Opinion ID: 772567
Heading Depth: 4
Heading Rank: 2

Heading: The Bernas Defendants

Text: 151 The Bernas defendants also argue that the plaintiffs failed to establish the commission of at least two predicate acts of racketeering against them. The plaintiffs charged the Bernas defendants with three predicate acts: (1) extortion of the construction contract to build the development's roads; (2) extortion of one-third of the JOBO stock; and (3) extortion of sand and gravel from the JOBO pit. The jury found that none of the Bernas defendants [e]xtorted from plaintiffs a construction contract to build Top of the World Phase I roads; but that they [e]xtorted from plaintiffs one-third of the shares of JOBO; and [e]xtorted from plaintiffs sand and/or gravel from the JOBO gravel pit. (JA:630-31); (T2:1201-02). 19 152
153 The Bernas defendants argue that the evidence does not demonstrate extortion of the one-third JOBO stock interest: Extortion, as defined in the Hobbs Act, consists of the use of wrongful means to achieve a wrongful objective, and [t]he use of economic fear as leverage to drive a hard bargain in an ordinary commercial relationship will not support a RICO claim based on extortion. Brief of Defendants-Appellants John Bernas, John Bernas, Inc. and JML Quarries, Inc. at 21. They argue that a threat to cause economic loss is wrongful only when it is used to obtain property to which one is not entitled. 154 The Bernas defendants claim that the District Court erred by failing to instruct the jury that, before it could find wrongful use of actual or threatened fear of economic loss, it had to find that the Bernas defendants had no lawful right to the JOBO stock. They argue that DeFalco and Bernas never had a binding agreement providing for the number of miles of roads Bernas had to build in order to obtain the transfer of the JOBO stock. They also argue that DeFalco later accepted a proposal by Bernas that he would finish the Phase I roads and do the Phase 2 roads for a flat fee of $40,000, in return for the plaintiffs' transfer of the one-third stock interest in JOBO. See Brief of Defendants-Appellants John Bernas, John Bernas, Inc. and JML Quarries, Inc. at 23-24 (citing (E:354); (T2:297)); see also (E:356). The Bernas defendants argue that, according to DeFalco's own testimony, this offer induced DeFalco to agree to give the stock to Bernas. See id. (citing (T2:175, 294-97)). The Bernas defendants therefore argue that they had a legal right to the JOBO stock and that the court erred by failing to instruct the jury that it had to find that the Bernas defendants had no lawful right to the JOBO stock before it could find wrongful use of actual or threatened fear of economic loss. 155 The trial court's instruction with respect to extortion as a RICO predicate act was as follows: 156 Extortion is a separate crime. Extortion is the obtaining of property or anything of value from another person with his consent, when that consent is induced or caused or brought about by the wrongful use of actual or threatened force, violence or fear of physical injury or economic harm and loss. 157 The word property includes money and any valuable right considered to be a source or element of wealth. It is not limited to physical or tangible property and things. In this case property includes money and payment for unwanted services, such as accounting or engineering or legal or landscaping or other work, sand and gravel and firewood and timber, and anything else of value. It also includes the right to have government affairs administered impartially, and to receive the benefits of permits or other lawful applications to planning boards or building inspectors or zoning boards. 158 The terms force, violence, fear, and threats have their common everyday meanings. The use or exploitation of fear exists if the victim would reasonably experience anxiety, concern or worry about economic harm to himself or his company. The reasonable existence of fear must be determined by considering all the facts existing at the time of the defendant's actions. 159 You may consider the person who made the demand, the nature of the conduct, and all the circumstances a reasonable person, situated as the particular victim was situated, would perceive. 160 You may consider the relationship of the parties in deciding whether the element of the use of fear exists. A friendly relationship between the parties, however, does not mean that you cannot find that fear exists. Indeed, the fact that relations between a victim and alleged extorter may sometimes appear cordial is not inconsistent with the crime of extortion. 161 Threats can be direct or indirect. It may be aimed at a third person. They may be veiled threats made by suggestion, implication and inference, though such inference on the part of the person extorted must be reasonable. Whether a physical gesture or veiled reference amounts to a threat is a matter for you to decide under all the circumstances. You must determine if a reasonable person under all the circumstances would perceive it to be a threat. 162 (T2:1174-76). The Bernas defendants failed to object to this charge, and now argue that the charge was plain error. 163 Because the Bernas defendants failed to object, this Court will review the jury charge not for plain error, but for fundamental error. As noted above, Rule 51 of the Federal Rules of Civil Procedure provides, in pertinent part, that [n]o party may assign as error the giving or the failure to give an instruction unless that party objects thereto before the jury retires to consider its verdict, stating distinctly the matter objected to and the grounds of the objection. Fed. R. Civ. P. 51; see also Fogarty, 162 F.3d at 79 (A party who fails to object to a jury instruction at trial waives the right to make that instruction the basis for an appeal.). Under these circumstances, the charge is reviewed for fundamental error, which is narrower than the plain error doctrine applicable to criminal cases. Travelers Indem. Co., 62 F.3d at 79. To qualify as a fundamental error there must be an error so serious and flagrant that it goes to the very integrity of the trial, id. (quoting Modave, 501 F.2d at 1072 (2d Cir. 1974)), and the instruction must have deprived the jury of adequate legal guidance to reach a rational decision. Id. (quoting Werbungs, 930 F.2d at 1026). 164 There was nothing close to fundamental error in the present case. The District Court's instruction on extortion - at the point at which it discussed the RICO claim - did not include language that wrongful means that the defendants had no lawful right to the property obtained. That principle was covered, however, elsewhere in the charge. In its discussion of the plaintiffs' claim of conversion by extortion, the District Court instructed the jury: 165 To prove conversion by extortion, the plaintiffs must prove by a preponderance of the evidence that by means of extortion, the defendants intentionally exercised control over the property of another, thereby interfering with the person's right of possession. The parties agree that 50 shares of JOBO stock were transferred to John Bernas by Mr. DeFalco. I have already explained the elements of extortion in connection with the RICO claim. 166 The plaintiffs allege that by means of extortion, John Bernas, John Bernas, Incorporated, and JML Quarries removed and sold large quantities of gravel and sand from the JOBO gravel pit belonging to JOBO Associates, Inc., and did not belong to them. Defendants assert that any gravel or sand taken from the JOBO pit was taken rightfully, with authority and by agreement with the plaintiffs, and not as a result of extortion.... 167 The plaintiffs also allege that by means of extortion, John Bernas, Incorporated, through its agent, obtained one-third of the stock in the JOBO Corporation. You are instructed that John Bernas, Inc., currently exercises control over one-third of the shares in JOBO Associates. 168 The defendants assert that John Bernas, Incorporated, obtained the shares of JOBO Associates rightfully by voluntary agreement with the plaintiffs, not by extortion. 169 (T2:1180-82) (emphasis added). 170 The principle that wrongful means that the defendants had no lawful right to the property obtained should have been set forth in the section discussing extortion under the RICO claim. Nevertheless, we cannot say that the failure to do so was fundamental error. '[A] single instruction to a jury may not be judged in artificial isolation, but must be viewed in the context of the overall charge.' United States v. Locascio, 6 F.3d 924, 942 (2d Cir.1993), cert. denied, 511 U.S. 1070 (1994) (quoting Cupp v. Naughten, 414 U.S. 141, 146 47 (1973)). Moreover, although it is preferable that the district court expressly instruct the jury that it must find that the defendants had no lawful claim of right to the property they obtained through wrongful use of fear, cf. United States v. Jackson, 196 F.3d 383, 387 (2d Cir. 1999), cert. denied, --- U.S. ---, 120 S. Ct. 2731 (2000), [t]he thrust of the district court's charge, when read as a whole, was that the use of fear of economic loss to obtain property to which one is not entitled is wrongful. United States v. Clemente, 640 F.2d 1069, 1077 (2d Cir.), cert. denied, 454 U.S. 820 (1981) (citation omitted). Unlike Jackson, where the Court gave no other explanation of the term extort and did not limit the scope of that term to the obtaining of property to which the defendant had no actual, or reasonable belief of, entitlement, the District Court here instructed the jury regarding the defendants' claim that the JOBO stock and any gravel or sand taken from the JOBO pit was taken rightfully, with authority and by agreement with the plaintiffs, and not as a result of extortion. (T2:1181). Accordingly, this was not an error so serious and flagrant that it goes to the very integrity of the trial. Travelers Indem. Co., 62 F.3d at 79 (internal quotation marks omitted); see also United States v. Middlemiss, 217 F.3d 112, 121 (2d Cir. 2000) (While we prefer the district court to explicitly instruct the jury that it must find that the defendants were not lawfully entitled to the property they obtained through wrongful use of fear, [the district court's] charge as a whole conveys that idea. No plain error is present.) (citation omitted). 20 171
172 The Bernas defendants also argue that the plaintiffs did not adduce any evidence from which the jury could find that the Bernas defendants extorted gravel and sand. The Bernas defendants argue that the gravamen of extortion is consent induced by the wrongful use of threats. They argue that, based on DeFalco's own testimony, the jury found that the Bernas defendants did not extort the contract to build the development's roads. The Bernas defendants assert that the same agreement under which they built the roads also permitted Bernas to mine the JOBO site to extract gravel necessary to build the roads at [Top of the World], as well as to sell to third parties, splitting any profits with plaintiffs 50-50. Brief of Defendants-Appellants John Bernas, John Bernas, Inc. and JML Quarries, Inc. at 19. They argue that this compels the conclusion that the removal and sale of sand and gravel was not the product of extortion, but of a wholly voluntary agreement. 173 The defendants further argue that the plaintiffs instructed Bernas to close down the JOBO operation effective December 15, 1989, and when DeFalco returned from Florida in March 1990 and found Bernas working at JOBO, DeFalco immediately ordered Bernas out and erected physical barriers to prevent entry. Accordingly, the defendants argue, any removal of materials after December 15, 1989 was without the plaintiffs' consent and, by definition, [s]uch materials were not obtained by extortion, the essence of which is consent induced by wrongful use of threats or fear. Brief of Defendants-Appellants John Bernas, John Bernas, Inc. and JML Quarries, Inc. at 20. 174 The plaintiffs concede that, pursuant to the negotiations between Bernas and DeFalco, the parties contemplated that Bernas would mine the JOBO gravel pit to obtain material for the roads in plaintiffs' development and sell the excess (and split the profit with plaintiffs). The plaintiffs argue, however, that it was not until after the plaintiffs discovered that Bernas was using the gravel for neither purpose and there was no splitting of profits that they instructed Bernas to cease removing any additional gravel. When Bernas refused to do so, the defendants threatened adverse political action from members of the enterprise if plaintiffs tried to force him to stop, thereby committing extortion. The plaintiffs argue that the evidence before the jury was therefore sufficient to conclude that Bernas used the political power of the enterprise to extort sand and gravel from the plaintiffs. We agree. 175 The essence of Bernas' argument is that he was contractually entitled to mine the sand and gravel and, if the plaintiffs were not satisfied with the work done or the profit sharing, their claim was for breach of contract. Bernas' argument, however, presupposes that the Bernas defendants indeed had a contractual right to the sand and gravel. The jury, however, made no such finding. 176 Although the jury found that the Bernas defendants did not extort a construction contract to build the development's roads, that is not tantamount to a finding that a construction contract existed and that the Bernas defendants therefore had a contractual right to the sand and gravel. The Bernas defendants' effort to infer a contractual right from the jury's negative finding on the first predicate act is unavailing. The jury could reasonably have concluded that there was no extortion of any construction contract because there was no contract. Indeed, Bernas concedes that there was no formal, written contract. See Brief of Defendants-Appellants John Bernas, John Bernas, Inc. and JML Quarries, Inc. at 19 (the removal and sale of sand and gravel was not the product of extortion but of a wholly voluntary agreement in principle, which the parties proceeded to carry out without benefit (unwisely) of ever executing a definitive written contract.). 177 Even assuming there was a contract, however, a reasonable jury could have found that Bernas had breached the agreement at the time DeFalco ordered him to stop removing sand and gravel, and DeFalco was within his contractual rights to order the stoppage. The jury could reasonably have concluded that the only reason DeFalco allowed any further access to the gravel was because of extortionate threats by Bernas. 178 In any event, there was ample evidence from which the jury could reasonably conclude that the Bernas defendants extorted sand and gravel from the JOBO pit. During the course of Bernas' work on the roads, the Town of Delaware removed gravel from the plaintiffs' gravel pit free-of-charge. (T2:162-63). When DeFalco raised the issue of Bernas giving away free sand and gravel, DeFalco suddenly faced problems with 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); compare (E:287) with (E:288). DeFalco also wanted Bernas to give him a detailed breakdown of what materials had been removed, sold or given away from the gravel pit. Whenever DeFalco broached the topic with Bernas, however, Bernas threatened to get the Town either to stop the project or to refuse dedication of the development's roads. In short, the evidence was sufficient for a reasonable jury to conclude that the Bernas defendants extorted from the plaintiffs sand and gravel from the JOBO pit.