Anderson v. Ayling , 396 F.3d 265 ( 2005 )

Opinions of the United
2005 Decisions States Court of Appeals
for the Third Circuit
1-24-2005
Anderson v. Ayling
Precedential or Non-Precedential: Precedential
Docket No. 04-1180
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PRECEDENTIAL
IN THE UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
_______________
No. 04-1180
________________
WILLIAM F. ANDERSON, JR.;
BARRY F. BRESLIN,
Appellants
v.
JACK AYLING; BRIAN KADA; PAUL VANDERWOUDE;
THOMAS H. KOHN; INTERNATIONAL BROTHERHOOD
OF TEAM STERS; JOHN DOES 1-20; JAM ES P. HOFFA;
MARKOWITZ & RICHMAN
___________________
On Appeal From the United States District Court
For the Eastern District of Pennsylvania
(D.C. No. 02-cv-2352)
District Judge: Honorable Anita B. Brody
_______________________________________
Argued: December 13, 2004
Before: NYGAARD, ROSENN and BECKER, Circuit Judges
(Filed January 24, 2005)
JOHN F. INNELLI (ARGUED)
1818 Market Street, Suite 3620
Philadelphia, PA 19103
Attorney for Appellants
SAMUEL L. SPEAR (ARGUED)
Spear, Wilderman, Borish, Endy, Spear & Runckel
230 South Broad Street, Suite 1400
Philadelphia, PA 19102
Attorney for Appellees Vanderwoude and Kada
Robert M. Baptiste
Susan Boyle
Baptiste & Wilder, P.C.
1150 Connecticut Avenue, N.W., Suite 500
Washington, D.C. 20036
Attorneys for Appellees Hoffa and International
Brotherhood of Teamsters
Marc L. Bogutz
William F. McDevitt
Christie, Pabarue, Mortensen and Young
1880 J.F.K. Boulevard, 10th Floor
Philadelphia, PA 19103
Attorneys for Appellee Kohn
_______________________
OPINION
_______________________
BECKER, Circuit Judge.
Plaintiffs William Anderson and Barry Breslin appeal from
a final order of the District Court dismissing their civil RICO
complaint for failure to state a claim upon which relief may be
granted. Anderson and Breslin’s extremely detailed twelve-page
complaint alleges a convoluted conspiracy involving coercion,
intimidation, and power struggles among competing factions in the
International Brotherhood of Teamsters (IBT), arising from the
rivalry between the late John Morris, former principal officer of
Teamsters Local 115, and James Hoffa, the president of the IBT.
Anderson and Breslin are Morris loyalists whose opposition to
Hoffa allegedly cost them their jobs as special coating operators at
Kurz-Hastings, a Local 115 Teamsters shop in Philadelphia.
Defendants are Brian Kada and Paul Vanderwoude, Local 115
members allegedly involved in cigarette smuggling, drug sales,
illegal gambling, and extortion; Jack Ayling, a member of
Teamsters Local 107 who was also allegedly involved in Local
115’s racketeering; James Hoffa, president of the IBT; Thomas
2
Kohn, an attorney who numbers the IBT among his clients; and the
IBT itself.
The critical issue on appeal is the existence vel non of a
proximate causal relationship between the alleged racketeering acts
and the claimed injury, which is necessary to satisfy the RICO
standing requirement. See 18 U.S.C. § 1964(c). The appeal thus
requires us to explore some of the contours of that doctrine.
Because we conclude that the proximate cause test is not met, we
will affirm the order of the District Court dismissing the
complaint. 1
I.
Because this is an appeal from a Rule 12(b)(6) dismissal, we
treat all of the allegations in the complaint as true. See Hishon v.
King & Spalding, 467 U.S. 69, 73 (1984); Malia v. Gen. Elec. Co.,
23 F.3d 828, 830 (3d Cir. 1994). We describe in the margin those
allegations that are most essential to the plaintiffs’ RICO theory,
which tell a seamy and confusing story of union corruption and
power struggles.2
1
We have jurisdiction pursuant to 28 U.S.C. § 1291.
2
On October 8, 1999, Local 115 representative and Morris
loyalist “Jocko” Johnson visited Kurz-Hastings and discovered that
many Local 115 members who were on the clock were not actually at
work there. Johnson reported this anomaly to Morris, who initiated an
investigation into Kurz-Hastings employees and management regarding
possible illegal gambling that may have occurred while the missing
workers were on the clock. On October 25, Kurz-Hastings fired
seventeen employees who had been absent during Johnson’s inspection.
Two days later, Morris informed Anderson that two other Kurz-Hastings
employees were retiring, and suggested that Anderson apply for one of
the open positions. The next day, October 28, 1999, Anderson and Barry
Breslin went to Kurz-Hastings to apply for jobs. They were hired as
special coating operators on November 2.
On October 28, Ayling called Thomas Schatz, the IBT Ethical
Practices Committee investigator, and told Schatz that Morris was
placing two ex-convicts, Anderson and Michael Breslin, at Kurz-
Hastings to replace some of the seventeen fired employees. A number of
Ayling’s statements were allegedly false, although plaintiffs do not deny
that they were in fact ex-convicts. The next day, Kada also called Schatz,
3
As the detailed description suggests, plaintiffs allege that the
defendants were involved in a protean racketeering conspiracy. The
true gravamen of plaintiffs’ allegations, however, is that two of the
defendants, Ayling and Kada, committed wire fraud by placing
and told him that he had been assaulted during an interview with Morris.
Plaintiffs state that this accusation was false. These telephone calls form
the basis of plaintiffs’ accusations of wire fraud in violation of 18 U.S.C.
§ 1343.
On November 15, 1999, Hoffa imposed an emergency trusteeship
on Local 115, and removed Morris from his position as principal officer
of the Local. This action was taken based on a wide-ranging
investigation that included the recommendation of Schatz. Plaintiffs
claim that this trusteeship was imposed based on falsehoods, including
allegations that Johnson, Anderson, and Michael Breslin committed
violence to enforce Morris’s will. These alleged falsehoods were
disseminated in a notice to members of Local 115, issued on November
15 over Hoffa’s signature, which named Johnson, Anderson, and
Michael Breslin as Morris loyalists with “criminal records and
reputations for violence and intimidation.” Plaintiffs contend that this
notice was based on Ayling’s and Kada’s alleged wire fraud.
Plaintiffs were among those who picketed outside the union hall
to protest the ouster of Morris. Breslin claims that he was assaulted by
Vanderwoude while picketing on December 1, 1999. Plaintiffs claim that
this was an attempt to intimidate Michael Breslin, the plaintiff’s brother,
who was a witness in an unrelated alleged conspiracy, and therefore
constituted witness tampering in violation of 18 U.S.C. § 1512(b)(1).
On November 24, 1999, Kurz-Hastings general foreman Vic
Franz fired Anderson and Breslin without giving any reason. Though it
is not alleged in the complaint, plaintiffs now claim that Franz’s
deposition revealed that he fired them because he believed them to be
dangerous and disruptive based on the November 15, 1999, notice to
Local 115 members, which in turn was based on Ayling’s and Kada’s
accusations of October 28-29.
On December 1, 1999, Anderson went to IBT Local 107 union
hall for a hearing on a complaint against him. Before this hearing, Kohn
allegedly asked Anderson to inform against John Morris in an unrelated
investigation, and offered to “take care of” the complaint against
Anderson, and help him get his job back, if he turned on Morris.
Plaintiffs allege that this constituted extortion in violation of 18 U.S.C.
§ 1951(b)(2). Anderson refused to cooperate, and was fined and
suspended from the union at the hearing later that day.
4
telephone calls to IBT investigator Thomas Schatz in which they
made various false accusations against Morris, Anderson, and
Breslin’s brother Michael. Schatz included these accusations in a
report to the IBT. According to plaintiffs, Hoffa relied on this
report in imposing an emergency trusteeship on Local 115, and
Kurz-Hastings relied on the trusteeship notice in terminating
plaintiffs’ employment. Plaintiffs allege that these acts of wire
fraud, as well as other acts of intimidation and coercion, constitute
predicate offenses under the Racketeer Influenced and Corrupt
Organizations Acts, 18 U.S.C. § 1961-1968 (RICO).
At the outset, we judicially notice the fact that a panel of this
Court has approved the IBT’s decision to impose a trusteeship on
Local 115. See M orris v. Hoffa, 361 F.3d 177 (3d Cir. 2004). We
found there that Hoffa’s investigation had discovered evidence that
Morris and other members of his faction had committed violent
attacks against union members (including Kada), and that Morris
had been involved in “financial malpractice,” nepotism, threats,
assaults, extortion, and embezzlement. Id. at 183-84. The panel
therefore had no difficulty in finding that the emergency trusteeship
was justified.
Defendants moved to dismiss the complaint under Federal
Rule of Civil Procedure 12(b)(6). The District Court found that,
even if plaintiffs could show that defendants violated RICO, their
allegations were insufficient to create standing for a civil RICO
action, and therefore granted the motion to dismiss. Plaintiffs
timely appealed.
II.
The civil RICO statute allows “[a]ny person injured in his
business or property by reason of a violation of section 1962 of this
chapter [to] sue therefor in any appropriate United States district
court.” 18 U.S.C. § 1964(c). Section 1962, in turn, provides in
relevant part that:
(c) It shall be unlawful for any person employed by
or associated with any enterprise engaged in, or the
activities of which affect, interstate or foreign
commerce, to conduct or participate, directly or
indirectly, in the conduct of such enterprise’s affairs
through a pattern of racketeering activity or
5
collection of unlawful debt.
(d) It shall be unlawful for any person to conspire to
violate any of the provisions of subsection (a), (b), or
(c) of this section.
18 U.S.C. § 1962(c)-(d). The term “racketeering activity” is
defined in 18 U.S.C. § 1961(1) to include a long list of state and
federal crimes, among them the wire fraud alleged here.
A.
The District Court dismissed the suit on the grounds that
plaintiffs’ allegations do not give rise to standing under § 1964(c),
which requires a plaintiff to show (1) that he was injured (2) by
reason of a violation of § 1962. Civil RICO “standing” is usually
viewed as a 12(b)(6) question of stating an actionable claim, rather
than as a 12(b)(1) question of subject matter jurisdiction. See M aio
v. Aetna, Inc., 221 F.3d 472, 482 n.7 (3d Cir. 2000).
In Holmes v. Sec. Investor Prot. Corp., 503 U.S. 258, 268
(1992), the Supreme Court interpreted § 1964(c) to mean that a
RICO plaintiff must show that defendant’s RICO violation was not
only a “but for” cause of his injury, but also that it was the
proximate cause. Then, in Beck v. Prupis, 529 U.S. 494, 507
(2000), the Court held “that a person may not bring suit under
§ 1964(c) predicated on a violation of § 1962(d) for injuries caused
by an overt act that is not an act of racketeering or otherwise
unlawful under the statute.” The Court held that a plaintiff needed
to allege that he or she was injured by “an act that is independently
wrongful under RICO,” id. at 505-06, and not merely by a non-
racketeering act in furtherance of a broader RICO conspiracy.
The plaintiff in Beck was the president of an insurance
company, some of whose directors and officers were engaged in
financial fraud. Id. at 498. On discovering this activity, Beck
contacted regulators to attempt to correct the fraud. Id. The
defendant conspirators then hired a consultant to write a false
report suggesting that Beck was remiss in his duties, and the board
of directors fired him upon receiving this report. Id. Beck alleged
that the conspirators committed several violations of § 1962(a)-(c);
moreover, he claimed that his termination was an overt act of a
§ 1962(d) conspiracy, and therefore gave rise to a § 1964(c) cause
of action. The Supreme Court disagreed, finding that only a direct
6
§ 1962(a)-(c) act of racketeering could serve as a predicate for a
civil RICO suit.
The District Court read Beck, and Shearin v. E.F. Hutton
Group, Inc., 885 F.2d 1162 (3d Cir. 1989), to stand for the
proposition that “there is an insufficient nexus between the injuries
caused by employment termination and a § 1962 violation to satisfy
the proximate cause requirement of § 1964(c) standing.” 3 We think
that this is too broad a reading of those cases; it is possible that a
predicate act of racketeering that directly caused a plaintiff to lose
his job could create civil RICO standing.
Nonetheless, the District Court was surely correct to follow
Beck as a factually analogous precedent. In Beck, as here, the
plaintiff described a complex pattern of racketeering, but alleged
only one act that directly harmed him: his termination. But whereas
the defendants in Beck apparently controlled the board of directors
that fired the plaintiff, and their falsified report was directly relied
on by the board, defendants here had no connection to Kurz-
Hastings, and their alleged falsehoods were filtered through the
following long chain of intervening causes.
Kurz-Hastings did not rely directly on Ayling’s or Kada’s
statements in firing Anderson and Breslin; in fact, Kada’s
statement did not mention the plaintiffs at all. Rather, Schatz, a
non-party, used their statements as but one source for his own
report. According to the pleadings, Hoffa then relied in part on that
report in imposing an emergency trusteeship—a trusteeship which,
as noted above, a panel of this Court has already found to have
been proper, and which was based on significant evidence of
violence and corruption. See M orris v. Hoffa, supra, 361 F.3d at
183-84. Kurz-Hastings then relied on the Notice of Trusteeship in
firing the plaintiffs. This chain of causation is far more attenuated
than that involved in Beck, where the Supreme Court found no
proximate cause and therefore no RICO standing. We are therefore
satisfied that the District Court was justified in relying on Beck to
dismiss plaintiffs’ complaint.
3
In Shearin, we held that non-racketeering overt acts of a RICO
conspiracy could not support a civil RICO suit under a § 1962(a)-(c)
theory, but might support a suit under a § 1962(d) conspiracy theory. 885
F.3d at 1168-69. Beck abrogated the latter holding, finding that non-
racketeering acts could not provide standing for any civil RICO suit.
7
B.
The proximate cause factors discussed in Steamfitters Local
Union No. 420 Welfare Fund v. Philip Morris, Inc., 171 F.3d 912(3d Cir. 1999), also undermine the plaintiffs’ case. In Steamfitters,
we found that antitrust standing principles have been incorporated
into civil RICO standing doctrine, and adopted antitrust standing
jurisprudence to more fully explore the RiCO proximate causation
requirement. See id. at 921, 932. Citing Associated Gen.
Contractors, Inc. v. Calif. State Council of Carpenters, 459 U.S.
519 (1983) (AGC), we set out six factors to be considered in the
antitrust standing analysis:
(1) the causal connection between defendant’s
wrongdoing and plaintiff’s harm; (2) the specific
intent of defendant to harm plaintiff; (3) the nature
of plaintiff’s alleged injury . . . ; (4) “the directness
or indirectness of the asserted injury”; (5) whether
the “damages claim is . . . highly speculative”; and
(6) “keeping the scope of complex antitrust trials
within judicially manageable limits,” i.e., “avoiding
either the risk of duplicate recoveries on the one
hand, or the danger of complex apportionment of
damages on the other.”
Steamfitters, 171 F.3d at 924 (citing AGC, 459 U.S. at 537-38, 540,
542-44).
The Steamfitters factors also support the District Court’s
decision to dismiss this action: (1) the causal connection between
wrongdoing and harm is attenuated, as several independent causes
(Schatz’s report, the imposition of the trusteeship, and Kurz-
Hasting’s own decision to fire the plaintiffs) intervened between
defendants’ alleged fraud and plaintiffs’ termination; (2) there is
little indication of specific intent to harm plaintiffs, as the alleged
wire fraud was apparently intended to attack Morris, not the
plaintiffs, and Kada’s phone call did not even mention Anderson
or Breslin; (3) the nature of the injury, job loss, is one that has been
found not normally to create RICO standing in Beck and Shearin;
(4) the injury is extremely indirect; (5) the damages claim is not
speculative insofar as plaintiffs claim lost wages, but it would be
8
difficult to determine to what extent plaintiffs’ job loss was due to
the alleged RICO acts and to what extent it was due to intervening
factors; and (6) while there is little danger of duplicate recovery,
there is significant danger of duplicative litigation, as this lawsuit
appears to be at least in part an attempt to relitigate the trusteeship
dispute that this Court settled in Morris v. Hoffa, supra.Thus we conclude that, under both the Supreme Court’s
RICO standing decision in Beck and our proximate cause analysis
in Steamfitters, Anderson and Breslin have failed to allege facts
sufficient to support a civil RICO cause of action with regard to the
wire fraud that supposedly led to their termination from Kurz-
Hastings.4
Although plaintiffs claim not only that they were injured in
losing their jobs, but also that they were “injured by the corruption
of their local,” this corruption is not a cognizable injury that can
create RICO standing. Maio, 221 F.3d at 483 (“[A] showing of
injury requires proof of a concrete financial loss and not mere
injury to a valuable intangible property interest.” (quoting Steele v.
Hospital Corp. of Am., 36 F.3d 69, 70 (9th Cir. 1994)). Plaintiffs
point to no concrete losses, financial or otherwise, stemming from
the alleged corruption of their local.
III.
Plaintiffs also argue that the District Court erred in
dismissing their suit with prejudice, but rather should have allowed
them leave to amend their complaint. We review this decision for
abuse of discretion. Gay v. Petsock, 917 F.2d 768, 771 (3d Cir.
1990). Plaintiffs concede that they should not have been allowed
to amend if amendment would be futile. See In re NAHC, Inc. Sec.
Litig., 306 F.3d 1314, 1332 (3d Cir. 2002) (“We have made it clear
that an amendment would be futile when ‘the complaint, as
amended, would fail to state a claim upon which relief could be
granted.’”). They argue, however, that they could have amended
4
Anderson and Breslin also accuse the defendants of other acts
of racketeering, to wit, attempted extortion in violation of 18 U.S.C.
§ 1951, and attempted witness tampering in violation of 18 U.S.C.
§ 1512(b). These acts cannot, however, have proximately caused their
job loss, for the simple reason that they occurred a week after plaintiffs
were terminated from Kurz-Hastings.
9
the complaint to “articulate the nexus between the wire fraud and
decision by Kurz-Hastings to terminate plaintiffs,” by adding
allegations, based on the deposition of Vic Franz, a Kurz-Hastings
foreman, that Anderson and Breslin were fired only because of the
false statements about them, allegedly supplied by Kada’s and
Ayling’s telephone calls, which were contained in the notice of
trusteeship.
Such an amendment could not have saved Anderson and
Breslin’s complaint. As we noted above, see supra Part II, the
chain of causation was simply too attenuated to create civil RICO
standing. Even assuming that Kurz-Hastings did take Kada’s and
Ayling’s accusations into account in deciding to fire the plaintiffs,
there are still at least three independent decisions—by Schatz, a
non-party; by Hoffa, whose decision has been ratified by this
Court, see Morris v. Hoffa, supra; and by Kurz-Hastings, a non-
party—that intervened between the alleged wire fraud and
plaintiffs’ ultimate injury. Beck and Steamfitters make it clear that
plaintiffs’ proposed amendment would not be enough to
demonstrate that the racketeering acts proximately caused their
injury, and thereby to create civil RICO standing. An amendment
would therefore have been futile, and the District Court did not
abuse its discretion in denying leave to amend.
The Order of the District Court dismissing the complaint
will be affirmed.
10