Opposition Brief — Ferrante v. United States

Ta the Bence Guaiargetines series

OcTOBER TERM, 1994

NICHOLAS FERRANTE, PETITIONER

v.

UNITED STATES OF AMERICA

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

BRIEF FOR THE UNITED STATES IN OPPOSITION

Drew S. Days, IT]

Solicitor General

JO ANN HARRIS

Assistant Attorney General

NINA GOODMAN

Attorney

of Justice

Washington, D.C. 20520

(202) 514-2217

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QUESTIONS PRESENTED

1. Whether, in determining petitioner’s liability in

a civil RICO action, the district court properly took

into consideration petitioner’s assertion of his Fifth

Amendment privilege against compulsory self-incrim-

ination.

2. Whether the district court correctly held that

petitioner’s prior guilty plea to a state offense con-

clusively established a predicate racketeering act for

purposes of the RICO statute.

3. Whether the district court’s order granting

summary judgment against petitioner and awarding

injunctive relief violated petitioner’s rights under the

Due Process Clause of the Fifth Amendment or the

Excessive Fines Clause of the Eighth Amendment.

(I)

TABLE OF CONTENTS

Page

ERECT IES SITE A LITS 0 Op RO 1

EN SEES SESS ASRS ARN a 1

SR TOLER AI ae 2

Ee RS 0 7

Neen aswibe seen cee 14

TABLE OF AUTHORITIES

Cases:

Allen v. McCurry, 449 U.S. 90 (1980) .....c.cccccccccccccceeeeee 10

Austin v. United States, 113 S. Ct. 2801 (1993) ....... 9, 11, 12, 13

Baxter v. Palmigiano, 425 U.S. 308 (1976) ................... 8, 9

Browning-Ferris Industries v. Kelco Disposal, Inc.,

sk vaicaskanceie 11

County of Cook v. Midcon Corp., 574 F. Supp. 902

(N.D. Ill. 1983), aff’d, 773 F.2d 892 (7th Cir. 1985) ...... 10-11

FDIC vy. Elio, 39 F.3d 1239 (1st Cir. 1994) ..............000.. 9

Kremer v. Chemical Construction Corp., 456 U.S. 461

ECS TULRTEAIEC IEEE OR one OSS Ba 10, 11

Parklane Hosiery Co. v. Shore, 439 U.S. 322 (1979) ..... 11

Porter v. Warner Holding Co., 328 U.S. 395 (1946) ...... 12

SEC vy. Bilzerian, 29 F.3d 689 (D.C. Cir. 1994)............. 13

SEC v. Graystone Nash, Inc., 25 F.3d 187 (3d Cir.

a cammuneee 9

United States v. Carson, No. 94-6044 (2d Cir.

I atria lelvsdtiinbcsensauiclindevessnieteiniscicadiedesencee reson 12

United States v. Halper, 490 U.S. 435 (1989) .......000..... 13

United States v. E. I. du Pont de Nemours & Co.,

EEE 13

United States v. Private Sanitation Industry Ass’n,

SGD FBG STO Gd Cir. 1008) .............00cccccccccccccccscececoosess 5-6, 7

United States v. United States Gypsum Co., 438 U.S.

SIRE SCRE RESTS a le cP 9

(III)

IV

Constitution and statutes: Page

U.S. Const.:

I eihsiccaebiteds gratia dicn ce cus oadoenssasikecen oda 5, 8, 9

TO I Nn ela 8, 13

Self-Incrimination’ Clause ..............cccccccccocccecscsecees 9

I RE Seite ica talceandanibinacacdaceiccis cnccuectes 8, 11, 13

EMOTO Ne SID oincsopsssccvcreveciaciscnabonsaosenans 13

FR as Fe EE edn seacsarstotenebenarkccacdseicsoueis 4

Racketeer Influenced and Corrupt Organizations Act,

Be Oe I nics viens acta cdcks dan ntcuaaaecsaneneiianaes 2

De Sire I vantdnitinssdintibcigiadiecaienaaiintebaun 2

BOF ree EE hice dickckas oa asada edema 2-3, 12

Be Re IE wriidacleatpeccasdvlontcen cette 10

Be WGI As REED cca pacsducnbusncwccnshenadpusessateatiase tn daincatensabensa 9, 10

Miscellaneous:

8 J. Wigmore, Evidence (McNaughton rev. 1961) ......... 8

Jn the Supreme Court of the United States

OCTOBER TERM, 1994

No. 94-1756

NICHOLAS FERRANTE, PETITIONER

Vv.

UNITED STATES OF AMERICA

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

BRIEF FOR THE UNITED STATES IN OPPOSITION

OPINIONS BELOW

The opinion of the court of appeals (Pet. App. la-4a)

is unpublished, but the judgment is noted at 47 F.3d

1158 (Table). A prior opinion of the court of appeals

(Pet. App. 5a-24a) is reported at 44 F.3d 1082. The

opinion of the district court (Pet. App. 25a-42a) is

unreported.

JURISDICTION

The judgment of the court of appeals was entered on

January 23, 1995. The petition for a writ of certiorari

was filed on April 24, 1995 (a Monday). The juris-

diction of this Court is invoked under 28 U.S.C.

1254(1).

(1)

STATEMENT

1. On June 6, 1989, the United States filed a civil

complaint in the United States District Court for the

Eastern District of New York against petitioner and

more than 100 other individual and corporate defen-

dants who were involved in the solid waste disposal

industry in Nassau and Suffolk Counties in _New

York. Pet. App. 25a; I C.A. App. A71-A202. The com-

plaint was broight under the Racketeer Influenced

and Corrupt Crganizations Act (RICO), 18 U.S.C.

1961 et seq. Pat. App. 25a; I C.A. App. A75-A76. It

alleged that far several decades the waste disposal

industry in Nassau and Suffolk Counties had been

“infiltrated, controlled, influenced, corrupted and run

by organized :rime,” including the Lucchese and

Gambino organized crime families. I C.A. App. A75.

The complaint alleged that the defendants had en-

gaged in a pattern of racketeering activity, in viola-

tion of 18 U.S.C. 1962(c), by committing illegal acts

and using force and threats against other individuals

engaged in the waste disposal industry in order to

maintain the wntrol of organized crime over that

industry. Pet. App. 25a; see I C.A. App. A79-A82.

The complaint sought, among other remedies, in-

junctive relief »ursuant to 18 U.S.C. 1964(a)." I C.A.

App. A199-A201

' Section 1964() provides:

The district ourts of the United States shall have juris-

diction to prevent and restrain violations of section 1962 of

this chapter ly issuing appropriate orders, including, but

not limited to ordering any person to divest himself of any

interest, diret or indirect, in any enterprise; imposing

reasonable restrictions on the future activities or invest-

ments of any person, including, but not limited to, prohibit-

3

In April 1994, the government moved for summary

judgment against petitioner. See I C.A. App. A228-

A229. The government alleged that petitioner, who

was involved in the waste disposal industry through

his companies Unique Sanitation and U-Need-A-Roll-

Off, worked closely with Salvatore Avellino, an

official in the Lucchese organized crime family, in

controlling waste collection in Nassau and Suffolk

counties. Pet. App. 25a-26a; II C.A. App. A689-A691.

In particular, the government alleged, petitioner

acted as a principal “bagman” for Avellino and

assisted Avellino in collecting extortion payments

from waste disposal companies for the Lucchese

crime family. Pet. App. 26a; II C.A. App. A690-A691.

In support of those allegations, the government

submitted the affidavit of FBI Agent Donald

McCormick, along with numerous transcripts of

intercepted telephone conversations. Pet. App. 36a;

I C.A. App. A230-A687.

To establish the predicate acts necessary for RICO

liability, the government relied in part en petitioner’s

1986 New York state court guilty plea to the felony

offense of coercion. Pet. App. 7a, 26a-27a. During the

plea proceeding, petitioner acknowledged that he had

threatened private contractors with damage to their

property if they bid for waste disposal work. Pet. App.

26a-27a. In addition, the government alleged that

petitioner had bribed officials at the Oyster Bay town

dump in order to receive a reduction in the fees his

ing any person from engaging in the same type of

endeavor as the enterprise engaged in, the activities of

which affect interstate or foreign commerce; or ordering

dissolution or reorganization of any enterprise, making due

provision for the rights of innocent. persons.

companies were required to pay for use of the town’s

refuse disposal services. Pec. App. 7a, 27a. In support

of that allegation, the government submitted affi-

davits of three former Oyster Bay employees, who

stated that petitioner bribed employees of the dump

with the understanding that they would improperly

assist him in reducing his companies’ fees. Pet. App.

33a; II C.A. App. A717-A718, A730, A745-A746.

In its summary judgment motion, the government

requested that petitioner be enjoined from engaging

in any activities involving waste disposal, committing

further violations of the RICO statute, participating

in the affairs of any trade waste association or labor

union, and associating with any member of organized

crime for any commercial purpose. Pet. App. 37a;

II C.A. App. A777. In addition, the government re-

quested that petitioner be ordered to divest his

interests in his waste disposal companies and to

disgorge proceeds derived from his unlawful conduct.

Ibid.

2. The district court granted the government’s

summary judgment motion. Pet. App. 25a-42a. The

court found that the evidence submitted by the gov-

ernment showed that petitioner had engaged in illegal

acts that constituted a pattern of racketeering activ-

ity. Pet. App. 30a-37a. The court held that peti-

tioner’s admission during the guilty plea proceeding

that he had threatened private contractors with

property damage if they did not refrain from bidding

for waste disposal work “conclusively establishe[d]”

that petitioner had violated the Hobbs Act, 18 U.S.C.

1951. Pet. App. 30a-33a. The court also found that the

government’s evidence showed that petitioner had

“personally bribed officials at the Oyster Bay dump,”

in violation of state bribery laws. Pet. App. 33a. In

5

addition, the court observed that petitioner had in-

voked his Fifth Amendment privilege against com-

pulsory self-incrimination when questioned about the

bribes at a deposition, and it concluded that “an

adverse inference may be drawn in a civil RICO pro-

ceeding against a defendant who invokes the priv-

ilege against self-incrimination.” Pet. App. 33a-34a.

In response to the government’s motion, petitioner

submitted affidavits of his son, Joseph Ferrante, and

of Gary Pezza, whose father operated a waste disposal

company. Pet. App. 29a-30a, 36a-37a; II C.A. App.

A781-A812, A991-A993. The district court found that

although Ferrante and Pezza “den[ied] knowledge of

the allegations of the government and offerfed]

alternative interpretations of the events described,”

they failed to “assert knowledge of specific facts

showing that there is a genuine issue for trial.” Pet.

App. 29a-30a. The court concluded that petitioner had

not “shown the existence of a genuine issue of

material fact as to his civil RICO liability,” and that

summary judgment was therefore appropriate. Pet.

App. 37a.

The district court ordered the relief requested by

the government. Pet. App. 37a-38a. The court ob-

served that the court of appeals had upheld its award

of similar relief against Avellino, and that “[t]he

activities on which [petitioner’s} RICO violations are

based are * * * similar to those for which Avellino

was held liable.” Pet. App. 38a (citing United States

2 The court also noted that petitioner had asserted his Fifth

Amendment privilege in response to questions about

intercepted conversations submitted by the government in

support of its characterization of petitioner as a “bagman” for

Avellino. Pet. App. 36a.

v. Private Sanitation Industry Ass’n, 995 F.2d 375,

377 (2d Cir. 1993)).

3. Petitioner appealed the district court’s order

and filed a motion in the court of appeals requesting a

stay of the order pending resolution of the appeal.

Pet. App. 6a. The court of appeals denied the stay

motion, finding that petitioner had “point[ed] to no

material issue of fact to establish a substantial

possibility” that the district court’s order would be

reversed on appeal. Pet. App. 5a-9a.

Judge Heaney of the Highth Circuit, sitting by

designation, dissented from the denial of petitioner’s

motion for a stay. Pet. App. 10a-24a. In Judge

Heaney’s view, the district court’s order requiring

' petitioner to divest his inierests in his waste disposal

companies and enjoining him from engaging in any

activities in connection with solid waste disposal,

participating in the affairs of any labor union, and

associating with members of organized crime for

commercial purposes went “beyond rough compen-

sation to serve the goals of retribution and deterrence

and therefore constitute[d] punishment.” Pet. App.

17a-18a. Judge Heaney concluded that “the quasi-

criminal nature of the remedies sought by the

government * * * render summary judgment an

inappropriate means by which to impose liability on

(petitioner].” Pet. App. 10a. Because Judge Heaney

believed that petitioner had “demonstrated a sub-

stantial possibility of success on appeal on the issue

3 Judge Heaney “agree[d] that disgorgement of ill-gotten

gains constitutes a nonpunitive relief,” Pet. App. 17a, anc he

acknowledged that his view that the other remedies imposed by

the district court were punitive “has not been adopted by the

courts of this circuit in similar cases.” Pet. App. 15a.

of summary judgment’s propriety in a quasi-criminal

action,” Pet. App. 19a, he would have imposed a

“limited stay” to “preserve the status quo” pending

the resolution of petitioner’s appeal. Pet. App. 23a-

24a.

4. The court of appeals affirmed the district

court’s order granting summary judgment against

petitioner. Pet. App. la-4a. The court rejected peti-

tioner’s claim that the government failed to establish

that he had committed the two racketeering acts

required for liability under RICO. Pet. App. 2a-3a.

The court explained that petitioner’s state court

guilty plea to coercion “conclusively showed that he

had engaged in conduct indictable under the Hobbs

Act,” and that petitioner “had a full and fair opportu-

nity to litigate in state court, and is now precluded

from relitigating the facts underlying his plea.” Ibid.

In addition, the court found, the government estab-

lished that petitioner had repeatedly committed the

state crime of bribery, and the district court properly

drew “an adverse inference from [petitioner’s] failure

to testify in this civil RICO proceeding, notwith-

standing the fact that the [g]overnment, rather than a

private party, is the plaintiff.” Pet. App. 3a. Finally,

the court rejected petitioner’s challenge to the scope

of the injunctive relief ordered by the district court,

noting that it had upheld the district court’s award of

similar injunctive relief against Avellino. Pet. App.

4a (citing United States v. Private Sanitation

Industry Ass’n, supra).

ARGUMENT

l. Petitioner renews his challenge to the district

court’s entry of summary judgment against him,

claiming (Pet. 20-24) that the court erred in drawing

an adverse inference based on his assertion of his

privilege against compulsory self-incrimination and

in according collateral estoppel effect to his guilty

plea. Petitioner also contends (Pet. 24-25) that the

RICO action against him was “quasi-criminal,” and

that the district court’s,‘order granting summary

judgment for the government and awarding injunctive

relief violated his rights under the Due Process

Clause of the Fifth Amendment and the Excessive

Fines Clause of the Eighth Amendment. There is no

merit to those claims.

1. In Baxter v. Palmigiano, 425 U.S. 308 (1976),

this Court held that “the Fifth Amendment does not

forbid adverse inferences against parties to civil

actions when they refuse to testify in response to

probative evidence offered against them: the Amend-

ment ‘does not preclude the inference where the

privilege is claimed by a party to a civil cause.’”

Id. at 318 (quoting 8 J. Wigmore, Evidence 439

(McNaughton rev. 1961)). That holding disposes of

petitioner’s claim that his Fifth Amendment rights

were violated by the district court’s reliance on his

refusal to answer incriminating questions in this

case.

Petitioner asserts (Pet. 21-22) that Baxter is

inapplicable in this case, because the Fifth Amend-

ment is violated by permitting a court in a civil action

brought by the government to draw an adverse

inference from the defendant’s silence in response to

questioning by government officials. That claim,

however, does not serve to distinguish Baxter, which

involved questioning by government officials during

prison disciplinary proceedings. This Court made

clear in Baxter that the critical factor was not that

the invocation of the right to silence occurred in

response to government questioning, but that the

proceeding in which an adverse inference was drawn

(in favor of the State) from the assertion of the right

to silence was not a criminal proceeding. 425 U.S. at

316-320 (no violation of Fifth. Amendment where

government has not “sought to make evidentiary use

of [inmate’s] silence * * * jn any criminal

proceeding”); see Austin v. United States, 113 S. Ct.

2801, 2804 & n.4 (1993) (Self-Incrimination Clause

of Fifth Amendment is “expressly limited to criminal

cases”). Following Baxter, the courts of appeals

have held that in civil actions brought by the govern-

ment, courts may draw an adverse inference from

a defendant’s invocation of the Fifth Amendment

privilege against compulsory self-incrimination in

response to questioning by government officials.

See, e.g., FDIC v. Elio, 39 F.3d 1239, 1248 (1st Cir.

1994); SEC v. Graystone Nash, Inc., 25 F.3d 187, 190-

191 (3d Cir. 1994). Accordingly, the court of appeals in

this case correctly held that the district court pro-

perly drew “an adverse inference from [petitioner’s]

failure to testify in this civil RICO proceeding,

notwithstanding the fact that the [glovernment,

rather than a private party, is the plaintiff.” Pet. App.

3a.4

2. Petitioner’s claim (Pet. 22-23) that the district

court erred in according collateral estoppel effect to

his prior state conviction is equally unavailing. The

full faith and credit statute, 28 U.S.C. 1738, “requires

* Similarly, because this case involves only civil liability,

petitioner’s observation (Pet. 21) that the RICO statute uses

“precisely the same language to create both criminal and civil

liability” is irrelevant. Cf. United States v. United States

Gypsum Co., 438 U.S. 422, 436 n.13 (1978).

10

federal courts to give the same preclusive effect to

state court judgments that those judgments would be

given in the courts of the State from which the

judgments emerged.” Kremer v. Chemical Con-

struction Corp., 456 U.S. 461, 466 (1982). Accord-

ingly, “the federal courts consistently have applied

res judicata and collateral estoppel to causes of action

and issues decided by state courts.” Jd. at 466 n.6; see

Allen v. McCurry, 449 U.S. 90, 95 (1980).

Petitioner makes no argument that the courts of

the State of New York would not accord collateral

estoppel effect to his criminal conviction. He con-

tends only that 18 U.S.C. 1964(d) limits the use of

collateral estoppel in civil RICO actions to cases

in which the United States has obtained a prior

criminal conviction under the RICO statute. Peti-

tioner’s claim is based on a misreading of Section

1964(d). That provision merely states that a federal

RICO conviction “shall estop the defendant from

denying the essential allegations of the criminal

offense in any subsequent civil proceeding brought by

the United States”; it does not limit the use of

collateral estoppel in civil RICO actions to federal

RICO convictions. Full faith and credit principles

require federal courts to respect final state court

judgments unless Congress “plainly state[s]” to the

contrary. Kremer v. Chemical Construction Corp.,

456 U.S. at 485. Nothing in the RICO statute or its

legislative history suggests that Section 1964(d) was

intended to create an exception to those principles.

5 Section 1738 provides that “judicial proceedings of any

court of any * * * State * * * shall have the same full faith

and credit in every court within the United States * * *

as they have by law or usage in the courts of such State.”

11

See County of Cook v. Midcon Corp., 574 F. Supp. 902,

913 (N.D. Ill. 1983), aff’d, 773 F.2d 892 (7th Cir. 1985),

Petitioner also asserts (Pet. 23) that the “factors

articulated by this Court” in Parklane Hosiery Co. v.

Shore, 439 U.S. 322 (1979), weigh against according

collateral estoppel effect to his prior criminal con-

viction, but he does not identify any factor mentioned

in Parklane Hosiery that was not satisfied in this

case. In particular, petitioner fails to show that the

application of collateral estoppel was “unfair,” as he

suggests. As the court of appeals explained (Pet. App.

3a), petitioner “had a full and fair opportunity to

litigate [the criminal charge] in state court, and is

now precluded from relitigating the facts underlying

his plea.” Moreover, petitioner expressly acknowl-

edged at the state court guilty plea proceeding that he

understood that “the entry of this coercion plea * *

* would act as a predicate felony offense for anything

that may occur in the future.” II C.A. App. A673.

3. Petitioner also contends (Pet. 24-25) that the

remedies imposed by the district court subjected him

to punishment that violated the Excessive Fines

Clause of the Eighth Amendment. Contrary to peti-

tioner’s assertion, the Eighth Amendment has no ap-

plication to the relief awarded by the district court.

In Austin v. United States, supra, the Court ex-

plained that “[t]he purpose of the Eighth Amendment

* * was to limit the government’s power to

punish”; thus, the “Excessive Fines Clause limits the

[glovernment’s power to extract payments, whether

in cash or in kind, ‘as punishment for some offense.’ ”

113 S. Ct. at 2805 (quoting Browning-Ferris In-

dustries v. Kelco Disposal, Inc., 492 U.S. 257, 265

(1989)) (emphasis added by the Court).

12

In contrast to the in rem forfeiture at issue in

Austin, which, the Court noted, has “historically

* * * been understood, at least in part, as pun-

ishment,” 113 S. Ct. at 2810, the civil sanctions

available under 18 U.S.C. 1964(a) serve solely reme-

dial purposes. By its terms, Section 1964(a)

authorizes courts in civil RICO actions to order

relief only to “prevent and restrain” violations of the

RICO statute, not to punish past illegal conduct. See

United States v. Carson, No. 94-6044 (2d Cir. Apr. 12,

1995), slip op. 3258 (“the jurisdictional powers in

§ 1964(a) serve the goal of foreclosing future

violations, and do not aiford broader redress”). Thus,

the district court’s order enjoining petitioner from

engaging in activities involving waste disposal,

committing further RICO violations, participating in

the affairs of trade waste associations or labor unions,

and associating with members of organized crime for

commercial purposes was plainly aimed at preventing

future violations of the RICO statute rather than

punishing petitioner for past violations. This Court

has also made clear that divestiture and disgorgement

of proceeds of unlawful activity are nonpunitive

remedies. As the Court explained in United States v.

EI. du Pont de Nemours & Co., 366 U.S. 316, 326

(1961), divestiture is “an equitable remedy designed to

protect the public interest,” and is_ therefore

appropriate in civil proceedings, even though relief in

those proceedings “must not be punitive.” Similarly,

a disgorgement order merely deprives a wrongdoer of

the fruits of his illegal acts and is thus purely

remedial. See Porter v. Warner Holding Co., 328

U.S. 395, 399, 402 (1946); SEC v. Bilzerian, 29 F.3d

689, 696 (D.C. Cir. 1994). In sum, because the

sanctions imposed by the district court can “ ‘fairly be

13

said solely to serve a remedial purpose,’” Austin, 113

S. Ct. at 2806 (quoting United States v. Halper, 490

U.S. 435, 448 (1989)), they are not subject to the

limitations of the Eighth Amendment’s Excessive

Fines Clause.

For the same reasons, there is no basis for peti-

tioner’s claim (Pet. 25) that this civil RICO action

was “quasi-criminal,” and that therefore the entry of

summary judgment violated his rights under the Due

Process Clause.’ The Court observed in Austin that

“protections associated with criminal cases may

apply to a civil forfeiture proceeding if it is so puni-

tive that the proceeding must reasonably be con-

sidered criminal.” 113 S. Ct. at 2805 n.4. In this case,

as we have explained, the remedies imposed by the

district court were nonpunitive. Accordinjly, the

district court’s order granting summary judgment

for the government in this civil action did not violate

petitioner’s due process rights.

6 Petitioner relies (Pet. 24-25) on Judge Heaney’s dissent

from the denial of his motion for a stay pending appeal. Judge

Heaney acknowledged (Pet. App. 15a), however, that his view

that the remedies imposed by the district court were punitive

and that summary judgment therefore was inappropriate in

this civil RICO action had “not been adopted by the courts of

this circuit,” and we are aware of no other court that has

endorsed that position. ;

14

CONCLUSION

The petition for a writ of certiorari should be

denied.

Respectfully submitted.

DREw S. Days, III

Solicitor General

JO ANN HARRIS

Assistant Attorney General

NINA GOODMAN )

Attorney |

JUNE 1995