Opinion ID: 757729
Heading Depth: 2
Heading Rank: 2

Heading: Merits of Summary Judgment on RICO Liability

Text: 22 The basic facts underlying the Appellants' bribery of officials at the Oyster Bay dump are essentially undisputed. What is at issue is whether these acts, under the circumstances in which they were done, permit different factual inferences as to whether the Appellants have thereby conduct[ed] the affairs of a RICO enterprise within the meaning of section 1962(c).
23 A violation of 18 U.S.C. § 1962(c) requires (1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity. Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 496, 105 S.Ct. 3275, 87 L.Ed.2d 346 (1985) (footnote omitted). The Appellants contend that the Government has failed to adduce evidence that conclusively demonstrates that they conduct[ed] the affairs of either the PSIA or the CIE through the admitted acts of bribery. They rely on Reves v. Ernst & Young, 507 U.S. 170, 113 S.Ct. 1163, 122 L.Ed.2d 525 (1993), in which the Supreme Court explained that in order to conduct or participate directly or indirectly, in the conduct of [an] enterprise's affairs, 18 U.S.C. § 1962(c), one must participate in the operation or management of the enterprise itself, Reves, 507 U.S. at 185, 113 S.Ct. 1163, and play some part in directing the enterprise's affairs, id. at 179, 113 S.Ct. 1163. 24 The Appellants contend that the undisputed facts at most permit an inference that they were involved in the management or operation of the RICO enterprises, but also permit the contrary inference that, although involved in the bribery activity in which the enterprises were engaged, they took no part in the direction of such activities. The Ace Defendants argue that the payment of bribes is insufficient to compel a finding that they directed the enterprises' activities, and that the only evidence tying them to PSIA decision-making is that Joseph and Patricia Petrizzo sometimes attended PSIA meetings. They contend, relying on Patricia Petrizzo's affidavit, that their role in the PSIA was passive. 25 The Allen Defendants argue that the evidence suggests only that they accidentally discovered the bribery scheme, and that their participation was limited to insisting that the dump workers give them corrupt benefits on the same terms as those given to the members of the enterprise. Accordingly, they argue that they cannot be understood to have operated the enterprise whose scheme they envied and then imitated. 26 The Government contends that the Appellants' admitted bribery suffices to establish that they conduct[ed] the affairs of the enterprise. The Government relies on a number of post-Reves cases in which this Court has affirmed criminal RICO convictions, despite a contention that the defendants were merely low-level members in the enterprise. See United States v. Miller, 116 F.3d 641, 671-73 (2d Cir.1997); United States v. Workman, 80 F.3d 688, 695-98 (2d Cir.1996); United States v. Masotto, 73 F.3d 1233, 1238-39 (2d Cir.1996); Napoli v. United States, 45 F.3d 680, 683-84 (2d Cir.1995); United States v. Wong, 40 F.3d 1347, 1371-74 (2d Cir.1994); United States v. Thai, 29 F.3d 785, 816 (2d Cir.1994). And the Government notes that only once, in United States v. Viola, 35 F.3d 37 (2d Cir.1994), has this Court reversed a conviction on the basis of Reves. In Viola, the Court characterized the appellant--a janitor and handyman for the enterprise, who had also transported stolen goods on orders from his superiors--as outside the circle of people who operated or managed the enterprise's affairs. Id. at 43. The Court elaborated: 27 Although Reves still attaches liability to those down the ladder of operation who nonetheless played some management role, it is plain to us that, since Reves, § 1962(c) liability cannot cover [this defendant]. [He] was not on the ladder at all, but rather as the [kingpin's] janitor and handyman, was sweeping up the floor underneath it. 28 Id. 29 To determine whether these opposing contentions frame a factual dispute that precludes summary judgment, we start with the Supreme Court's elucidation in Reves of the statutory phrase that renders it unlawful to conduct or participate, directly or indirectly, in the conduct of [a RICO] enterprise's affairs. 2 18 U.S.C. § 1962(c). The Court explained that it must read conduct to include an element of direction. Reves, 507 U.S. at 178, 113 S.Ct. 1163 (emphasis added). The Court then elaborated: 30 Once we understand the word conduct to require some degree of direction and the word participate to require some part in that direction, the meaning of § 1962(c) comes into focus. In order to participate, directly or indirectly, in the conduct of such enterprise's affairs, one must have some part in directing those affairs. 31 Id. at 179, 113 S.Ct. 1163. On this understanding of the statutory language, the Court upheld the Eighth Circuit's liability standard used in Reves--participation in the operation or management of the enterprise, see Bennett v. Berg, 710 F.2d 1361, 1364 (8th Cir.1983) (in banc)--because the  'operation or management' test expresses [the 'directing'] requirement in a formulation that is easy to apply. Reves, 507 U.S. at 179, 113 S.Ct. 1163. 32 From the Supreme Court's explanation in Reves it is evident that its endorsement of the Eighth Circuit's operation or management test did not use the word operat[ing] in the sense of doing (as in he operated the lathe) but in the sense of directing (as in he operated the business of the enterprise). 3 The Court acknowledged, however, that those who operate or direct a RICO enterprise sufficiently to conduct its affairs within the meaning of RICO need not be upper management, but might also be lower rung participants in the enterprise who are under the direction of upper management. Id. at 184, 113 S.Ct. 1163. Left unclear was whether such lower rung participants must themselves play some direct[ing] role, or need only be acting under the direction of upper management. 33 There is language in the opinions of several appellate courts, including our own, from which both sides on this appeal can take comfort. For example, we have said that Reves makes it clear that a defendant can act under the direction of superiors in a RICO enterprise and still 'participate' in the operation of the enterprise within the meaning of § 1962(c), Wong, 40 F.3d at 1373, but we have also said that [s]ince Reves, it is plain that the simple taking of directions and performance of tasks that are 'necessary or helpful' to the enterprise, without more, is insufficient to bring a defendant within the scope of § 1962(c). Viola, 35 F.3d at 41. Compare MCM Partners v. Andrews-Bartlett & Associates, 62 F.3d 967, 978-79 (7th Cir.1995) (approving view that  'the direction requirement includes both those who direct, as well as those who take direction' ) (quoting Daniel R. Fischel & Alan O. Sykes, Civil RICO After Reves: An Economic Commentary, 1993 Sup.Ct. Rev. 157, 192), United States v. Starrett, 55 F.3d 1525, 1548 (11th Cir.1995) ([W]e agree with the First Circuit that one may be liable under the operation or management test by 'knowingly implementing decisions, as well as by making them.' ) (quoting United States v. Oreto, 37 F.3d 739, 750 (1st Cir.1994), and United States v. Oreto, 37 F.3d 739, 750 (1st Cir.1994) (defendant may participate in conduct of enterprise by knowingly implementing decisions, as well as by making them)), with University of Maryland v. Peat, Marwick, Main & Co., 996 F.2d 1534, 1538-39 (3d Cir.1993) (Under [Reves ] not even action involving some degree of decisionmaking constitutes participation in the affairs of an enterprise.). 34 In most of the cases in which we have held lower level employees to be RICO participants, the defendant was shown to have played some management role in the enterprise. See Miller, 116 F.3d at 673; Workman, 80 F.3d at 697; Masotto, 73 F.3d at 1239; Thai, 29 F.3d at 816. In Napoli, the defendants--investigators working pursuant to directions from attorneys in their firm to bribe witnesses and falsify evidence supporting tort claims--though not acting in a managerial role, exercised broad discretion in carry[ing] out instructions from the law firm principals. Napoli, 45 F.3d at 683. Similarly, in Wong, at least two of the lower level employees whose convictions were upheld had significant managerial roles; Joseph Wang moved up the ladder and began planning crimes, Wong, 40 F.3d at 1374, and Alex Wong helped organize an effort to locate witnesses who had identified him as a shooter, see id. However, other defendants in Wong appear to have been deemed RICO participants only because they committed crimes in furtherance of the enterprise, albeit under the direction of their supervisors. See id. The affirmance of their convictions is not easily harmonized with the assertion in Viola that the simple taking of directions and performance of tasks that are 'necessary or helpful' to the enterprise, without more, is insufficient to bring a defendant within the scope of § 1962(c). Viola, 35 F.3d at 41. 35 We think the only principle to be drawn from this array of holdings and statements is that the commission of crimes by lower level employees of a RICO enterprise may be found to indicate participation in the operation or management of the enterprise but does not compel such a finding. Napoli and Wong affirmed the factfinding by juries, reached after a full trial. Unless a civil RICO defendant is indisputably directing the affairs of the enterprise, his commission of crimes that advance its objectives must be assessed by a fact-finder to determine whether or not his criminal activity, assessed in the context of all the relevant circumstances, constitutes participation in the operation or management of the enterprise's affairs. 36 The record here contains some circumstantial evidence that all the Appellants' acts of bribery were coordinated through the PSIA and the CIE. On the other hand, the Appellants are entitled to argue to a jury that they independently recognized the possibility of bribing scalehouse employees. 4 A reasonable fact-finder could find that payment of the bribes either did or did not render the defendants liable under section 1962(c). 37 Nor can the Government obtain summary judgment against the Allen Defendants on its theory that, as outsiders, they operated the Carting Industry Enterprise by bribing it. Though an enterprise can be  'operated' or 'managed' by others 'associated with' the enterprise who exert control over it as, for example, by bribery, Reves, 507 U.S. at 184, 113 S.Ct. 1163, the Allen Defendants contend that their payments to the scalehouse employees were bribes to them individually, not to the enterprise collectively. By John Allen's account, he dealt only with certain scalehouse workers--Vittorio, Jerome Kowalski, and Peter Stramiello--not with the other corrupt carters. And the Allen Defendants can point out that they neither sought nor obtained any benefits from the enterprise. Whether their bribes demonstrated operation or management of the enterprise remains a matter for fact-finding. 38 Summary judgment was not warranted on the issue of the Appellants' RICO liability. 39
40 The Allen Defendants also contend that they adduced facts sufficient to support valid defenses of coercion and extortion to the bribery offenses that served as their RICO predicate acts. They point to the statements in John Allen's affidavit (i) that he observed that all the other carters dumping in the Oyster Bay dump were allowed to slip (or, as he terms it, tip) the scale, (ii) that we were the only carter dumping at the Oyster Bay dump who was actually paying the amount required, and (iii) that [i]n order to survive, we had to pay off the scalehouse employees to allow us to pay lower prices. 41 The Allen Defendants rely on several New York statutes to establish the legal basis for their defense to the alleged acts of bribery. Under New York law, in a bribery prosecution, 42 it is a defense that the defendant conferred or agreed to confer the benefit involved upon the public servant involved as a result of conduct of the latter constituting larceny committed by means of extortion, or an attempt to commit the same, or coercion, or an attempt to commit coercion. 43 N.Y. Penal L. § 200.05. Larceny by extortion, in turn is defined, in relevant part, as follows: 44 A person obtains property by extortion when he compels or induces another person to deliver such property to himself or to a third person by means of instilling in him a fear that, if the property is not so delivered, the actor will: 45 ... 46 (viii) Use or abuse his position as a public servant by performing some act within or related to his official duties, or by failing or refusing to perform an official duty, in such manner as to affect some person adversely. 47 Id. § 155.05(2)(e). And second-degree coercion is similarly defined as follows: 48 A person is guilty of coercion in the second degree when he compels or induces a person to engage in conduct which the latter has a legal right to abstain from engaging in, or to abstain from engaging in conduct in which he has a legal right to engage, by means of instilling in him a fear that, if the demand is not complied with, the actor or another will:... 49 8. Use or abuse his position as a public servant by performing some act within or related to his official duties, or by failing or refusing to perform an official duty, in such a manner as to affect some person adversely. 50 Id. § 135.60. 51 These statutes do not support the alleged defenses. The statutes require that the government official actually compel or induce the citizen's conduct through instilling in him a fear of certain consequences. All those verbs require some active demand or threat on the part of the government official. However, in this case, John Allen claims to have discovered the corrupt scheme by observing it in action, and then demanding that he be allowed to participate. The scalehouse workers' compliance with this demand is not the sort of active, overbearing conduct that would allow the Allen Defendants to claim that they were either extorted or coerced. 52 Nor can the Allen Defendants enlist the statutes by relying on the provision that covers refusing to perform an official duty, Id. §§ 155.05(2)(e), 135.60. What the scalehouse employees refused to do without a payment was falsely report the cargo weight of a truck, a task that is obviously not an official duty. 53 Summary judgment rejecting the coercion and extortion defenses was properly granted.