Opinion ID: 1926434
Heading Depth: 1
Heading Rank: 2

Heading: jurisdiction under civil rico

Text: Count X of appellant's complaint alleges violations of the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. §§ 1961-1968 (1982 & Supp. III 1985) (RICO). The trial court dismissed this count as to all defendants since it found that jurisdiction of civil claims under RICO was vested exclusively in the federal courts. We find that the trial court erred in this conclusion and, therefore, we reverse the trial court's dismissal of Count X of the complaint. We begin with a brief review of the substantive provisions of and policies underlying RICO. RICO, enacted as Title IX of the Organized Crime Control Act of 1970, permits a civil action in which plaintiff can recover treble damages for injury sustained by reason of a violation of RICO's substantive provisions. As the Supreme Court has described RICO, the Act takes aim 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 bankruptcy, securities fraud or drug-related activities that is `punishable' under federal law. Sedima, S.P.R.L. v. Imrex Company, Inc., 473 U.S. 479, 481-82, 105 S.Ct. 3275, 3278, 87 L.Ed.2d 346 (1985). These acts constituting racketeering activity are commonly referred to as the predicate offenses under RICO. Specifically, RICO prohibits a person from investing in, acquiring, or conducting the affairs of an enterprise engaged in or affecting interstate commerce by means of a pattern of racketeering activity, as defined above. It also prohibits conspiring to commit any of these acts. 18 U.S.C. § 1962. RICO defines a pattern of racketeering activity as at least two acts of racketeering activity committed within ten years of each other, one of which occurred since the passage of RICO. Id. § 1961(5). The enterprise requirement of RICO is defined broadly to include any individual, partnership, corporation, association, or other legal entity and any union or group of individuals associated in fact although not constituting a legal entity. Id. § 1961(4). The person referred to is defined as any individual or entity capable of holding a legal or beneficial interest in property. Id. § 1961(3). Importantly, RICO also includes a provision permitting a private civil action to recover treble damages for injury sustained as a result of a violation of RICO's substantive provisions. Id. § 1964(c). Both the definitions and substantive provisions of RICO are broad. They have been construed to cover an ever increasing number of factual scenarios. Although the RICO statute generally has been described as an effort by Congress to provide new weapons of unprecedented scope for an assault upon organized crime and its roots, Russello v. United States, 464 U.S. 16, 26, 104 S.Ct. 296, 302, 78 L.Ed.2d 17 (1983), the application of the statute has now exceeded even this originally broad scope. As the Sedima Court stated, RICO is to be read broadly. This is the lesson not only of Congress' self-consciously expansive language and overall approach, but also of its express admonition that RICO is to `be liberally construed to effectuate its remedial purposes.' The statute's `remedial purposes' are nowhere more evident than in the provision of a private action for those injured by racketeering activity. . . . Sedima, 473 U.S. at 497-98, 105 S.Ct. at 3286 (citations omitted). The Sedima Court also noted that the fact that most of the private civil actions presently being brought under RICO are aimed at legitimate businessmen in no way connected with organized crime and are grounded in allegations of everyday fraud is not an indication that the Act has been interpreted in a manner inconsistent with Congressional intent. In fact, the Sedima Court found that Congress clearly intended that civil RICO have precisely such a broad scope. Id. at 498-500, 105 S.Ct. at 3286-87. Indeed, the inclusion in the definition of racketeering activity of mail and wire fraud as defined by federal law, 18 U.S.C. §§ 1341 & 1343, opens the door to numerous civil RICO suits where the central allegations of wrongdoing are no more than garden variety fraud allegations. The instant case would appear to involve just such a RICO claim. The specific issue of whether state courts have jurisdiction over civil RICO claims is of first impression in Pennsylvania courts. Only one federal appellate court has decided the issue. On November 12, 1987, the Court of Appeals for the Ninth Circuit held that jurisdiction of civil RICO claims is concurrent. Lou v. Belzberg, 854 F.2d 730 (9th Cir. 1987). In addition, the Seventh Circuit has stated in dicta that it doubts whether jurisdiction over civil RICO is exclusively federal and the Fifth Circuit has stated that state courts probably have jurisdiction over civil RICO claims. County of Cook v. Midcon Corp., 773 F.2d 892, 901 n. 4 (7th Cir. 1985); DuBroff v. DuBroff, 833 F.2d 557 (5th Cir. 1987). The remaining courts that have decided this issue to date are divided. The cases finding jurisdiction concurrent include Brandenburg v. First Maryland Savings and Loan, Inc., 660 F.Supp. 717 (D.Md. 1987); Village Improvement Ass'n v. The Dow Chemical Co., 655 F.Supp. 311 (E.D.Pa. 1987); Contemporary Services Corp. v. Universal City Studios, 655 F.Supp. 885 (C.D.Cal. 1987); HMK Corp. v. Walsey, 637 F.Supp. 710 (E.D.Va. 1986), aff'd on other grounds, 828 F.2d 1071 (4th Cir. 1987); Carman v. First National Bank, 642 F.Supp. 862 (W.D.Ky. 1986); Karel v. Kroner, 635 F.Supp. 725 (N.D.Ill. 1986); Charles Kurz Co. v. Lombardi, 595 F.Supp. 373 (E.D.Pa. 1984); Luebke v. Marine National Bank, 567 F.Supp. 1460 (E.D.Wis. 1983); Rice v. Janovich, 109 Wash.2d 48, 742 P.2d 1230 (1987); Cianci v. Superior Court, 40 Cal.3d 903, 221 Cal.Rptr. 575, 710 P.2d 375 (1985). The cases finding jurisdiction exclusively federal include Intel Corp. v. Hartford Acci. & Indem. Co., 662 F.Supp. 1507 (N.D.Cal. 1987); Massey v. City of Oklahoma City, 643 F.Supp. 81 (W.D.Okla. 1986); Broadway v. San Antonio Shoe, Inc., 643 F.Supp. 584 (S.D.Tex. 1986); Spence v. Flynt, 647 F.Supp. 1266 (D.Wyo. 1986); Nordberg v. Lord, Day & Lord, 107 F.R.D. 692 (S.D.N.Y. 1985); County of Cook v. Midcon Corp., 574 F.Supp. 902 (N.D.Ill. 1983), aff'd on other grounds, 773 F.2d 892 (7th Cir. 1985); Ideal Stencil Machine & Tape Co. v. Merchiori, 600 F.Supp. 185 (S.D.Ill. 1985); Ballarine v. Getty Oil Corp., 133 A.D.2d 330, 519 N.Y.S.2d 229 (1987); Thrall Car Mfg. Co. v. Lindquist, 145 Ill.App.3d 712, 99 Ill.Dec. 397, 495 N.E.2d 1132 (1986); Greenview Trading Co. v. Hershman & Leicher, P.C., 108 A.D.2d 468, 489 N.Y.S.2d 502 (1985); Main Rusk Assoc. v. Interior Space Constructors, Inc., 699 S.W.2d 305 (Tex.App. 1985); Maplewood Bank & Trust Co. v. Acorn, Inc., 207 N.J.Super. 590, 504 A.2d 819 (1985); Levinson v. American Accident Reinsurance Group, 503 A.2d 632 (Del.Ch. 1985). As all of the foregoing courts have recognized, the United States Supreme Court has established clear principles to guide our analysis. In Gulf Offshore Co. v. Mobil Oil Corp., 453 U.S. 473, 107 S.Ct. 2870, 69 L.Ed.2d 784 (1981), the Court stated these principles as follows: The general principle of state-court jurisdiction over cases arising under federal laws is straightforward: state courts may assume subject-matter jurisdiction over a federal cause of action absent provision by Congress to the contrary or disabling incompatibility between the federal claim and state-court adjudication. This rule is premised on the relation between the States and the National Government within our federal system. . . . In considering the propriety of state-court jurisdiction over any particular federal claim, the Court begins with the presumption that state courts enjoy concurrent jurisdiction. Congress, however, may confine jurisdiction to the federal courts either explicitly or implicitly. Thus, the presumption of concurrent jurisdiction can be rebutted by an explicit statutory directive, by unmistakeable implication from legislative history, or by a clear incompatibility between state-court jurisdiction and federal interests. Id. at 477-78, 101 S.Ct. at 2875. Applying these principles to RICO, it is beyond dispute that the statute itself does not expressly oust state court jurisdiction. The only section of RICO that addresses jurisdiction over claims under RICO is Section 1964(c), which provides: Any person injured in his business or property by reason of a violation of 1962 of this chapter may sue therefor in any appropriate United States district court and shall recover threefold the damages he sustains and the cost of the suit including a reasonable attorney's fee. Id. § 1964(c). This section grants jurisdiction to the federal courts. However, as the Gulf Offshore Court stated, [i]t is black letter law . . . that the mere grant of jurisdiction to a federal court does not operate to oust a state court from concurrent jurisdiction over the cause of action. Id. at 479, 101 S.Ct. at 2875-76. It is equally clear that there is no unmistakeable implication from the legislative history of RICO that requires us to conclude that federal courts have exclusive jurisdiction over RICO claims. The legislative history is silent as to this question. See Sedima, S.P.R.L. v. Imrex Co., Inc., 741 F.2d 482, 488 (2d Cir. 1984), rev'd on other grounds, 473 U.S. 479, 105 S.Ct. 3275, 87 L.Ed.2d 346 (1985) (RICO's legislative history . . . gives little hint of the intended scope of private action under civil RICO); Blakey, The RICO Civil Action in Context: Reflections on Bennett v. Berg, 58 Notre Dame L.Rev. 237, 249-80 (1982) (review of RICO legislative history). The only subject that received express attention from Congress was whether to include a private civil right of action in RICO at all. The subject of jurisdiction over such actions was not specifically discussed. Cianci, 40 Cal.3d at 912, 221 Cal.Rptr. at 579, 710 P.2d at 379. Indeed, as other courts considering this question have indicated, one of the principal draftsmen of RICO, Professor G. Robert Blakey, has also confirmed that Congress did not consider the question of state court jurisdiction when drafting the statute. [5] See Brandenburg v. First Maryland Sav. and Loan, Inc., 660 F.Supp. 717, 731 (D.Md. 1987) (quoting Professor G. Robert Blakey); Cianci, 40 Cal.3d at 912, 221 Cal.Rptr. at 579, 710 P.2d at 379. The major argument in favor of exclusive federal jurisdiction based upon the legislative history of RICO is that in drafting the jurisdictional provision of RICO, Congress consciously used language akin to that used in Section 4 of the Clayton Act, which expresses the availability of a private right of action under that Act and which has been interpreted to vest exclusive jurisdiction over Clayton Act suits in the federal courts. See County of Cook v. Midcon Corp., 574 F.Supp. 902 (N.D.Ill. 1983), aff'd on other grounds, 773 F.2d 892 (7th Cir. 1985). Reasoning from this use of similar language, some courts have concluded that Congress equally intended jurisdiction under RICO to be exclusively federal. Id. at 912; Trial Court Opinion at 8-9. [6] We disagree. We find no unmistakeable implication of exclusive federal jurisdiction from the legislative history of RICO. The legislative history reveals that Congress never expressly considered the jurisdictional question. Given the principle that state courts may assume subject matter jurisdiction over a federal cause of action absent provision by Congress to the contrary . . ., Gulf Offshore, 453 U.S. at 477, 101 S.Ct. at 2875, we cannot accept that jurisdiction is exclusively federal simply because Congress borrowed language from Section 4 of the Clayton Act. The legislative history of RICO tells us only that Congress borrowed this language in order to express the availability of a private RICO right of action. Simply because the section that was borrowed from the Clayton Act also addresses the jurisdiction of federal courts over Clayton Act suits and has been interpreted to vest such jurisdiction exclusively in federal courts does not mandate the same conclusion as to RICO. Moreover, our conclusion is further buttressed by the Supreme Court's recent rejection of the same analogy to the Clayton Act in the context of defining the injury requirement in RICO. See Sedima, 473 U.S. at 485, 105 S.Ct. at 3279; Lou v. Belzberg, supra . Lastly, the broad interpretation to be given to civil RICO, which is mandated not only by the language of RICO itself but also by the Sedima opinion, convinces us that Congress did not intend the use of Section 1964(c) to be restricted to an exclusively federal forum. Contemporary Services Corp. v. Universal City Studios, Inc., 655 F.Supp. at 893. As the Seventh Circuit Court of Appeals has cogently stated: We doubt whether the analogy to antitrust law is sufficiently strong to conclude that because jurisdiction over antitrust cases is exclusively federal, RICO jurisdiction necessarily must follow suit. Particularly in light of the normal presumption that state courts share concurrent jurisdiction over federal statutes, we would be reluctant to conclude from congressional silence that Congress intended to depart from the usual rule. County of Cook, 773 F.2d at 905 n. 4 (citations omitted). Having eliminated the first two possible grounds for a finding of exclusive federal jurisdiction as set forth by the Gulf Offshore Court, we must now proceed to the somewhat more difficult questions that arise under the third prong of the Gulf Offshore analysis. That is, we must determine if there is a clear incompatibility between state court jurisdiction and federal interests, i.e. presumably those interests Congress sought to advance by enacting RICO. This prong of our analysis must further be divided into three areas of inquiry. The Gulf Offshore Court has stated that in seeking to find if state court jurisdiction is clearly incompatible with federal court interests, we must look to see if any of three factors arguing in favor of exclusive federal jurisdiction apply. These factors are the desireability of uniform interpretation, the expertise of federal judges in federal law, and the assumed greater hospitality of federal courts to peculiarly federal claims. Gulf Offshore, 453 U.S. at 483-84, 101 S.Ct. at 2878. We are not persuaded that any of these factors require a finding of exclusive federal jurisdiction over federal civil RICO claims. We recognize that in all areas of the law there is present a desire for uniformity. But in deciding today whether this desire requires us to forego jurisdiction of RICO claims, our true inquiry is whether RICO presents a real possibility of inconsistency in interpretation that will be exacerbated by state court adjudication of RICO claims. We recognize, as have other courts considering this question, that several of RICO's provisions are somewhat vague. See, e.g., Brandenburg, 660 F.Supp. at 732 (pattern of racketeering is not yet clearly defined); Cianci, 40 Cal.3d at 915, 221 Cal.Rptr. at 580, 710 P.2d at 381 (same). However, we are also aware that at the present time, the situation has been greatly ameliorated by continuing United States Supreme Court clarification of RICO's requirements. Moreover, the Court will continue in future to clarify inconsistencies in interpretation by state courts by reviewing those state court decisions it finds worthy of certiorari. Brandenburg, 660 F.Supp. at 733. In any event, based upon the already extant familiarity of our courts with the substantive issues that arise in most civil RICO cases, which we describe more fully below, we see little risk of aberrant decision making by our courts in dealing with RICO claims. Some have argued that the best support for a finding of exclusive federal jurisdiction under RICO is that adjudication of civil RICO claims involves interpretation of numerous other federal laws because many of the predicate offenses constituting racketeering activity arise under these federal laws. Kinsey v. Nestor Exploration Ltd., 604 F.Supp. at 1371. This contention goes both to the factor discussed above, i.e. the risk of inconsistent results, and to the second factor in our analysis, i.e. greater expertise of federal judges on issues of federal law. Just as we are not persuaded that state courts will have special difficulty in interpreting or applying RICO, thus eroding uniform application of the law, nor are we persuaded that federal judges have greater expertise as to the substantive issues that will arise in civil RICO cases. In fact, state courts clearly have greater expertise as to the many state law crimes that constitute predicate offenses listed in RICO. In addition, as we have previously stated, the most common use of the private remedy afforded by RICO has been in cases such as the instant one, involving garden variety fraud. As to this issue, state courts have a long history of expertise, perhaps even greater than that of the federal courts. Brandenburg, 660 F.Supp. at 733; Cianci, 40 Cal.3d at 915-16, 221 Cal.Rptr. at 580, 710 P.2d at 381. Indeed, particularly in a case like that before us today, the heart of the case is a plethora of state law contract and tort claims to which the RICO claim is appended. Thus, as a whole, it is a matter particularly suited to state court adjudication. Lastly, we have no fear that our courts will view RICO with less hospitality than do the federal courts. There can be no question that the policy that underlies RICO, namely the elimination of crime in the marketplace, is also a fundamental policy of this Commonwealth, and one that our courts will have no difficulty in fostering through principled decision-making. In 1972 our legislature enacted our own little RICO statute. In doing so, it expressed the same policy concerns as those that underlay the enactment of federal RICO. 18 Pa.Cons.Stat.Ann. 911 (Purdon 1983). Moreover, the presence of this statute in our state law further buttresses our previous conclusion that our courts will have no difficulty in adjudicating RICO claims, since they have had experience with a similar state statute for fifteen years. [7] Cianci, 40 Cal.3d at 915, 221 Cal.Rptr. at 581, 710 P.2d at 381. We hold that jurisdiction over claims brought under Section 1964(c) of RICO is concurrent. The trial court's grant of appellee's preliminary objections to Count X of the complaint on the ground of lack of jurisdiction was error. The trial court's grant of individual defendant Carr's demurrer is reversed. The trial court's dismissal of Count X of the complaint for lack of subject matter jurisdiction is also reversed. The case is remanded to the trial court for further proceedings consistent with this opinion. The trial court is specifically directed to determine whether Count X states a cause of action under RICO. Jurisdiction is relinquished. WIEAND, J., files concurring and dissenting opinion. WIEAND, Judge, concurring and dissenting: I join the majority's decision holding that the state courts have concurrent jurisdiction with the federal courts to hear civil RICO claims. I also concur in the majority's decision to reverse the order of the trial court which sustained preliminary objections in the nature of a demurrer to Counts I, II, V, VI, VII, VIII, IX and XII of the complaint against Frank P. Carr, III, individually. I disagree, however, that in making this decision we can avoid a determination of whether the averments of Counts III and XI are sufficient to state causes of action against Carr. My review of the record suggests that the trial court properly sustained Carr's preliminary objections in the nature of a demurrer to these two counts. Each count seeks equitable relief which would require that title and possession of the sports complex, together with the right to receive the rents and profits therefrom, be turned over to the corporate appellant. The title to this sports complex is vested in Camelback Associates, a corporation. Therefore, even if these counts are sufficient to state a cause of action against Camelback  a decision which we are not required to make  it is clear to me that they do not state a cause of action against Carr. Therefore, I would affirm the judgment entered in favor of Carr on Counts III and XI of the complaint.