Opinion ID: 3010882
Heading Depth: 1
Heading Rank: 2

Heading: Can State Law Crimes, Torts, and Breaches of

Text: Contract Constitute Predicate Acts of Racketeering We may affirm a District Court's summary judgment ruling on different grounds, provided the issue which forms the basis of our decision was before the lower court. Morse v. Lower Merion School District, 132 F.3d 902, 904 n.1 (3d Cir. 1998); see also Salley v. Circuit City Stores, Inc., 160 F.3d 977, 978 (3d Cir. 1998). In moving for summary judgment, the Defendants presented several alternative theories on which the District Court could dismiss Annulli's civil RICO claims. In addition to the statute-of-limitations argument adopted by the District Court, the Defendants contended that (1) the Panikkars' breach of their contract with Annulli, and the Wrights' alleged interference with that contract were not predicate acts of racketeering necessary for a civil RICO claim; (2) Annulli's alleged four million dollars of lost profits from future sales of trees on the Panikkars' farms were not proximately caused by the alleged RICO violation; and (3) Panikkar's wife and Wright's wife and daughter had nothing to do with the conspiracy. We focus our attention on the first of these arguments, because its resolution is dispositive of the remainder of Annulli's civil RICO claims. 13
Summary Judgment Annulli's civil RICO claims arise under 18 U.S.C. SS 1962(c) and (d). Section 1962(c) provides that it is 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. Under S 1962(d), it is unlawful for any person to conspire to violate any of the provisions of subsection (c). Therefore, to prove a conspiracy claim under S 1962(d), Annulli must first establish his S 1962(c) claim. To recover under S 1962(c), a plaintiff must prove the following four elements: (1) the existence of an enterprise affecting interstate commerce; (2) that the defendant was employed by or associated with the enterprise; (3) that the defendant participated, either directly or indirectly, in the conduct or the affairs of the enterprise; and (4) that the defendant participated through a pattern of racketeering activity that included at least two racketeering acts. See Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 496 (1985); Shearin v. E.F. Hutton Group, Inc., 885 F.2d 1162, 1165 (3d Cir. 1989). At the summary judgment stage of proceedings, if the movant--in this case the Defendants--can point to the absence of any factual support for one of these essential elements, then the non-movant, bearing the burden of persuasion at trial, must introduce specific facts showing a need for trial, pursuant to FED. R. CIV. P. 56(e). See Celotex, 477 U.S. at 322-24. If the non-moving party fails to go beyond conclusory allegations in its pleadings and to produce specific facts indicating that there is a genuine issue for trial, summary judgment will be granted in favor of the moving party. See id. at 323-24; Pastore v. Bell Telephone Co. of Pa., 24 F.3d 508, 512 (3d Cir. 1994). As noted above, we construe the record in the light most favorable to the non-moving party. See supra note 3.
Racketeering Activity? The Defendants point to an absence of factual support for the fourth element of Annulli's S 1962(c) civil RICO claim-- 14
racketeering activity. The Defendants argue that with respect to his last two claims of injury--those accruing in 1993--Annulli has, at most, provided factual support for state contract, tort, and criminal claims, but has not introduced any evidence of racketeering activity as it is defined by 18 U.S.C. S 1961(1). The relevant portion of S 1961(1) defining racketeering activity provides, inter alia, that the term encompasses (A) any act or threat involving murder, kidnapping, gambling, arson, robbery, bribery, extortion, dealing in obscene matter, or dealing in a controlled substance or listed chemical . . . , which is chargeable under State law and punishable by imprisonment for more than one year; (B) any act which is indictable under any of the following provisions of title 18, United States Code: . . . section 1341 (relating to mail fraud), section 1343 (relating to wire fraud), . . . sections 2314 and 2315 (relating to interstate transportation of stolen property), . . . 18 U.S.C. S 1961(1). In Tabas v. Tabas, 47 F.3d 1280, 1290 (3d Cir. 1995) (en banc), we noted that Congress's inclusion of mail and wire fraud in subsection (1)(B) strikes some observers as sweeping common law or `garden variety' fraud claims that are normally the subject of commercial litigation into a statutory scheme aimed at punishing defendants who engage in crimes traditionally associated with racketeering, such as those enumerated in section (1)(A): murder, kidnapping, gambling, extortion, and the like. As Tabas recognized, however, we are bound by RICO's text and the Supreme Court's instruction that `RICO is to be read broadly' ; therefore,RICO, with its severe penalties, may be applicable to many `garden-variety' fraud cases, . . . particularly considering the judiciary's broad interpretation of the mail fraud statute. Id. at 129697. That said, Annulli has provided no evidence establishing that the Defendants engaged in racketeering activity within the statutory period. More particularly, Annulli has made no allegation that the Defendants committed one of the 15 state law crimes defined as racketeering activity in S 1961(1)(A). He argues instead that the Defendants are guilty of the Pennsylvania state law crime of theft by deception, 18 PA. CONS. STAT. S 3922, for stealing Annulli's services in managing the tree farms. Even if Annulli could make this showing, theft by deception, like a simple breach of contract or intentional interference with contract, is not a predicate act of racketeering activity enumerated in S 1961(1).7 Even thoughS 1961 and its mail and wire fraud predicates have been interpreted with flexibility, see Tabas, 47 F.3d at 1297, courts discussing the state crime of theft, and its analogues, have refused to read it intoS 1961's expansive list.8 This is for good reason. First, RICO's list of acts constituting predicate acts of racketeering activity is exhaustive. See, e.g., Harvey v. Harvey , 931 F. Supp. 127, 130 (D. Conn. 1996); Red Ball Interior Demolition Corp. v. _________________________________________________________________ 7. See Brokerage Concepts, Inc. v. U.S. Healthcare, Inc., 140 F.3d 494 (3d Cir. 1998) ([D]efendant's heavy-handed business tactics, . . . while relevant to a tortious interference claim, cannot be made to fit within the statutory and doctrinal constraints of the mail and wire fraud statutes.); Blount Financial Services, Inc. v. Walter E. Heller and Co., 819 F.2d 151, 152-53 (6th Cir. 1987) (holding that absent specific allegations of intentional fraud, [s]ending a financial statement which misconstrues the prime rate provided by the terms of the contract may breach the contract but it does not amount to a RICO mail fraud cause of action.). 8. See, e.g., United States v. Napoli, 54 F.3d 63, 68 (2d Cir. 1995) (finding that despite the broad range of criminal offenses designated by the money laundering statute, the crime of theft, standing alone, is not a specified unlawful activity. It is neither a federal crime listed in sections 1956 and 1961, nor one of the state-law offenses that constitute RICO predicate acts.); Toms v. Pizzo, 4 F. Supp. 2d 178, 183 (W.D.N.Y. 1998) (noting that simple theft is not one of the crimes constituting a predicate act for purposes of establishing a pattern of racketeering activity); Buck Creek Coal, Inc. v. United Mine Workers, 917 F. Supp. 601, 612 (S.D. Ind. 1995) ([T]heft is not the type of act that forms a predicate act under RICO.); Bonton v. Archer Chrysler Plymouth, Inc., 889 F. Supp. 995, 1002 (S.D. Tex. 1995) (Under RICO, . . . acts that constitute theft under state law are not predicate acts for racketeering activity. . . . A plaintiff may not convert state law claims into a federal treble damage action simply by alleging that wrongful acts are a pattern of racketeering related to an enterprise.). 16 Palmadessa, 874 F. Supp. 576, 586 (S.D.N.Y. 1995). To read it otherwise would be to usurp the role of Congress in drafting statutes. Second, if garden-variety state law crimes, torts, and contract breaches were to constitute predicate acts of racketeering (along with mail and wire fraud), civil RICO law, which is already a behemoth, would swallow state civil and criminal law whole. Virtually every litigant would have the incentive to file their breach of contract and tort claims under the federal civil RICO Act, as treble damages and attorney's fees would be in sight. We will not read language into S 1961 to federalize every state tort, contract, and criminal law action. As for those predicate acts listed in the statute, Annulli has provided no evidence that the Defendants engaged in S 1961(1)(B) mail fraud, wire fraud, or interstate transportation of stolen property during the four-year statutory period. He has adduced evidence that the Wrights stole Annulli's price list in 1991 and faxed it from Pennsylvania to one of Annulli's customers in Connecticut. See supra note 6. This may have the makings of wire fraud and interstate transportation of stolen property, which are enumerated predicate acts of racketeering in S 1961(1)(B). As noted in Section II.B, supra, however, a 1996 civil RICO action arising out of this predicate act is untimely by one year. That leaves Annulli with the Wrights' and Panikkars' alleged acts of conspiracy and racketeering in 1993 both to defraud Annulli of his labor and contractual rights with Panikkar, and to share the profits from tree sales to which Annulli was entitled. This intentionally fraudulent activity, if proven, might constitute mail or wire fraud if Annulli could also provide sufficient evidence that the Defendants used inter- or intrastate mail or interstate wire in furtherance of this scheme.9 This they have not done. _________________________________________________________________ 9. There are two elements of a mail or wire fraud charge: (a) a scheme to defraud, and (2) a mailing or wire in furtherance of that scheme. Greenberg v. Brewster, 816 F. Supp. 1039, 1049 (E.D. Pa. 1993). Wholly intrastate use of the mails for fraud violates the mail fraud statute. See, e.g., In re Burzynski, 989 F.2d 733, 742 (5th Cir. 1993). In contrast, the federal wire fraud statute requires interstate use of the wire. See, e.g., Smith v. Ayers, 845 F.2d 1360, 1366 (5th Cir. 1988) (As several courts have recognized, the statute requires that the wire communication cross state lines.). 17 Annulli sufficiently pled the elements of mail and wire fraud violations to survive judgment on the pleadings, but since then, he has introduced nothing into the record establishing that, incident to an essential part of their scheme to defraud him, Tabas, 47 F.3d 1294 n.18, the Defendants (1) mailed anything to one other or to Annulli, or (2) had phone communications with each other or with Annulli across state lines. The only mailings that Annulli has referenced include checks mailed to him for trees sold before 1991 and the 1991 letter the Wrights wrote to him terminating their contract. These mailings, while potentially acts of mail fraud under this court's expansive interpretation of the statute, see id., are outside the statutory period, see supra Section II.B. All other communications between the parties appear to have occurred face to face or during intrastate telephone conversations, which are not covered under the wire fraud act. See supra note 9. Panikkar terminated his contract with Annulli in person. Wright informed Panikkar of Annulli's negligent work--and purportedly at the same time conspired with him to defraud Annulli--in a series of telephone conversations that were presumably intrastate, given that the two physicians are Bloomsburg, Pennsylvania neighbors. Annulli presented no evidence that these conversations between the Wrights and the Panikkars, or any other conversation in furtherance of their conspiracy to defraud Annulli, took place across interstate phone lines, as we detail in the margin.10 Accordingly, _________________________________________________________________ 10. In his Reply Brief, Annulli asserts that such evidence can be found in his brief opposing summary judgment before the District Court. In those papers, Annulli claims that [t]here were hundreds of calls to [him] from all over the country, outside the State of Pennsylvania requesting that he work faster and work harder for each of the Defendants. Annulli cites his own January 6, 1998 deposition at pages 89-91 to support this claim. On review, these pages contain no discussion regarding interstate phone calls made to Annulli by the Defendants. Instead, they include a discussion regarding the indemnity clause in Annulli's contract with the Wrights. Annulli further asserted in his summary judgment opposition brief that the Wrights operated their business schemes from Lake Placid, Florida during the winter months. From this, he would presumably have 18 Annulli's civil RICO claims based on predicate acts of wire and mail fraud, which are unsupported by any record evidence, cannot survive summary judgment.11 _________________________________________________________________ us draw the inference that the Wrights called Annulli and furthered their scheme to defraud him over interstate phone lines. To support the contention giving rise to this inference, Annulli cites Exhibits 41 and 42 from the trial record and Joanne Wright's February 22, 1998 deposition in its entirety. This evidence similarly fails to establish an issue of material fact regarding Annulli's mail and wire fraud allegations. Exhibit 41 is a phone bill of an unidentified person or company dated April 10, 1990, on which a March 20, 1990 phone call is logged to Lake Placid, Florida. Exhibit 42 is a canceled check written on March 11, 1989 from Evergreen to United Telephone. Neither of these documents even begins to prove that Wrights used interstate wire in furtherance of a conspiracy to defraud Annulli, absent some explanation in the record as to why this telephone bill and canceled check have anything to do with the Defendants' alleged racketeering activity. Cf. Scheiner v. Wallace, 860 F. Supp. 991, 997-98 (S.D.N.Y. 1994) (noting that, when alleging mail and wire fraud as predicate acts in a RICO claim, plaintiff's pleadings must identify the purpose of the mailing within the defendant's fraudulent scheme and specify the fraudulent statement, the time, place, and speaker and content of the alleged misrepresentations). Even if Annulli did offer such explanations, the predicate acts of racketeering they would tend to prove are well outside the statutory period. As for Joanne Wright's 220 page deposition, it too provides Annulli with no assistance. It makes not one mention of the Wrights operating their tree business from Florida during the winter months; instead, it primarily contains extensive discussions regarding the Wrights' unprofitable tree business before they hired Annulli. 11. Annulli bemoans the fact that the Defendantsrepeatedly refused to turn over their telephone records as requested by him during discovery. With these telephone records, Annulli suggests, he could have proven that some of the allegedly conspiratorial telephone conversations were conducted interstate. This is the wrong time to raise such an objection. FED. R. CIV. P. 56(f) affords a party opposing summary judgment, who has not had the time or means to discover facts necessary to defeat the motion, the ability to ask the court to grant a continuance or deny the motion altogether. The rule specifies the procedure to be followed, and explicitly provides that the party must file an affidavit setting forth why the time is needed. Pastore v. Bell Telephone Co. of Pa., 24 F.3d 508, 510-11 (3d Cir. 1994). Annulli has filed no such affidavit. His failure to do so is usually fatal, because by not filing a Rule 56(f) affidavit, a plaintiff fails to 19 In sum, because Annulli has not produced any evidence showing that the Defendants engaged in a predicate act of racketeering within the statutory period, both hisS 1962(c) pattern of racketeering claims and his S 1962(d) conspiracy to racketeer claims were rightly rejected as a matter of law. We affirm the District Court's decision to grant summary judgment on Annulli's civil RICO claims in favor of the Defendants.