICIOUS DESTRUCTION
OF PROPERTY
In support of its claim of malicious destruction, Yellow
Bus introduced testimony of damage to vehicles observed by
employees at the strike site. Although no employee saw
Woodward participate directly in vandalism, the court found
that “circumstantial” evidence linking Woodward to property
damage, coupled with threats made by Woodward and other
strikers, was sufficient to support the jury determination that
Woodward was liable for the property damage. The court
decided, however, that the evidence against the Local was
insufficient to support liability under § 6 of the
Norris-LaGuardia Act, which requires clear proof of union
responsibility for the acts of its agents.
Section 6 of the Norris-LaGuardia Act states that
No officer or member of any association or
organization, and no association or organization
participating or interested in a labor dispute shall be held
responsible or liable in any court of the United States for
the unlawful acts of individual officers, members, or
agents, except upon clear proof of actual participation
in, or actual authorization of, such acts, or of
ratification of such acts after actual knowledge thereof.
29 U.S.C. § 106 (1982). Section 6 applies in "federal court
adjudications of state tort claims arising out of labor
disputes.” United Mine Workers v. Gibbs, 383 U.S. 715,
6a
737 (1965). See also Ramsey v. United Mine Workers, 401
U.S. 302, 310 (1970). In order to support a grant of the
motion for JNOV, the trial judge must conclude that a
reasonable jury could not have found "clear proof” of the
union’s participation or authorization. See Anderson v.
Liberty Lobby, Inc., 106 S. Ct. 2505, 2512-13 (1986). After
reviewing the record and taking all justifiable inferences in
favor of appellants, we conclude that a reasonable jury could
have found"clear proof” of union ratification or authorization
of Woodward’s actions, and that the damage award against
the Local on this count should not have been set aside.
In evaluating whether Local 639 "ratified" the
destructive acts ascribed to Woodward “after actual
knowledge” of their perpetration, the district court failed to
take into account a crucial piece of evidence concerning the
Local’s awareness of the events which transpired during the
Yellow Bus strike. At trial, counsel for Yellow Bus
introduced without objection a letter sent by Yellow Bus and
received by Mr. George, President of Teamsters Local 639,
on November 10, 1981. This letter described with
particularity “numerous incidents of threats, violence,
property damage, and verbal abuse” by Woodward and other
strike participants. Following this communication, the record
shows that business continued as usual at the Yellow Bus
strike and Mr. Woodward remained on-site as the Local’s
man in charge. There is nothing in the record to indicate
that the union took any action to investigate the allegations or
to curb any excesses of Woodward or the strikers.
In the circumstances of this case, the combination of the
Local’s notification of events early in the strike, coupled with
the complete failure to act on that knowledge, fulfills the
requirement of “proof, either that the union approved the
Ta
violence which occurred, or that it participated actively or by
knowing tolerance in further acts which were in themselves
actionable under state law." Gibbs, 383 U.S. at 739. A
union may "ratify" or “authorize” without going so far as to
openly encourage or embrace the tactics of its official
representative. Section 6 does not impose a requirement of
such formal authorization by the union. See James R. Snyder
Co. v. Edward Rose & Sons, Inc., 546 F.2d 206 (6th Cir.
1976). Rather, “proof of authorization or ratification can be
based upon circumstantial evidence, but that proof, although
circumstantial, must nevertheless be clear." Jd. at 209.
From the Local’s apparent lack of concern with the violence
brought to its attention, the jury plausibly could conclude that
the Local "knowingly tolerated” this state of affairs. No
more is required to support a finding of ratification. In
short, there was clear proof that the other officials at the
Local ratified by knowing tolerance those acts of violence in
which Woodward was shown to have participated.
Moreover, specific proof of "knowing tolerance” by
other union officials was not required in order to hold the
Local directly responsible for Woodward’s actions because
Woodward was clothed with plenary authority to direct the
strike on behalf of the union. Section 6 was meant to
"change[] the substantive law of agency,” Brotherhood of
Carpenters v. United States, 330 U.S. 395, 403 (1946), by
nullifying the doctrine of respondeat superior in those cases
where a union member or official has not been charged with
directing union activities. That provision does not serve to
absolve a union of ordinary responsibility for actions
undertaken by officers exercising authoritative responsibility.
For example, in Charles D. Bonanno Linen Service, Inc. v.
McCarthy, 708 F.2d 1, 11 (1st Cir.), cert. denied, 464 U.S.
936 (1983), evidence that a union representative “with the
8a
power and authority” to orchestrate a strike and discipline
participants took no action to curb strike violence was held
sufficient to establish liability of a union local. As the
Bonanno court observed, "the Supreme Court has held that
the union need do no more than authorize an agent’s general
activity." Id. at 12 (citing Brotherhood of Carpenters v.
United States, 330 U.S. at 410 ("The grant of authority to an
officer of a union to negotiate agreements with employers ...
may well be sufficient to make the union liable."))
As the union’s authorized representative, Woodward was
empowered to conduct the union’s business at Yellow Bus.
Since Woodward was the designated union presence on the
site authorized to run the strike, his acts can be considered
the union’s acts for which the union is responsible. See
United Mine Workers of America v. Meadow Creek Coal
Co., 263 F.2d 52, 63 (6th Cir.), cert. denied, 359 U.S. 1013
(1959) (high union official in charge of a strike and directly
involved in its unlawful activity “was high enough in the
hierarchy ... to render [the] organization liable for the
consequences of conduct of its members under his general
leadership"). See also Kayser-Roth Corp. v. Textile Workers
Union of America, 479 F.2d 524, 527-28 (6th Cir.), cert.
denied, 414 U.S. 976 (1973) (acts of high officials in
violation of state law deemed “participation” for purposes of
union liability under § 6).
In sum, "[i]f a union delegates to an agent unrestricted
authority going beyond the norms of union conduct, § 6 does
not immunize it from liability for his illegal acts. Similarly,
if it continues him in a previous position of high
responsibility after knowledge of his illegal activities, § 6
affords no shelter.” Harlem River Consumers Coop., Inc. v.
Associated Grocers of Harlem, Inc., 450 F.2d 271, 273-274
9a
(2d Cir. 1971) (citing Carpenters, 330 U.S. at 409-410).
The record supports that Local 639 both knowingly tolerated
Woodward’s acts and fully authorized Woodward to act. In
either case, the jury verdict against the union comports with
statutory requirements and should be upheld.
Ili. JNOV ON ABUSE OF PROCESS AND
INTENTIONAL INTERFERENCE WITH CONTRACT
The jury awarded a total of $100,000 against Woodward
and the Local for intentional interference with a contract
between Yellow Bus and the Charles Smith Jewish Day
School ("JDS"). The district court set aside this verdict,
finding that Yellow Bus had failed to offer proof, “clear or
otherwise", of causal connection between appellees’ alleged
conduct and the decision by JDS to terminate the contract.
See Tuxedo Contractors, Inc. v. Swindell-Dressler Co., 613
F.2d 1159, 1160 (D.C. Cir. 1979) (complainant must prove
"contract, knowledge of contract, intentional procurement of
its breach by defendant, and damages resulting from
breach"). We agree with the district court and uphold its
judgment notwithstanding the verdict.
First, Yellow Bus offered no evidence whatsoever of the
Local’s intent to procure a breach of this particular contract.
Additionally, Yellow Bus completely failed to establish any
link between the damage suffered during the strike and the
subsequent cancellation of the JDS contract over one year
later. The two factors precipitating the cancellation by JDS
- Yellow Bus’ tax liabilities and inadequate service - had
nothing to do with appellees’ activities. Yellow Bus’
difficulties with the IRS predated the Local’s involvement
with the company. Abundant testimony linked the
company’s poor performance to lax employee discipline and
10a
the rapid deterioration of the company’s stock of antiquated
buses after the departure of its only skilled mechanic in the
fall of 1982. A number of Yellow Bus’ own witnesses
admitted that these difficulties were not traceable to
appellees’ efforts or action. Since appellants failed to offer
the most elementary evidence of any causal connection
between the cancellation and the appellees’ malefaction, the
motion for a judgment notwithstanding the verdict was
appropriately granted.
Appellants’ objection to the grant of JNOV on abuse of
process also has no merit. To prevail on abuse of process,
a plaintiff must demonstrate that process is being used "to
compel the party affected by it to do some collateral thing
which he could not legally and regularly be compelled to
do." Hall v. Hollywood Credit Clothing Co., 147 A.2d 866,
868 (D.C. App. 1959). See also Jacobson v. Thrifty Paper
Boxes, Inc., 230 A.2d 710, 711 (D.C. App. 1967) (citing
1 Am. Jur. 2d Abuse of Process § 4 (1962)). Plaintiff must
demonstrate not only ulterior motive, but success in
achieving illegitimate ends with resulting injury. Morowitz
v. Marvel, 423 A.2d 196, 198 (D.C. App. 1980) ("[I]n
addition to ulterior motive, one must allege and prove that
there has been a perversion of the judicial process and
achievement of some end not contemplated in the regular
prosecution of the charge.”); see also Hall v. Hollywood
Credit Clothing Co., 147 A.2d at 868; McCarthy v.
Kleindienst, 741 F.2d 1406, 1414 (D.C. Cir. 1984).
Appellants’ abuse of process claim fails because one of
the alleged ulterior aims is implausible, and the other was not
achieved. The appellants claimed that Woodward sought to
discover information vital to his criminal defense and to
coerce the company to make labor concessions. However,
lla
the fact that Woodward’s lawyer did not commence
discovery until after Woodward’s criminal charges were
dropped conclusively discredits discovery as an “ulterior
motive". As for the coercive contract claim, Woodward
responded to the company’s resistance by abandoning the
“collateral” demand that Yellow Bus agree to sign a
collective bargaining agreement as a condition of settlement
of Woodward’s lawsuit. He eventually agreed to drop the
action in exchange for $3,000. However, even if Woodward
had initially commenced legal action to induce Yellow Bus to
acquiesce in his labor demands, appellants suffered no
actionable injury because Woodward did not accomplish this
impermissible purpose. See Morowitz v. Marvel, 423 A.2d
at 198 ("[W]ithout more, [the] proffer that [defendant] filed
{a claim] with the ulterior motive of coercing settlement is
deficient."). Moreover, the procurement of an “ordinary”
settlement will not ground abuse of process; the settlement
must accomplish some outrageous end and represent a
"perversion" of the judicial process. See id. In sum,
plaintiffs have failed to make out essential elements of their
abuse of process claim. The district court’s decision to set
aside the jury award for abuse of process was appropriate.
IV. RICO COMPLAINT
In its original complaint, Yellow Bus alleged that the
conduct of Woodward and the Local violated 18 U.S.C.
§§ 1962(c) and (d) of the Racketeer Influenced and Corrupt
Organizations Act and requested treble damages under
18 U.S.C. § 1964(c). Section 1962(c) makes it “unlawful
for any person employed by or associated with any enterprise
engaged in ... interstate commerce, to conduct or participate,
directly or indirectly, in the conduct of such en! rprise’s
affairs through a pattern of racketeering activity.” Section
12a
1962(d) prohibits any conspiracy to violate subsection (c).
Section 1961(1) and (5) of the statute define "racketeering
activity" to include acts or threats involving murder, arson,
and extortion punishable under state law. A “pattern” of
such activity requires at least two acts occurring within ten
years. 18 U.S.C. § 1961(4). The predicate acts which
combine to produce the pattern of illegal activity must be
marked by the factors of “continuity plus relationship.”
S. Rep. No. 617, 91st Cong., 2d Sess. 158 (1965). See also
Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 496 n.14
(1985).
Yellow Bus listed ten predicate acts allegedly performed
by the Local and Woodward in violation of D.C. and
Maryland laws punishing extortion, including threats against
property and threats of bodily harm. A careful examination
of the pleadings reveals that five of the counts involve
violence against property or persons unconnected with
Yellow Bus or its labor organizing effort. These allegations
are not properly part of Yellow Bus’ § 1962(c) RICO claim
against appellees. Of the remaining counts, four allege direct
threats to Yellow Bus property or employees which qualify
as offenses listed in the § 1961(1) definition of racketeering
activity. Additionally, these predicate acts appear to fulfill
the requirement for a “pattern” - “continuity plus
relationship” - as stated in the Senate Report. The definition
of “pattern” of conduct, provided by Congress later in the
same bill, indicates that this term embraces “criminal acts
that have the same or similar purposes, results, participants,
victims, or methods of commission ... and are not isolated
events.” 18 U.S.C. § 3575(e) (1982). See also Sedima, 473
U.S. at 496 n.14. Here, appellees are accused of engaging
in acts of vandalism and intimidation during a specific time
period in pursuit of a unitary goal. We believe this scenario
|
13a
meets the statutory requirements for a “pattern of
racketeering activity.”
Nevertheless, the district court, in two separate orders,
dismissed the RICO complaints against appellees. The count
against the Local was dismissed because it designated the
Local as both the RICO "person" and the RICO “enterprise”, 4
violating the requirement that these be separate and distinct
entities under § 1962(c). The court refused to allow the
appellants to cure this deficiency by amending the complaint
to name Yellow Bus as the “enterprise”, reasoning that the
amended complaint would not state a valid RICO claim
because the Local did not fulfill the statutory requirement of
participation in the conduct of Yellow Bus’ affairs. The
court also indicated that the motion had "come too late.” In
a second order dismissing the RICO complaint against
Woodward, the court relied on the now repudiated
requirement of demonstrating a distinct "RICO injury” -
injury different in kind from that occurring as a result of the
predicate acts themselves. See Sedima, S.P.R.L. v. Imrex
Co., 741 F.2d 482 (2d Cir. 1984), rev’d, 473 U.S. 479
(1985).
While the trial in this case was proceeding, the Supreme
Court reversed the Court of Appeals decision in Sedima by
holding that RICO required no allegation of a separate
"racketeering injury". See Sedima, 473 U.S. at 493-500.
On the basis of this clarification, we conclude that the district
court erred in dismissing the RICO cause of action against
Woodward. Our conclusion that the dismissal of the RICO
count against the i.ocal was error requires more extensive
analysis. At the outset, we agree with the district court that
the designation of the Local as both the "enterprise" and the
defendant “person” does not comport with statutory language
l4a
or design. In refusing to permit amendment of the complaint
because of the timing of the request, however, the court
abused its discretion. A complaint amended to name Yellow
Bus as the RICO “enterprise” would state a cognizable claim
under § 1962(c), and that amendment should be permitted.
A. The "person" and the “enterprise” under § 1962(c)
Section 1962(c) is directed at "any person employed by
or associated with any enterprise” who participates in the
enterprise’s affairs by racketeering. (emphasis added). All
but one of the Courts of Appeals considering the question
have required that the "person" and “enterprise” be different
entities under this section. See, e.g., Schofield v. First
Commodity Corp., 793 F.2d 28, 30-31 (ist Cir. 1986);
Bennett v. U.S. Trust Co., 770 F.2d 308, 315 (2d Cir.), cert.
denied, 474 U.S. 1058 (1986); Haroco, Inc. v. American
Nat’l Bank & Trust Co., 747 F.2d 384, 399-402 (7th Cir.
1984); but see United States v. Hartley, 678 F.2d 961,
989-90 (11th Cir. 1982); Bergen v. Rothschild, 648 F. Supp.
582, 589 (D.D.C. 1986) (allowing identity of person and
enterprise partnership). See generally, Enterprise: Relation
of Liable Person, 5 RICO L. Rep. 364-365 (1987).
In perceiving and justifying this requirement, the courts
rely on both the language of the provision and the policy
behind the act. Logic alone dictates that one entity may not
serve as the enterprise and the person associated with it
because, as Judge Posner of the Seventh Circuit has stated,
"you cannot associate with yourself." McCullough v. Suter,
757 F.2d 442, 144 (7th Cir. 1985). The majority rule also
reflects Congress’ apparent decision in § 1962(c) to target
criminal activity of a particular kind - the exploitation and
appropriation of legitimate business by corrupt individuals.
15a
Congress was aware that organized crime often operates by
infiltration of legitimate enterprises through a pattern of
racketeering activity. See S. Rep. No. 617, 91st Cong.,
Ist Sess. 76-78 (1969). In considering the intention of the
provisions’ drafters, courts have reasoned that section
1962(c) was intended to punish the person who conducts the
affairs of an otherwise legitimate business in an illegal
manner. "Such a distinction focuses the section on the
culpable party and recognizes that the enterprise itself is
often a passive instrument or victim of the racketeering
activity.” Bennett v. U.S. Trust Co., 770 F.2d at 315.
Allowing identity of person and enterprise would permit
punishment of the exploited "victim" enterprise as well as the
infiltrator person or entity. This consequence is both
unintended and undesirable.
Under the rule requiring distinct entities, however,
§ 1962(c) liability usually cannot be imposed on those
organizations created solely for illegal purposes and operated
to the detriment of third parties by corrupt directors or
controlling partners. Consequently, an exception to the
non-identity rule has at times been made for the institution
that functions as both "perpetrator" and "victim." See, e.g.,
United States v. Hartley, 678 F.2d at 989 (because plaintiff
could have named culpable corporate directors as defendant
“association-in-fact” distinct from corporate enterprise, court
"pierced the corporate veil” to allow corporation to be named
as both defendant and enterprise).
It is important to realize, however, that corrupt
organizations which conduct their own affairs by illegal
means may often be subject to direct liability under another
section of RICO. Section 1962(a) prohibits the receipt and
subsequent investment of racketeering proceeds into an
16a
"enterprise". Under this section - which does not contain the
language of subsection (c) implying that the person and
enterprise must be distinct - a number of courts have rejected
a non-identity requirement. At least three Courts of Appeals
have concluded that "a corporation-enterprise may be held
liable under subsection (a) where the corporation is also a
perpetrator” and not merely a passive instrument of the
racketeering activity. See Haroco, 747 F.2d at 402
(7th Cir.); Schofield, 793 F.2d at 31 (1st Cir.). See also
Schreiber Distributing Co. v. Serve-Well Furniture Co., 806
F.2d 1393, 1398 (9th Cir. 1986) (allowing corporation that
is the “direct or indirect beneficiary” of pattern of
racketeering activity to be both "person" and “enterprise”
under 1962(a)). When interpreted in this way, section
1962(a) provides one mechanism to punish such corrupt
organizations by depriving them of their ill-gotten gains.
It is thus apparent that the language of each section
contemplates a different role the enterprise may play in a
variety of corrupt schemes. See Haroco, 747 F.2d at 401
(Under the respective subsections of 1962, "the enterprise
may play the various roles of victim, prize, instrument, or
perpetrator. The RICO liability of the enterprise should
depend on the role played."). Through section (a), Congress
provided for punishment of organizations which in fact gain
from their wrongdoing by focusing on profits gleaned from
illegal activities, thus “sparing” organizations that do not so
profit. Section (c) likewise immunizes organizations which
are merely "victims", but this result depends on the
requirement of nonidentity of person and enterprise which
also places some corrupt organizations beyond reach. The
use of (c) to impose liability on some types of organizations
covered by (a) carries the danger of exposing innocent
Organizations to prosecution. Absent the non-identity
17a
requirement, respondeat superior could operate to impose
§ 1962(c) liability on a corporation that is unaware of the
racketeering activities of its agents and has not been enriched
by those activities. Since we agree with the court in
Schofield, 793 F.2d at 32, that "the concept of vicarious
liability is directly at odds” with the Congressional intent
behind § 1962(c), we think it wise not to risk this
consequence by disturbing Congress’ carefully crafted
scheme. We therefore hold with those courts that forbid
identity of person and enterprise under § 1962(c) and
conclude that the original complaint naming the Local as
person and enterprise was properly dismissed.
Yellow Bus attempts to avoid this legal result by
depicting the RICO enterprise as an “association-in-fact”
comprised of the Local and Woodward, an entity distinct
from each of these named defendants. This attempt is
unavailing. It is true that under the expansive § 1961
definition of “enterprise”, some courts have permitted the
enterprise to be defined as an association composed of some
number of the distinct individual defendants or defendant
corporations. See Cullen v. Margiotta, 811 F.2d 698,
729-730 (2d Cir.), cert. denied sub nom. Nassau County
Republican Committee v. Cullen, 107 S. Ct. 3266 (1987)
("[W]e see no reason why a single entity could not be both
the RICO ’person’ and one of a number of members of the
RICO ’enterprise.’ "); Fustok v. Conticommodity Services,
Inc., 618 F. Supp. 1070, 1076 (S.D.N.Y. 1985) (group of
individual corporate defendants may qualify as
"association-in-fact” enterprise); see also United States v.
Perholtz, 657 F. Supp. 603, 605 (D.D.C. 1986); but cf. Beck
v. Cantor Fitzgerald & Co., 621 F. Supp. 1547, 1563 (N.D.
Ill. 1985) (association of defendants may constitute an
’enterprise’ only if that enterprise has a “separate and
18a
sufficiently lasting identity apart from the person’ or
*persons’ ... who are employed [by] or associated with it.")
Several courts, however, have disallowed a § 1962(c) claim
where the relationship among the members of the enterprise
association is the relationship of parts to a whole. That is,
while the corporate or organizational defendant may itself be
a member of the enterprise association, the members of the
enterprise association may not simply be subdivisions,
agents, or members of the defendant organization. See
Hanline v. Sinclair Global Brokerage Corp., 652 F. Supp.
1457, 1462 (W.D. Mo. 1987) (enterprise association of
corporation with its employees not distinct from corporation
defendant); see also Atkinson v. Anadarko Bank & Trust Co.,
808 F.2d 438, 441 (Sth Cir.), cert. denied, 107 S. Ct. 3276
(1987) (bank, holding company, and three employees have no
distinct existence apart from defendant bank); Tarasi v.
Dravo Corp., 613 F. Supp. 1235, 1236-37 (W.D. Pa. 1985)
(corporate defendant may not be associated with its agent to
form 1962(c) enterprise).
In short, an organization cannot join with its own
members to do that which it normally does and thereby form
an enterprise separate and apart from itself. Where, as here,
the organization is named as defendant, and the organization
associates with its member to form the enterprise
"association-in-fact", the requisite distinctness does not
obtain. As the district court pointed out, there is no
difference between the union as an entity including
Woodward as officer, and the union plus Woodward, since
"the whole is no different than the sum of its parts in this
context." Furthermore, allowing plaintiffs to generate such
“contrived partnerships” consisting of an umbrella
Organization and its subsidiary parts, would render the
non-identity requirement of section 1962(c) meaningless. We
19a
decline to permit such an “end run” around the statutory
requirements.
B. "Participate in the conduct of the affairs”
The district court rejected Yellow Bus’ attempt to charge
the local as a RICO defendant under § 1962(c) by amending
the complaint to name itself as the “enterprise”. In addition
to objecting to the timing of the request, the court concluded
that the amended complaint would fail to state a proper RICO
claim because the union’s acts were not committed in the
conduct of Yellow Bus’ affairs; rather, Yellow Bus was
merely the “setting” for the union’s activities. We disagree
with the district court’s assessment of the relationship
between the bus company and the Local’s alleged conduct,
and reject as overly restrictive any interpretation of the
language of § 1962(c) which would necessitate a dismissal of
the RICO claim against the Local in this case.
Unlike "enterprise" and "pattern", the terms "conduct",
“participate” and "through" do not have statutory definitions.
The Act has been challenged as unconstitutionally vague for
this reason. See United States v. Stofsky, 409 F. Supp. 609
(S.D.N.Y. 1973). In rejecting the vagueness argument the
court in Stofsky explained:
The statute does not define [the] connection by
distinguishing between predicate acts which play a major
or a minor role, or any role at all in what might seem as
the usual operation of the enterprise; nor does it require
that such acts be in furtherance of the enterprise, as
defendants suggest it must.
20a
In this Court’s view, the statute fails to state these
requirements because Congress did not intend to require
them in these terms. The perversion of legitimate
business may take many forms. The goals of the
enterprise may themselves be perverted. Or the
legitimiate goals. may be continued as a front for
unrelated criminal activity. Or the criminal activity may
be pursued by some persons in direct conflict with the
legitimate goals, pursued by others. Or the criminal
activity may, indeed, be utilized to further otherwise
legitimate goals. No good reason suggests itself as to
why Congress should want to cover some, but not all of
these forms; nor is there any good reason why this
Court should construe the statute to do so. It plainly says
that it places criminal responsibility on both those who
conduct and those who participate, directly or indirectly,
in the conduct of the affairs of the enterprise, without
regard to what the enterprise was or was not about at the
time in question. This may be broad, but it is not
vague.
Id. at 613. Thus, in Stofsky’s view, the "requisite nexus"
between unlawful acts and enterprise activities was left
undefined "for the simple reason that no particular degree of
interrelationship is required." United States v. Field, 432
F. Supp. 55, 58 (S.D.N.Y. 1977) (citing Stofsky).
Notwithstanding Stofsky’s refusal to clarify the reach of
§ 1962(c), courts have struggled to define the scope of
behavior chargeable under that section. Attempts have been
made to formalize the intuition that § 1962(c) was not meant
to punish predicate activity which forms no part of the
ordinary affairs of the enterprise, and is only incidentally
related to its day-to-day business. See, e.g., U.S. v. Yonan,
2la
623 F. Supp. 881, 883 (N.D. Ill. 1985), aff'd in part and
rev'd in part, 800 F.2d 164 (7th Cir. 1986) (seeking a test
for “association” and “participation” to disqualify, for
example, “robbing a bank twice"). Some federal courts have
required that the defendant participate in the “direction” or
"management" of the organization, or have fashioned other
rules to restrict the universe of relationships subject to
§ 1962(c) liability. See, e.g., Bennett v. Berg, 710 F.2d
1361, 1364 (8th Cir.), cert. denied sub nom. Prudential Ins.
Co. v. Bennett, 464 U.S. 1002 (1983) ("[S]ome participation
in the operation or management of the enterprise itself” is
ordinarily required); Bank of America v. Touche Ross & Co.,
782 F.2d 966, 970 (llth Cir. 1986) (chargeable predicate acts
must be “helpful or necessary" to the operation of the
enterprise); United States v. Ladmer, 429 F. Supp.
1231, 1244 (E.D.N.Y. 1977) (dismissing a RICO charge
based on unauthorized expenditure of union funds for
personal travel expenses because unrelated to the enterprise’s
"essential" or “core” function).
Other federal courts, however, merely impose an
open-ended requirement that the predicate acts relate to, or
have some effect upon, the affairs of the enterprise. See,
e.g., United States v. Welch, 656 F.2d 1039, 1060-62 (Sth
Cir. 1981), cert. denied sub nom. Cashell v. U.S., 456 U.S.
915 (1982) (holding that 1962(c) requires a "sufficient nexus
between the racketeering activities and the affairs of the
enterprise” and rejecting the requirement of "benefit" to the
enterprise); United States v. Carter, 721 F.2d 1514, 1525-27
(llth Cir.), cert. denied sub nom. Morris v. U.S., 469 U.S.
819 (1984) (allowing "proof of effect on the common
everyday affairs of the enterprise"). In United States v.
Scotto, 641 F.2d 47, 54-55 (2d Cir. 1980), cert. denied, 452
U.S. 961 (1981), union officials were accused of forgiving
22a
contract requirements and steering business in exchange for
illegal payoffs. The court refused to embrace the "core
functions” formula of Ladmer, or the Berg requirement that
the conduct relate to the operation or management of the
enterprise. Citing with approval to the district court decision
in United States v. Stofsky, the Scotto court fashioned a two
part test for "conducting the activities of an enterprise",
holding that the proper connection is established when
"1) one is enabled to commit the predicate offenses solely by
virtue of [one’s] position in the enterprise or involvement in
or control over the affairs of the enterprise, or 2) the
predicate offenses are related to the activities of that
enterprise." Jd. at 54. The court went on to note that
"(simply committing predicate acts which are unrelated to the
enterprise or one’s position within it would be insufficient."
Id. Another Court of Appeals restated the Scotto test in
United States v. Cauble, 706 F.2d 1322 (Sth Cir. 1983),
cert. denied, 465 U.S. 1005 (1984), finding the demands of
§ 1962(c) satisfied when “the defendant’s position in the
enterprise facilitated his commission of the racketeering acts"
and "the predicate acts had some effect on the lawful
enterprise." Jd. at 1333. See also United States v.
Provenzano, 688 F.2d 194, 200 (3rd Cir.), cert. denied, 459
U.S. 1071 (1982) (following Scotto).
We decline to adopt a more restrictive standard than that
enunciated in Cauble and Scotto. Section 1962(c) of RICO
refers to direct as well as indirect participation in the
enterprise’s affairs, and imposes no requirement that
participation be at the management level or relate to “core
functions". Moreover, Congress has expressed its intention
that RICO be "liberally construed to effectuate its remedial
purposes.” Pub. L. No. 91-452, § 904 (a), 84 Stat. 947
(1969). The inappropriateness of artificially restricting the
23a
types of relationships satisfying § 1962(c) is especially
apparent in cases of predicate acts committed by enterprise
“outsiders” rather than "insiders". In such instances, a
stringent test threatens to frustrate RICO’s broad remedial
purpose. See United States v. Elliott, 571 F.2d 880, 903
(Sth Cir.), cert. denied sub nom. Delph v. United States, 439
U.S. 953 (1978) ("The substantive proscriptions of the RICO
statute apply to insiders and outsiders - those merely
’associated with’ an enterprise - who participate directly and
indirectly in the enterprise’s affairs. [Citations omitted.]
Thus the RICO net is woven tightly to catch even the
smallest fish, those peripherally involved with the
enterprise.)
Mindful of these flexible terms, a number of courts have
permitied RICO actions in bribery cases against those seeking
to influence organizations in which they hold no official
position of authority. See, e.g., United States v. Forsythe,
560 F.2d 1127, 1136 (3rd Cir. 1977) (reversing a lower
court holding that a magistrate who accepts bribes from a
bonding company is not sufficiently “associated with" the
bonding company enterprise’s affairs). See also United
States v. Bright, 630 F.2d 804, 830 (Sth Cir. 1980) (holding
that bribing and influencing a_ sheriff qualified as
participation in the affairs of the sheriff's office); United
States v. Lee Stoller Enterprises, 652 F.2d 1313, 1320-21
(7th Cir.), cert. denied, 454 U.S. 1082 (1981) (businessman
paying kickbacks to sheriff in exchange for lucrative
contracts held to participate in sheriff's office affairs); United
States v. Blackwood, 768 F.2d 131, 137-38 (7th Cir.), cert.
denied, 474 U.S. 1020 (1985) (applying Cauble to allow
§ 1962(c) RICO charge against a police officer charged with
soliciting bribes to influence county court case disposition);
United States v. Yonan, 800 F.2d 164, 167 (7th Cir. 1986),
24a
cert. denied, 107 S. Ct. 930 (1987) (reversing the dismissai
of a RICO count against a criminal defense attorney charged
with bribing a state district attorney)
The Yonan court stressed that defendant need not have
a stake or ongoing interest in the enterprise, nor any direct
contact with managers of the enterprise, as long as the
predicate acts formed part of a “business re!ationship.“
Id. at 168. In a context not involving official corruption, the
court in State of New York v. O’Hara, 652 F. Supp. 1049,
1053-54 (W.D.N.Y. 1987), applied the analysis in Yonan to
uphold a RICO claim against a private contractor who
allegedly submitted fraudulent bids on a municipal waste
clean-up contract. The court held that this activity fulfilled
the statutory requirement of association with the City of
Niagara Falls through indirect participation in its affairs. See
also United States v. Starnes, 644 F.2d 673, 679 (7th Cir.),
cert. denied, 454 U.S. 826 (1981) (arsonist hired by
company Official to "torch" its headquarters “associates with"
and “participates” in the company’s affairs under § 1962(c)).
The alleged relationship between the Local and Yellow
Bus falls well within the scope of activity contemplated by
the words of the statute, and meets the appropriately minimal
requirements set out in Scotto, Cauble, and Yonan and their
progeny. As in Yonan, Yellow Bus and the union had a
full-fledged “business relationship" - Yellow Bus was not
merely a "setting" for crimes otherwise unrelated to the
company’s affairs. As we have shown, it matters not that
Woodward and the Local did not direct or manage the “core”
day-to-day transportation activities of Yellow Bus, or that the
union initially exerted its influence over the conduct of
employees, rather than management. A strike for recognition
of the union as a collective bargaining representative is an
| 7
25a
activity sufficiently related to the company’s ongoing role as
a business enterprise and employer to establish the requisite
nexus. Although the Local and the bus company were
associated for a limited period, their relationship had vital
significance for the economic destiny of Yellow Bus. The
elaborate legal structure which governs all aspects of
management - labor interaction only serves to emphasize that
a strike by a union seeking to bargain with an employer is an
important “affair” of the employer company. More often
than not, it is a momentous event in the life of that
enterprise.
Having established that the strike and organizational
effort were “affairs” of Yellow Bus, we must decide whether
appellees’ actions, if proved, would amount to participation
in the conduct of those affairs “through a pattern of
racketeering activity." Yellow Bus alleges that the violence
was committed with the intent to influence the company’s
conduct. Allegations of a requisite nu-aber of intentional
destructive acts or threats during the strike would alone
satisfy the participation requirement for the purpose of
stating a RICO.claim. Any further showing of success in
influencing concrete company choices through violent
extortion is unnecessary. In contending that appellees chose
to avail themselves of violent tactics as one way of
conducting the strike, Yellow Bus charges that appellees
participated in the conduct of the company’s affairs for the :
duration of the strike by means of these activities, among
others. This clearly serves to fuifill the requirement of
participation in the affairs of the company.
26a
V. RULE 15(a) LEAVE TO AMEND
Finally, we hold that the district court abused its
discretion to the extent that it relied on lack of timeliness to
justify its refusal of leave to amend. Fed. R. Civ. P. 15(a)
declares that leave to amend "shall be freely given when
justice so requires”. As the Supreme Court forcefully stated
in Foman v. Davis, 371 U.S. 178, 182 (1962), "this mandate
is to be heeded." These pleading rules were designed to
facilitate a proper decision on the merits, and the opportunity
to test the merits should ordinarily be accommodated if
injustice will not otherwise result. See generally 6 C. Wright
& A. Miller, Federal Practice and Procedure § 1484 (1971).
The reasons recognized as justifying denial of motion to
amend - "undue delay, bad faith or dilatory motive ...,
repeated failure to cure deficiencies ..., undue prejudice to
the opposing party ..., futility of the amendment,” 371 U.S.
at 182 - are not applicable here. Only two months elapsed
between the March 31, 1984 hearing at which the court first
expressed doubts about the deficiencies of the original
pleadings and Yellow Bus’ request to amend those pleadings.
When the court ruled in late June on the Local’s April 13
motion to dismiss the original RICO claim against the union,
commencement of trial was still over eight months away.
Consideration of this timetable indicates that Yellow Bus
moved with more than reasonable alacrity to correct its
pleadings, and that ample time was available to defendants
for trial preparation. Amendment of the complaint, in any
event, would not have imposed any additional burdens on the
Local because the restated RICO claim required consideration
of no new facts and arguments. Since there was no evidence
of prejudice to appellees or of deliberate delay or bad faith,
27a
leave to amend was appropriate and should have been
granted.
CONCLUSION
We remand to the district court for a trial on the RICO
charges after Yellow Bus has had the opportunity to lodge
revised pleadings. We also reinstate the judgment against the
Local for malicious destruction of property. After
considering the remaining contentions on appeal, we find
them to-be without merit. Accordingly, the judgment of the
district court is affirmed in part and reversed in part, and the
Case is remanded to the district court for further proceedings.
28a
EDWARDS, Circuit Judge concurring: I have nagging
doubts about our holding that "the strike and organizational
effort were ’affairs’ of Yellow Bus,” maj. op. at 23, and
that, consequently, plaintiff might be able to state a cause of
action under section 1962(c) of RICO. This result seems
strangely at odds with certain fundamental precepts of labor
law and collective bargaining. However, I recognize that
this holding finds support in the case law, and that it is not
inconsistent with RICO’s broad remedial purpose. I
therefore concur, albeit with pause.
bd
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