44 F.3d 1082 | 2d Cir. | 1995
Lead Opinion
Defendant-appellant Nicholas Ferrante moves this court for a stay , pending appeal and an expedited appeal of a judgment entered October 18, 1994 in the United States District Court for the Eastern District of New York, I. Leo Glasser, Judge, that granted summary judgment and injunctive relief in favor of the United States on a civil complaint alleging a violation of the Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. § 1961 et seq. On November 30, 1994, we denied the motion for a stay and granted the motion for an expedited appeal, indicating that this opinion supporting our decision would follow.
Ferrante is one of many defendants, including various organized crime families, labor unions, and private sanitation companies, named in a complaint alleging a massive conspiracy to control the solid waste disposal industry on Long. Island through the use and threatened use of force in violation of RICO. See United States v. Private Sanitation Indus. Ass’n, 793 F.Supp. 1114, 1121-23 (E.D.N.Y.1992) (describing alleged-conspiracy in detail).
This appeal stems from the district court’s grant of summary judgment against Ferrante. See United States v. Private Sanitation Indus. Ass’n, No. CV-89-1848, slip op. (E.D.N.Y. October 13, 1994). Ferrante had pled guilty in the Supreme Court of the State of New York to coercion in the first degree, in violation of New York Penal Law § 135.65(1); for threatening certain private, contractors with damage to their property if they bid for waste disposal work. Id. at 2-3. The district court held that the conduct underlying this conviction, as established in Ferrante’s plea allocution, was clearly indictable under the Hobbs Act, 18 U.S.C. § 1951, and was therefore a RICO predicate act under 18 U.S.C. § 1961(1)(B). Slip op. at 9-10.
In addition, the government alleged that Ferrante had bribed officials at the Oyster Bay dump in order to receive a reduction in the amount of money that his companies
Finally, the district found no material dispute of fact that these acts were sufficiently related to constitute a pattern, id. at 12-13, and that Ferrante was sufficiently involved in the Private Sanitation Industry Association, the RICO enterprise, to be subject to RICO liability. Id. at 13-15.
Having determined that the gbvernment was entitled to summary judgment with respect to liability, the court enjoined Ferrante from participating in the waste disposal business, violating RICO, and associating with his eodefendants for any commercial purpose, and ordered him to divest his interests in various enterprises and to disgorge the proceeds derived from his unlawful conduct into a court-administered fund. Id. at 15-17. Ferrante appealed and filed the motion to which this opinion responds.
A party seeking a stay of a lower court’s order bears a difficult burden. We consider (1) whether the movant will suffer irreparable injury absent a stay; (2) whether a party will suffer substantial injury if the stay is granted; (3) whether the movant has established a substantial possibility, which need not be a likelihood, of appellate success; and (4) the public interest. Hirschfeld v. Board of Elections, 984 F.2d 35, 39 (2d Cir.1992) (collecting cases).
There is no basis for a stay in this case. Ferrante points to no material issue of fact to establish a substantial possibility that the district court’s summary judgment regarding liability will be reversed on appeal. Indeed, we affirmed the district court’s grant of summary judgment and imposition of identical injunctive relief with respect to Fer-rante’s codefendant, Salvatore Avellino, Jr., in United States v. Private Sanitation Industry Ass’n, 995 F.2d 375, 377-78 (2d Cir.1993) (per curiam). See also United States v. Private Sanitation Indus. Ass’n, 811 F.Supp. 808, 818 (E.D.N.Y.1992) (addressing constitutionality of broad injunctive relief and specifying terms of injunctive relief against Avelli-no), aff'd, 995 F.2d 375 (2d Cir.1993) (per curiam). Like Ferrante, Avellino’s RICO liability wás based upon extortion and bribery in connection with Avellino’s trash-hauling companies. Id. at 810-11. Moreover, once liability is established, the trial court has broad discretion in fashioning relief, see 995 F.2d at 377, and is explicitly authorized to “order[ ] any person to divest himself of any interest, direct or indirect, in any enterprise.” 18 U.S.C. § 1964(a); see also United States v. Private Sanitation Indus. Ass’n, 793 F.Supp. at 1150-52 (discussing divestiture and disgorgement as RICO remedies).
In deciding to deny Ferrante’s motion for a stay, we have also considered the other factors pertinent to the issue whether to grant a stay. While Ferrante may well suffer irreparable harm from the divestiture of his companies, the interests of the government and the public in terminating the control of trash handling on Long Island by criminal conspirators weigh heavily against granting a stay. Because of the scope of the relief ordered against Ferrante, however, his
Dissenting Opinion
dissenting:
In my view, the quasi-criminal nature of the remedies sought by the government in this RICO action render summary judgment an inappropriate means by which to impose liability on Ferrante. I recognize, however, that this circuit has held to the contrary in United States v. Private Sanitation Indus. Ass’n, 995 F.2d 375 (2d Cir.1993) (“Avelli-no”) I recognize that we are bound by that holding, but believe that this case can and should be distinguished from Avellino. While I fully accept the federal government’s compelling interest in purging the Long Island private sanitation industry of organized crime, I also believe that Ferrante has met his burden of establishing a substantial possibility of success on appeal. Hirschfeld v. Board of Elections, 984 F.2d 35, 39 (2d Cir.1992). Consequently, I would concur in a stay designed both to preserve Ferrante’s assets for possible future disgorgement and to delay the government from commencing disgorgement and disinvestment proceedings pending the resolution of Ferrante’s appeal.
As to the appropriateness of summary judgment, I must emphasize at the outset that this is a close case. I can find little fault in the majority’s identification and use of relevant case law. Nevertheless, the government’s use of summary civil procedures to impose punitive sanctions for alleged criminal behavior represents a further erosion of citizens’ protections in criminal proceedings, particularly in light of RICO’s wide applicability outside the bounds of organized crime. My conviction that Ferrante need not be denied his day in court is reinforced by the fact that the prosecution would suffer no appreciable harm if it were required to sever Ferrante from his co-defendants and bring him individually to trial. The evident strength of the government’s case against Ferrante cannot justify the circumvention of the judiciary’s duty to put the government to its proofs: In a quasi-criminal RICO action, the government should be required to establish each element of liability before a trier of fact.
I. THE QUASI-CRIMINAL NATURE OF THIS ACTION
The Supreme Court has prescribed a highly deferential test to determine when an apparently civil statutory penalty is, in fact, criminal:
First, we ... set out to determine whether Congress, in establishing the penalizing mechanism, indicated either expressly or impliedly a preference for one label or the other. Second, where Congress has indicated an intention to establish a civil penalty, we ... inquire! ] further whether the statutory -scheme was so punitive in purpose or effect as to negate that intention ....
United States v. Ward, 448 U.S. 242, 248-49, 100 S.Ct. 2636, 2641, 65 L.Ed.2d 742 (1980). Once determined to be criminal, actions to enforce such a statute must be accompanied by the full range of constitutional protections for criminal deféndants, including the Fourth, Fifth, and Sixth Amendments. The test for quasi-criminality, however, is considerably less rigid and less deferential. A finding of quasi-criminality requires that only certain protections be imported from the criminal law in order to guarantee that due process is satisfied.
As set forth below, the touchstone of quasi-criminality is punishment.
The Supreme Court has identified two types of proceedings as quasi-criminal: first, those actions in which a defendant faces loss of liberty or livelihood; second, those imposing a civil penalty arising from the commission of a criminal offense. See Elizabeth A. Fuerstman, Trying (Quasi) Criminal Cases in Civil Courts: The Need for Constitutional Safeguards in Civil RICO Litigation, 24 Co-lum.J.L. & Soc.Probs. 169 (1991). Put together, these decisions establish that the imposition of punishment for criminal activity segregates quasi-criminal from garden-variety civil causes of action. Both lines of cases fortify the conclusion that the present action is quasi-criminal.
The first line follows from In re Gault, 387 U.S. 1, 87 S.Ct. 1428, 18 L.Ed.2d 527 (1967), in which the Supreme Court held that due process protections apply to juvenile delinquency proceedings. The Court held that “[a] proceeding where the issue is whether the child will be found to be ‘delinquent’ and subjected to the loss of liberty for years is comparable in seriousness to a felony prosecution.” Id. at 36, 87 S.Ct. at 1448. Due process, the Court found, entitled the allegedly delinquent child to be notified of the charges against him and of his right to be represented by counsel; to assert the privilege against self-incrimination; and to confront and cross-examine witnesses. Similarly, in In re Ruffalo, 390 U.S. 544, 550, 88 S.Ct. 1222, 1225, 20 L.Ed.2d 117 (1968), the Supreme Court held that because “[disbarment, designed to protect the public, is a punishment or penalty imposed on the lawyer,” the accused lawyer “is accordingly entitled to procedural due process.... ” The Court characterized disbarment actions as “adversary proceedings of a quasi-criminal nature.” Id. at 551, 88 S.Ct. at 1226. The Second Circuit has expanded upon Ruffalo, explaining that “a court’s disciplinary proceeding against a member of its bar is comparable to a criminal rather than to a civil proceeding.” Erdmann v. Stevens, 458 F.2d 1205, 1209 (2d Cir.1972). Central to the reasoning in Erdmann was the court’s acknowledgment that disbarment is punitive in nature: “[F]or most attorneys the license to practice law represents their livelihood, loss of which may be a greater punishment than a monetary fine.” Id. at 1210.
In the case before us, it is clear that Ferrante faces the loss of his livelihood. The government seeks an order
enjoining Nicholas Ferrante: (1) from engaging in any activities involving or connected with the collection, transportation or disposal of solid waste ... (3) from participating in any of the affairs of any trade waste association, and from participating in any of the affairs of Local 813 or of any other union, and from participating in any way in the affairs of any of the Trust Funds of Local 813 or any other union, and (4) from associating with any other defendant or any member or associate of organized crime for any commercial purpose. In addition, it is requested that he be ordered to divest his interests in the named enterprises and to disgorge the proceeds derived from his unlawful con*1087 duct or from participation in the Enterprises into a Court-administered fund to be used for the Monitorship of the carting industry on Long Island ... in an amount to be determined after an inquest.
Memorandum of Law in Support of Plaintiffs Motion for Summary Judgment as Against Nicholas Ferrante at 2-3. If required to divest his interests in Unique Sanitation Co. and U-Need-A-Roll-Off Corp. and to remain permanently out of the industry, Fer-rante, like a disbarred attorney, will lose the only source of income he has known, at least part of which the government concedes may be legitimate. Moreover, Ferrante faces being branded as a “racketeer,” just as the juvenile in Gault faced the label “delinquent.” Thus, Gault, Buffalo, and their progeny suggest that the relief sought by the government in this case renders the action quasi-criminal.
Beginning with Boyd v. United States, 116 U.S. 616, 6 S.Ct. 524, 29 L.Ed. 746 (1886), the second line of cases isolates certain varieties of civil forfeitures as quasi-criminal. In Boyd, the Court held that “proceedings instituted for the purpose of declaring the forfeiture of a man’s property by reason of offenses committed by him, although they may be civil in form, are in their nature criminal.... [Sjuits for penalties and forfeitures, incurred by the commission of offenses against the law, are of this quasi criminal nature.” Id. at 633-34, 6 S.Ct. at 534. While the full implications of Boyd’s broad language have occasionally been foreclosed by the Supreme Court,
In the case at hand, the government has requested relief closely analogous to civil forfeiture, including, among other things, divestiture, disgorgement, and a wide-ranging dissociation injunction. In my view, the RICO remedies sought by the government in this case go beyond the roughly compensatory. I recognize, however, that this view has not been adopted by the courts of this circuit in similar cases. Because I believe those decisions to rest on incomplete analyses, it may prove useful to set forth the basis for my disagreement.
In the limited context of the Fifth Amendment’s applicability to RICO, several courts, including this one, have held that equitable remedies, such' as divestiture, disgorgement, and injunction, are remedial, rion-punitive, forms of relief. See, e.g., United States v. Ianniello, 824 F.2d 203, 208 (2nd Cir.1987); United States v. Bonanno Organized Crime Family, 683 F.Supp. 1411, 1450-51 (E.D.N.Y. 1988). First, these decisions employ only the United States v. Ward test of criminality, without considering whether RICO remedies sought in those cases were quasi-criminal. The Supreme Court has recently rejected similarly myopic approaches to civil forfeitures in Austin v. United States, — U.S. -,-, 113 S.Ct. 2801, 2805-06, 125 L.Ed.2d 488 (1993). Holding that the Excessive Fines Clause may limit the amount of a civil forfeiture under 21 U.S.C. § 881, the Court stated that “the question is not, as the United States would have it, whether forfeiture ... is civil or criminal, but whether
In addition to divestiture and disgorgement, the government seeks to enjoin Fer-rante from any involvement in any solid waste enterprise; from participating in the affairs of any union; and from associating with any of the other defendants for commercial purposes. While I have no quarrel with the necessity of such injunctions in the fight against organized crime, it simply cannot be denied that they are punitive measures. Dissociation orders and lifetime bans neither compensate victims nor prevent unjust enrichment. On the contrary, they serve to punish wrongdoers and deter others from similar courses of action. In sum, the relief sought by the government in this case goes beyond rough compensation to serve the goals of retribution and deterrence and therefore constitutes punishment. See Halper, 490 U.S. at 448, 109 S.Ct. at 1901 (“punishment serves the'twin aims of deterrence and retribution”); Kennedy v. Mendoza-
Thus, in light of Boyd’s still vital holding that “suits for penalties and forfeitures, incurred by the commission of offenses against the law, are of this quasi-criminal nature,” I conclude that the action before us must be considered quasi-criminal. Boyd, 116 U.S. at 634, 6 S.Ct. at 534.
II. THE CONSEQUENCE OF QUASI-CRIMINALITY
Because I believe this ease to be quasi-criminal in nature, I believe that summary judgment was an inappropriate procedural mechanism by which to find Ferrante liable under RICO. More accurately, in the context of this motion for a stay, I believe that Ferrante has demonstrated a substantial possibility of success on appeal on the issue of summary judgment’s propriety in a quasi-criminal action.
It must be conceded that several cases have been reported in which a defendant was found liable under RICO through the use of summary judgment. See Beneficial Standard Life Ins. Co. v. Madariaga, 851 F.2d 271, 276-77 (9th Cir.1988); Crawford v. La Boucherie Bernard Ltd., 815 F.2d 117, 122 (D.C.Cir.1987); Aetna Casualty & Surety Co. of Illinois v. Levy, No. 83-C-3566, 1985 WL 2131 (N.E.Ill. July 24,1985). However, none of these involved the federal government as a plaintiff. The only reported case in which the court upheld a grant of summary judgment in favor of the plaintiff in a government-prosecuted civil RICO action is United States v. Private Sanitation Indus. Ass’n, 995 F.2d 375 (2d Cir.1993) (‘Avellino ”). In that case, RICO liability was imposed on Salvatore Avellino, one of Ferrante’s co-defendants, by means of summary judgment. The equitable remedies upheld against Avel-lino were virtually identical to those the government seeks to impose on Ferrante. Id. at 377-78. However, none of the cases granting or upholding a grant of summary judgment address the legal question of whether summary judgment ought to be available in a quasi-criminal — that is, punitive — action predicated on criminal behavior. Thus, while I recognize that we are bound by the result in Avellino, I must nevertheless express my disagreement with its premise of procedural regularity.
In my view, because a finding of liability constitutes a finding that the defendant has committed criminal acts, the conventional standards for summary judgment, see Celotex v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986), and Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986), provide inadequate protection to civil RICO defendants. The prospect of punitive liability in a quasi-criminal action demands that the court afford the defendant something akin to a presumption of innocence.
In the case before us, the availability of severance renders the government’s use of summary judgment unnecessary. Fed. R.Crim.Proc. 14. Ferrante could easily be severed from his co-defendants and tried separately. Given the vast size of this case, little additional burden would be imposed by a requirement that the government prove the
In sum, my belief that Ferrante has a substantial possibility of success on appeal begins with my conviction that summary judgment ought not be employed to impose quasi-criminal liability, except in cases entirely devoid of contested material facts.
III. THIS CASE MUST BE DISTINGUISHED FROM AVELLINO
Recognizing that we are bound by Avelli-no ’s approval of the use of summary judgment in a similar case, I nevertheless believe that Ferrante has demonstrated a substantial possibility of success on appeal by pointing out a critical distinction between the two cases: In Avellino, both requisite predicate acts were established by the defendant’s pri- or guilty pleas, while Ferrante was held liable on the basis of only one prior guilty plea. The second requisite predicate act was established by means of the affidavits of three former employees of the Oyster Bay weighing station. In particular, the affidavit of Joseph Vittorio stated that Vittorio has personally accepted payments from Ferrante in exchange for the falsification of weight information. The district court held that Vitto-rio’s affidavit was uncontradicted because Ferrante failed to produce a counter-affidavit by an individual with personal knowledge. Because the Vittorio affidavit does not describe specific incidents of bribery, including dates, times, and locations, it is unclear whether any affidavits — other than an express, denial by Ferrante
The affidavit of Joseph Ferrante, Nicholas Ferrante’s son, presents a close call. An executive of his father’s corporations, Joseph Ferrante stated that he has worked with his father since the early 1970s and has “been with him virtually on a daüy basis since that time.” Affirmation of Joseph Ferrante at 1. Viewing his affidavit in its entirety, it is clear that Joseph Ferrante could not have avoided personal knowledge of any pattern of bribery committed by his father in connection with Unique and U-Need, his carting companies, over a period of years. In light of the quasi-criminal nature of this action, I believe that any doubts as to whether a genuine issue of material fact has been created must be resolved in favor of the defendant. Thus, I believe that Joseph Ferrante’s affidavit should have precluded summary judgment on the second predicate offense.
In addition, Joseph Ferrante’s affidavit created a genuine issue of material fact as to a critical component of the enterprise element of RICO liabüity. The district court relied, in part, upon the Declaration of Special Agent Donald McCormick in concluding that Nicholas Ferrante was involved in the illegal racketeering activities of the Luchese crime famfiy. Joseph Ferrante denies any relationship between his father and the Luchese organization. Despite its recitation of McCormick’s allegations, the district court apparently believed that to establish the enterprise element the government need only prove that Nicholas Ferrante owned and operated his two carting companies. In my view, the government must show that Fer-rante was involved in the enterprise of the Private Sanitation Industry Association.
In sum, in light of the quasi-criminal nature of this action, Joseph Ferrante’s affidavit must be considered to have created genuine issues of material fact as to the second predicate act and the enterprise element of civil RICO liability.
IV. CONCLUSION
I believe that Nicholas Ferrante has demonstrated a substantial possibility of success on appeal and that none of the other three Hirschfeld factors counsel against the issuance of a stay to preserve the status quo pending the resolution of Ferrante’s appeal.
. It does not follow that the availability of punitive damages in a given civil action renders it quasi-criminal in nature. Although the line between tort and crime is ambiguous, it does nevertheless exist. Punitive damages obviously constitute punishment, but the underlying acts for which such awards are levied sound in tort, and not under the criminal law. It may safely be said that punitive damage awards punish and deter tortious behavior, while quasi-criminal civil remedies punish and deter criminal behavior.
. I agree with United States v. Cappetto, 502 F.2d 1351, 1357 (7th Cir.1974), that a civil proceeding “is not rendered criminal in character by the fact that the acts also are punishable as crimes.”
. “pjhis Court has declined, however, to give full scope to the reasoning and dicta in Boyd_" United States v. Ward, 448 U.S. 242, 253, 100 S.Ct. 2636, 2643, 65 L.Ed.2d 742 (1980). See also Fisher v. United States, 425 U.S. 391, 405-09, 96 S.Ct. 1569, 1578-80, 48 L.Ed.2d 39 (1976) (overruling Boyd's extension of Fifth Amendment privileges to all private papers, but upholding its applicability to those containing incriminating testimony).
. The Court went on: "For this reason, the United States' reliance on Kennedy v. Mendoza-Martinez and United States v. Ward is misplaced..,. The question in those cases was whether a nominally civil penalty should be reclassified as criminal and the safeguards that attend a criminal prosecution should be required. In addressing the separate question whether punishment is being imposed, the Court has not employed the tests articulated in Mendoza-Martinez and Ward. See, e.g., United States v. Halper...." Austin, - U.S. at-, n. 6, 113 S.Ct. at 2806, n. 6 (citations omitted).
. Of course, as the Bonanno court recognized, disgorgement is "dependent upon the government’s ability to prove that the proceeds sought to be disgorged were 'ill-gotten' under the RICO statute.” 683 F.Supp. at 1449. "[T]he primary purpose of disgorgement is to prevent unjust enrichment regardless of whether any victims are entitled to damages.” Id.
. Cf. United States v. Property at 4492 S. Livonia Road, 889 F.2d 1258, 1270 (2d Cir.1989) (“At some point, it seems that a forfeiture would cross the line of condemning the instrumentality of crime and move into the area of punishing a defendant by depriving him of his estate.").
. Recognizing as I do the impracticality of partial divestment in organized crime cases, I do not mean to suggest that total divestment should be disfavored out of sympathy for the defendant. Rather, by labeling RICO remedies punitive, I seek only to call a duck a duck.
. The Second Circuit has held that the preponderance of the evidence standard applies to all elements of a civil RICO claim. Cullen v. Margiotta, 811 F.2d 698, 731 (2d Cir.1987). I note that despite strong dictum in Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 491, 105 S.Ct. 3275, 3282, 87 L.Ed.2d 346 (1985), suggesting the inappropriateness of more stringent standards, the Supreme Court has declined to decide the issue.
. Ferrante has invoked his Fifth Amendment privilege against self-incrimination. While it is clear that adverse inferences may be drawn from a defendant's refusal to provide evidence in civil RICO actions in which the government is a party, it is also true that "an adverse inference drawn from the assertion of the Fifth Amendment privilege in a civil proceeding may not be the sole basis for imposing liability upon a defendant.” United States v. Bonanno Organized Crime Family, 683 F.Supp. 1411, 1451-52 (E.D.N.Y.1988). I agree with the district court that the affidavits of the Oyster Bay employees constitute independent corroborative evidence sufficient to permit the drawing of an adverse inference in this case.
. I accept the district court's earlier determination in United States Private Sanitation Indus. Ass’n, 811 F.Supp. 808, 815 (E.D.N.Y.1992), that the Private Sanitation Industry Association constitutes an enterprise within the meaning of RICO.
. I do not believe that any of the other three Hirschfeld factors weigh heavily either for or against a stay in this case. The public’s interest in the immediate commencement of disgorgement and disinvestment proceedings against Fer-rante shrinks in light of the fact that we have granted Ferrante an expedited appeal and that dozens of PSIA defendants remain untried. In my view, the public interest also includes the preservation of procedural fairness, even for defendants against whom the government has assembled a strong case.