U.S. v. Allen, Docket Nos. 97-6254

• Citation: 155 F.3d 35
• Decision Date: 06 August 1998
• Docket Number: 97-6274,Docket Nos. 97-6254
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. John ALLEN and Daniel Finley Allen & Co., Inc., Defendants-Appellants. UNITED STATES of America, Plaintiff-Appellee, v. John PAGANO, Ace Garbage and Garbage and Rubbish Removal, Inc., and Mets Roll-Off Service, Inc., Defendants-Appellants.
• Court: United States Courts of Appeals. United States Court of Appeals (2nd Circuit)

Page 35

155 F.3d 35

UNITED STATES of America, Plaintiff-Appellee, v. John ALLEN and Daniel Finley Allen & Co., Inc.,

Defendants-Appellants.

UNITED STATES of America, Plaintiff-Appellee, v. John PAGANO, Ace Garbage and Garbage and Rubbish Removal,

Inc., and Mets Roll-Off Service, Inc.,

Defendants-Appellants.

Docket Nos. 97-6254, 97-6274.

United States Court of Appeals, Second Circuit.

Argued April 27, 1998.

Decided Aug. 6, 1998.

Stephen P. Scaring, Garden City, NY (Steven N. Nachman, Garden City, NY, on the brief), for defendants-appellants John Allen, et al.

Judd Burstein, New York City (Robert N. Fass, Marc Fernich, Burstein & Fass, New York City, on the brief), for defendants-appellants John Pagano, et al.

Christopher G. Lehmann, Asst. U.S. Atty., Brooklyn, NY (Zachary W. Carter, U.S. Atty., Deborah B. Zwany, Asst. U.S. Atty., Brooklyn, NY, on the brief), for appellee.

Before: NEWMAN and LEVAL, Circuit Judges, and WEXLER, ^* District Judge.

JON O. NEWMAN, Circuit Judge:

This case primarily concerns the appropriateness of summary judgment in resolving the issue of whether defendants in a civil case under the Racketeer Influenced and Corrupt Organizations Act ("RICO"), see 18 U.S.C. § 1964, have exercised the requisite control over the affairs of an alleged RICO enterprise to incur liability for conducting the enterprise's affairs. Two sets of defendants, (i) John Pagano, Ace Garbage and Rubbish Removal, Inc. ("Ace Garbage"), and Mets Roll-Off Service, Inc. ("Mets Roll-Off") (collectively, the "Ace Defendants"), and (ii) John Allen and Donald Finley Allen & Co., Inc. ("DAF") (collectively, the "Allen Defendants"), appeal from orders of the District Court for the Eastern District of New York (Leo I. Glasser, District Judge), entered October 2, 1997. The District Court granted summary judgment for the United States, the plaintiff in this civil RICO action, and ordered various forms of injunctive relief, as well as the disgorgement of defendants' illegal profits.

All the Appellants contend that genuine issues of disputed fact preclude summary judgment for the Government. The Allen Defendants also challenge the District Court's rejection as a matter of law of their defenses of extortion and coercion. We conclude that these defenses were properly rejected but that summary judgment was not warranted on the issue of the Appellants' liability, and we therefore affirm in part, vacate in part, and remand.

Background

The complaint. In 1989, the Government filed this civil RICO action against 112 defendants involved in the solid waste carting industry on Long Island. Named as defendants were alleged organized crime families, a trade association, a labor union, carting firms and their officers and directors, and a number of town employees who were alleged to have taken bribes for permitting trucks loaded with solid waste to be underweighed at the scalehouse of the Oyster Bay landfill. Although the case is still pending in District Court, its scope has been substantially narrowed, as a result of settlements and the granting of various motions for summary judgment.

The core of the complaint was the alleged effort--beginning in the 1950s--of successive associations of Long Island carters to control the carting industry by setting up a "property rights" regime. Carters were allegedly assigned "rights" to service particular customers or geographic areas. The system allegedly operated to suppress competitive pricing, and organized crime elements used violence to enforce the "property rights" regime. In addition to the formation and enforcement of this cartel, the complaint alleged that "carting industry racketeers have, either singly or in concert, used their control, power or money to corrupt public officials by offers of bribes or by rewarding misconduct, in return for actions by these officials which benefit the corrupt businesses."

The complaint alleged the existence of two overarching RICO "enterprises." See 18 U.S.C. §§ 1961(4), 1962. First, it identified the Private Sanitation Industry Association of Nassau/Suffolk, Inc. ("PSIA"), and characterized it as "an association organized, existing and operating for the purpose of controlling the solid waste disposal industry on Long Island." Second, it identified a group that it termed the "Carting Industry Enterprise" ("CIE"), composed of all defendants together with other unnamed "entities in which defendants have an interest." The CIE was described as "associated in fact for the purpose of controlling the solid waste disposal industry on Long Island."

While numerous other defendants were alleged to have used violence and intimidation to enforce the carters' "property rights" system, the alleged predicate acts of the Appellants were limited to bribery of workers at the Oyster Bay town dump. The Appellants were alleged to have conferred "bribes and rewards" on dump employees, in exchange for the employees' underreporting the weight of the Appellants' trucks, thereby undercharging them for fees for dumping at the landfill. Although the complaint characterized this activity as racketeering acts under state law punishing both bribery and grand larceny, the Government defends the challenged rulings on appeal by contending that the Appellants' predicate acts were only bribery. See 18 U.S.C. § 1961(1)(A) (state law offenses qualifying as "racketeering activity" include bribery but not theft).

The complaint alleged violations of RICO's substantive and conspiracy provisions. See 18 U.S.C. § 1962(c), (d). However, after the Court granted the defendants' motion to dismiss the conspiracy count without prejudice, against all but three defendants (none of whom is involved in the instant appeal), the Government elected not to replead this count. Accordingly, only the substantive claim under section 1962(c) remains at issue on this appeal. ¹

The Government and the Defendants-Appellants cross-moved for summary judgment. The following facts, unless otherwise noted, are undisputed.

The Ace Defendants. Ace Garbage and Mets Roll-Off are New York corporations. Ace is owned equally by Pagano and Joseph Petrizzo, who serve as president and vice-president, respectively. Mets Roll-Off is wholly owned by Petrizzo. However, because the entities are run as a single operation, the parties have consented to their being treated interchangeably.

The PSIA was organized in 1979 as a trade association of those engaged in the business of solid waste collection, transportation, and disposal on Long Island. Both Ace Garbage and Mets Roll-Off were members of the PSIA from its inception until 1989 and paid dues and assessments during that period. The parties agree that Petrizzo attended certain PSIA meetings; however, the parties appear to disagree over the extent to which he was involved in PSIA decision-making. Petrizzo's daughter, Patricia, submitted an affidavit averring that the Ace Defendants were only "passive" members of the PSIA. She acknowledged that she attended some PSIA meetings with her father, but stated that these consisted of nothing more than informational presentations and exchanges of pleasantries.

Ace Garbage and Mets Roll-Off also became members of a sub-group of PSIA--the "Oyster Bay PSI Committee" (the "OB-PSI Committee"). The parties agree that the OB-PSI Committee was specifically concerned with protecting and representing the interests of those of its members who used the Oyster Bay dump. The Appellants maintain, however, that none of these objectives was illegal and that their involvement extended only to receiving mailings.

In any event, it is undisputed that from at least January 1982 until February 1985, Ace Garbage and Mets Roll-Off, along with other carting companies, made regular payments to workers at the municipal dump, in exchange for underweighing the trucks. This practice, known as "slipping the scale," was accomplished by allowing the truck to pull only partially onto the scale before the weight was measured. Ace Garbage and Mets Roll-Off together paid bribes of $100 per scalehouse employee every two months, and gave an additional $100 to each employee at Christmas. The only representative of the companies specifically identified as making these payments was Pagano. In October 1986, Ace Garbage pled guilty to a state-law misdemeanor charge of theft of services, in connection with its activities at the Oyster Bay dump.

The Allen Defendants. DAF is a New York corporation, wholly owned by Sarah Allen, who is a defendant in this action, but not an appellant. Prior to its incorporation in 1984, DAF was operated as a sole proprietorship. During the period relevant to this action, DAF was operated on a day-to-day basis by Sarah Allen and her sons, John and Daniel Allen. DAF was a dues-paying member of the PSIA during 1980 and 1981, but stopped paying dues as of January 1, 1983.

At some point in either 1982 or 1983, John Allen was waiting in line at the municipal dump and observed that all the trucks ahead of him were allowed to slip the scale. Thereafter, he confronted the dump weight-master, Joseph Vittorio, and told him that he would "squeal on the whole operation at Oyster Bay" if DAF was not treated in the same manner as the other companies using the dump. The dump employees then regularly allowed DAF to slip the scales, in exchange for cash payments, meals, and alcohol. In October 1986, DAF pled guilty to a state-law misdemeanor charge of theft of services, in connection with its activities at the Oyster Bay dump.

In separate rulings, each entered October 2, 1997, the District Court granted the Government's summary judgment motion in each case. The Court also ordered the Ace Defendants and the Allen Defendants to disgorge all gains that resulted from their bribery scheme. The Court did not quantify these sums, and the parties apparently apprehend that these sums are to be determined at a later hearing. The Court also issued injunctive relief. Pagano...