Source: https://m.openjurist.org/975/f2d/1134/tel-phonic-services-inc-v-tbs-international-inc
Timestamp: 2017-11-20 03:54:01
Document Index: 28406076

Matched Legal Cases: ['§ 1961', '§ 3827', '§ 1404', '§ 1404', '§ 1406', '§ 201', '§ 201', '§ 13', '§ 13', '§ 13', '§ 1294', '§ 1404', '§ 1406', '§ 1404', '§ 1406']

975 F. 2d 1134 - Tel-Phonic Services Inc v. Tbs International Inc
975 F2d 1134 Tel-Phonic Services Inc v. Tbs International Inc
975 F.2d 1134
1992-2 Trade Cases P 70,014, 24 Fed.R.Serv.3d 128,
RICO Bus.Disp.Guide 8139
TEL-PHONIC SERVICES, INC., William Kirk, and John Bowen,
TBS INTERNATIONAL, INC. a/k/a Dy-Con, International, Inc.
and the Dispatch Printing Company, Defendants-Appellees.
Plaintiffs have stated one claim of mail fraud, in their allegation that TBS wrote an April 27, 1983, letter "with false representations inducing plaintiffs to change the agreement to allow TBS to sell two new systems to the Bell subsidiary falsely representing that TBS would buy back two systems from plaintiff." Am.Compl. p 28. TBS had allegedly previously agreed that Plaintiffs could sell their two TBS systems to the Bell subsidiary, and, through this false representation, TBS secured the profitable sale for itself. See Am. Compl. p 27, Compl. pp 40-41. We find this allegation of fraud sufficient to withstand Rule 9(b). The filing of the complaint within four years of this alleged mail fraud preserves the right to RICO damages caused by that act, if Plaintiffs can prove a pattern of racketeering activity. See Agency Holding Corp. v. Malley-Duff & Associates, Inc., 483 U.S. 143, 155-56, 107 S.Ct. 2759, 2767, 97 L.Ed.2d 121 (1987) (applying four-year limitation period of analogous Clayton Act claims to civil RICO actions in the interest of uniformity);4 Zenith Radio Corp. v. Hazeltine Research, Inc., 401 U.S. 321, 338, 91 S.Ct. 795, 806, 28 L.Ed.2d 77 (1971) (holding that in "continuing conspiracy" to violate antitrust laws, statute of limitations for damages for a particular act causing injuries runs from the commission of the act); Al George, Inc. v. Envirotech Corp., 939 F.2d 1271, 1273 & n. 3 (5th Cir.1991) (recognizing Zenith 's rule of separate accrual for overt acts in an antitrust "continuing conspiracy," and noting that under Agency Holding RICO claims are subject to the same limitation period as anti-trust claims).
To prove a "pattern of racketeering activity," a plaintiff must show at least two predicate acts of racketeering that are related and amount to or pose a threat of continued criminal activity. 18 U.S.C.A. § 1961(5); H.J., Inc. v. Northwestern Bell Tel. Co., 492 U.S. 229, 238, 109 S.Ct. 2893, 2900, 106 L.Ed.2d 195 (1989). Upon review of the complaints, we find that Plaintiffs may be able to prove a second predicate act consistent with the allegations that Robert Adler misrepresented to Plaintiffs' representative (via telephone conversation on September 4, 1982) that certain call programs were "delayed" (when the call programs were actually going to a competitor of Plaintiffs, a sister corporation of Defendant TBS). See Am.Compl. pp 9-10. Establishing the minimum number of predicates, however, is not sufficient to establish a pattern; the racketeering predicates must be related and amount to or pose a threat of continued criminal activity. H.J., Inc., 492 U.S. at 236-239, 109 S.Ct. at 2899-2900.
Even assuming that these two predicate acts establish the pattern "relationship" element, the alleged predicate acts lack the "continuity" element required to establish a RICO pattern. "Continuity" is a temporal concept. Id. 492 U.S. at 242-243, 109 S.Ct. at 2902. RICO reaches activities that "amount to or threaten long-term criminal activity." Id. 492 U.S. at 243 n. 4, 109 S.Ct. at 2902 n. 4. The complaints cover a time frame from early 1981 through mid-1984 or beyond. (The Amended Complaint was filed in September 1988). Yet these two alleged instances of fraud occurred only seven months apart.
"Continuity" refers "either to a closed period of repeated conduct, or to past conduct that by its nature projects into the future with a threat of repetition." Id. 492 U.S. at 241, 109 S.Ct. at 2902.
Id. In this case, there is no such continuity alleged. There has been no "specific threat of repetition," nor any suggestion that the predicate acts or offenses are part of Defendants' "regular way of doing business." Id. There has been no suggestion that Defendants "operat[e] as part of a long-term association that exists for criminal purposes." Id. Finally, there is no suggestion that "the predicates are a regular way of conducting defendant's ongoing legitimate business ... or of conducting or participating in an ongoing and legitimate RICO 'enterprise.' " Id. "Short-term criminal conduct is not the concern of RICO." Calcasieu Marine Nat'l Bank v. Grant, 943 F.2d 1453, 1464 (5th Cir.1991).
We agree with the Second Circuit that "[b]ecause the core of a RICO civil conspiracy is an agreement to commit predicate acts, a RICO civil conspiracy complaint, at the very least, must allege specifically such an agreement." Hecht v. Commerce Clearing House, Inc., 897 F.2d 21, 25 (2d Cir.1990); see also Glessner v. Kenny, 952 F.2d 702, 714 (3d Cir.1991) (civil RICO conspiracy claim must plead agreement to commit predicate acts and knowledge that the acts were part of a pattern of racketeering activity); Miranda v. Ponce Fed. Bank, 948 F.2d 41, 47 (1st Cir.1991) (civil RICO conspiracy claim must charge that defendants knowingly entered into an agreement to commit two or more predicate crimes). Accordingly, because the complaints fail to plead specifically any agreement to commit predicate acts of racketeering, the RICO conspiracy claim was also properly dismissed.
"[F]ollowing a section 1406(a) transfer, regardless of which party requested the transfer or the purpose behind the transfer, the transferee court must apply the choice of law rules of the state in which it sits." Ellis v. Great Southwestern Corp., 646 F.2d 1099, 1110 (5th Cir. Unit A June 1981); see also 15 Charles A. Wright et al., Federal Practice and Procedure § 3827, at 267 (1986) ("[W]henever the original venue is improper ... the transferee court should apply whatever law it would have applied had the action been properly commenced there."). On the other hand, a section 1404(a) transfer does not change the law applicable, regardless of who initiates the transfer. Ferens v. John Deere Co., 494 U.S. 516, 523-525, 110 S.Ct. 1274, 1280, 108 L.Ed.2d 443 (1990). Van Dusen v. Barrack, 376 U.S. 612, 84 S.Ct. 805, 11 L.Ed.2d 945 (1964), holding that a transferee district court is obligated to apply the state law that would have applied had there been no change in venue, addresses only matters transferred under § 1404(a). See Van Dusen, 376 U.S. at 639, 84 S.Ct. at 821 (holding that a § 1404(a) change of venue is "but a change of courtrooms").
This case was transferred because venue was improper, i.e., as a transfer under § 1406(a). See Mem. Order of Sept. 12, 1988 (noting that venue in the Middle District of Tennessee was "improper"); see also Defs.' Mot. to Dismiss Pls.' Compl. (for "improper" venue under Federal Rule 12(b)(3)). The transferring court held,
2. Choice-of-Law Rules of Texas
As to the fraud claim, we believe that the Texas Supreme Court would follow the conflicts principle that the effect of a misrepresentation or undue influence upon a contract is determined by the same law that governs the contract. Restatement (Second) of Conflicts of Law § 201 (1971); see Duncan, 665 S.W.2d at 421 (adopting the choice-of-law test for contracts explained in Restatement (Second) of Conflicts ); see also Gutierrez v. Collins, 583 S.W.2d 312, 318-19 (Tex.1979) (adopting the Restatement 's choice-of-law principles for torts). The claimed fraud is fraud in the inducement. "[Q]uestions involving the effect of misrepresentation, duress, undue influence and mistake upon a contract are determined by the law chosen by the parties, if they have made an effective choice." Restatement § 201 cmt. a.
3. Applying Texas Law
The district court did not articulate a reason for dismissing the claims for breach of contract (and the Federal Rules do not require reasons for a Rule 12 dismissal, Fed.R.Civ.P. 52(a)). Defendants suggest that the dismissal was apparently based on limitations. If so, it was erroneous.
The complaint alleges violations of the Robinson-Patman Anti-Discrimination Act, which prohibits sellers from discriminating among purchasers of commodities by price differences or, among purchasers for resale, by disparate provision of services. See 15 U.S.C.A. §§ 13(a), (e) (West 1973). The district court dismissed the antitrust claims, ruling that "neither [of the complaints] state[s] that any other buyer received preferential treatment in services or facilities compared with Plaintiff Tel-Phonic." Additionally, it concluded, "neither pleading states that services of like grade and quality to those the Plaintiffs claim they deserved under their agreement with the Defendants were being provided to other buyers for the same consideration as paid by the Plaintiffs." Taking as true the well-pleaded facts of the complaints,9 we agree with the district court and affirm the dismissal of the antitrust claims.
The amended complaint alleges that "plaintiff and TBS of Ohio [a competitor] purchased like commodities, grade and quality from TBS in contemporaneous sales." Compl. p 37. Even if these purchases were within the limitations period,10 we note that the allegations do not state an antitrust violation. The Act prohibits price discrimination by a seller of commodities among different purchasers of commodities of like grade and quality. 15 U.S.C. § 13(a) (West 1973). "Price discrimination" is price differentiation, or "selling the same kind of goods cheaper to one purchaser than to another." Federal Trade Comm'n v. Anheuser-Busch, Inc., 363 U.S. 536, 549, 80 S.Ct. 1267, 1274, 4 L.Ed.2d 1385 (1960).
The pleading does not suggest any such price differentiation. Cf. Hartley & Parker, Inc. v. Florida Beverage Corp., 307 F.2d 916, 919 (5th Cir.1962) (complaint charging sales to competitor "at prices substantially lower" than prices offered plaintiffs charges § 13(a) violation).
Plaintiffs finally assert that the various courts erred by denying them discovery. In their opposition to the motion to dismiss, Plaintiffs requested that the court allow them either to conduct discovery before amending the complaint or to file a more definite statement by amending their complaint. Upon Plaintiffs' presentation of an amended pleading, the court allowed an amendment, referring the amended pleading to the magistrate judge for a recommendation as to its sufficiency. See Order of Sept. 12, 1988. We will not infer from this action that the court "refused" Plaintiffs discovery. The court issued no protective order limiting discovery while the motion to dismiss was pending. The docket sheet reveals four years of litigation and no motions on the subject of discovery. Under the Federal Rules Plaintiffs could have conducted discovery and did not. See Fed.R.Civ.P. 26-37; cf. Elliott, 867 F.2d at 882 (five months between complaint and dismissal was adequate time for plaintiff to have conducted discovery). Because Plaintiffs sought no ruling on the subject of discovery, there is no error for our review.
The Judicial Code provides for appeals "[f]rom a district court ... to the court of appeals for the circuit embracing the district." 28 U.S.C.A. § 1294(1) (West 1966)
Because Agency Holding applied its rule to the parties in that case, we apply its holding retroactively to the parties in this litigation. See James B. Beam Distilling Co. v. Georgia, --- U.S. ----, ----, 111 S.Ct. 2439, 2446, 115 L.Ed.2d 481 (1991); Sterling v. Block, 953 F.2d 198, 200 (5th Cir.1992); see also Davis v. A.G. Edwards & Sons, Inc., 823 F.2d 105, 108 (5th Cir.1987) (applying Agency Holding retroactively)
We are cognizant of In re Fireman's Fund Ins. Cos., 588 F.2d 93, 94-95 (5th Cir.1979), in which this Court noted that a district court's transfer according to a forum-selection clause was a transfer under § 1404(a)) rather than § 1406(a). Although the transferee court in this case was similarly chosen because of a forum-selection clause, want of a special venue provision distinguishes the transfer order in this case from that approved in Fireman's Fund. In Fireman's Fund venue was proper in the transferring forum under the Miller Act's special venue provision. In this case the court noted that venue was "only proper based on the broadly worded venue provision of the RICO statute." Mem. Order at 2. After the dismissal of the RICO claim, the court dismissed because the RICO special venue provision was inapplicable, and venue was then "improper" in the transferring court. Accordingly, nothing in Fireman's Fund would characterize the transfer in this case as under § 1404(a) rather than § 1406(a)
Plaintiffs argue, for the first time on appeal, that the district judge failed to consider the effect of Tel-Phonic's having filed bankruptcy on the various limitation periods. Ordinarily, an issue not presented to or passed on by the district court will not be considered by this Court on appeal. Clark v. Aetna Casualty & Sur. Co., 778 F.2d 242, 249 (5th Cir.1985); see also Nathan Rodgers Constr. & Realty Corp. v. City of Saraland, Ala., 676 F.2d 162, 163 (5th Cir.1982) (no plain error in district court's failure to consider plaintiff's tolling argument not clearly addressed to district court)
Stanton v. United States, 434 F.2d 1273, 1276 (5th Cir.1970). The complaint asserts in a conclusory fashion that Defendants knew of "the unlawful discrimination of service and price." Compl. p 39. In considering the sufficiency of the complaint, we do not accept as true such unsupported conclusions of law. See id