1994 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

11-1-1994

Gasoline Sales, Inc. v. Aero Oil Co., et al.

Precedential or Non-Precedential:

Docket 93-7555

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Recommended Citation

"Gasoline Sales, Inc. v. Aero Oil Co., et al." (1994). 1994 Decisions. Paper 174.

http://digitalcommons.law.villanova.edu/thirdcircuit_1994/174
 

 UNITED STATES COURT OF APPEALS 

 FOR THE THIRD CIRCUIT 

 

 N0. 93-7555 

 

 GASOLINE SALES, INC. 

 Appellant 

v. 

 AERO OIL COMPANY; GETTY PETROLEUM CORPORATION; 

.... JERRY T. LANK; ALVIN SMITH; RECO PETROLEUM, INC. 

 

 On Appeal From the United States District Court 

 For the Middle District of Pennsylvania 

 (D.C. Civil Action No. 92-01771) 

 

 Argued March 1, 1994 

 BEFORE: STAPLETON and SCIRICA, Circuit Judges, and 

 SMITH, District Judge* 

 (Opinion Filed November 1, 1994) 

 

 

Frederick J. Fanelli (Argued) 

221 Mahantongo Street 

Pottsville, PA 17901 

Attorney for Appellant 

Joseph M. Hankins (Argued) 

Joseph A. Dougherty 

BRITT, HANKINS, SCHAIBLE & MOUGHAN 

Two Penn Center Plaza 

Suite 515 

Philadelphia, PA 19102 

Attorneys for Appellees 

 

*Honorable D. Brooks Smith, United States District Judge for the 

Western District of Pennsylvania, sitting by designation. 
 

 OPINION OF THE COURT

 

STAPLETON, Circuit Judge: 

 Gasoline Sales, Inc. ("Gas Sales") sued three related 

corporations and officers of two of the corporations. Gas Sales 

alleged that the defendants injured Gas Sales in the course of 

violating the Racketeer Influenced and Corrupt Organizations 

("RICO") chapter of the Organized Crime Control Act of 1970, 18 

U.S.C. §§ 1961-68. The district court dismissed Gas Sales' 

second amended complaint pursuant to Fed. R. Civ. Pro. 12(b)(6) 

for failure to state a claim upon which relief could be granted. 

Gas Sales appeals from this dismissal. It also appeals from the 

district court's ruling refusing to grant it leave to file a 

third amended complaint. The primary question raised on appeal 

is whether Gas Sales has satisfied the "person/enterprise" 

pleading requirement which we have held applies in RICO suits 

premised on 18 U.S.C. § 1962(c). See B.F. Hirsch v. Enright 

Refining Co., 751 F.2d 628 (3d Cir. 1984). We hold that Gas 

Sales has failed to satisfy this requirement, and we will 

therefore affirm the judgment of the district court. 
I.

A.

 Because the district court dismissed Gas Sales' second 

amended complaint at the pleading stage pursuant to Rule 

12(b)(6), we must consider whether relief could be granted to Gas 

Sales "under any set of facts that could be proved consistent 

with the allegations" in its complaint. National Organization 

For Women, Inc. v. Scheidler, ___ U.S. ___, 114 S. Ct. 798, 803 

(1994) quoting Hishon v. King & Spalding, 467 U.S. 69, 73 (1984). 

The relevant allegations are as follows. 

 The defendants are a corporation, Getty Petroleum Corp. 

("Getty"); Getty's two wholly-owned subsidiaries, Aero Oil 

Company ("Aero"), and Reco Petroleum, Inc. ("Reco"); Getty's 

senior vice-president, Alvin Smith; and Aero's general manager, 

Jerry T. Lank. Getty, Aero, and Reco are engaged in the leasing 

of retail gasoline stations and the sale of petroleum products. 

Getty acquired Aero in 1986, and acquired Reco on June 30, 1989. 

 Getty originally was incorporated under the name of 

Power Test Corporation ("Power Test"), but changed its name in 

1985. Between 1982 and 1985, Getty -- then called Power Test -- 

violated New York State statutes by defrauding 182 New York 

gasoline-station lessees. In 1986, the New York Attorney General 

filed a civil suit against Getty on behalf of the 182 lessees. 

Getty settled the suit for a large monetary payment. 

 In 1990, in the District Court for the Eastern District 

of New York, a Getty subdivision named Getty Terminals Corp. 
(which is not a party to this lawsuit) was convicted of tax 

evasion and conspiracy to defraud the United States. 

 From 1986 to 1991, in Pennsylvania and Maryland, the 

defendants have engaged in a widespread fraudulent scheme, 

through the use of both mail and wire communications, to induce 

the plaintiff Gas Sales and at least twenty others to enter into 

retail-gasoline-station lease-agreements with the defendants. 

Once the lessees entered into the contracts, the defendants would 

embark on a course of fraudulent conduct designed to render the 

retail gasoline-stations unprofitable and thereby "squeeze" the 

lessees out of business. 

B.

 The district court had jurisdiction over Gas Sales' 

complaint pursuant to RICO, 18 U.S.C. § 1964(c). We have 

jurisdiction over this appeal pursuant to 28 U.S.C. § 1291. 

II.

A.

 In 18 U.S.C. § 1964(c), RICO provides a private civil 

right of action to "any person injured . . . by reason of a 

violation of" the substantive RICO provisions contained in 18 

U.S.C. § 1962. Gas Sales alleges that it was injured by 

violations of one of these substantive provisions -- section 

1962(c). A "person" violates section 1962(c) by conducting an 
"enterprise" through a pattern of racketeering activity.1 

Sedima, S. P. R. L. v. Imrex Co., 473 U.S. 479, 496 (1985). 

"Racketeering activity" is defined by RICO as any of a host of 

enumerated crimes, including mail and wire fraud. 18 U.S.C. 

§ 1961(1). "Pattern" is defined as the commission of at least 

two acts of "racketeering activity" within a ten-year period. 

18 U.S.C. § 1961(5). 

 The parties do not dispute whether Gas Sales has 

alleged facts sufficient to satisfy the "racketeering" and 

"pattern" elements of a section 1962(c) violation. They dispute 

whether Gas Sales has alleged facts sufficient to establish that 

any of the defendants engaged in the "conduct of an enterprise." 

Since B.F. Hirsch v. Enright Refining Co., 751 F.2d 628 (3d Cir. 

1984), we have held that to plead a claim successfully under 

section 1962(c), a complaint must be capable of being read to 

allege that a "person" was "conducting a pattern of racketeering 

through a separate and distinct enterprise." Glessner v. Kenny, 

952 F.2d 702, 714 (3d Cir. 1991) (emphasis added); see also Banks 

v. Wolk, 918 F.2d 418, 421 (3d Cir. 1990); Kehr Packages, Inc. v. 

Fidelcor, Inc., 926 F.2d 1406, 1411 (3d Cir. 1991); Brittingham 

 

1. In its entirety, section 1962(c) states: "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." 
v. Mobil Corp., 943 F.2d 297, 300 (3d Cir. 1991); Lorenz v. CSX 

Corp., 1 F.3d 1406, 1413 & n.4; Lightning Lube, Inc. v. Witco 

Corp., 4 F.3d 1153, 1191 (3d Cir. 1993). 

 Gas Sales has pled that Getty, Lank, and Smith were 

"persons" who conducted the "enterprise" or "enterprises" of Aero 

and Reco.2 RICO's definitions of "person" and "enterprise" are 

quite broad. Each includes human beings and legal entities, and 

"enterprise" also includes unofficial "associations" of human 

beings and/or legal entities.3 Thus, in RICO terms, any of the 

defendants could be a "person," and any of the defendants or any 

combination of the defendants could be an "enterprise." However, 

under our precedents, none of the defendants is sufficiently 

distinct from the "enterprises" Aero and Reco to have conducted 

them within the meaning of section 1962(c). 

1.

 Only "persons" can be sued for violating RICO 

§ 1962(c). Petro-Tech, Inc. v. Western Co. of North America, 824 

F.2d 1349, 1358 n.* (3d Cir. 1987). Because Gas Sales has 

alleged that Aero and Reco were conducted as "enterprises" in 

violation of section 1962(c), and because we have held that 

enterprises cannot conduct themselves within the meaning of 

 

2. Gas Sales has not stated whether it alleges Reco and Aero 

constitute one or two enterprises. 

3. "Person" is defined to "include[ ] any individual entity 

capable of holding a legal or beneficial interest in property." 

18 U.S.C. § 1961(3). "Enterprise" is defined to "include[ ] any 

individual, partnership, corporation, association, or other legal 

entity, and any union or group of individuals associated in fact 

although not a legal entity." 18 U.S.C. § 1961(4). 
section 1962(c), Gas Sales cannot sue Aero or Reco under section 

1962(c). B.F. Hirsch v. Enright, 751 F.2d at 633-34; Banks v. 

Wolk, 918 F.2d at 421; Kehr Packages, 926 F.2d at 1411. For the 

same reason, Aero cannot be vicariously liable for any 1962(c) 

violation committed by Lank, its vice president, in conducting 

Aero through a pattern of racketeering. Petro-Tech, 824 F.2d at 

1351, 1358-60; Kehr Packages, 926 F.2d at 1411. 

2.

 We have also held that a corporation generally cannot 

be a defendant under section 1962(c) for conducting an 

"enterprise" consisting of its own subsidiaries or employees, or 

consisting of the corporation itself in association with its 

subsidiaries or employees. Brittingham, 943 F.2d at 302-03; 

Glessner, 952 F.2d at 710-13; Lorenz, 1 F.3d at 1411-13. This is 

because we have interpreted corporate identity expansively, so 

that the actions of a corporation's agents conducting its normal 

affairs are constructively its own actions for section 1962(c) 

purposes. Brittingham, 943 F.2d at 302; Glessner, 952 F.2d at 

710-12. Under this "Brittingham rationale," Getty cannot be sued 

by Gas Sales for conducting its subsidiaries Aero and Reco any 

more than it could be sued for conducting itself. 

 We have hypothesized that a "narrow," "theoretical," 

and "rare" exception to the Brittingham rule might exist, when 

there are allegations that the defendant corporation "had a role 

in the racketeering activity that was distinct from the 

undertakings of those acting on its behalf." Brittingham, 943 

F.2d at 302; see also Glessner, 952 F.2d at 712; Lorenz, 1. F.3d 
at 1413 n.4. Gas Sales has not so alleged, however. As the 

district court accurately recounted, Gas Sales has alleged that 

Getty and its two subsidiaries acted in concert in furtherance of 

a common scheme to defraud gasoline station lessees. Gas Sales' 

complaints, far from distinguishing Getty's role in the scheme, 

closely identify Getty's actions with the actions of Aero and 

Reco. 

3.

 We have held that corporate employees who victimize 

their employer by draining it of its own money or using it as a 

passive tool to extract money from third parties are proper 

section 1962(c) defendants. Glessner, 952 F.2d at 713. Where 

the employees merely participate in the corporation's own fraud 

by acting as corporate agents, however, the employees may not be 

sued under section 1962(c). Id. at 713-14. We have stated that 

this interpretation of 1962(c) "avoids the absurd result that a 

corporation may always be pled to be the enterprise controlled by 

its employees or officers." Id. at 713. 

 Gas Sales has not alleged that Smith and Lank profited 

personally from the conducting of Getty, Aero, or Reco's affairs 

beyond the compensation they receive for their services to the 

corporation or that they acted as anything other than Getty and 

Aero's agents. Gas Sales therefore cannot sue Smith and Lank 

under section 1962(c). 
B.

 The third amended (i.e. fourth) complaint that Gas 

Sales seeks to file, minimizes any allegation of an active 

racketeering role by the subsidiaries Aero and Reco, and also 

includes a new legal theory of liability for violation of RICO 

§ 1962(b).4 The district court refused to permit the filing of 

the amendment because it was repetitive, or, in the alternative, 

because it was futile. This was not an abuse of discretion. See

Foman v. Davis, 371 U.S. 178, 182 (1962); Lorenz, 1 F.3d at 1413-

14; Glessner, 952 F.2d at 714. 

 First, as the district court stated, "three attempts at 

a proper pleading is enough," and a "plaintiff has to carefully 

consider the allegations to be placed in a complaint before it is 

filed." Dist. Ct. Mem. Op. at 12. Gas Sales is not seeking to 

add claims it inadvertently omitted from its prior complaints or 

which it did not know about earlier. Rather, Gas Sales is 

modifying its allegations in hopes of remedying factual 

deficiencies in its prior pleadings, even to the point of 

contradicting its prior pleadings. 

 Second, regarding Gas Sales' section 1962(c) theory of 

liability, the third amended complaint still contains sufficient 

 

4. 18 U.S.C. § 1962(b) states: "It shall be unlawful for any 

person through a pattern of racketeering activity or through 

collection of an unlawful debt to acquire or maintain, directly 

or indirectly, any interest in or control of any enterprise which 

is engaged in, or the activities of which affect, interstate or 

foreign commerce." Anyone injured by reason of a violation of 

section 1962(b), may sue the violator pursuant to 18 U.S.C. 

§ 1964(c). 
allegations of concerted behavior by Getty, Aero, and Reco that 

it fails to establish that Getty played a distinctive and 

separate role in the alleged racketeering activity. 

 Finally, regarding section 1962(b), we have not yet 

decided whether the "person/enterprise" distinction is a 

necessary element of a violation of that section. Lightning 

Lube, 4 F.3d at 1190-91. Nonetheless, we need not resolve the 

issue now, because proof of a violation of that section requires 

a showing that the plaintiff was injured by the defendant's 

acquisition or control of an interest in an enterprise through 

racketeering. Id. at 1189-91. Gas Sales does not allege in its 

third amended complaint that it was injured by Getty's 

acquisition or maintenance of control over Aero and Reco, or that 

Getty's acquisition or maintenance of control over these 

subsidiaries was accomplished through racketeering. It would be 

futile, therefore, to permit Gas Sales to file its third amended 

complaint on section 1962(b) grounds. 

III.

 For the foregoing reasons, the judgment of the district 

court will be affirmed.