Opinion ID: 6295
Heading Depth: 4
Heading Rank: 2

Heading: Merit, Merit Environmental and Gymco

Text: The Merit Environmental and Gymco claims appear to be integrally related to the Merit transaction. However, neither of these transactions suffices to defeat summary judgment on the RICO case. Since Merit Environmental was a corporation wholly owned by Merit, Conkling could have no claim that he was defrauded out of 11 See supra note 4. 23 any proportionate ownership in Merit Environmental unless he could prove fraud with respect to Merit. Further, although Conkling argues in a conclusory manner that he was defrauded out of his relative ownership in Merit [ ], Merit Environmental, and Gymco pursuant to his ownership relationship agreement with Turner, he does not articulate in his brief any basis for asserting the predicate act of mail fraud with respect to Gymco. In fact, the only evidence proffered by Conkling to defeat summary judgment on the Gymco predicate act is evidence showing a fact issue with respect to Turner's ownership of the partnership. Conspicuously absent from Conkling's argument is any analysis of, or even reference to, summary judgment evidence tending to prove a mail fraud in connection with Gymco.12 In short, we have serious doubt that the Gymco transaction was ever more than an attempt to put before the jury evidence of Turner's other crimes under Federal Rule of Evidence 404(b). Regardless of whether the district court treated the Gymco facts as merely Rule 404(b) evidence or as an attempted predicate act of mail fraud, it properly disposed of the claim in summary judgment. The claims relating to Merit are more difficult. Conkling asserts in this court as below that he was fraudulently deprived by Turner of his rightful proportionate interest in Merit. This transaction was clearly not derivative, nor was it a direct result 12 Indeed, none of the 183 items transmitted through the U.S. mail to [Conkling] in furtherance of defendants' scheme to defraud, or the numerous mailings to the Louisiana Secretary of State referred to by Conkling in his brief even relates to Gymco. 24 of the 1963 agreement. However, we do not believe it was a viable predicate act by the time of trial. The defendants pointed out that Conkling waived any claim for damages from Merit, concluding that he could introduce the evidence under Federal Rule of Evidence 404(b) as evidence of other crimes, wrongs, or acts, which are only admissible for limited purposes, such as proof of motive, opportunity, [or] intent.... FED.R.EVID. 404(b). Conkling admits that he waived any damage claim with respect to Merit but contends that he did not waive the predicate act itself. He argues that it is not necessary to demonstrate injury flowing from each predicate act, but only from some in order to show a pattern of racketeering activity. See, e.g., Deppe v. Tripp, 863 F.2d 1356, 1366-67 (7th Cir.1988); Town of Kearny v. Hudson Meadows Urban Renewal Corp., 829 F.2d 1263, 1268 (3d Cir.1987); Marshall & Ilsley Trust Co. v. Pate, 819 F.2d 806, 809 (7th Cir.1987); Panna v. Firstrust Sav. Bank, 760 F.Supp. 432, 437 n. 6 (D.N.J.1991). Although the record is somewhat ambiguous on this point, it appears to us that Conkling waived the entire predicate act.13 During trial, Conkling's counsel admitted that he had previously agreed to abandon the damage claim on Merit because he understood the district court to have ruled 13 We asked the parties for additional briefing on whether Conkling had waived the Merit claims as predicate acts since the defendants had so intimated in their brief. The transcript shows that Conkling waived the Merit claim, assuming that he could admit the evidence under Rule 404(b), and reveals a series of conflicting positions taken by Conkling on this issue. Although, as acknowledged above, the sequence of events is less than clear—due largely to the fact that several critical, pre-trial conferences on this issue were unrecorded—our best reading of the record leads us to conclude that Conkling abandoned Merit as a predicate act. 25 that the evidence could be admitted under Rule 404(b) at a prior status conference. The district court apparently considered the transaction as being at best other crimes evidence as reflected in the following exchange: MR. BECKER [Conkling's counsel]: .... Do you remember, we talked about it. I agreed to give up the damage claim on Merit because you said it was admissible under 404(b) at the status conference. THE COURT: I didn't say that it was totally admissible.... [Merit] could not even be a damage claim because it wasn't prayed for, number one. Number two, what I said was—what I said was the fact that it is not a damage claim doesn't mean that it can[not] be used for another purpose including 404(b), but I never made a ruling that it was absolutely admissible under 404(b) at that time. It is entirely inconsistent for Conkling to claim that the Merit evidence is admissible under Rule 404(b) and yet to argue that it constitutes a predicate act. A predicate act, by its very nature, is evidence directly bearing on an issue in the case which would not need to be screened through Rule 404(b). Important in this regard is the fact that several documents of record reflect that the status conference referred to by Conkling's counsel in the above-cited dialogue took place prior to the district court's severance of the RICO claim. Accordingly, Conkling's voluntary waiver of the Merit transaction as a claim under the belief that the evidence would be admitted under Rule 404(b) could not have been simply a response to the trial court's ruling that only one predicate act would be tried.