De Falco v. Bernas

• Decision Date: 05 January 2000
• Docket Number: Docket No. 99-7648,Docket No. 99-7694,Docket No. 99-7696
• Citation: 244 F.3d 286
• Parties: (2nd Cir. 2001) JOSEPH DE FALCO, ELEANOR DE FALCO, ROBERT BROWN, JANICE BROWN, TOP OF THE WORLD ESTATES, INC. and JOBO ASSOCIATES, INC., Plaintiff-Appellees-Cross-Appellants, v. JOHN BERNAS, JOHN BERNAS, INC., and JML QUARRIES, INC., WILLIAM DIRIE, Defendants-Cross-Defendants-Appellants-Cross-Appellees, PAUL ROUIS, V. EDWARD CURTIS, ALFRED STEPPICH, RICHARD FERBER, and WILLIAM ROSEN, Defendants-Cross-Defendants-Cross-Appellees, GEORGE LAHM, Defendant-Cross-Appellee, TERRY KELLY, Defendant-Cross-Defendant-Cross-Claimant-Cross-Appellee, HARRY FISHER, WILLIAM DIEHL and ROBERT ROSEN, Defendants-Cross-Defendants. (L);(XAP);(CON) Argued:
• Court: U.S. Court of Appeals — Second Circuit

Page 286

244 F.3d 286 (2nd Cir. 2001)

JOSEPH DE FALCO, ELEANOR DE FALCO, ROBERT BROWN, JANICE BROWN, TOP OF THE WORLD ESTATES, INC. and JOBO ASSOCIATES, INC., Plaintiff-Appellees-Cross-Appellants, v. JOHN BERNAS, JOHN BERNAS, INC., and JML QUARRIES, INC., WILLIAM DIRIE, Defendants-Cross-Defendants-Appellants-Cross-Appellees, PAUL ROUIS, V. EDWARD CURTIS, ALFRED STEPPICH, RICHARD FERBER, and WILLIAM ROSEN, Defendants-Cross-Defendants-Cross-Appellees, GEORGE LAHM, Defendant-Cross-Appellee, TERRY KELLY, Defendant-Cross-Defendant-Cross-Claimant-Cross-Appellee,

HARRY FISHER, WILLIAM DIEHL and ROBERT ROSEN, Defendants-Cross-Defendants.

Docket No. 99-7648 (L); Docket No. 99-7696 (XAP); Docket No. 99-7694 (CON)

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

Argued: January 5, 2000.

Decided: March 16, 2001.

Appeal and cross-appeal from a judgment entered by the United States District Court for the Southern District of New York.

Affirmed in part, reversed in part.

[Copyrighted Material Omitted]

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[Copyrighted Material Omitted] MICHAEL L. LEVINE, The Law Firm of Michael Levine, P.C., Scarsdale, NY for Plaintiffs-Appellees-Cross-Appellants.

JAMES J. HARRINGTON, Harrington Henry LLP, New York, NY for Defendant-Cross-Defendant-Appellant-Cross-Appellee William Dirie and for Defendant-Cross-Defendant-Cross-Appellee V. Edward Curtis.

MARTIN J. SCHWARTZ, Rubin Baum Levin Constant & Friedman, New York, NY and MAX WILD, Liberty, NY for Defendants-Appellants-Cross-Appellees John Bernas, John Bernas, Inc. and JML Quarries, Inc. and for Defendant-Cross-Appellee Paul Rouis.

LAWRENCE S. GOLDMAN, Goldman & Hafetz, New York, NY for Defendant-Cross-Defendant-Cross-Appellee William Rosen.

Before: KEARSE and SACK, Circuit Judges, and UNDERHILL, District Judge.^*

                TABLE OF CONTENTS
                I. THE PARTIES [2]
                A. The Plaintiffs [2]
                B. The Defendants [2]
                II. BACKGROUND [3]
                A. Factual Background [3]
                B. Procedural History [14]
                1. The First Trial [14]
                

                2. Unconsummated Sales Opportunities and the October 15, 1998 Order [15]
                3. The Second Trial [19]
                III. DISCUSSION [22]
                A. Standard of Review [22]
                B. Elements of a RICO Claim [23]
                1. The Town of Delaware as a RICO Enterprise [25]
                2. Interstate Commerce [30]
                3. Participation in the Conduct of the Town's Affairs [30]
                4. Predicate Acts [36]
                a. William Dirie [36]
                b. The Bernas Defendants [42]
                i. The JOBO Stock [43]
                ii. The Sand and Gravel [47]
                5. Pattern of Racketeering Activity [50]
                a. Closed-Ended Continuity [52]
                b. Open-Ended Continuity [55]
                C. Damages [58]
                1. The Damages from the Predicate Acts [59]
                2. The Vacated $1.6 Million Award [66]
                D. Dismissal of the Claim Against William Rosen [69]
                E. Vacating the First Jury Verdict and the October 15, 1998 Order [70]
                IV. CONCLUSION [71]
                

UNDERHILL, District Judge:

Plaintiffs brought this action under 18 U.S.C. § 1962(c), a provision of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. §§ 1961 68, claiming that their efforts to develop real estate in Sullivan County, New York, were illegally impeded as a result of the defendants' operation of the Town of Delaware, New York as a RICO enterprise. Plaintiffs claimed that the action arose out of a conspiracy, plan and scheme among the defendants - an assortment of public officials, private individuals and corporations - to use the Town of Delaware as a racketeering enterprise to extort money, real property and personal property through misuse of certain public offices, in violation of section 1962(c).

After pretrial proceedings eliminated a number of defendants, the plaintiffs' claims against eleven remaining defendants were first tried to a jury between December 10 and December 20, 1996, with United States District Judge Barrington D. Parker presiding. The trial resulted in jury verdicts against six defendants. The Court granted motions for judgment as a matter of law in favor of two defendants and, with respect to the remaining four defendants, the Court held that the proof of damages adduced at trial was too speculative and imprecise to support the damages awarded by the jury. Accordingly, Judge Parker granted a new trial on both liability and damages.

The case was then retried against the remaining defendants from February 1 to February 9, 1999, with United States District Judge Charles L. Brieant presiding. The second trial again resulted in jury verdicts against the four defendants. Although the Court sustained certain damage awards, Judge Brieant vacated a special verdict of $1.6 million (before trebling) as having "no relation to reality."

This appeal and cross-appeal followed. The defendants appealed, contending that the plaintiffs' evidence at the second trial was insufficient as to both liability and damages. The plaintiffs' cross-appeal challenges the Court's vacatur of the jury's verdicts at the first trial and, alternatively, the Court's vacatur of the $1.6 million award at the second trial. For the reasons discussed below, we vacate a $1,000.00 award against the defendant Dirie, but affirm the judgments of the District Court in all other respects.

I. THE PARTIES

A. The Plaintiffs

Plaintiff Top of the World Estates, Inc. ("TOP") is the owner and developer of approximately 1,450 acres of land in the Town of Delaware in Sullivan County, New York. Located on this property is a residential development known as "Top of the World Estates."

Plaintiff JOBO Associates, Inc. ("JOBO") owns approximately 250 acres adjoining the TOP property. The JOBO property contains deposits of sand and gravel.

The individual plaintiffs, Joseph DeFalco, Eleanor DeFalco, Robert Brown and Janice Brown are the principal officers, directors and shareholders of both TOP and JOBO.

B. The Defendants

The defendants are an assortment of public officials, private individuals and corporations from Sullivan County, New York:

Defendant William Dirie was the elected Supervisor of the Town of Delaware from January 1986 to December 1991. In that position, Dirie served as a member of the Town Board and as a member of the Town Legislature;

Defendant John Bernas is a local contractor and owner of both Defendant JML Quarries, Inc. and Defendant John Bernas, Inc.;

Defendant V. Edward Curtis was the appointed Chairman of the Delaware Planning Board from 1964 to December 1994. At all relevant times, he was also engaged in the nursery and landscaping business;

Defendant Alfred Steppich was the appointed Building Inspector of the Town of Delaware from 1986 to 1991;

Defendant Richard Ferber was an elected Tax Assessor for the Town of Delaware from 1976 to 1994 and was Chairman of the Delaware Tax Assessors from 1990 to 1994;

Defendant Donald Meckle was an elected Tax Assessor for the Town of Delaware from 1978 to 1993 and was Chairman of the Delaware Tax Assessors from 1979 to 1990;

Defendant Paul Rouis was the appointed Sullivan County Administrator from 1977 to June 1993;

Defendant Terry Kelly was at all relevant times chief engineer of the Town of Delaware;

Defendant William Rosen was the appointed Town Attorney for the Town of Delaware from 1986 to December 1991. He was also Sullivan County Attorney from 1988 to 1991;

Defendant George Lahm was at all relevant times the Highway Superintendent for the Town of Delaware; and

Defendant Harry Fisher was at all relevant times an overseer of the plaintiffs' business operations as well as a personal acquaintance of William Dirie.

II. BACKGROUND

A. Factual Background

Reading the evidence from the second trial in the light most favorable to the plaintiffs, a reasonable jury could have found the following facts.

In May 1987, Joseph DeFalco ("DeFalco"), a butcher and professional hunter from Long Island, New York, decided to purchase approximately 1,700 acres of land from the Tamarack Hunting Club. The property straddled the Town of Delaware and the Town of Cochecton, in Sullivan County, New York. DeFalco and his partner, Robert Brown, and their wives, formed two corporations, Top of the World Estates, Inc. ("TOP") and JOBO Associates, Inc. ("JOBO"). TOP acquired title to the portion of the property in the Town of Delaware and JOBO acquired title to the smaller portion located in the Town of Cochecton. Although DeFalco initially intended to use the Tamarack property for hunting, he subsequently decided to develop a small part of it as a residential real estate development known as "Top of the World Estates."

Before the closing of the land purchase, DeFalco was approached by local resident Harry Fisher ("Fisher"), who told DeFalco that there were potentially valuable gravel deposits on the JOBO parcel. Shortly thereafter, Fisher paid another visit to DeFalco, this time with William Dirie ("Dirie"), Supervisor of the Town of Delaware and a local firewood salesman. Dirie introduced himself and informed DeFalco that Delaware, New York "is not Long Island," and that "[a]round here in Sullivan County, you got to deal with the local people." (T2:71).¹ Dirie advised DeFalco that he would help guide DeFalco "through the muddy waters" of real estate development in the Town of Delaware, so long as DeFalco followed Dirie's suggestions. (T2:70).

Dirie made some suggestions to DeFalco at this initial meeting. First, Dirie informed DeFalco that Fisher was about to retire and he recommended that DeFalco hire Fisher as a foreman for the real estate development project at $300 per week. It was imperative, however, that Fisher not show the $300 per week as income, so Dirie suggested that DeFalco pay Fisher by purchasing him a new truck in Fisher's son's name and making the loan payments on the truck purchase. Second, Dirie recommended that DeFalco buy shrubs and other landscaping items from V. Edward Curtis ("Curtis"), a local nursery owner and Chairman of the Delaware Planning Board. Dirie also suggested that DeFalco, an avid hunter with a televised hunting program,...