*1 modify part will the district court’s precluding
order claims for mismanagement preclusion the basis of claim to bar Rob- up ertson’s claims to March instead August Finally, 1988. we will affirm holding of the district court duty loyalty Bank did not violate its remánd this to the ease district court for proceedings
further opin- consistent with this ion. TABAS; Harriette Tabas; S. Richard S. Nancy Tabas; Levinson, C. Gerald As
Executors of the Estate of Charles L.
Tabas, Appellants, TABAS; Joseph Campbell; Daniel M. P. McSwiggan; Tabas; James J. A. Lee Tabas; Robert Tepper; Susan Tabas Stempel; Linda Tabas Joanne Tabas Wurzak; Stofman; Carol Tabas Howard Wurzak. 92-1495,
Nos. 92-1529. United States Appeals, Court of
Third Circuit. Argued Jan. 1993. Reargued In Banc Oct. 1994.
Decided Feb. As Amended Feb. March 7 and 2,May *2 L. (argued), Daniel Sprague
Richard A. Pallante, & Lemisch, Sprague Denise Weiss, Goldstein, Astor, K. Sprague, Howard PA, Rosenblum, for Philadelphia, Kaplan & appellants. LaRoeca, Kohn, Robert J. E.
Harold Graf, Kohn, & (argued), Nast Zack Joanne PA, P.C., appellees. Philadelphia, for 26, 1993. Argued Jan. GREENBERG, ROTH and Before: LEWIS, Judges. Circuit Oct. In Banc Reargued SLOVITER, Judge, Chief Before: MANSMANN, STAPLETON, BECKER, SCIRICA, HUTCHINSON, GREENBERG, ALITO, ROTH, NYGAARD, COWEN, MCKEE, Judges. LEWIS, Circuit COURT OF THE OPINION ROTH, Judge: Circuit action, brought under the Racke- In this Corrupt Organizations Influenced teer IX, 91-452, (“RICO”), Title Pub.L. Act §§ amended, 1961— U.S.C. Stat. question with the presented we alleged, consti- acts, as whether defendants’ activity.” “pattern tuted a show- what we must determine Specifically, to meet plaintiffs required for ing is re- “pattern” prong of RICO’s “continuity” plaintiffs find that we Because quirement. sufficient series of alleged a have requirement, satisfy RICO’s sum- grant of district court’s reverse the will this case remand mary judgment and opin- with this proceedings consistent further ion. plaintiffs are four of the executors of cial advisor to Daniel and to Tabas Enter- (“the Estate”): Tabas Estate Charles prises, was asked Daniel to recommend a widow, Tabas; Charles’s Harriette Richard arrangement reasonable financial between *3 Tabas, Nancy and two of Charles and Tabas widow, Daniel and Charles’s In Harriette. children; Levinson, and Harriette’s Gerald response, Der Van Wal sent a letter to Har- one Charles’s business associates.1 In ad- riette in which he recommended that Daniel Tabas, who is dition to Daniel President and $180,000 receive a management annual fee Enterpris- Chief Executive Officer of Tabas Enterprises, prior from Tabas profit to shar- es, Joseph named defendants include the ing by partners. Van Der Wal further Campbell, the Executive Vice President of recommended that Harriette and Daniel each Enterprises; MeSwiggan,
Tabas James $10,000 monthly receive draw check from Enterprises; of Tabas Comptroller Daniel’s Enterprises.2 Tabas children; and one of Daniel’s sons-in-law. 1983, Beginning in March monthly distri- I. $10,000 bution checks of were drawn on a Enterprises Tabas account and sent to Har- A. through riette the United States mail. Dan- In brothers Charles and Daniel Ta- provided $10,000 iel was also with a monthly partnership, Enterpris- bas formed a Tabas addition, draw. In from March Sep- 1983 to es, conduct real estate and other business tember Enterprises paid Tabas var- for partnership agreement gov- ventures. The personal expenses ious by incurred Harriette erning joint property holdings brothers’ and Daniel. required that, in the event of the death of partner, surviving partner either would In September Enterprises Tabas partnership equally distribute income to him- stopped paying personal Harriette’s expenses self part- and the estate of the deceased and $10,000 also eliminated Harriette’s ner, regardless any personal services ei- monthly Instead, draw. Enterprises Tabas might Appendix ther brother render. See began $15,000 paying monthly draw to the ¶ 3). (Partnership at 62 (“App.”) Agreement time, Estate. At the same monthly Daniel’s partnership agreement The provided also $15,000. draw was increased to En- Tabas that: terprises pay continued to manage- Daniel It is the parties intent that ment fees and to personal cover his ex- survivor of them shall be to exercise free penses.3 joint his judgment for the benefit of own- ership provided always, ... that the re- thereafter, Shortly brought the Estate suit sponsibility obligation of the survivor against Daniel and Montgomery others in the to the estate of the deceased be shall that County, Pennsylvania, Court of Common required fiduciary. of a complaint Pleas. alleged, alia, The inter App. 4(b)). (Partnership Agreement IF was not being Estate allocated an equal Charles Tabas died. Soon income, after share of the partnership that death, Wal, Charles’s John Der Van a finan- Daniel Enterprises used Tabas per- funds for Estate, 1. including There are six heirs to the compensation Daniel's and therefore could L. Charles Tabas Foundation. have been monthly deceived checks which served as the basis of the mail fraud death, Prior Charles's each brother received acts. acknowledge they Plaintiffs that believed $10,000 monthly disbursement of from Tabas taking Daniel was more than he was entitled to addition, Enterprises. appeared the brothers partnership agreement; under the part- this was arrangement to have an under which Tabas En- ly They basis for the 1986 state suit. con- terprises paid many personal for and business tend, however, they did not know the extent expenses. they being short-changed which were until given Price parties dispute Waterhouse access to plaintiffs The Tabas En- whether terprises' Consequently, plaintiffs aware that records. receiving Daniel was substantial as- com- pensation they sert Enterprises from Tabas initiated they this suit as in addition to soon as monthly that, his argue draw check. alleged discovered Defendants the extent of the fraudulent death, plaintiffs soon after Charles’s activity. knew of legal parties’ resolved be could not the Estate Daniel misled purposes, sonal agreement settlement representatives. false and preparation directing the Judge deci- Yohn’s provided that specifically statements, misleading financial final, binding, matters “shall on such sions fiduciary duties his breached had Daniel (Settlement App. at 70 non-appealable.” the Estate. ¶ 12). Agreement parties settled November On Estate Daniel and the May the assets agreed that On suit the state release, general set- which mutual be sold. Enterprises would executed Tabas that, obligations except a schedule provided agreement established tlement *4 majority agreement, the settlement liquidating parties the under for the and method conjunction forever dis- and parties would release properties.4 the jointly held the assets, joint the charge another from: of the one liquidation the with “the Es- provided that agreement settlement action, actions, de- causes of any and all all access to given complete tate shall be dues, debts, contracts, mands, judgments, in connection and records books properties, contracts, covenants, bonds, accounts, (Settlement Agree- App. at 67 therewith!.]” any suits, claims, nature and demands ¶ 4(a)(i)). agreement The settlement ment law, arbi- whatsoever, equity, whether of income the distribution not address did otherwise, or [sic] know whether tration 1987, 20, did but November after earned time, present [either which at the unknown that: provide can, had, has, hereinafter party] ever now Partnership Agree- the that have, To the extent mat- may by reason of shall or 12,1964 inconsis- is not whatsoever, March ment dated the ter, thing cause or from world, [Settle- of this provisions the tent with to November beginning of Partnership Agree- Agreement, ment] 1987. and effect in full force continue ment shall added). (emphasis App. Tabas [of auction liquidation and until the plain- agreement, settlement Despite the completed. assets] are Enterprises’ com- with Daniel’s remained dissatisfied tiffs 13). ¶ (Settlement Agreement App. at 70 On agreement. partnership with the pliance settlement of the provision Another agree- hearing 25, 1990, Judge Yohn held July agree parties would provided ment agreement settlement whether the consider release: general mutual to execute for asserting claims the Estate from barred prejudice of with the dismissal requiring agreement stem- partnership of the breach between litigation in all parties all Tabas management of Daniel’s ming from hand, Daniel, and the one among on subsequent to November Enterprises executors, on other any of its Estate or of the provision Finding that “[t]he and only the terms hand, excluding 12, 1964 agreement of March partnership contained herein. conditions in- of income is concerning distribution ¶ 9). (Settlement Agreement App. at 69 of the settle- provisions with the consistent agree- ... the settlement Yohn, as agreement ment H. Lastly, Honorable William concerning the provisions no ment contains as the arbitrator Jr.,5 to act was named November after of income imple- distribution arising from disputes any future could 1987,” that the Estate Judge Yohn held agreement the settlement mentation of dispute the appear to plaintiffs do not provided that While agreement also 4. The settlement received, they do assert the Estate has purchase Estate’s interest amount Daniel would equal Company $1.5 mil- one-half Supply not received has Acorn Iron addition, agree- Es- partnership Royal Bank stock. required lion tate's interest under income City property Line Avenue ment. Daniel, apparently ex- was transferred Enterprises. De- change monies from Tabas time, Pennsylva- Judge sat on Yohn 5. At that fendants, million that pointing $16.9 to the a United He is now Pleas. of Common nia Court pursuant the settlement received Estate has Judge Eastern District for the District States Pennsylvania. Enterprises, liquidation of Tabas agreement and equally. plaintiffs been treated have assert against arising “pursue any handling claims” Daniel Enterpris- distribution of Tabas Enterprises’ of Tabas from the distribution complaint es assets. The initial was filed on App. income after November March complaint 1991. The amended 8).6 (Arbitration Award No. May filed on 1991.7 decision, Following Daniel’s counsel this appealed Plaintiffs have the district court’s Judge requested Yohn mediate the is- grant summary of defendants’ motion for by plaintiffs’ proposed sues raised RICO judgment. appeal, required On we are complaint. Judge Yohn held two conferences base our review of the district court’s deci- discuss, among topics, with counsel to other Accordingly, sion on the evidence of record. proposed During claims. oral ar- RICO before we turn to parties’ the merits of the 1,1991, February gument on Daniel’s counsel assertions, we will summarize the record sub- that, plaintiffs’ proposed asserted because mitted to court. complaint sought damages against RICO de- significantly, Most the record contains two agree- in the fendants not named settlement Waterhouse, financial Price ana- reports ment, proposed complaint was out- lyzing Enterprises’ oper- Tabas financial and scope side the of arbitration and therefore *5 ational records. Plaintiffs’ counsel retained by Judge in could not be decided Yohn his Price Waterhouse to determine whether Nevertheless, role as arbitrator. Daniel’s these equal records reflected the distribution in expressed having Judge counsel interest ¶ of income to the required Estate as under 3 Yohn in attempt serve as a mediator to partnership agreement. of the in proposed resolve the claims set forth complaint. RICO report The first Price Waterhouse ana- 20, 1991, February Judge On Yohn formal- lyzed Enterprises’ Tabas financial records ly request denied Daniel’s to mediate the dating from in through Charles’s death Instead, dispute. Judge Yohn ordered that: 1990, early focusing period on the after No- “By agreement parties, of the and with the 20, Then, vember 1987. in late after undersigned, of the pro- concurrence filed, complaint the amended was Price Wa- posed Complaint’ may in ‘RICO be filed completed supplemental terhouse report, United District Court for States the Eastern analyzing Tabas Enterprises’ records from Pennsylvania District of and the issues raised through July total, October 1989 1991. In subject proce- therein will not be the reports Price Waterhouse documented Agreement dure under the [Settlement] years more than three and one-half of activi- (Arbitra- App. November 1987.” at 1282 ty subsequent to the November 1987 settle- 10). tion Award No. agreement. ment In reports, both Price Wa- thereafter, plaintiffs brought Soon in- terhouse concluded that “the books and rec- action, alleging stant Enterprises violations of ords of Tabas do not reflect the 1962(a), (b), (c), (d), §§ equal income,” as well as several distribution of and that “indi- stemming state law claims from defendants’ cations of App. fraud exist.”8 460-61. rulings premised upon Judge 6. These were parties disagree- because the had further finding "By agreement par- Yohn's that: discovery, ments about the factual record is not arbitrator, ties and with the concurrence of the Nonetheless, fully developed. the record is suffi- jurisdiction upon the arbitrator has to rule support requi- cient to our conclusion that the may issue of whether the Estate make claims sites for RICO have been met. against concerning manage- M. Daniel Tabas his Enterprises subsequent ment of Tabas to Novem- 8.Price Waterhouse “opin- noted that its formal App. ber 1987.” subject scope ion” was to limitations as dis- report. cussed within each Our review of these 29, 1991, May 7. On district court entered a limitations indicates that most were caused scheduling alia, provided, order. This schedule inter Enterprises’ cooperate Tabas failure to with the discovery completed by December addition, Price Waterhouse auditors. Price provided 1991. The schedule also that defen- Enterprises’ major Waterhouse summary judgment described Tabas dants' motion for had to be depository disarray.” filed on plaintiffs’ records as in a or before October "state of and that response considering reports, weigh was due these we will November the ef- required plaintiffs scope light 1991. Because this schedule fect of the limitations in of our con- respond prior to completion discovery, analysis clusion that most limitations telephone payment of Enterprises’ a Tabas reports revealed Price Waterhouse resi- primary Daniel’s and vacation to divert bills for of transactions continuing series dences; Enterprises’ payment of personal for the and Tabas income Enterprises’ Tabas nonpartnership as- through coverage direct for family, and his insurance Daniel use antique types sets, including Daniel’s six automo- as other monetary as well benefits instance, for report, In its first biles. benefits. itemized substantial Waterhouse
Price report noted Price Waterhouse’s second En- items, Tabas purchased with number that, completion of the first and between income, no there which terprises’ for Tabas reports, Daniel had reimbursed second sub- explanation adequate documentation portion of these Enterprises for a small necessary busi- ordinary and stantiating an report also noted expenses.10 The second report expense. purpose for the ness expenses de- many questionable pur- that, to the extent Daniel noted to occur. report first continued tailed Enterprises’ using Tabas these items chased instance, report identified an the second For income, inappropriate- expenses “would such $78,000 payments personal for additional En- in Tabas interest ly the Estate’s reduce $35,000 phone and an additional services reducing income available terprises mo- private Daniel’s residences bills for App. the Estate.” distribution report also not- second telephones. The bile report, According the Price Waterhouse family his continued that Daniel and ed personal apparel, purchases included these Enterprises, to Tabas charge personal items vacation home Daniel’s dues for homeowner’s homeowner’s including personal apparel, Vermont, purchases meals and other Vermont, vacation home dues for his *6 homes, vacation had where Daniel cities meals. foreign in ten purchases and other meals nonmonetary investigating addition medicine, pool countries, and prescription benefits, reports also Price Waterhouse Pennsyl- home at Daniel’s heater installed monetary re- benefits the direct examined these and other total of The cost vania. family from Tabas by and his Daniel ceived $140,- approximated at expenses was similar that be- reports found Enterprises. The 000. 1987 and November tween November in the first re- cited problem areas Other $1,502,000 salary partner- Daniel received payment of Enterprises’ Tabas port were distributions, in- management fees and ship provision of $67,000 compensation for the centives, from Tabas and bonuses gratuities, maid, services, gardening, and such home period between and that for the Enterprises, services, family; his for Daniel and handyman 1991, he received and June November automobiles owned assignment of 24 that, $1,166,000. reports found dur- The also family, Daniel and his Enterprises Tabas paid a was period, in which Daniel ing this were not em- family members who including part- $2,668,000,the received of Estate total Enter- Enterprises; Tabas by Tabas ployed $660,000.11 totalling nership distributions insurance, automobile payment of prises’ re- Price According to the Waterhouse maintenance, car gasoline,9 repairs and to Daniel’s monetary payments registration ports, membership, club phones, auto eclipsed those cars; during time family also fees, for all 24 tags, and fees title ever, provide specific recol- could not Enterprises' Daniel efforts to hinder a result of Tabas purpose involved. the business lection of audits. Price Waterhouse that, charges, in addition gasoline also noted report Waterhouse found these 11.Price income, $18,000, received Enterprises Daniel especially problematic, since to his of Tabas excess Royal of the Board of compensation submis- as Chairman revealed routine the relevant documents deposition, testified that he multiple requests reimbursement his Daniel Bank. At sions of per Enter- week for Tabas single receipt. hours arising worked 60-70 from a Royal Bank his prises, app. at and that Thursday morning consisted of time all un- commitment deposition, testified that Daniel In his meeting one meetings board and a legitimate staff represented busi- executive evening expenses reimbursed App. at 614. expenses, each month. how- expenses. these For of ness most reports Spe- by the Estate. docu- fraud violation 18 U.S.C. 1341.12 received cifically, plaintiffs allege that November 1987 and defendants con- mented that between family, including ducted a scheme to defraud the Estate of its Daniel’s his six June son-in-law, equal partnership’s $1,363,- share of the income received children and one wrongfully diverting Enterprises’ Tabas Enterprises in form 000 from Tabas incentives, pay personal expenses funds to for the salaries, fees and management family by understating Daniel and his bonuses, consulting gratuities, fees. The the Estate’s share of the income. Plaintiffs complaint alleges payments amended that, assert from the time of Charles’s death and son-in-law “do not con- Daniel’s children through period in which the amended for work which stitute reasonable salaries filed, complaint “continuously Daniel they actually performed and that some of representations made false to the Estate spouses those children their and/or fraudulently mail and distributed millions of ‘phantom’ ‘ghost’ employees per- who Enterprises’ dollars of Tabas funds to him- App. all.” formed little or no work at family self and to ¶ members his (“AC”) 25). (Amended Complaint scheme to defraud the Estate of income to report Price Waterhouse also The first ¶ (AC 24). App. which it was entitled.” at 20 that, receiving compensa- noted in addition to specifically allege Daniel, Plaintiffs Enterprises, certain tion from Tabas mem- Campbell, McSwiggan forty- committed family Daniel’s also worked for and bers of one acts of mail fraud between December compensation Royal received from Bank. February purpose 1987 and 1991 for “the instance, For Lee Tabas served as President executing the scheme to defraud the Estate Bank, Royal Robert Tabas served as Vice equal of its App. share of income.” at 43 President, Tepper and Susan Tabas served (AC ¶49).13 Thirty-nine forty-one of these Marketing. as Director represented monthly disbursements of n Finally, findings, in addition to the above $15,000 (a holding from Tabas Brothers reports both Price Waterhouse noted that Enterprises) Tabas to the Estate. The re- subjected may also have been “the Estate to maining mailing two acts involve the of vari- taxes, interest, of additional risk *7 Enterprises ous from IRS forms Tabas penalties” apparent due to Internal Revenue reflecting the Estate income earned and reporting by Service violations Tabas Enter- expenses by business incurred certain Tabas prises. App. at Enterprises’ entities. Plaintiffs contend that mailing monthly by checks defen- B. dants “constituted an misrepre- intentional sentation” that one-half of the income of Ta- complaint alleges Count I of the amended Enterprises being paid bas was to the Estate that, 1962(a), (b), § in violation of 18 U.S.C. pursuant partnership agreement. to the (c), conspired and the defendants to defraud ¶ (AC 50). App. at 46 equal of its share of Estate Tabas Enter- prises’ income, to which it Finding was entitled under dispute present that the did not partnership agreement, through pat- satisfy sufficient threat to RICO’s “continui- including ty” tern of requirement, mail granted the district court complaint alleges allege 12. Count II of the amended 13. Plaintiffs also as acts defen- 1962(d) by § conspiring that defendants violated dants' use of the United States mails to send (a), (b), (c). to violate subsections checks to Daniel's children and son-in-law for complaint allege Counts III-VI the amended performed. rely work not We do not on these state law claims that are not central appeal, however, this allegations, plaintiffs because have not including fiduciary duty, breach of produced any McSwiggan's evidence to counter contract, fraud, breach of and conversion. The deposition testimony that these checks were de- district court dismissed these state law claims See, Correa, e.g., livered courier. 631 Utz prejudice. without Because we find that the (S.D.N.Y., 1986) F.Supp. (delivery II, dismissing district court erred in I and Counts by messenger letter did not violate the mail fraud we will instruct the district court to vacate the statute since the United States mails were not plaintiffs' supplemental dismissal of state law used). claims. summary judgment motion. The defendants’ ii. that: reasoned
district court
subject
juris-
court had
matter
The district
essentially allege one
claims
pursuant
Plaintiffs’
civil action
to 28
diction over this
against
perpetrated
§§
one
1331 and 1367. The district
U.S.C.
fraudulent scheme
jurisdiction
in-
question
court’s federal
was
gist
perpetrator.
one
victim
I and II of the amend-
voked because Counts
Daniel Tabas
complaint is that
plaintiffs’
RICO,
complaint raise claims under
ed
partnership
failed to abide
has
§§
and 1962. The district
U.S.C.
brother, Charles,
with his
agreement made
supplemental jurisdiction
invoked
court’s
employed various
Daniel has
and that
through
because Counts III
VI of the amend-
trickery
cheat Charles’s
methods
complaint
ed
raise claims that are so related
fifty percent share of the
of their
heirs
they
II that
to the claims
Count
and Daniel buflt.
that Charles
business
controversy
part
form
of the same case or
is
of this scheme Charles
The sole victim
under Article III of the United States Con-
perpetrator
The sole
Tabas’s estate.
stitution. Under 28 U.S.C.
this
under his con-
Tabas or individuals
Daniel
jurisdiction
appellate
has
over the final
Court
no
affected. There is
No one else is
trol.
court.14
orders of the district
community
large. This is
threat to the
predicate acts are
where the
not a case
plenary
This Court has
review over
way
doing
entity’s regular
“part of an
summary
grant
judg
the district court’s
business,”
affect others do-
such as would
Ins.
v. Aardvark
ment. See Northern
Co.
entity.
ing
with the
business
(3d Cir.1991).
Assocs.,
942 F.2d
194 n. 5
order for
On review of the district court’s
between Charles
partnership
summary judgment,
‘apply the same test
“we
liqui-
currently
process
Daniel is
initial
the district court should have utilized
activity al-
All of the fraudulent
dation.
”
Erie,
ly.’ Erie Telecommunications v.
liqui-
once the
leged in this suit will cease
(3d Cir.1988) (citations
1084, 1093
omit
F.2d
complete. Given the
process is
dation
ted).
reviewing
summary
grant
“In
re-
Appeals’
“[i]t
admonition
Court of
judgment,
must be
‘that the
we
convinced
open question whether RICO
mains an
successfully
prevailing party has
demonstrat
single-
for a
liability
appropriate
is ever
genuine issue as to
ed that there is no
scheme,
threatening
single-victim conduct
moving party
fact
material
harm,”
simply
not find
do
no future
”
judgment
a matter of law.’
entitled
alleged conduct in
that the defendants’
Inc.,
Liberty Lobby,
(citing
Id.
Anderson v.
worthy of
“pose[s] a societal threat
case
2505, 2511,
U.S.
penalties and remedies avail-
the draconian
Catrett,
(1986);
Corp. v.
L.Ed.2d 202
Celotex
*8
able under RICO.”
2548, 2552,
317, 322,
477 U.S.
106 S.Ct.
(1986)).
L.Ed.2d
8-10, 1992 WL
opinion at
District Court
omitted)
(citations
121600; App. at 1376-78
summary judg
determining
In
whether
omitted).
(footnotes
timely
Plaintiffs filed
evidence of the
appropriate, “[t]he
ment is
grant
court’s
appeal
notice of
of the district
believed,
justifi
and all
non-movant is to be
Defen-
summary judgment to defendants.
in his favor.”
are to be drawn
able inferences
seeking review of
appeal,
also filed an
dants
Anderson,
255, 106
at 2513.
S.Ct.
U.S.
decision to dismiss
the district court’s
pres
inquiry
the evidence
The
is “whether
Following
prejudice.
claims without
disagreement
require
state
to
sub
a sufficient
ents
decision,
granted
one-
filing
panel’s
jury
of the
whether it is so
mission to the
or
prevail as a matter
rehearing
party
in banc and
that one
must
appellants’ petition for
sided
251-52,
at 2512.
Id. at
of law.”
panel opinion.
vacated
order,
26,
1367(c)(3).
order,
May
§
court's second
The district
dated
14. The district court's first
to
1993,
summaiy
the first order
dated June
amended
granted
for
defendants’ motion
II,
pursuant
to
Count VI
include dismissal of
judgment
and dismissed
Counts I and
on
1367(c)(3).
III, IV,
pursuant
U.S.C.
and V
to 28
Counts
irregularity
III.
some other
of this nature on the
him
part of the Arbitrator which caused
we must address is defen-
issue
The first
unjust, inequitable
render an
or unconsciona-
preclud-
that this lawsuit is
contention
dants’
finding”).
alleged
ble
Defendants have not
agreement and the
1987 settlement
ed
part
Judge
action on the
Yohn
question was con-
This
mutual release.
fraud,
amounting
corruption,
partiality.
only.
find defen-
panel
We
sidered
addition,
presented
In
defendants have
no
to be without merit.
argument
dants’
Judge
provide
Yohn
evidence
failed to
First, binding
by Judge
arbitration
hearing
prior
party’s
to consider each
views
present claims
Yohn holds the
viable.
fact,
clearly
to his decision.
the record
final,
provides
agreement
for
settlement
Judge
hearing
indicates that
Yohn held a
on
any dispute
“as to the
binding arbitration
question
this
and considered numerous ex-
Agreement or as to the
provisions of this
changes
correspondence
ruling
before
operation
provisions
implementation this matter.
between Daniel and the
Agreement”
of this
(Settlement Agreement
App.
Estate.
at'70
Second,
if
even we were to make our
¶ 12).
very
claims such
issue whether
own
evaluation whether the 1987 settle
brought
could be
was submit
as this lawsuit
agreement
pre
ment
and the 1990 release
arbitrator,
Yohn,
who deter
Judge
ted
lawsuit,
cluded
we would conclude that it
juris
initially that “the arbitrator has
mined
does not. Defendants’ rebanee on Main
upon
diction to rule
the issue whether the
Theatres,
Line
Inc. v. Paramount Film Dis
against
may make claims
Daniel M.
Estate
(3d Cir.),
Corp.,
trib.
pression of
rea-
litigation should and
settlement of the
IV.
sonably
understand that both as-
would
covered
the set-
pects
Having
plaintiffs’
of the suit were
lawsuit is not
found
precluded by
agreement
tlement.
1987 settlement
release,
the 1990 mutual
we now turn to
added).
(emphasis
298 F.2d
plaintiffs
decision that
the district court’s
Line,
point to no
plaintiffs could
In Main
allege
failed to
a course of conduct sufficient
limitations,
implied, in their oral
expressed or
“pattern
racketeering
to establish a RICO
Accordingly,
with defendants.
agreement
satisfy
plaintiffs failed to
conduct” because
agreement covered their
their settlement
“continuity” requirement.
RICO’s
injunctive
money
relief and
prayers for both
case, however, the
damages.
present
In the
provides
statute
for civil dam-
The RICO
Dan-
signed by plaintiffs and
mutual release
injured in
ages
“any person
his business
for
expressly
applicability
limits the
iel
a violation of
property
[18
reason of
or
arising
begin-
any claims
“from the
release to
1964(c).
§
A
§ 1962].” 18 U.S.C.
U.S.C.
20, 1987.”
ning
the world to November
running throughout
1962is
common thread
limitation distin-
express
This
App. at 294.
injured party must demonstrate that
that an
pre-
facts
guishes
case from the
the instant
“pattern
engaged
the defendant was
sented Main Line.
1962(a)
activity.”
pro-
racketeering
Section
“any person who has received
hibits
also draw the Court’s attention
Defendants
pattern of racke-
...
from a
income derived
“[c]er-
in Main Line that
to our statement
money
activity”
using that
teering
from
offering a sum in settle-
tainly, a defendant
engaged in
any enterprise
things,
acquire
operate
asking, among other
ment of a suit
1962(b)
conduct,
pro-
interstate commerce. Section
injunction against similar
acquiring, maintain-
any person from
demand
hibits
understand that a similar
would not
in,
controlling any such
day
ing an interest
after settlement.”
could be asserted
added).
enterprise “through
The Es-
(emphasis
F.2d at 803
1962(c)
any per-
prohibits
here, however,
activity.”
although de-
Section
suit
tate’s state
an enter-
employed
or associated with
Equity,”
did not
son
“Complaint
nominated
*10
from
in interstate commerce
holding
prise engaged
in
injunctive
The
broad
relief.
seek
in the affairs of
conducting
participating
or
plaintiff
on the fact that the
Main Line relies
racke-
enterprise through
“a
enjoin Paramount from the
specifically sought to
1962(d)
Finally,
teering activity.”
section
using
distributing
pictures
methods
motion
Restriction,
conspiring
Impropriety
person from
to vio-
and
Judicial
any
prohibits
(1982) (“Given
(c).
(a), (b),
Harv.L.Rev.
or
late subsections
prevalence of mail and wire use
commer-
dispute in this case is the
to the
Central
transactions,
provision
pri-
for a
cial
RICO’s
participated
defendants
question whether
predicated
vate cause of action
on violations
activity.”
racketeering
The
pattern of
“a
virtually
of the
and wire fraud statutes
mail
“pattern”
a
of racke
defines
RICO statute
fraud”).
federalizes common law
requiring “at least
two
teering activity as
language
If we examine the
of the statute
activity”
a ten
racketeering
within
acts of
itself,
attempt
scope
in an
to discern the
1961(5).
§
The stat
year period. 18 U.S.C.
RICO,
civil
we find ourselves lost in a land
con
the offenses which
ute also enumerates
1961(5)
signposts.
with few
Section
defines
“racketeering
activity,” including
stitute
requiring
“pattern” as
“at least two acts of
traditionally been associat
that have
crimes
activity.”
The breadth of the
transgressions of racketeers:
ed with the
acts,
1961(1),
predicate
§in
com-
described
arson,
murder, kidnapping, gambling,
rob
1961(5)’s
pat-
§with
bined
loose definition of
extortion, dealing in
bery, bribery,
obscene
tern,
many
has led
courts to recoil from the
matter,
dealing in narcotic or other dan
and
inclusion within RICO offenses which were
1961(1).
§
gerous drugs.
18 U.S.C.
The
gangsters.
not considered to be the crimes of
is, however, expansive
statutory enumeration
court-imposed
scope
Such
limitations on the
specific
of
goes
and
on to include
federal
of civil
were first reviewed
which,
they may
although
often be
fenses
Sedima,
Supreme
Court
S.P.R.L. v. Imrex
categor
by those whom we would
committed
Co.,
473 U.S.
105 S.Ct.
87 L.Ed.2d
“racketeers,”
category
also fall into the
ize as
(1985).
Sedima,
Supreme
Court
“garden variety” fraud and
of common law or
expansive
concept
set out an
definition of the
would,
past,
which
in the
have been the
“pattern”
in civil RICO.
subject
litigation
of commercial
under state
Among
broadly
law.
these
delineated feder
Sedima arose from
action filed in the
by Belgian
mail fraud and wire fraud.15 Eastern
of New York
al offenses are
District
1964(c)
(d)
many
corporation,
§
con
offenses are the ones
based on
These
fraud,
predicate
sider to be the most troublesome as RICO
acts of mail fraud and wire
Imrex,
charging
partner
inclusion within the
acts. The
Sedima’s
in a
fraud,
venture,
types
joint
presented
scope of civil RICO of these
had
inflated
bills
portion
in the commercial world than
had
prevalent
more
cheated Sedima out of a
of its
racketeers,
proceeds by
collecting
the world of
has caused con
for nonexistent ex-
.
sweeps
penses.
cern that RICO
too broad
swathe
The district court dismissed the
See,
Note,
claim,
e.g.,
Temptation
Civil RICO:
RICO counts for failure to state a
fraud,
"everything designed
by representa
U.S.C.
Mail
racketeer-
to defraud
ing activity
past
present,
suggestions
in the case before us. Sec-
involved
tions as to the
or
or
provides
pertinent part:
promises
tion 1341
as to the future.” Durland v. United
States,
306, 313,
Whoever, having
any
devised ...
scheme or
Fraud,
(1896).
involving
L.Ed. 709
the use of
defraud,
obtaining money
artifice to
or for
or
out,
postal system cany
was made a
properly by
pre-
means of false or fraudulent
by Congress
"purpose
federal offense
with the
tenses, representations,
promises,
...
protecting
public against
all such intentional
executing
purpose
such scheme or arti-
despoil,
prevent
post
efforts to
and to
office
any
places
post
fice ...
office or authorized
being
cany
matter,
from
used to
them into effect....”
thing
depository for mail
matter or
Id. at
Id. at Court, chosen to Congress date has not narrow the legislation which would enact this less restrictive Justice White based exactly more scope civil RICO or to define prior law and reading case of the statute Moreover, the efforts “pattern.” surrounding the stat- what is general principles entirely so have not been broadly. courts to read This is do ute: “RICO is to be design attempts to a mean Congress’ successful. Our only of self-con- the lesson not pattern have continued ingful concept of language ap- and overall sciously expansive *12 1292 language pattern racketeering activity plaintiff of a broad of the stat with the
collide
however,
Sedima,
racketeering predicates
the must
response,
In
show
ute.'
guidelines
related,
they
began
pose
to structure
and that
amount to or
various circuits
pattern
a
had
determining
activity.”
whether RICO
a threat of continued criminal
Id.
for
Circuit,
239,
In
the Third
been established.
at
H.J.
v. Northwestern Bell Tel.
Inc.
continuity showing,
the Court
(8th Cir.1987).
described
F.2d 648
Court
continuity
open-ended
as “both a closed- and
granted certiorari to resolve the conflict be-
concept, referring
period
to a
either
closed
single
over
tween the circuits
whether
conduct,
repeated
past
or to
conduct that
multiple
required
schemes
to demon-
projects
its nature
into the future with a
pattern.
a
strate
repetition.”
is,
threat of
Id.
“It
in either
opinion
Inc. v.
its
H.J.
Northwestern
ease, centrally
temporal
a
concept,” id. at
Co.,
Bell Tel.
S.Ct.
241-42,
party
109 S.Ct. at
so that a
(1989),
year period. 18 U.S.C.
B.
long duration.
years
period
is a
that ten
acts,
Yet,
one
would two related
Moreover,
if
even we were not to have
com-
February
1982 and one
committed
lasting
found that conduct
three and one-half
January
to form
be sufficient
mitted
years was sufficient to establish closed-ended
Indeed,
unlikely.
pattern?
It would seem
*15
continuity,
continuity
we conclude that
still
that,
in a footnote
while
noted
Justice White
purposes
would have been established for the
1961(5)
racketeering
a
of
defines
summary judgment
present
in the
of
ease
of
activity
requiring at
least
two acts
as
“open-ended” continuity analysis.
under an
may
activity, two acts
not be
racketeering
Inc.,
brought
if a RICO action is
Under H.J.
at 496 n.
Id. 473 U.S.
sufficient.
plaintiff
long-term
before a
can establish
n. 14.
at 3285
S.Ct.
conduct,
“continuity” prong may
criminal
then,
remains,
what more is
question
plaintiff
prove
met if a
can
a threat of
still be
whether conti
required in order to evaluate
racketeering activity.
continued
Whether
predicate
when
nuity has been established
predicate acts constitute a threat of con-
period
a
of several
acts have occurred over
racketeering
depends on “the
tinued
can be
years.
helpful consideration
One
case,”
specific
of each
id. at
facts
requirements
open-
for
in the
found
Court’s
suggests
Inc.
that
S.Ct. at
but H.J.
continuity.
In
Inc.
the Court
H.J.
ended
may
open-ended continuity
be satisfied
continuity is estab
open-ended
that
states
predicates
it is shown that the
are a
“where
predicate
when the commission of
lished
conducting
ongo-
regular way of
defendant’s
way
conducting defen
regular
is “a
of
acts
conducting
...
ing legitimate business
or of
legitimate business.”
ongoing
dant’s
ongoing
legitimate
participating
or
in an
”
243, 109
It would seem
at
S.Ct. at 2902.
U.S.
at
at
‘enterprise.’
Id.
S.Ct.
that,
analogy
predicate
if
a valid
2902.
conducting
regular way
a
of
defen
have been
us,
Packages instructs
long period
a
Mindful
Kehr
legitimate
dant’s
business over
determining continuity,
focus on the
pattern has been satisf
past,
in the
the RICO
underlying
case,
of
fraudu-
mail fraud element
a
the relatedness and
ied.19
such
entity,
opposed
way imply
to investors or
making
analogy,
ness with the
we in no
this
so,
"regular
entity.
partners
a
If
that the
acts must constitute
or beneficiaries of the
doing
way”
business. We mere-
of a defendant’s
support
such a re
in H.J. Inc. for
we find no
give
example
which
ly
of the manner in
one
passage
implication
quirement.
of the cited
may
“pattern”
be demonstrated.
holding
require
Inc. does not limit its
in H.J.
doing
those who are
busi
that the effect be on
court,
summary judg
granting
20. The district
entity.
ness with the
defendants,
"[tjhis is not a
found that
ment
hand,
If,
court was
the district
other
‘part
an
acts are
of
case where the
finding
scope
making
fact on the
of
business,'
doing
entity's regular way
such as
business, i.e.,
doing
regular way of
defendants’
doing
enti
business with the
would affect others
alleged
the Estate and
scheme to defraud
Inc.,
(citing
ty.” App.
H.J.
492 U.S.
at 1377.
beneficiaries,
through
repeated actions
its
2902).
page
supra at
S.Ct. at
See
Waterhouse,
did not consti-
described
Price
suggests
court
the extent that the district
To
business,
way
doing
regular
tute defendants'
doing
upon
with the
that effects
others
business
record, we must
view of the facts of
then in
"continuity,”
finding
entity
are relevant to
clearly
finding of fact is
that such a
requir
conclude
certain if the district court is
we are not
ing
doing
busi
erroneous.
affected be outsiders
that those
not, however,
they
as on the element of the
here does
mean
activity as well
lent
persuaded
might
the evidence
not be relevant
a different case
mailings, we are
open-ended
continuity
con- determining
meets the standard
if
exists. As the
here
presented
Inc.,
have
evidence
tinuity. Plaintiffs
noted in H.J.
in those cases
Court
continuously
questiona-
took
continuity
that defendants
relatedness
are in
where
directly affected the
expenses,
doubt,
which
ble
other factors should be examined to
available
the Estate.
partnership income
“pattern
if
discern
there is
reports
replete
Price Waterhouse
Both
activity” under RICO:
expense charges
taken
examples
with
relationship
The limits of the
and continui-
adequate
there is not
for which
defendants
ty concepts that
combine to define RICO
explanation to substantiate
documentation
pattern,
precise
and the
methods which
necessary
purpose.
ordinary and
business
relatedness and
threat
its
meals,
services,
trips,
home
included
These
may
proved,
be
cannot be fixed in advance
cars,
expenditures,
insurance
gasoline,
clarity
always
with such
will
telephone bills.
apparent
particular
whether in a
case a
litigation,
must
stage
“pattern
racketeering activity”
At
exists.
light most favorable to
facts
view the
It
2902-03.
non-movants, i.e., that as a
plaintiffs, the
therefore,
helpful,
determining
when
whether
business,
way
doing
regular
defendants
“continuity”
prov-
“relatedness” or
has been
fraudulently misrepresenting expendi-
en,
fact-oriented, case-by-ease ap-
to use a
deprive
to benefit themselves and
tures
proach
“pat-
to determine whether there is a
*16
legiti-
and its beneficiaries of their
the Estate
racketeering activity.”21
tern of
profits
Enterpris-
mate share of the
of Tabas
case,
present
plaintiffs
In the
we find that
in the record is clear that
es. The evidence
clearly presented
legal-
have
evidence that is
regular way
practices, defendants’
these
ly
summary judgment
sufficient to survive
on
business,
plain-
doing
continued even after
continuity through
the issue of
the defen-
complaint
consequence,
filed. As a
tiffs’
was
alleged
dants’
commission of the
plaintiffs have established
threat of con-
underlying
activity
acts and of the
fraudulent
required
tinuing fraudulent conduct as
under
ongoing way
doing
as an
business. Ac-
continuity analysis.
“open-ended”
cordingly, we do not need to concern our-
applicability
selves with the
of the Barticheck
C.
specific
factors to the
facts of this case.
pattern
have found a
Because we
racke-
teering
in both the duration of and
D.
on-going
implicit in
threat
defendants’
business,
regular way
doing
go
recognize
we will not
ruling
We
that our
means that
RICO,
analyze
penalties, may
ap-
on to
this case under the six Barti-
with its severe
plicable
many “garden-variety”
check factors. The fact that we do not em-
fraud
cases, Marshall-Silver,
ploy
analysis
597,
the Barticheck factors
our
see
894 F.2d at
clear, however,
Although
we decided Barticheck before H.J.
It remains
that “duration is the
Hindes,
Inc.,
qua
continuity.”
sine
non of
937 F.2d at
we have since noted
six Barticheck
reason,
873. For this
the Barticheck factors are
determining
factors are still relevant in
whether
analytical
best viewed as
tools available to
Castle,
courts
See Hindes v.
F.2d
exists.
continuity
clearly
when the issue of
cannot be
868,
(3d Cir.1991) ("[T]he
873 n. 3
Barticheck
open-ended
under
determined
analysis.
either
closed- or
factors,
acts, victims,
such as the number of
It should also be noted that the H.J.
perpetrators and the character of the unlawful
holding
Inc. decision cites the Third Circuit’s
activity, may be relevant in some cases in assess-
(1)
propositions only:
two
Barticheck for
narrow
ing
continuing
the threat of
criminal conduct
open-ended
is both a closed- and
throwing light
illegal activity
on
whether
concept,
issue is not day. separately I write another therefore Judge opinion, properly As read Roth’s my understanding of the order to set forth length treats the of time over which the implications of this court’s decision. (Barticheck predicate acts were committed (fac- 2),
factor #
the number of unlawful acts
II
1),
#
tor
and the routineness or customari-
(which
is,
my
ness
the acts
view as I
example
Perhaps
most serious
below,
explain
only permissible interpre-
*18
needlessly
jurispru-
uncertainty
sown
tation of factor #
the character of the
Judge
opinion
of
Roth’s
con-
dential reticence
activity)
unlawful
as relevant for the continui-
6,#
cerns Barticheck factor
the “character of
ty
Although
inquiry.
Judge
does not
Roth
view,
activity.”
my
opin-
In
the unlawful
(similari-
#
discuss Barticheck factors
3-# 5
leaving open
possibili-
ion can
as
be read
acts,
victims,
ty of
number of
and number
factor,
ty
along
that this
with the other Bar-
perpetrators),
analysis
I believe that
its
factors,
today’s
ticheck
survives
decision.
that
shows
these factors are irrelevant to the
(“The
page
fact
Op.
See Lead
at
that we
continuity inquiry.
employ
do
factors in out-
not
Barticheck
not, however,
notes,
analysis
'Judge
continuity
here does
mean that
As
Roth
is “cen-
they might
trally
temporal concept.”
Op.
in a
be relevant
different case
Lead
at
exists.”)
Inc.,
H.J.,
determining
continuity
(empha-
page
(quoting
if
492 U.S. at
(“The
2902).
supplied);
simply
id. at 1296 n. 21
It
sis
Barti-
“refer[s]
may
period
repeated
...
check factors
be relevant
some
either
a closed
conduct
assessing
continuing
continuity],
past
[closed-ended
cases
the threat of
or to
conduct
conduct....”)
(internal
quotation
projects
criminal
that
its nature
into the future
omitted, emphases supplied).
repetition [open-ended
marks
This is with a threat of
conti-
H.J., Inc.,
apparently
nuity].”
Judge
(quoting
the conclusion drawn
Id.
focus is
in this context.
continuity.
Congress
specified
in the RICO statute
predicate
number
acts could indi-
laundry
arguably
extensive
list of serious and
activity
cate an extent of
that would bear on
less serious acts that all constitute racketeer-
activity
whether the
sporadic
frequent,
ing activity, and
improper
so
strikes me as
predicate
and extent of
is there-
to maintain that
“pattern”
the statute’s
re-
continuity,
fore relevant
Judge
as
Roth
quirement
in a
builds
normative evaluation of
recognize.
seems to
Op.
See Lead
page
predicate
the seriousness of the
acts. The
(“[If]
acts have been a
concern about
federalizing
attaching
regular way
conducting
legiti-
defendant’s
penalties
“garden
fraud,”
drastic
variety
mate
long period
business over a
past,
Dissenting Op.
see
page
legiti-
ais
satisfied.”).
pattern
the RICO
been
But
one,
mate
but one that must be addressed
relevant, for,
number of victims is not
under
Congress rather than the courts. And Con-
present congressional scheme,
we are
gress has told us what
worry
sorts of acts to
looking
continuity
in order to show a
pattern
about. Our concern with the
re-
acts,
not harm from
quirement
simply
to insure that RICO
supra page
the acts. See
1302 n. 2.
liability is not
“spo-
attached to “isolated” or
radic”
requires
acts. That task
no
C.
inquiry into the
seriousness
the acts. The
“threat”
looking
for which we are
is the
previously
We have
“similarity”
held that
repeated
conduct,
threat of
prohibited
(factor
3)
see,
#
continuity,
does not bear on
grievous
the threat of
harm.
Marshall-Silver,
e.g.,
With this I Judge believe this court already length Roth has made (factor 2) plainly should state that the number of vic- time # and number of unlawful acts (factor 4) (factor 1) tims # perpetrators and number of part analysis, # of her core irre- (factor 5) # view, do not bear on spective my of Barticheck. the lead inquiry. Certainly, opinion neither the virtually nothing number of leaves of Barticheck perpetrators victims nor the number of and I along Judge Greenberg with believe— analysis which, dissent, should affect of duration Dissenting Op. see page Judge explains, Roth especially Court say lines 33—that we should so. centerpiece has rendered the of the continui- I Judge While share Roth’s uneasiness as to ty Indeed, jurisprudence. law, these factors where this hope leaves the can
1302
See
predicate violations.
the
of
duration
will not be
clarion call
and
eloquent
that its
Inc.,
1422-23
F.2d
926
at
Packages,
Kehr
Congress.
ignored
dissenting).
J., concurring
(Alito,
and
join in
and McKEE
Judges STAPLETON
Barticheck
that the
Finally, I
not think
do
concurrence.
this
except to
be considered
should
factors
bearing on
logical
concurring.
they
Judge,
have some
ALITO,
that
extent
Circuit
Kehr
“continuity.” See
“relatedness”
join
I
those
and
judgment,
in the
I concur
(Alito, J., concur-
F.2d at 1421
Packages, 926
that constitute
opinion
Judge Roth’s
parts of
dissenting).
ring and
I,
i.e.,
court,
parts
the in bane
of
opinion
Judge
join part IV
II, V,
I do not
and VI.
dissenting.
GREENBERG,
Judge,
Circuit
the discussion
While
opinion.
Roth’s
Judge
part
IV of
requirement
“continuity”
complaint, the Estate
its amended
away from
step
is a welcome
opinion
Roth’s
its
to transform
L. Tabas seeks
Charles
court’s
of this
in some
taken
approach
over
dispute
defendants
with
state-law
certain
decisions,
agree with
I do not
prior
prof
partnership’s
a
allocation of
the proper
my
I
out
set
discussion.
that
portions of
by alleg
simply
case
RICO
its
a federal
into
“continuity”
concept of
understanding of
used the United
the defendants
ing that
Fidelcor, Inc., 926
v.
Packages, Inc.
in Kehr
a
it over
with
mail to communicate
States
Cir.1991)
J.,
(3d
(Alito,
1406, 1419-26
F.2d
have
we
period of time. While
substantial
dissenting),
pursuant
and
concurring and
plaintiff
directly whether
not considered
conti-
closed-ended
analysis, I think that
that
circum
action in such
bring a RICO
can
to de-
sufficiently
here
nuity
established
clearly
such
stances,
forbid
precedents
our
My principal
judgment.
summary
feat
Consol-Pennsylva
Hughes v.
alchemy. See
the discussion
with
disagreement
points of
Cir.1991),
(3d
Co.,
945
609-11
F.2d
nia Coal
opinion are as fol-
Judge Roth’s
part
IV
denied,
1222, 112 S.Ct.
501 U.S.
rt.
ce
lows.
(1992);
v.
224
Hindes
L.Ed.2d
119
(3d Cir.1991);
intimation
First,
agree
Castle,
not
with
Kehr
I do
1303
pose
ty
a threat of
criminal
open-ended
continued
“is both a closed- and
concept,
activity.” H.J. Inc. v. Northwestern Bell Tel.
referring
period
either to a closed
of re-
Co.,
229, 239,
2893, 2900,
conduct,
peated
past
conduct that
its
(1989) (emphasis
origi-
8. While the answers that did unlawful acts in accordance with the sixth Barti- factor, distinguish mailings purely intend to between and hand check the use mails particular as deliveries the former but not the latter could fortuitous in this case and it was the fraud, my point. My alleged be mail this answer misses fraud not how the checks were deliv- point considering injured is that in the character of the ered which the Estate. authorities, and therefore complaint to the point with critical final but one I make of the defendants apprehension activ- make the the unlawful character of respect to the mailings had taken likely if no than less point this because I focus on ity in this case. ” (citation Majority n.- 18 at 1294-95 place.’ character regard I omitted). event, no matter how in this factor significant Barticheck most case, even if characterizes this Estate out, majority points ease. As acts, this suit is there were some fraudulent $15,- mailing of acts consist part- how dispute about and last first two and the other to the Estate 000 checks distributed. should have been nership income on such Reliance mailing tax forms. concern context, mailing this Seen Es- because the problematic acts is a thin benign an act that was so cheeks the defen- pleading essence tate is to build the on which foundation by sending it “mail fraud” committed dants bottom, regardless pejo- At element. cases which money. I can conceive to char- the Estate uses words which rative may money consti- sending act of defendant’s conduct, case defendants’ acterize the even, the defendants’ fraud; perhaps, tute dispute a discrete involves a commercial over case) (as theoretical- alleged in this activities in its issue, to the Estate the amount due fraud the mail prosecuted under ly could simply not dispute monthly draws. Such statute,9 be remembered although it must controversy.10 a RICO ... mails con- every use of the that “not as mail punishable” a scheme is nection with majority listed recognize has I Frey, 42 F.3d States v. fraud. United charged expenses questionable numerous Cir.1994). (3d undisputed But three 797-98 ac- Enterprises and further against Tabas there- that this is conclusion belie the facts may have knowledge that defendants First, March between case. fore a RICO liability expenses. of these law for some state Enterpris- “Tabas September considering *27 to this important But it is case expenses in- personal for various paid es incurring of these keep in mind that Daniel.” as] well [as Hamette curred con- predicate criminal expenses is not the Second, “[p]rior Majority typescript at 1282. Rather, predi- charged in case. duct this appeared ... the brothers to Charles’s death jurisdiction are to establish RICO cate acts Tabas under which arrangement to have to to disburse checks and the use of the mails many personal and Enterprises paid for Overall, therefore, after distribute forms. Majority typescript at expenses.” business character of the unlawful consideration added). Finally, as the (emphasis 1282 n. activity, together with the other relevant indicates, acknowledge majority plaintiffs factors, qualitatively and both Barticheck lawsuit, court state that as of the time of the has quantitatively, that the Estate conclude taking more than “they Daniel believed was genuine a issue of material failed to establish partnership he entitled to under was continuity yet and that this case fact over [only] they They agreement ... contend square attempt plaintiff a “to fit a another they were extent to which did not know the garden- squeezing peg in a round hole Majority types- being short-changed_” disputes ac- variety into civil business RICO added). (emphasis cript at 1282 n. 3 Co., Grinding 976 F.2d at tions.” Midwest 1025. accept the These facts make difficult conclusions, my I have taken “mailings reaching In
majority’s conclusion that
opinion in
particular note of our
Jordan
into a
‘designed
[the Estate]
to lull
[were]
Rothschild,
Frankel,
Fox,
F.3d
O’Brien &
security, postpone
ultimate
[its]
sense of
false
States,
really
Keeping
case is
about
that this
mind
v. United
See Schmuck
714-15,
L.Ed.2d 734
gets
partnership
to use
income for what
who
("To
(1989)
draw
Schmuck would
the extent that
happened
purpose,
have
if
consider what would
general
previous
a
rule
these
cases
from
routine
nothing
paid
to the Estate
defendants
had
mailings
in themselves
that are
innocent
they actually
three-year period in which
over the
supply
mailing element of the mail
cannot
fraud
cedents.”).
$585,000.
gotten
paid
Estate would have
offense,
pre-
misapprehends this Court's
he
nothing
be a
case.
and there would not
(3d Cir.1994), which affirmed the
typical
dis-
involves a
[partnership] dispute
judgment granting
trict court’s
certain of the
about the construction of a [partnership
“summary
agreement]
judgment
defendants
on the
and what sums ...
respec-
to_
against
parties
RICO claim
them for failure to show
tive
are entitled
The ac-
essentially
...
tions of
agents,
relatedness
defendants and their
how-
characterized,
ever
given by
pose
the reasons
the district court.”
do not
type
Id.
significant
societal threat
opinion report-
1254. The district court
that RICO was
Berman,
designed
penalize.
F.Supp.
ed as Jordan v.
deter or
(E.D.Pa.1992).
complex
Jordan is a
case Thus, this case is no more a RICO case than
involving controversy
a
between tenants and was Jordan.
landlord,
the details of which I need not
coming
my
conclusions I also have
discuss. Germane here is the district court’s
found it useful to consider United States v.
plaintiffs
conclusion that the
had not adduced Pelullo,
(3d Cir.1992),
find a
under Estate relies. Pelullo
post-N./.
is a
Inc.
prevailing ease law.” Id. at 388. The dis-
case in which we found that a RICO violation
explained
trict court
the basis for its decision
proved
could be
based on a closed-ended
as follows:
Pelullo,
scheme that lasted 19 months.
the defendant was a chief executive officer of
relationships in
society
Few
our
seem to
Royale Group, Ltd.,
publicly
held cor-
engender more conflict than that of land-
poration
through
which
acquired
subsidiaries
lord
aggressive
and tenant. The
landlord
six
hotels in Miami Beach. In June
disgruntled
and the
tenant have almost
hotels obtained a
million loan
$13.5
from a
stereotypical.
become
The instant case
subsidiary
Savings
of American
and Loan
typical
dispute
involves a
landlord-tenant
Association.
loan,
Under the terms of the
about the construction
a lease and what
renovation,
million was to
$6.2
be used for
respective parties
sums or services the
are
with
retaining
portion
American
and dis-
Permitting
entitled to.
trash
accumu-
bursing the funds as renovation costs were
day,
late for
disrupting utility
service for
disbursement, Royale
incurred. To obtain a
day
half a
vigorously pursuing
plau-
required
requests
submit draw
which
interpretation
generally
sible contract
forth
set
a certified itemization of the costs.
things
not the kind of
from which RICO
*28
cases are made. The actions of defendants
charged
The indictment
Pelullo with three
characterized,
agents,
and their
(1)
however
defrauding
fraudulent schemes:
Ameri-
pose
type
significant
do not
the
can,
societal
Royale,
Royale’s
and
shareholders
designed
threat that RICO was
to deter or
submitting false documents in connection
penalize.
(2)
requests;
with certain
defrauding
draw
$114,000
Royale
by diverting
cash from
added).
(emphasis
By
Id.
affirming “essen-
repay
one of its subsidiaries to
a debt Pelullo
tially
given by
for the reasons
the district
(3)
owed;
defrauding Royale
approxi-
and
court,”
statement,
approved
foregoing
the
$500,000
mately
by diverting money for uses
though
even
the case involved the use of the
purposes
other than for the
of the loans.
thus,
theory,
mails and
in
could have been a
Accordingly,
alleged
the
number of schemes
RICO case.
larger
in Pelullo was
than the one scheme
If we
relationship
alleged
substituted the
between
here. And while the number of vic-
partners
relationship,
for the landlord-tenant
tims in Pelullo could be characterized as
language
small,
the
quo
underscored
in the above
the nature of the unlawful
had
it,
tation
Certainly
would describe
ring
this case.
a different
to
because in Pelullo the
partnership relationship,
alleged perpetrator
like the land
public
was an officer in a
(American
relationship,
frequent
lord-tenant
company
is a
source
and the main victims
and
disputes.
case,
dispute
Royale)
Moreover,
in
public
this
entities.
quote
paraphrase
from and to
alleged
Royale’s
Jordan v. Ber
fraud was not confined to
man:
operations,
place
internal
in
but
took
gar-
becoming
surrogate for
RICO from
oper-
external business
normal
its
context of
brought
den-variety
properly
fraud actions
Thus,
though the Estate relies
even
ations.
1022;
law,”
Mar-
see also
id.
under state
Pelullo,
much more
case involved
shall-Silver,
(noting that
F.2d at 596-97
partners and does
dispute between
than a
in
important role
con-
continuity plays an
position. Pelullo
the Estate’s
support
not
straining operation of RICO statute
to illustrate
instructive
nevertheless
inju-
threaten societal
activities which
those
case and
a real RICO
contrast between
Moreover,
has con-
ry).
Court
dispute.
Tabas’s
by limiting
scope
of RICO
fined
plaintiff
suggest
that a
I do
While
18 U.S.C.
can
liable under
persons who
be
injuring
scheme
single fraudulent
alleging a
—
1962(c).
Young,
Reves v. Ernst &
See
private
of a
context
single victim the
1163,
-,
would view, majority!s opinion inexora- my RICO, al- where the especially covered federalizing numerous inter- bly result will mail fraud. acts are leged predicate way Congress disputes nal business conclusion, cognizant that I am reaching’this opinion never could have intended. requirement does not re- “RICO’s attorneys will applied in this lead circuit than one of more quire the existence ” ordinary actions com- repackage as RICO Marshall-Silver, ‘scheme,’ 894 F.2d parties in which the mercial controversies has declared Supreme Court Indeed, by mail or wire. have communicated be read broad- statute should that the RICO principles of it seems obvious ‘illegitimate’ ‘legitimate’ and ly “to reach both applied to routine commercial could be case Co., Sedima, v. Imrex enterprises,” S.P.R.L. par- many which the disputes situations relationship, ongoing have been ties (1985). Furthermore, recog- L.Ed.2d 346 tenancies, employer-em- e.g., partnerships, noted that civil RICO nize that the Court has contracts, contracts, supply ployee, service something quite into appears “evolving to be accounts, rentals, brokerage equipment conception of its original from the different A in such a relation- party others as well. enactors,” problem is for Con- and that this party’s per- ship, the other dissatisfied with courts, at 499- correct. Id. gress, not the formance, to establish RICO will able at 3287. See also NOW 105 S.Ct. by alleging pointing — jurisdiction fraud Scheidler, U.S.-,-, party’s mailings in the other numerous fur- (1994). 127 L.Ed.2d understanding of its terms therance clearly establish that precedents Yet our reasons, relationship. foregoing For every intend RICO to cover Congress did not I dissent. Marshall-Silver, garden-variety fraud. See 597; Grinding accord Midwest F.2d at SLOVITER,11 Judges Judge Chief *29 (“[I]t Co., equally evident at 1025 976 F.2d SCIRICA, COWEN, HUTCHINSON, every state has federalized join in this dissent. NYGAARD12 available to rem- cause of common-law action sour.”). Rather, edy gone business deals Court, “by refocusing long-term crimi-
requirement on the sort quantum of nal that carries some Co., society,” Grinding threat Midwest prevent “to attempted 976 F.2d at has fraud, garden variety following Judge joins federalization of 11. with the state- Sloviter Congress’s expressed directly contrary to intent. Although agree every with detail ment. I do not dissent, join Judge Greenberg’s because it dissent, believing Judge Nygaard joins in the 12. expressing my frustration comes closest summary properly granted that the district court litany analytic courts must now con- judgment the defendants. He bases in favor of result, the leads to a duct in civil RICO cases summary judgment prop- his conclusion
13H Shipman, Rendell, Hon. Edward G. City Philadelphia, Appellants. HARRIS; Kithcart; Martin Jesse William Davis; Evelyn Cummings; Randall 93-1997, Nos. 93-2116 and 93-2117. Lingham; Fowler; Tyrone Hill; Estrus and Nathaniel Carter Appeals, United States Court of
Third Circuit. Argued Sept.
Decided Feb. PHILADELPHIA; The CITY OF Joan
Reeves, capacity in her official as Com Department
missioner of The of Human City Philadelphia; of the Al Services Campbell; Saez-Achilla; bert F. Rosita Brinkley, Esq., Genece E. Rev. Paul M. Washington, Mendel, M. Mark Hon.
Stanley Kubacki, Faines, Mamie each in capacity her his or official as a member of the Board of of the Trustees Philadel phia System; Prison J. Patrick Galla
gher, capacity Superin in his official as Philadelphia Sys tendent of the Prison tem; Harry Moore, E. in his official
capacity Holmesburg as Warden of Pris
on; Speach, Wilhelmina in her official
capacity as Warden of the Detention
Center; Grooms, Press in his official
capacity as Warden of the House of Cor rections; Raymond Shipman, E. in his capacity Managing
official as Director City Mayor Philadelphia; of the Rendell, capac Edward G. in his official ity Mayor City Philadelphia, Levine, Campbell, Theodore Albert F. Saez-Achilla, Rosita E. Brink Genece ley, Esq., Washington, Rev. Paul M. M. Mendel, Esq., Stanley
Mark Hon. Ku backi, Faines, Mamie J. Patrick Galla
gher, Harry Moore, E. Wilhelmina
Speach,
Grooms, Raymond
Press
E.
*30
er, however,
fruition,”
upon plaintiffs’
mailing,
failure to show facts
reached
at the time of the
giving
mailings
question
rise to mail fraud under RICO rather than
cannot be said that the
scheme,
upon
purpose
executing
a failure to establish a
of racketeer
for the
as re
States,
ing activity.
Judge Nygaard’s analysis,
quired by
Under
the statute. Kann v. United
were,
88,
148,
mailings
(1944).
here
as in
U.S.
United States
65 S.Ct.