Source: https://law.justia.com/cases/federal/appellate-courts/F2/941/1220/402789/
Timestamp: 2020-07-06 01:51:54
Document Index: 328316197

Matched Legal Cases: ['§ 351', '§ 351', '§ 351', '§ 1961', '§ 351', '§ 4', '§ 4', '§ 4', '§ 1961', '§ 1961', '§ 1962', '§ 1964', '§ 1962', '§ 1962', '§ 1962', '§ 1962', '§ 1962', '§ 1962', '§ 1962', '§ 1962', '§ 1962', '§ 1962', '§ 1962', '§ 1962', '§ 1962', '§ 1964', '§ 1962', '§ 1962', '§ 1962', '§ 1962', '§ 1962', '§ 1962']

Lloyd T. Danielsen, et al., Appellants, v. Burnside-ott Aviation Training Center, Inc., et al, 941 F.2d 1220 (D.C. Cir. 1991) :: Justia
Justia › US Law › Case Law › Federal Courts › Courts of Appeals › D.C. Circuit › 1991 › Lloyd T. Danielsen, et al., Appellants, v. Burnside-ott Aviation Training Center, Inc., et al
Lloyd T. Danielsen, et al., Appellants, v. Burnside-ott Aviation Training Center, Inc., et al, 941 F.2d 1220 (D.C. Cir. 1991)
US Court of Appeals for the District of Columbia Circuit - 941 F.2d 1220 (D.C. Cir. 1991) Argued May 2, 1991. Decided Aug. 16, 1991
In 1965, Congress determined that "the service contract is the only remaining category of Federal contracts to which no labor standards protection applies." S.Rep. No. 798, 89th Cong., 1st Sess. 1 (1965), U.S.Code Cong. & Admin.News 1965, p. 3737. To correct this perceived omission, Congress enacted the McNamara-O'Hara Service Contract Act, a labor standards statute applicable to service contracts. See 41 U.S.C. §§ 351-358 (1988). That Act requires every federal government contract exceeding $2,500 (with exceptions not relevant here), "the principal purpose of which is to furnish services ... through the use of service employees," to contain minimum wage provisions for each class of service employees in the performance of the contract. 41 U.S.C. § 351(a). More specifically, the SCA provides that contracts and bid specifications must contain "(1) a provision specifying the minimum monetary wages to be paid the various classes of service employees" and "(2) a provision specifying the fringe benefits to be furnished the various classes." 41 U.S.C. § 351(a) (1) and (2). As to each such provision, the statute requires the Secretary of Labor to make a determination of the applicable minimum wages and fringe benefits based on prevailing rates in the locality of the performance of the contract. Id.
Congress enacted the RICO statute, 18 U.S.C. §§ 1961-1968, as Title IX of the Organized Crime Control Act of 1970, Pub. L. No. 91-452, 84 Stat. 922 (1970) ("OCCA"). After extensive hearings and investigations presided over by Senator McClelland, a principal sponsor of the legislation, Congress in the OCCA sought to combat criminal organizations at large in the American commercial republic. Title IX, RICO, was designed specifically to remove the tentacles of organized crime from legitimate business. See generally Lynch, RICO: The Crime of Being a Criminal, 87 Colum. L. Rev. 920, 972-73 (1987). As an administration official testifying in support of the adoption of RICO--with the blessings of Senator McClelland--stated during hearings on the bill, RICO was drafted with the intention of providing "devices [that] can prove effective in cleaning up organizations corrupted by the forces of organized crime." 116 Cong.Rec. 18,939-40 (1970).
Appellants are the three named plaintiffs in the District Court action suing individually and as representatives of a class of "all other persons ... who, during the period of approximately October 1, 1981 to the present, were or are service employees of either Dyncorp, Burnside-Ott, UNC Support, or UNC." Appellants brought suit against five corporations: (1) Burnside-Ott Aviation Training Center, Inc.; (2) UNC Services, a wholly owned subsidiary of UNC, Inc.; (3) UNC, Inc.; (4) Dyncorp (formerly Dynalectron Corp.); and (5) BOC of Miami, Inc.; as well as four natural persons: William V. Ott, Robert C. Ott, Donald Burnside, and Marjorie Burnside, each sued "individually and as trustee to BOC of Miami, Inc.," and all designated in the complaint as "the directors of BOC, and ... upon information and belief ... shareholders in Burnside-Ott prior to its sale to UNC, Inc." Appellants' Complaint at 7, Danielsen v. Burnside-Ott Aviation Training Center, Inc., 746 F. Supp. 170 (D.D.C. 1990). For good measure, the complaint adds ten more defendants designated as "John Doe Defendants One through Ten," described in the complaint only as "unknown present or former employees, officers or directors of Burnside-Ott, UNC Support, UNC, Dyncorp, and/or BOC who have engaged in interstate commerce through racketeering activities on behalf of themselves and [all the named corporations]." Id.
The factual allegations concern events surrounding five maintenance contracts, each of which the Department of the Navy awarded to one of the corporate defendants, and some of which one defendant obtained and subsequently assigned to another. According to the allegations of the complaint, see Danielsen v. Burnside-Ott Aviation Training Center, Inc., 746 F. Supp. 170 (D.D.C. 1990), before 1981, the Navy performed its own maintenance service on the aircraft covered by the five contracts. In September of 1981, however, the Navy contracted out the maintenance services for its TH-57 helicopters to Burnside-Ott Aviation Training Center, Inc.
The litigation in this case concerns all five of the above contracts, that is, the three TH-57 maintenance contracts and the two contracts for maintenance of the T-2 and T-34/44 fixed-wing aircraft. The contracts are governed by the SCA, as "the principal purpose of ... [each] is to furnish services in the United States through the use of service employees." Pursuant to the SCA, the contracts included provisions specifying "minimum monetary wages to be paid to various classes of service employees" involved in the performance of the contracts. 41 U.S.C. § 351. In keeping with the implementing regulations, the contracts further contained provisions classifying employees in positions not listed on the wage determination in such a fashion "as to provide a reasonable relationship (i.e., appropriate level of skill comparison) between such unlisted classifications and the classifications listed in the wage determination." 29 C.F.R. § 4.6(b) (2) (i). The phrase "wage determination" in § 4.6(b) (2) (i) refers back to the determination made by the Secretary as specified in such determination attached to the contract, pursuant to § 4.6(b) (1).
Defendants moved to dismiss all counts for failure to state claims upon which relief could be granted. On August 27, 1990, the District Court filed a memorandum explaining its reasoning that the SCA had "preempted" this area of law to the exclusion of RICO so that the first four counts failed to state claims upon which relief could be granted. Danielsen, 746 F. Supp. at 170. As the jurisdiction over Count V was purely pendent, the District Court dismissed it as well. Appellants then filed this appeal.
We agree with the District Court that the statutory scheme for administrative relief set forth by Congress in the SCA leaves no room for a RICO action on the present allegations. We have a slight semantic difficulty with the use of the word "preemption" for the concepts we discuss in this section. We recognize that this use of "preempt" is not inconsistent with uses of that word in the labor law context. For example, in Amalgamated Association of Street Employees, etc. v. Lockridge, 403 U.S. 274, 276, 91 S. Ct. 1909, 1913, 29 L. Ed. 2d 473 (1971), the Supreme Court held that the NLRA "preempts state and federal court jurisdiction to remedy conduct that is arguably protected or prohibited by the Act." Most recent use of the word in federal jurisprudence, however, generally has been in the context of the "preemption doctrine," which recognizes that "certain matters are of such a national, as opposed to local, character that federal laws pre-empt or take precedence over state laws." Black's Law Dictionary 1060 (West 5th ed. 1979) (emphasis added). As the present case raises a narrower question, our task is more accurately described as determining whether there is a statutory provision of an exclusive remedy rather than the preemption of an entire field. Therefore, while we agree with the District Court in its conclusion, we differ in terminology.
While prior litigation has not focused on RICO, other circuits previously have held that no private civil action will lie under the SCA. The Ninth Circuit faced the question in Miscellaneous Service Workers, etc. v. Philco-Ford Corp., 661 F.2d 776 (9th Cir. 1981) ("MSW"). Plaintiffs in that case, as here, sued a service contractor alleging violations of the SCA similar to those alleged in the present case. That circuit noted that "the question whether a private right of action is conferred by a federal statute is essentially one of interpreting congressional intent." Id. at 780 (citations omitted). The MSW court then applied the four-fold test drawn from Cort v. Ash, 422 U.S. 66, 95 S. Ct. 2080, 45 L. Ed. 2d 26 (1975). That test asks:
MSW, 661 F.2d at 780 (internal quotations omitted). While noting that the service workers' complaint passed the first test, the Ninth Circuit determined that it failed the next two. As to the second test, " [p]laintiffs confuse an intention to confer rights--which Congress does repeatedly through legislation--with the specification of remedies for the protection of those rights." Id. Nothing in the language of the SCA provides any indication that Congress intended to create a private cause of action.
When the Eleventh Circuit considered an attempted action by a union under the SCA, that court referred to MSW as "the Ninth Circuit's in-depth analysis of the SCA, and its correct application of the Cort test, fully support [ing] its conclusion that both before and after the 1972 amendments, Congress did not intend to authorize private suits to enforce the Act." District Lodge No. 166, International Association of Machinists & Aerospace Workers v. TWA Services, Inc., 731 F.2d 711, 715 (11th Cir. 1984), cert. denied, 469 U.S. 1209, 105 S. Ct. 1175, 84 L. Ed. 2d 324 (1985). The Eleventh Circuit agreed with the Ninth Circuit's analysis and conclusions; so do we.
Not only is the Ninth Circuit's application of the Cort test unassailable as a matter of logic, but its decision in MSW is consistent with our own precedent in a distinguishable but closely analogous application of the SCA. In International Association of Machinists & Aerospace Workers v. Hodgson, 515 F.2d 373 (D.C. Cir. 1975), a union brought an action challenging the decision of the Secretary not to issue wage determinations for a particular project pursuant to the SCA and seeking to recover damages from a contractor which had entered a contract with the National Aeronautics and Space Administration without such a wage determination. We affirmed the District Court's dismissal of that action in part "because the Act does not provide such a remedy." Id. at 379. In so doing, we noted that Congress had amended the SCA in 1972, see Pub. L. No. 92-473, to restrict the Secretary of Labor's discretion not to issue a wage determination, but that the amendments "do not create new remedies against contractors." Id. at 379 n. 9. While that case is factually distinct from the present one, as it involved allegations of nondetermination rather than misdetermination of classification, the absence of statutory private remedy is no different. In short, by all authority and reason, it is plain that the SCA creates no private remedy.
True, racketeering activity encompasses "any act which is indictable under any of the following provisions of title 18, United States Code: ... section 1341 (relating to mail fraud)." 18 U.S.C. § 1961(1). But it is not obvious that to fall short of the contract requirements of the SCA constitutes the "devi [sing] of a scheme or artifice to defraud," 18 U.S.C. § 1961(1), especially given the familiar requirements of the Federal Rules of Civil Procedure, "in all averments of fraud ... the circumstances constituting fraud ... shall be stated with particularity." Fed. R. Civ. P. 9(b).
In Count I, appellants attempt to allege a claim for violation of 18 U.S.C. § 1962(a). This section makes it unlawful to use or invest income derived from a pattern of racketeering activity in an enterprise. The civil remedy created by § 1964(c) authorizes recovery only for injury "by reason of" the RICO violation. Therefore, a plaintiff claiming under § 1962(a) must plead and prove that his injury flowed from the defendant's use or investment of racketeering income. It is not sufficient to allege injury flowing from the predicate acts of racketeering. See, e.g., Craighead v. E.F. Hutton & Co., Inc., 899 F.2d 485, 494 (6th Cir. 1990); Rose v. Bartle, 871 F.2d 331, 357-58 (3d Cir. 1989); Grider v. Texas Oil & Gas Corp., 868 F.2d 1147, 1149-50 (10th Cir.), cert. denied, 493 U.S. 820, 110 S. Ct. 76, 107 L. Ed. 2d 43 (1989).
Although there is some contrary authority to the effect that the predicate act injury is sufficient to provide standing to a claimant under § 1962(a), see, e.g., Mid-State Fertilizer Co. v. Exchange Nat'l Bank of Chicago, 693 F. Supp. 666, 671 (N.D. Ill. 1988), we agree with the majority of courts in holding that "the allegation of income use or investment injury is consistent with both the literal language and the fair import of the language of section 1962(a)." Rose, 871 F.2d at 358 (internal signals and citations omitted). Indeed, we find this requirement so consistent with the language and import of the RICO statute that not requiring this allegation would be untenable.
This reply ignores the well-established rule of law that in reviewing the decision of a lower court, an appellate court can affirm a correct decision even if on different grounds than those assigned in the decision under review. See, e.g., SEC v. Chenery Corp., 318 U.S. 80, 88, 63 S. Ct. 454, 459, 87 L. Ed. 626 (1943); Helvering v. Gowran, 302 U.S. 238, 245, 58 S. Ct. 154, 157-58, 82 L. Ed. 224 (1937). This is especially true where we are reviewing the grant of a motion to dismiss for failure to state a claim upon which relief can be granted, a pure question of law which we review de novo. Wells v. Walker, 852 F.2d 368, 370 (8th Cir. 1988), cert. denied, 489 U.S. 1012, 109 S. Ct. 1121, 103 L. Ed. 2d 184 (1989); North Star Int'l v. Arizona Corp. Comm'n, 720 F.2d 578, 580 (9th Cir. 1983). Thus, if appellants have a response to this argument, they would have done well to have asserted it. Apparently they have none.
When questioned at oral argument, appellants' counsel contended that the conduct of the affairs of the enterprise through the alleged pattern of racketeering activity should be sufficient to satisfy the requirements of § 1962(a), not only § 1962(c). If this were so, indeed, if it were true under any theory that a predicate act injury would be sufficient to provide standing to a claimant under § 1962(a), then it would be difficult to understand why Congress enacted § 1962(a). In other words, if allegations sufficient to base a § 1962(c) action meet all the requirements of a § 1962(a) allegation, then why did Congress pass both? We are required to interpret acts of Congress in such a fashion as to give meaning to each word of the statute. Connecticut Dep't of Income Maintenance v. Heckler, 471 U.S. 524, 530, 105 S. Ct. 2210, 2213-14, 85 L. Ed. 2d 577 (1985); Consolidated Rail Corp. v. ICC, 896 F.2d 574, 578 (D.C. Cir. 1990). To meet this standard in construing RICO, we must conclude that there is some different requirement for violation of § 1962(a) than for violation of § 1962(c). Accordingly, we must give effect to the words "to use or invest such income." In terms of the civil remedy, the requirement that plaintiff must have suffered injury "by reason of" the violation of § 1962(a) prohibiting use or investment differs from that arising from § 1962(c) prohibiting the conduct of the affairs. To hold otherwise would render one of the two subsections of the same statute redundant.
In Count II, appellants attempt to allege a claim for violation of § 1962(b). That section makes it unlawful to acquire control of an enterprise through a pattern of racketeering activity. Therefore, given the language of § 1964(c) set forth above, plaintiffs must allege an "acquisition" injury, analogous to the "use or investment injury" required under § 1962(a) to show injury by reason of a § 1962(b) violation. Old Time Enterprises, Inc. v. International Coffee Corp., 862 F.2d 1213, 1219 (5th Cir. 1989) (asserted claims under §§ 1962(a) and (b) properly dismissed "where the complaint fails to identify and describe any proximate causal relationship between an acquisition of an interest in an enterprise, through a pattern of racketeering activity or with income derived therefrom, and the damages claimed by [plaintiff]").
In Count III, appellants attempt to allege a claim for violation of § 1962(c). A civil RICO plaintiff claiming a violation of § 1962(c) must allege and prove (1) an injury to his business or property by reason of the violation; (2) the existence of an enterprise; (3) that the defendant was employed by or associated with the enterprise; (4) that the defendant participated in the conduct of the enterprise's affairs; and (5) that the participation was through a pattern of racketeering activity. See Yellow Bus Lines, Inc. v. Drivers, Chauffeurs & Helpers Local Union 639, 913 F.2d 948, 950 (D.C. Cir. 1990) (en banc), cert. denied, --- U.S. ----, 111 S. Ct. 2839, 115 L. Ed. 2d 1007 (1991). See also Sedima S.P.R.L. v. Imrex Co., 473 U.S. 479, 496, 105 S. Ct. 3275, 3285, 87 L. Ed. 2d 346 (1985) (elements of a § 1962 violation are "(1) conduct, (2) of an enterprise, (3) through a pattern, (4) of racketeering activity").
The District Court entertained the claim within its pendent jurisdiction. As is well known, " [p]endent jurisdiction, in the sense of judicial power, exists whenever there is a [federal] claim ... and the relationship between that claim and the state claim permits the conclusion that the entire action before the court comprises but one constitutional 'case.' " United Mine Workers v. Gibbs, 383 U.S. 715, 725, 86 S. Ct. 1130, 1138, 16 L. Ed. 2d 218 (1966) (emphasis in original). Of course, this is a discretionary power on the part of the court, and it would be rare that we would reverse a district court for declining to exercise it. More pertinent to the present case, the Supreme Court has made it plain that " [c]ertainly, if the federal claims are dismissed before trial, even though not insubstantial in a jurisdictional sense, the state claims should be dismissed as well." Id. at 726, 86 S. Ct. at 1139. The District Court quite properly followed that course in dismissing Count V.
It may be credibly argued that appellants set forth no claim for relief in Count V in the first place. Any such claim may be barred by the exclusivity of remedy created in the SCA as we held in reference to the RICO claims and as the Ninth Circuit held in reference to all claims in MSW, supra. Moreover, it may be that the allegations of the complaint do not meet the heightened pleading requirement for fraud as set forth in Fed. R. Civ. P. 9(b). These may be fine arguments, but they are for another day. On this day, we affirm the District Court's plainly correct decision that, absent the jurisdictional peg of RICO, there was nothing to hold this pendent claim within the federal court. When that peg was pulled, the pendent claim fell.
On the same date, appellants commenced a companion suit against the Secretary of Labor and the Secretary of the Navy seeking a writ of mandamus compelling the departments to collect back wages from the same defense contractors sued in this litigation alleging the same SCA violations. The District Court dismissed that action on August 27, 1990, for failure to state a claim upon which relief could be granted. Danielsen v. Dole, 746 F. Supp. 160 (D.D.C. 1990). By order of January 3, 1991, a panel of this Court granted summary affirmance. Danielsen v. Dole, No. 90-5302, 1991 WL 2248 (D.C. Cir. Jan. 3, 1991)
Although the statute is not explicit on the question, this jurisdiction is nonexclusive. State courts enjoy concurrent jurisdiction over civil RICO claims. Tafflin v. Levitt, 493 U.S. 455, 110 S. Ct. 792, 107 L. Ed. 2d 887 (1990)