Source: https://law.justia.com/cases/federal/appellate-courts/F2/796/1076/251872/
Timestamp: 2020-02-24 02:58:10
Document Index: 473604725

Matched Legal Cases: ['§ 1861', '§ 1292', '§ 1964', '§ 1961', '§ 1961', '§ 1962', '§ 1961', '§ 1963', '§ 1964', '§ 1964', '§ 15', '§ 26', '§ 1964', '§ 1332', '§ 1964', '§ 15', '§ 25']

Religious Technology Center and Church of Scientologyinternational, Inc., Plaintiffs-appellees, v. Larry Wollersheim, et al., Defendants,andchurch of the New Civilization, Harvey Haber, Dede Reisdorf,jon Zegel and David Mayo, Defendants-appellants, 796 F.2d 1076 (9th Cir. 1986) :: Justia
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Religious Technology Center and Church of Scientologyinternational, Inc., Plaintiffs-appellees, v. Larry Wollersheim, et al., Defendants,andchurch of the New Civilization, Harvey Haber, Dede Reisdorf,jon Zegel and David Mayo, Defendants-appellants, 796 F.2d 1076 (9th Cir. 1986)
US Court of Appeals for the Ninth Circuit - 796 F.2d 1076 (9th Cir. 1986) Argued and Submitted March 5, 1986. Decided Aug. 8, 1986
We reverse the district court's order granting a preliminary injunction. Pursuant to this court's order, the district court advised that it issued its preliminary injunction "on both the plaintiffs' 18 U.S.C. §§ 1861-1968 [1961-1968] ("RICO") claim and on plaintiffs' state law trade secrets claim." We resolve the appeal, therefore, under both these theories. We hold that injunctive relief is not available to a private plaintiff in a civil RICO action. Additionally, we hold that the California courts would conclude that sacred scriptures do not meet the definition of a trade secret under California law.
The new church filed a timely appeal. We denied the new church a stay pending appeal, but heard the appeal on an expedited schedule. We have jurisdiction under 28 U.S.C. § 1292(a) (1).
Determining whether a private remedy should be afforded for violation of duties mandated by a statute that does not expressly create a suitable private remedy causes the concepts of "standing," "subject matter jurisdiction," and "implication of a private cause of action" to "overlap ... even more than they ordinarily would." National Railroad Passenger Corp. v. National Association of Railroad Passengers, 414 U.S. 453, 455-56, 94 S. Ct. 690, 691-92, 38 L. Ed. 2d 646 (1974). The issue is best described as falling within the generic problem of "federal jurisdiction" without attempting to characterize it with greater specificity. See generally 13 C. Wright, A. Miller, and E. Cooper, Federal Practice and Procedure Sec. 3531.6 at 494-506 (2d ed. 1984). We are obligated to raise a jurisdictional issue sua sponte as a threshold question before considering a matter on its merits. See Solano v. Beilby, 761 F.2d 1369, 1370 (9th Cir. 1985); Othman v. Globe Indemnity Co., 759 F.2d 1458, 1462-63 (9th Cir. 1985). Interpretation of the statute under which an injunction has been issued is a question of law, which we review de novo. California ex rel. Van de Kamp v. Tahoe Regional Planning Agency, 766 F.2d 1308, 1312 (9th Cir. 1985). We review matters of state law de novo. In re McLinn, 739 F.2d 1395, 1403 (9th Cir. 1984) (en banc).I. Is Injunctive Relief Available to a Private Party in a Civil RICO action?
The Church's basis for federal jurisdiction is 18 U.S.C. § 1964 ("civil RICO").4 Civil RICO permits both the government and private plaintiffs to sue for violations of substantive provisions of the Racketeer Influenced and Corrupt Organizations Act, which formed Title IX of the Organized Crime Control Act of 1970, Pub. L. 91-452, 84 Stat. 941 (1970), as amended, codified as 18 U.S.C. §§ 1961-1968. Neither party questioned before the district court, nor in briefs before this court, whether injunctive relief is available under civil RICO. We ordered the parties to submit supplemental briefs on this issue.
Civil RICO is directed at "racketeering activity," which it defines as any act "chargeable" under several generically described state criminal laws; any act "indictable" under numerous specific federal criminal provisions, including mail and wire fraud; and any "offense" involving narcotics or bankruptcy or securities fraud "punishable" under federal law. 18 U.S.C. § 1961(1). Civil RICO prohibits the use of income derived from a "pattern of racketeering activity" in relation to an "enterprise" engaged in or affecting interstate commerce. 18 U.S.C. § 1962(a). A "pattern" of racketeering activity "requires at least two acts of racketeering activity." 18 U.S.C. § 1961(5). Broad criminal penalties are provided for RICO violations. See 18 U.S.C. § 1963. In addition, Congress provided for a civil enforcement scheme, including private treble damages actions. See 18 U.S.C. § 1964.
Despite repeated efforts by courts to limit the reach of civil RICO private damages actions, it is clear that suits alleging the requisite predicate acts are entitled to federal court jurisdiction, even if the acts are of a common-garden variety far removed from what is normally regarded as "organized crime" activity. See Sedima, S.P.R.L. v. Imrex Co., --- U.S. ----, 105 S. Ct. 3275, 3284-85, 87 L. Ed. 2d 346 (1985) (civil RICO suit may be based on commercial contract dispute involving two allegations of mail and wire fraud; civil RICO jurisdiction requires no prior criminal convictions for predicate acts nor any showing of "racketeering injury.") The Church's complaint alleges that the higher level materials are the Church's trade secret which the new church misappropriated through several acts of mail or wire fraud constituting a pattern of racketeering activity.5 The complaint characterizes the contacts between the new church and Wollersheim and his counsel as a conspiracy within RICO's definition of "enterprise." The Church's complaint also includes a claim for money damages under RICO. Thus, the Church apparently satisfies the federal jurisdictional requirements for a civil RICO damages action.6 B.
No appellate court has expressly determined whether civil RICO permits a private party to secure injunctive relief. The Fourth Circuit has implied that injunctive relief is not available to a private civil RICO plaintiff, but reserved ultimate judgment on the matter. See Dan River, Inc. v. Icahn, 701 F.2d 278, 290 (4th Cir. 1983) ("While we do not undertake to resolve the question ... [i]n light of the most recent indications from the Supreme Court, Dan River's action for equitable relief under RICO might well fail to state a claim."). In dictum in a moot appeal in Trane Co. v. O'Connor Securities, 718 F.2d 26, 28 (2d Cir. 1983) the Second Circuit stated: "We have the same [serious] doubts [as courts such as the Fourth Circuit in Dan River ] as to the propriety of private party injunctive relief...." More recently, in Sedima, S.P.R.L. v. Imrex Co., 741 F.2d 482, 489 n. 20 (2d Cir. 1984), rev'd, --- U.S. ----, 105 S. Ct. 3275, 87 L. Ed. 2d 346 (1985), the Second Circuit observed that " [i]t thus seems altogether likely that Sec. 1964(c) as it now stands was not intended to provide private parties injunctive relief." However, the precedential value of this conclusion, itself somewhat equivocal, is thrown into considerable doubt by the Supreme Court's total rejection of the conclusions drawn by the Second Circuit from its historical analysis of the RICO statute. See 105 S. Ct. 3275.
In contrast, the Eighth Circuit, expressly without resolving the issue, has hinted that injunctive relief may be available either under civil RICO or under a court's general equitable powers. See Bennett v. Berg, 685 F.2d 1053, 1064 (8th Cir. 1982) (citing a law review article which supports the availability of injunctive relief), aff'd on rehearing, 710 F.2d 1361 (8th Cir.) (en banc), cert. denied, 464 U.S. 1008, 104 S. Ct. 527, 78 L. Ed. 2d 710 (1983).7 See also USACO Coal Co. v. Carbomin Energy, Inc., 689 F.2d 94, 97-98 (6th Cir. 1982) (affirming grant of injunctive relief to private plaintiff on pendent state claims where RICO provided federal jurisdiction base).
A similar disunity of views exists among those district courts that have confronted the issue. The only three published decisions explicitly to hold that injunctive relief is not available to a civil RICO plaintiff are all from the Northern District of Illinois. See Miller v. Affiliated Financial Corp., 600 F. Supp. 987, 994 (N.D. Ill. 1984); DeMent v. Abbott Capital Corp., 589 F. Supp. 1378, 1382-83 (N.D. Ill. 1984); and Kaushal v. State Bank of India, 556 F. Supp. 576, 581-84 (N.D. Ill. 1983). See also Ashland Oil, Inc. v. Gleave, 540 F. Supp. 81, 85-86 (W.D.N.Y. 1982) (statutory attachment not available to private civil RICO plaintiff).
Two district courts have held that injunctive relief is available to a private civil RICO plaintiff. See Aetna Casualty and Surety Co. v. Liebowitz, 570 F. Supp. 908, 910-11 (E.D.N.Y. 1983), aff'd on other grounds, 730 F.2d 905 (2d Cir. 1984); and Chambers Development Co. v. Browning-Ferris Industries, 590 F. Supp. 1528, 154041 (W.D. Pa. 1984). Additionally, several district courts have simply assumed the availability of injunctive relief to civil RICO plaintiffs. See USACO Coal Co. v. Carbomin Energy, Inc., 539 F. Supp. 807, 814-16 (W.D. Ky.), aff'd on other grounds, 689 F.2d 94 (6th Cir. 1982); Marshall Field & Co. v. Icahn, 537 F. Supp. 413, 420 (S.D.N.Y. 1982); Vietnamese Fishermen's Association v. Knights of the Ku Klux Klan, 518 F. Supp. 993, 1014 (S.D. Tex. 1981).
Still other district courts have raised, but managed to avoid deciding the issue. See McLendon v. Continental Group, Inc., 602 F. Supp. 1492, 1518-19 (D.N.J. 1985) ("The law [in this area] is in great flux."); Kaufman v. Chase Manhattan Bank, N.A., 581 F. Supp. 350, 359 (S.D.N.Y. 1984).
Thus, we must decide essentially as a matter of first impression for an appellate court whether injunctive relief may be granted to a private plaintiff under civil RICO. When interpreting a statute, the plain meaning of the words used is controlling absent "a clearly expressed legislative intent to the contrary." United States v. Turkette, 452 U.S. 576, 580, 101 S. Ct. 2524, 2527, 69 L. Ed. 2d 246 (1981) (quoting Consumer Product Safety Commission v. GTE Sylvania, Inc., 447 U.S. 102, 108, 100 S. Ct. 2051, 2056, 64 L. Ed. 2d 766 (1980)); Powell v. Tucson Air Museum Foundation of Pima County, 771 F.2d 1309, 1311 (9th Cir. 1985). When the language of a statute is ambiguous, we construe the statute in the light of Congress's purpose in enacting it as expressed in the legislative history. See Train v. Colorado Public Interest Research Group, Inc., 426 U.S. 1, 9-10, 96 S. Ct. 1938, 1942, 48 L. Ed. 2d 434 (1976).
Section 1964 has four parts.8 Part (c) was added late in RICO's legislative passage through Congress. The bill passed by the Senate included only the present parts (a), (b), and (d). See infra pages 1083 - 84; Sedima, 105 S. Ct. at 3280-81.
As the Supreme Court has emphasized, Congress expressly admonished that RICO "be liberally construed to effectuate its remedial purposes," and that " [t]he statute's 'remedial purposes' are nowhere more evident than in the provision of a private action for those injured by racketeering activity." Sedima, 105 S. Ct. at 3286; see also, Turkette, 452 U.S. at 587, 101 S. Ct. at 2530. In this spirit, those sympathetic to a private equitable remedy under civil RICO have suggested two other readings of the statute. The Church urges us to adopt either or both of these constructions of section 1964.
First, the Church suggests that it is significant that the treble damage clause of section 1964(c) is preceded by "and" rather than "to." Thus, it is suggested, all appropriate relief, including the equitable remedies of part (a), are available to private plaintiffs because there is no clear statutory limitation. Moreover, the Church argues, there is no good reason for Congress denying victims equitable relief while permitting them damages relief. See Blakey, The RICO Civil Fraud Action in Context: Reflections on Bennett v. Berg, 58 Notre Dame L.Rev. 237, 332 (1982); Blakey and Gettings, Racketeer Influenced and Corrupt Organizations (RICO): Basic Concepts--Criminal and Civil Remedies, 53 Temple L.Q. 1014, 1038 n. 133 (1980). No court has accepted this reading. Indeed, two courts have been vehement in their rejection of this analysis. See Sedima, 741 F.2d at 489 n. 20 ("rather remarkable argument"); Kaushal, 556 F. Supp. at 582 ("bizarre and wholly unconvincing as a matter of plain English and the normal use of language."). See also infra note 11.
Second, the Church asserts that the variation in language used in parts (a) and (b) of section 1964 indicate that Congress did not intend to limit the inherent powers of federal courts to grant equitable relief in suitable cases. The argument is made that because part (b) grants the Attorney General the express power to seek temporary equitable relief, other parties are permitted to seek permanent equitable relief. Moreover, the Church contends, if the availability of equitable relief under section 1964 were determined solely by part (b), part (a) would become superfluous. See J. Fricano, Civil RICO--An Antitrust Plaintiff's Considerations, in 1 Current Problems in Federal Civil Practice 827-28 (PLI, 1983); Chambers, 590 F. Supp. at 1540.
The Church develops this textual argument with particular vigor. It argues that part (a), alone of the subparts of section 1964, is general in theme and apparently unrestricted in application. Its plain words place no limit on the class or category of litigants who might avail themselves of the remedies it makes available under RICO. While the other subparts of section 1964 provide for specific relief to specific parties, the Church observes that they give no indication that part (a) is anything other than a simple and broad grant of jurisdiction. See Belgard, Private Civil RICO Plaintiffs Are Entitled to Equitable Relief under Sec. 1964(a), 2 RICO Law Rep. 537, 537-38 (1985). The Church reads section 1964(b) as permission for the government to secure injunctive relief without satisfying the traditional equity tests of irreparable harm and inadequacy of alternative remedy at law. See United States v. Cappetto, 502 F.2d 1351, 1358-59 (7th Cir. 1974), cert. denied, 420 U.S. 925, 95 S. Ct. 1121, 43 L. Ed. 2d 395 (1975). Thus, the Church asserts, part (b) does not restrict RICO injunctive relief to the government, but merely sets aside for civil RICO cases the traditional rule that only a victim may enjoin a crime. See In re Debs, 158 U.S. 564, 582-84, 15 S. Ct. 900, 905-06, 39 L. Ed. 1092 (1895). Thus, the Church would have us read part (a) as sufficient for a federal court to grant an injunction to a private RICO plaintiff even if part (c) had never been added to section 1964.
This latter construction of section 1964 is certainly a plausible reading of the statutory language. However, our review of Congress' intent in enacting civil RICO convinces us that the Church is incorrect. The legislative history mandates us to hold that injunctive relief is not available to a private party in a civil RICO action. The Supreme Court's apparent endorsement of the conclusion that we reach here reinforces this reading of the statute. See Sedima, 105 S. Ct. at 3280 ("The civil remedies in the bill passed by the Senate, S. 30, were limited to injunctive actions by the United States and became Secs. 1964(a), (b), and (d).").
While the Act for the most part originated in the Senate, the civil RICO provision permitting suit by private persons, 18 U.S.C. § 1964(c), originated in the House. See Sedima, 105 S. Ct. at 3280. During hearings on S. 30 before the House Judiciary Committee, Representative Steiger proposed the addition of a private treble damages action "similar to the private damage remedy found in the antitrust laws.... [T]hose who have been wronged by organized crime should at least be given access to a legal remedy. In addition, the availability of such a remedy would enhance the effectiveness of title IX's prohibitions." Organized Crime Control: Hearings on S. 30, and related proposals, before Subcommittee No. 5 of the House Committee on the Judiciary, 91st Cong., 2d Sess. 520 (1970) ("House Hearings "). The American Bar Association also proposed an amendment "based upon the concept of Section 4 of the Clayton Act." Id. at 543-44, 548, 559; see 116 Cong.Rec. 25,190-91 (1970); Sedima, 105 S. Ct. at 3280-81.
In the next term of the Senate, the same amendment as that offered by Representative Steiger on the House floor during debate on the RICO bill, see supra note 9, was proposed as a bill to amend the now enacted legislation. S. 16, 92nd Cong., 1st Sess. (1971). See Victims of Crime, Hearing before the Subcommittee on Criminal Laws and Procedures of the Senate Committee of the Judiciary, 92nd Cong., 1st Sess. 3 (1972). The new bill "would expand the available civil remedies" since " [n]ow only the United States can institute injunctive proceedings. " Id. at 158. (Statement of Richard Velde, Associate Administrator, Law Enforcement Assistance Administration) (emphasis added).10
The Senate Judiciary Committee reported favorably on S. 16, 92d Cong., 2d Sess., 118 Cong.Rec. 29,368-69 (1972). The committee report noted that RICO as enacted, provided for private treble damages actions, and that the new bill would supplement this and "authorize private injunctive relief from racketeering activity." S.Rep. No. 1070, 92d Cong., 2d Sess. 10 (1972) (emphasis added). During Senate floor debates on S. 16, Senator McClellan observed that the bill would add to existing private RICO remedies by "authoriz [ing] private injunctive relief from racketeering activity." 118 Cong.Rec. 29,370 (1972). See also id. (remarks of Senator Hruska). Although the Senate passed S. 16, the bill never passed the House, and its substance never became law.
This clear message is reinforced by recalling that civil RICO was intended to provide a private cause of action modeled on the analogous provision of the antitrust laws. See 116 Cong.Rec. 592 (remarks of Sen. McClellan); id. at 602 (remarks of Sen. Hruska) (RICO's civil provisions employ "time-tested antitrust remedies"); S.Rep. No. 617, 80-82, 125, 160 (1969) U.S.Code Cong. & Admin.News 1970, p. 4007; 116 Cong.Rec. 35,295 (Private treble damages provision is "another example of the antitrust remedy being adapted for use against organized criminality.") (remarks of Rep. Poff); House Hearings at 543-44 (testimony of ABA President Wright); Sedima, 105 S. Ct. at 3282 ("The clearest current in [the legislative] history is the reliance on the Clayton Act model....").
The language of the treble damages antitrust remedy, section four of the Clayton Act, 15 U.S.C. § 15(a), is similar to that of civil RICO.11 The Supreme Court has explicitly held that the language of section 4 precludes private injunctive relief. See Paine Lumber Co. v. Neal, 244 U.S. 459, 471, 37 S. Ct. 718, 719, 61 L. Ed. 1256 (1917). Cf. Minnesota v. Northern Securities Co., 194 U.S. 48, 70-71, 24 S. Ct. 598, 604-605, 48 L. Ed. 870 (1904) (no private right to injunctive relief under section 4 of Sherman Act). Private antitrust plaintiffs can, however, secure injunctive relief only by virtue of a separate section of the Clayton Act which expressly provides for private equitable actions. See Section 16 codified at 15 U.S.C. § 26.12 RICO contains no parallel provision to section 16's grant of a private right to injunctive relief.
Transamerica Mortgage Advisors, Inc. v. Lewis, 444 U.S. 11, 19, 100 S. Ct. 242, 247, 62 L. Ed. 2d 146 (1979); see also Touche Ross & Co. v. Redington, 442 U.S. 560, 568, 99 S. Ct. 2479, 2485, 61 L. Ed. 2d 82 (1979).
Where a statute provides an elaborate enforcement scheme that confers authority to sue on both government officials and private citizens, "it cannot be assumed that Congress intended to authorize by implication additional judicial remedies for private citizens." Middlesex County Sewerage Authority v. National Sea Clammers Association, 453 U.S. 1, 14, 101 S. Ct. 2615, 2623, 69 L. Ed. 2d 435 (1981). "In the absence of strong indicia of a contrary congressional intent, we are compelled to conclude that Congress provided precisely the remedies it considered appropriate." Id. at 15, 101 S. Ct. 2623. Compare Sea Clammers (no private right of action implied in federal environmental statutes) with Herman & MacLean v. Huddleston, 459 U.S. 375, 380-87, 103 S. Ct. 683, 686-90, 74 L. Ed. 2d 548 (1983) (implied remedy under securities law available because of congressional intent even where cumulative to express remedies).
It may be that in drawing the line between private equitable relief and private damages, Congress wished to preclude federal courts from interfering with the day-to-day running of businesses at the behest of what might be only a disgruntled competitor. However, this same concern about anticompetitive litigation has been frequently leveled at RICO's treble damages provision. The Supreme Court, despite expressing sympathy for this concern, has rejected it as not consistent with the statute's wording and history. See Sedima, 105 S. Ct. at 3277-78.
In contrast, we recognize the force of the Church's argument that a private injunctive remedy would permit an injured party to put an immediate stop to racketeering behavior that threatens his or her business with economic destruction before the business has been brought to its knees. While the treble damages remedy is a potent weapon, it necessarily assumes that economic injury has occurred. The preventive effect of injunctive relief is often a more just remedy. Although civil RICO empowers the government to bring an injunctive suit to protect a threatened enterprise, we recognize that the resources of the United States Attorney's office are limited. Civil RICO deliberately created dual avenues of enforcement--private and public. We recognize that precluding enforcing parties from employing the weapon of equitable relief partially hamstrings the statute's effect. "Private attorney general provisions such as Sec. 1964(c) are in part designed to fill prosecutorial gaps," Sedima, 105 S. Ct. at 3284, and use of equitable remedies by private parties would frequently result in substantial benefits to society generally. These broad social benefits, such as the dismantling of an illegitimate enterprise, would generally exceed the gain to the private plaintiff from this action, especially where the individual's injury has been ameliorated by treble damages.
"The maintenance of standards of commercial ethics and the encouragement of invention are the broadly stated policies behind trade secret law." Kewanee Oil Co. v. Bicron Corp., 416 U.S. 470, 481, 94 S. Ct. 1879, 1886, 40 L. Ed. 2d 315 (1974); Chicago Lock Co. v. Fanberg, 676 F.2d 400, 404-05 (9th Cir. 1982). States may regulate trade secrets only to the extent that state law does not conflict with federal copyright and patent laws. Kewanee, 416 U.S. at 479, 94 S. Ct. at 1885. We review matters of state law de novo. McLinn, 739 F.2d at 1403.
Sinclair v. Aquarius Electroncis, Inc., 42 Cal. App. 3d 216, 221, 116 Cal. Rptr. 654, 658 (1974) (emphasis omitted); see also Chicago Lock, 676 F.2d at 404; 7 B. Witkin, Summary of California Law, Equity Sec. 82 (8th ed. 1974 and Supp.1984). The Restatement (Second) of Torts omitted section 757 and any reference to trade secrets. In response, a Uniform Trade Secrets Act was drafted. California adopted this uniform Act, with minor changes, in 1985. See 14 U.L.A. 537, 538-40 (1980 and 1985 Supp.); M. Jager, Trade Secrets Law, Sec. 3.04 (1985); 3 R. Milgrim, Milgrim on Trade Secrets App. AA (1985).16
No published California decision has yet construed Civ.Code Sec. 3426.1(d)' § definition of trade secret. In the only significant effort by any state court to construe the Uniform Act's definitional reference to "independent economic value," the Minnesota Supreme Court stated: "This statutory element carries forward the common law requirement of competitive advantage. ... This does not mean ... that the owner of the trade secret must be the only one in the market. ... If an outsider would obtain a valuable share of the market by gaining certain information, then that information may be a trade secret if it is not known or readily ascertainable." Electro-Craft Corp. v. Controlled Motion, Inc., 332 N.W.2d 890, 900 (Minn.1983) (emphasis added). We think it probable that the California courts will follow the Minnesota Supreme Court's view because of the wording of the California criminal law equivalent of Civ.Code Sec. 3426.1(d). Cal.Penal Code Sec. 499c(a) (9) (West Supp.1986) states: " 'Trade secret' means ... information ... which is secret and which is not generally available to the public, and which gives one who uses it an advantage over competitors who do not know of or use the trade secret." (Emphasis added) See People v. Serrata, 62 Cal. App. 3d 9, 22, 133 Cal. Rptr. 144, 152 (1976) ("The phrase 'advantage over competitors' [in Cal.Pen.Code Sec. 499c] refers to any form of commercial advantage. " (emphasis added)).
Hubbard apparently assigned the materials, together with other materials forming the technology and advanced technology of "Scientology" and "Dianetics," to the Religious Technology Center. See Church of Scientology International v. The Elmira Mission of the Church of Scientology, 794 F.2d 38, 45 (2d Cir. 1986) (Hubbard validly assigned his rights in all Scientology materials to Religious Technology Center). Hubbard apparently intended the Center to be the "trustee of the scriptures" of Scientology. The Center makes available the higher level materials of the advanced technology to Church offices around the world in the form of "packs." Apparently the advanced technology packs at issue here are only available at six Church offices in the world.
The Church's complaint alleges federal jurisdiction under RICO, 18 U.S.C. § 1964. The complaint also alleges jurisdiction under 28 U.S.C. §§ 1332 and 1339, covering diversity, patent, trademark, and copyright matters, and pendent jurisdiction over several state claims. The parties are not diverse, both being California corporations. The complaint makes no substantive allegations of patent, copyright, or trademark infringement. Thus, RICO provides the only basis for federal court jurisdiction over the Church's complaint
In Sedima, the Supreme Court stated that "the plaintiff only has standing if, and can only recover to the extent that, he has been injured in his business or property by the conduct constituting the violation.... Where the plaintiff alleges each element of the violation, the compensable injury necessarily is the harm caused by predicate acts sufficiently related to constitute a pattern, for the essence of the violation is the commission of those acts in connection with the conduct of an enterprise." 105 S. Ct. at 3285-86. The district court found such a "nexus" between the Scott theft and the new church. The court did not expressly find a further nexus between the new church's actions via the predicate acts and the injury to the Church adherents. Sedima apparently requires such a nexus for civil RICO damages "standing."
Assuming that this nexus can be established, the injury alleged by the Church may not be compensable under civil RICO. In a footnote in Sedima, the Court explains that civil RICO damages "include, but are not limited to ... competitive injury." 105 S. Ct. at 3286 n. 15. In disagreeing with the dissent's attempt to limit civil RICO standing, Sedima apparently embraces the notion that "harm proximately caused by the forbidden conduct" is compensable. Id. The court gives no indication whether nonfinancial proximate harm, such as the emotional-type injury alleged by the Church, is compensable under civil RICO. Since we are reviewing only the injunctive relief granted to the Church, we need not decide this issue. However, if the action proceeds to trial on the Church's damages claim, the district court will then be obliged to confront the problem.
18 U.S.C. § 1964 states:
While post-enactment legislative history is not by any means conclusive, it cannot merely be ignored. North Haven Board of Education v. Bell, 456 U.S. 512, 530-35, 102 S. Ct. 1912, 1922-25, 72 L. Ed. 2d 299 (1982)
15 U.S.C. § 15(a) provides in pertinent part:
" [A]ny person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws may sue therefor in any district court of the United States in the district in which the defendant resides or is found or has an agent, without respect to the amount in controversy, and shall recover threefold the damages by him sustained, and the cost of suit, including a reasonable attorney's fee." (Emphasis added.)
The Church argues that comparisons with section 16 of the Clayton Act are inappropriate because the Clayton Act also includes a provision, section 15, 15 U.S.C. § 25, expressly limiting injunctive relief to the government and thus the statutes--RICO and the Clayton Act--are not similar. See Belgard, 2 RICO Law Rep. at 541, n. 13. See also Fricano, Civil RICO at 828-29. This argument is to no avail. The legislative history shows that Congress recognized and accepted the validity of the comparison during the passage of RICO
The Church argues that a more appropriate test whether civil RICO implies a private right is that articulated in Cort v. Ash, 422 U.S. 66, 78, 95 S. Ct. 2080, 2087, 45 L. Ed. 2d 26 (1975). See Belgard, 2 RICO Law Rep. at 539. Cort posed four "relevant" questions to assist in determining "whether a private remedy is implicit in a statute not expressly providing one." Cort, 422 U.S. at 78, 95 S. Ct. 2088. We see no conflict between Cort and the more recent line of Supreme Court cases upon which we rely. Applying the Cort factors still produces a ruling adverse to the Church. First, the Church is not "one of the class for whose especial benefit the statute was enacted." Id. (emphasis in original). RICO was aimed principally at protecting the public from organized crime front enterprises, not at enabling a religious organization to prevent the dissemination of doctrinal materials by a rival religious organization. Second, as we have discussed supra, there is substantial "indication of legislative intent, explicit and implicit" against an implied private remedy. Id. Third, while implying an injunctive remedy may be consistent generally with RICO's purpose, in this particular case, we doubt whether this is so. Id. Fourth, to the extent that the dispute here concerns trade secrets misappropriation, "it would be inappropriate to infer a cause of action based solely on federal law." Id
Since the remedy granted to the Church by the district court was beyond the jurisdiction of the court, it is not necessary for our resolution of this appeal to reach the additional jurisdictional questions whether the Church had standing to assert its adherents' "religious injury" caused by the new church's alleged conduct and whether the dispute was ripe for resolution by the court. See Liberty National Insurance Holding Co. v. Charter Co., 734 F.2d 545, 553 n. 19 (11th Cir. 1984); Raypath, Inc. v. City of Anchorage, 544 F.2d 1019, 1021 (9th Cir. 1976) (per curiam) (if no cause of action can exist, the case should be dismissed before reaching the issue of standing)
By resolving this appeal on jurisdictional grounds we avoid deciding the significant first amendment issues raised by the district court's injunction. For example, the effect of the injunction's prohibition on the use of any of the higher level materials is to curtail the religious practice of the new church's adherents. See Sherbert v. Verner, 374 U.S. 398, 83 S. Ct. 1790, 10 L. Ed. 2d 965 (1963). Similarly, the court's review of the Church's stolen materials and the new church's documents to determine whether essential elements have been appropriated raises the potential for impermissible entanglement in matters of religious doctrine. See Serbian Eastern Orthodox Diocese v. Milivojevich, 426 U.S. 696, 96 S. Ct. 2372, 49 L. Ed. 2d 151 (1976). Further, the court's recognition of "religious injury" from premature unsupervised exposure to Church materials as irreparable harm justifying an injunction prompts worrisome establishment concerns. See Lemon v. Kurtzman, 403 U.S. 602, 91 S. Ct. 2105, 29 L. Ed. 2d 745 (1971).
The Church relies heavily on language in Purcell v. Summers, 145 F.2d 979, 985 (4th Cir. 1944) which states that unfair competition law applies fully to religious and not-for-profit organizations. That case involved an injunction under South Carolina law for the improper use of a church's name by a splinter church. The Methodist Episcopal Church South had merged with two other churches to form the United Methodist Church. Dissident members who opposed the merger formed their own church using the former name. The Fourth Circuit held that the property and charitable gifts of the merged church would be threatened by the use of its former name by a different church