47 F.3d 1280 (3rd Cir. 1995), 92-1495, Tabas v. Tabas
| Citation | 47 F.3d 1280 |
| Party Name | RICO Bus.Disp.Guide 8754, RICO Bus.Disp.Guide 8937 Harriette S. TABAS; Richard S. Tabas; Nancy C. Tabas; Gerald Levinson, As Executors of the Estate of Charles L. Tabas, Appellants, v. Daniel M. TABAS; Joseph P. Campbell; James J. McSwiggan; Lee A. Tabas; Robert Tabas; Susan Tabas Tepper; Linda Tabas Stempel; Joanne Tabas Wurzak; Carol Tabas Stofma |
| Case Date | February 13, 1995 |
| Court | United States Courts of Appeals, U.S. Court of Appeals — Third Circuit |
Page 1280
Argued Jan. 26, 1993.
Reargued In Banc Oct. 18, 1994.
As Amended Feb. 23, March 7 and
May 2, 1995.
Page 1281
Richard A. Sprague (argued), Daniel L. Lemisch, Denise Pallante, Sprague & Sprague, Howard K. Goldstein, Astor, Weiss, Kaplan & Rosenblum, Philadelphia, PA, for appellants.
Harold E. Kohn, Robert J. LaRocca, Joanne Zack (argued), Kohn, Nast & Graf, P.C., Philadelphia, PA, for appellees.
Argued Jan. 26, 1993.
Before: GREENBERG, ROTH and LEWIS, Circuit Judges.
Reargued In Banc Oct. 18, 1994.
Before: SLOVITER, Chief Judge, BECKER, STAPLETON, MANSMANN, GREENBERG, HUTCHINSON, SCIRICA, COWEN, NYGAARD, ALITO, ROTH, LEWIS, and MCKEE, Circuit Judges.
OPINION OF THE COURT
ROTH, Circuit Judge:
In this action, brought under the Racketeer Influenced and Corrupt Organizations Act ("RICO"), Pub.L. 91-452, Title IX, 84 Stat. 941, as amended, 18 U.S.C. Secs. 1961-1968, we are presented with the question whether defendants' acts, as alleged, constituted a "pattern of racketeering activity." Specifically, we must determine what showing is required for plaintiffs to meet the "continuity" prong of RICO's "pattern" requirement. Because we find that plaintiffs have alleged a series of acts sufficient to satisfy RICO's continuity requirement, we will reverse the district court's grant of summary judgment and remand this case for further proceedings consistent with this opinion.
Page 1282
The plaintiffs are four of the executors of the Estate of Charles Tabas ("the Estate"): Charles's widow, Harriette Tabas; Richard Tabas and Nancy Tabas, two of Charles and Harriette's children; and Gerald Levinson, one of Charles's business associates. 1 In addition to Daniel Tabas, who is President and Chief Executive Officer of Tabas Enterprises, the named defendants include Joseph Campbell, the Executive Vice President of Tabas Enterprises; James McSwiggan, the Comptroller of Tabas Enterprises; Daniel's children; and one of Daniel's sons-in-law.
I.
A.
In 1964, brothers Charles and Daniel Tabas formed a partnership, Tabas Enterprises, to conduct real estate and other business ventures. The partnership agreement governing the brothers' joint property holdings required that, in the event of the death of either partner, the surviving partner would distribute partnership income equally to himself and to the estate of the deceased partner, regardless of any personal services either brother might render. See Appendix ("App.") at 62 (Partnership Agreement p 3). The partnership agreement also provided that:
It is the intent of the parties that the survivor of them shall be free to exercise his judgment for the joint benefit of ownership ... provided always, that the responsibility and obligation of the survivor to the estate of the deceased shall be that required of a fiduciary.
App. at 62 (Partnership Agreement p 4(b)).
In 1983, Charles Tabas died. Soon after Charles's death, John Van Der Wal, a financial advisor to Daniel and to Tabas Enterprises, was asked by Daniel to recommend a reasonable financial arrangement between Daniel and Charles's widow, Harriette. In response, Van Der Wal sent a letter to Harriette in which he recommended that Daniel receive a $180,000 annual management fee from Tabas Enterprises, prior to profit sharing by the partners. Van Der Wal further recommended that Harriette and Daniel each receive a $10,000 monthly draw check from Tabas Enterprises. 2
Beginning in March 1983, monthly distribution checks of $10,000 were drawn on a Tabas Enterprises account and sent to Harriette through the United States mail. Daniel was also provided with a $10,000 monthly draw. In addition, from March 1983 to September 1986, Tabas Enterprises paid for various personal expenses incurred by Harriette and Daniel.
In September 1986, Tabas Enterprises stopped paying Harriette's personal expenses and also eliminated Harriette's $10,000 monthly draw. Instead, Tabas Enterprises began paying a $15,000 monthly draw to the Estate. At the same time, Daniel's monthly draw was increased to $15,000. Tabas Enterprises continued to pay Daniel management fees and to cover his personal expenses. 3
Shortly thereafter, the Estate brought suit against Daniel and others in the Montgomery County, Pennsylvania, Court of Common Pleas. The complaint alleged, inter alia, that the Estate was not being allocated an equal share of the partnership income, that Daniel used Tabas Enterprises funds for personal
Page 1283
purposes, that Daniel misled the Estate by directing the preparation of false and misleading financial statements, and that Daniel had breached his fiduciary duties to the Estate.
On November 20, 1987, the parties settled the state suit and agreed that the assets of Tabas Enterprises would be sold. The settlement agreement established a schedule and method for liquidating the majority of the jointly held properties. 4 In conjunction with the liquidation of the joint assets, the settlement agreement provided that "the Estate shall be given complete access to all properties, books and records in connection therewith[.]" App. at 67 (Settlement Agreement at p 4(a)(i)). The settlement agreement did not address the distribution of income earned after November 20, 1987, but did provide that:
To the extent that the Partnership Agreement dated March 12, 1964 is not inconsistent with the provisions of this [Settlement] Agreement, the Partnership Agreement shall continue in full force and effect until the liquidation and auction [of Tabas Enterprises' assets] are completed.
App. at 70 (Settlement Agreement p 13). Another provision of the settlement agreement provided that the parties would agree to execute a mutual general release:
requiring the dismissal with prejudice of all parties in all litigation between or among Daniel, on the one hand, and the Estate or any of its executors, on the other hand, and excluding only the terms and conditions contained herein.
App. at 69 (Settlement Agreement p 9).
Lastly, the Honorable William H. Yohn, Jr., 5 was named to act as the arbitrator of any future disputes arising from the implementation of the settlement agreement that could not be resolved by the parties' legal representatives. The settlement agreement specifically provided that Judge Yohn's decisions on such matters "shall be final, binding, and non-appealable." App. at 70 (Settlement Agreement p 12).
On May 15, 1990, Daniel and the Estate executed the mutual general release, which provided that, except for the obligations of the parties under the settlement agreement, the parties would release and forever discharge one another from:
any and all actions, causes of action, demands, judgments, contracts, debts, dues, accounts, bonds, covenants, contracts, suits, claims, and demands of any nature whatsoever, whether in law, equity, arbitration or otherwise, whether know [sic] or unknown at the present time, which [either party] ever had, now has, hereinafter can, shall or may have, by reason of any matter, cause or thing whatsoever, from the beginning of the world to November 20, 1987.
App. at 293 (emphasis added).
Despite the settlement agreement, plaintiffs remained dissatisfied with Daniel's compliance with the partnership agreement. On July 25, 1990, Judge Yohn held a hearing to consider whether the settlement agreement barred the Estate from asserting claims for breach of the partnership agreement stemming from Daniel's management of Tabas Enterprises subsequent to November 20, 1987. Finding that "[t]he provision of the partnership agreement of March 12, 1964 concerning distribution of income is not inconsistent with the provisions of the settlement agreement ... as the settlement agreement contains no provisions concerning the distribution of income after November 20, 1987," Judge Yohn held that the Estate could
Page 1284
"pursue any claims" against Daniel arising from the distribution of Tabas Enterprises' income after November 20, 1987. App. at 1187 (Arbitration Award No. 8). 6
Following this decision, Daniel's counsel requested that Judge Yohn mediate the issues raised by plaintiffs' proposed RICO complaint. Judge Yohn held two conferences with counsel to discuss, among other topics, the proposed RICO claims. During oral argument on February 1, 1991, Daniel's counsel asserted that, because plaintiffs' proposed RICO complaint sought damages against defendants not named in the settlement agreement, the proposed RICO complaint was outside the scope of arbitration and therefore could not be decided by Judge Yohn in his role as arbitrator. Nevertheless, Daniel's counsel expressed interest in having Judge Yohn serve as a mediator in an attempt to resolve the claims set forth in the proposed RICO complaint.
On February 20, 1991, Judge Yohn formally denied Daniel's request to mediate the dispute. Instead, Judge Yohn ordered that: "By agreement of the parties, and with the concurrence of the undersigned, the proposed 'RICO Complaint' may be filed in the United States District Court for the Eastern District of Pennsylvania and the issues raised therein will not be the subject of this procedure under the [Settlement] Agreement of November 20, 1987." App. at 1282 (Arbitration Award No. 10).
Soon thereafter, plaintiffs brought the instant action, alleging violations of RICO Secs. 1962(a), (b), (c), and (d), as well as several state law claims stemming from defendants'...
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