Opinion ID: 772567
Heading Depth: 3
Heading Rank: 3

Heading: Participation in the Conduct of the Town's Affairs

Text: 123 Section 1962(c) makes it unlawful for any person employed by or associated with any enterprise... to conduct or participate, directly or indirectly, in the conduct of such enterprise's affairs through a pattern of racketeering activity.... 18 U.S.C. § 1962(c) (emphasis added). The Supreme Court has interpreted the phrase to participate... in the conduct of [the] enterprise's affairs to mean participation in the operation or management of the enterprise. See Reves v. Ernst & Young, 507 U.S. 170, 185 (1993). Both Dirie and the Bernas defendants argue that there was insufficient evidence for the jury to find that they conducted the affairs of the Town and that their conduct met the operation or management test. We disagree. 124 In Reves, when assessing the RICO liability of an outside accounting firm for racketeering activity carried on by its client, the Supreme Court addressed the question whether one must participate in the operation or management of the enterprise itself to be subject to liability under this provision. Id. at 172. The Supreme Court examined Section 1962(c) and adopted an operation or management test to determine whether a defendant had sufficient connection to the enterprise to warrant imposing liability. Id. at 178-79. The Court held that, to conduct or participate, directly or indirectly, in the conduct of an enterprise's affairs, one must have some part in directing those affairs. Id. at 179. The Court stated that the word 'participate' makes clear that RICO liability is not limited to those with primary responsibility, just as the phrase 'directly or indirectly' makes clear that RICO liability is not limited to those with a formal position in the enterprise.... Id. 125 The jury specifically found that Dirie, Bernas, JML and JBI each conducted or participated in the conduct of the affairs of the Town of Delaware through a pattern of racketeering activity, see Special Verdict Form, Question 3 at 2 (JA:630); (T2:1200-01), and the record here contains ample evidence from which a reasonable jury could have found that Dirie and the Bernas defendants each had some part in directing the Town of Delaware's affairs. 126 Dirie was the elected Supervisor of the Town of Delaware from January 1986 to December 1991. In this position, Dirie served as a member of the Town Board and as a member of the Town Legislature. There was evidence at trial that Dirie offered to help guide DeFalco through the muddy waters of real estate development in the Town of Delaware, so long as DeFalco followed Dirie's suggestions. (T2:70). There was also evidence that, when DeFalco resisted Dirie's suggestions, Dirie used his authority within the Town of Delaware to affect the plaintiffs' development. 127 For example, when DeFalco resisted Dirie's suggestion that DeFalco let Dirie's son cut timber on the property, Dirie responded, If you want to go by the Planning Board and you want things to go smooth, you know, this is the way it is in Sullivan County. That's it. (T2:97). When DeFalco granted a logging contract to a lumber company for $8800, see (E:129-30), Dirie insisted that DeFalco cancel the contract and return the check. When DeFalco resisted, Dirie told him Don't expect to get your approvals at the Planning Board meeting unless it's done. (T2:126). At the next Planning Board meeting on Oct. 21, 1987, DeFalco's project was suspended for thirty days (T2:127); see also Pl.'s Ex. 24, Oct. 21, 1987 Planning Board Minutes (E:133-34). The following day, Dirie visited DeFalco at the development and asked whether he got the message. (T2:127). DeFalco returned the check and paid a penalty for canceling the contract. (T2:128). At the next Planning Board meeting on November 18, 1987, the project was once again allowed to move forward. (T2:130); see also Pl.'s Ex. 26, Nov. 18, 1987 Planning Board Minutes (E:135-37). Similarly, when DeFalco attempted to fire Fisher and his crew, Dirie told DeFalco that he would scrap the project. (T2:132). Dirie also instructed Town of Delaware Building Inspector Alfred Steppich to stop issuing building permits for Top of the World. (T2:335). 13 128 Dirie also threatened adverse official action if DeFalco failed to give Bernas the JOBO stock. (T2:178). DeFalco testified that Dirie told me straight up and down, '[y]ou can kiss Phase 2 good-bye.' (T2:178). The sudden issues regarding plowing and maintenance of the development's roads and whether the roads would be accepted for dedication by the Town were also tied to transfer of the JOBO stock. According to DeFalco, with Dirie, it was always the same story. 'If you sign over the stock, the problems go away.' (T2:197). 129 Dirie also influenced the Town of Delaware tax assessments for the plaintiffs' development. For example, Tax Assessor Richard Ferber testified that, notwithstanding that the Town Supervisor and the Town Board had no role in tax assessments, there were several conversations with Dirie and others, off the record and outside of official Town Board meetings, regarding the Top of the World taxes. (T2:614-19). 130 In short, there was ample evidence from which a reasonable jury could conclude that Dirie participated in the operation or management of the Town of Delaware. Indeed, there was more than enough evidence in the record for a reasonable jury to conclude that Dirie had more than just some part in directing those affairs. Reves, 507 U.S. at 179 (emphasis added). 131 Similarly, a reasonable jury could have found that the Bernas defendants participated in the operation or management of the Town of Delaware. Although the Bernas defendants had no official role in the operation or management of the Town, RICO liability is not limited to those with primary responsibility for the enterprise's affairs,... [or] limited to those with a formal position in the enterprise.... Id. An enterprise also might be 'operated' or 'managed' by others 'associated with' the enterprise who exert control over it as, for example, by bribery. Id. at 184. There was ample evidence from which the jury could have concluded that Bernas played some part in directing the affairs of the Town. 132 For example, when DeFalco complained about Bernas giving free sand and gravel to the Town of Delaware, DeFalco suddenly faced problems with a previously agreed deal regarding plowing and maintenance of the development roads by the Town as well as threats that the Phase I roads either would not be accepted for dedication by the Town or that the dedication process would be delayed. (T2:165-66). Although the Town was prepared to accept the roads in October 1988, see Sullivan County Board of Supervisors Letter from William Dirie dated Oct. 17, 1988 (E:287), in December 1988 Bernas sought to delay the dedication of the roads to the Town until they met his standards. See Letter from John Bernas to Robert M. Rosen dated Dec. 9, 1988, showing courtesy copies to William Dirie and Joseph DeFalco (E:288). 14 133 Bernas also threatened adverse official action from the Town of Delaware if DeFalco did not give him the JOBO stock. On several occasions, Bernas indicated that, if DeFalco did not sign over the stock, the project would be scrapped and that Bernas had the power to cause the development to come to a halt. (T2:202). Dirie threatened adverse official action if DeFalco failed to give Bernas the stock (T2:178), and Delaware Town Engineer Terry Kelly, Tax Assessor Ferber, Tax Assessor Meckle and Building Inspector Steppich each pressured DeFalco to turn the stock over to Bernas. (T2:183). Once DeFalco transferred the stock to Bernas, the Phase I roads were immediately accepted for dedication by the Town. (T2:206). 134 After DeFalco signed over the one-third interest in JOBO, however, Bernas wanted rights to the entire gravel pit and the dedication of the Phase I roads was called into question again. (T2:206). Bernas told DeFalco that, if he did not turn the gravel pit over to him, [t]hey were going to close the development down. (T2:214). When DeFalco resisted giving Bernas the entire gravel pit, Tax Assessors Ferber and Meckle reassessed certain lots from $20,000 to $45,000 a piece, more than doubling plaintiffs' taxes. (T2:253). When DeFalco asked Dirie how he could get Phase II approved in light of the April 2, 1990 letter from the Town of Delaware Planning Board listing certain uncompleted requirements, Dirie replied, Give Bernas the gravel pit. (T2:225). 135 Perhaps the most striking evidence that Bernas influenced the affairs of the Town, however, was set forth in the Sullivan County Board of Supervisors Letter from Delaware Supervisor William Dirie to Joe DeFalco dated March 30, 1990, in which Dirie wrote: As we have previously discussed, there are several ways that you can complete the work on Phase II. I am confident that we can reach an agreement with the approval of John Bernas, that will meet all our needs. See Sullivan County Board of Supervisors Letter from Delaware Supervisor William Dirie to Joe DeFalco dated Mar. 30, 1990 (E:189-90; E:315-16) (emphasis added). 15 That letter - stating in effect that completion of Phase II of the plaintiffs' development was subject to Bernas' approval - is strong evidence from which a jury could conclude that Bernas participated in the operation or management of the Town of Delaware. 136 In short, there was ample evidence from which a reasonable jury could conclude that Bernas participated in the operation or management of the Town of Delaware, had at least some part in directing the affairs of the Town and, indeed, exerted some control over it. See Reves, 507 U.S. at 179, 184. 16