HJ INC. v. Northwestern Bell Telephone Co.

• Decision Date: 18 February 1987
• Docket Number: Civ. No. 4-86-546.
• Citation: 653 F. Supp. 908
• Parties: H.J. INC., a Minnesota corporation, Kirk Dahl, Larry Krugen and Mary Krugen, individually and d/b/a Photo Images, Susan Davis, Robert Neal, Isaac H. Ward, Richard L. Anderson, Thomas J. Mott, and all others similarly situated, Plaintiffs, v. NORTHWESTERN BELL TELEPHONE COMPANY, a subsidiary of U.S. West, A.B.C. individually and D.E.F. as corporations, and other unnamed Co-conspirators, Defendants.
• Court: U.S. District Court — District of Minnesota

653 F. Supp. 908

H.J. INC., a Minnesota corporation, Kirk Dahl, Larry Krugen and Mary Krugen, individually and d/b/a Photo Images, Susan Davis, Robert Neal, Isaac H. Ward, Richard L. Anderson, Thomas J. Mott, and all others similarly situated, Plaintiffs, v. NORTHWESTERN BELL TELEPHONE COMPANY, a subsidiary of U.S. West, A.B.C. individually and D.E.F. as corporations, and other unnamed Co-conspirators, Defendants.

Civ. No. 4-86-546.

United States District Court, D. Minnesota, Fourth Division.

February 18, 1987.

Mark Reinhardt, Susan Bedor, Reinhardt & Anderson, and John Cochrane, Cochrane & Bresnahan, St. Paul, Minn., for plaintiffs.

John D. French, John F. Beukema, James L. Volling, Joseph H. Otterstetter, Faegre & Benson, and Stephen T. Refsell, General Atty., Minneapolis, Minn., for defendants.

MacLAUGHLIN, District Judge.

This matter is before the Court on plaintiffs' motion to reconsider. Plaintiffs' motion will be denied.

FACTS

This is a class action arising under the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. §§ 1961-1968. Plaintiffs also bring a state law claim pursuant to the Court's pendent jurisdiction, alleging acts of bribery in contravention of Minn.Stat. § 609.42, subd. 1(1) and (2) and the common law of bribery. By order dated November 21, 1986, the Court granted defendant Northwestern Bell Telephone Co.'s (Northwestern Bell) motion to dismiss the complaint in its entirety, 648 F.Supp. 419. The facts of the case are set forth in the Court's prior order and will not be extensively reprised here. In brief, plaintiffs allege that Northwestern Bell, by and through its corporate agents, initiated a scheme designed to illegally influence various members of the Minnesota Public Utilities Commission (MPUC), the regulatory body which sets rates which Northwestern Bell may charge for the goods and services it provides. Plaintiffs allege that from early 1980 and through the present Northwestern Bell has offered benefits, rewards and consideration to certain MPUC commissioners, including bribes, offers of employment and various gifts, free meals, and emoluments, with intent to influence these commissioners in the performance of their duties. In its November 21 memorandum and order, the Court found that plaintiffs had failed to allege a "pattern" of racketeering within the meaning of the RICO statute, and accordingly granted defendant's motion to dismiss the RICO counts of plaintiffs' amended complaint. The Court dismissed plaintiffs' pendent state law claim without prejudice. Plaintiffs now bring this motion for reconsideration.

DISCUSSION

A. Pattern of Racketeering

It is by now well established that in order to establish a civil RICO cause of action plaintiffs must prove the existence of four elements: (1) conduct, (2) of an enterprise, (3) through a pattern, (4) of racketeering activity. See Sedima, S.P. R.L. v. Imrex Co., 473 U.S. 479, 105 S.Ct. 3275, 3285, 87 L.Ed.2d 346 (1985) (footnote omitted); Simon v. Fribourg, 650 F.Supp. 319-323 (D.Minn.1986). The RICO act defines "pattern of racketeering activity" in the following terms:

"pattern of racketeering activity" requires at least two acts of racketeering activity, one of which occurred after the effective date of this chapter and the last of which occurred within ten years (excluding any period of imprisonment) after the commission of a prior act of racketeering activity.

18 U.S.C. § 1961(5). In Sedima the Supreme Court pointed out that while at least two acts of racketeering are necessary to form a pattern, two acts may not be sufficient. Sedima, 105 S.Ct. at 3285 n. 14. Rather, it is the factor of continuity plus relationship which combines to produce a pattern. Sedima, 105 S.Ct. at 3285 n. 14, citing S.Rep. No. 91-617, p. 158 (1969). In passing, the Sedima majority noted that the failure of Congress or the courts to develop a meaningful concept of "pattern" has contributed to the expansive potential of RICO's application, and suggested that a stricter interpretation of the pattern requirement might be the key to arresting civil RICO's explosive growth. Sedima, 105 S.Ct. at 3287. Subsequently, the lower courts have accepted the Supreme Court's invitation to flesh out the pattern element, albeit with varying results. See, e.g., Frankart Distributors, Inc. v. RMR Advertising, Inc., 632 F.Supp. 1198, 1200 (S.D.N.Y.1986) (numerous courts have struggled with establishing a definition of pattern of racketeering activity in light of the Sedima Court's reasoning and the clear objectives of the RICO statute); Smoky Greenhaw Cotton Co. v. Merrill Lynch, Pierce, Fenner and Smith, Inc., 785 F.2d 1274, 1280 n. 7 (5th Cir.1986) (Fifth Circuit directed its lower courts to consider more rigorous interpretation of the pattern requirement).

In the language of one of the more trusted sources for the definition of English words, a "pattern" is defined as: "an arrangement or composition that suggests or reveals a design; a configuration...." WEBSTER'S NEW COLLEGIATE DICTIONARY (C & G Merriam Co. 1961), cited in United States v. Freshie Co., 639 F.Supp. 442, 444 (E.D.Pa.1986). The Omnibus Crime Control Act of 1970 provides that "criminal conduct forms a pattern if it embraces criminal acts that have the same or similar purposes, results, participants, victims, or methods of commission, or otherwise are interrelated by distinguishing characteristics and are not isolated events." 18 U.S.C. § 3575(e), cited in Sedima, 105 S.Ct. at 3285 n. 14. The courts have suggested that to compose a pattern "the acts complained of must be related to and similar in purpose, and must be part of an ongoing series of acts, rather than separate incidents in a series of sporadic activities." Louisiana Power and Light Co. v. United Gas Pipe Line Co., 642 F.Supp. 781, 808 (E.D.La.1986), citing Superior Oil Co. v. Fulmer, 785 F.2d 252, 257 (8th Cir.1986). In their search for a meaningful interpretation of "pattern" the courts have focused on the dual requirements of "relationship" and "continuity" highlighted by the Sedima majority.

1. Relationship

Relationship generally has proved the less problematic of the prongs enunciated by Sedima. It has been stated that to be related, the predicate acts of a RICO claim must involve common perpetrators, common methods of commission, common victims, and a common motive or purpose. Medallion TV Enterprises, Inc. v. SelecTV of California, Inc., 627 F.Supp. 1290, 1296 (C.D.Cal.1986); Graham v. Slaughter, 624 F.Supp. 222, 225 (N.D.Ill.1985); Allington v. Carpenter, 619 F.Supp. 474, 478 (C.D. Cal.1985). Relationship requires that the acts of racketeering be related to the operation of the enterprise, that is, sufficiently related to the statutorily proscribed conduct. Papai v. Cremosnik, 635 F.Supp. 1402, 1407-08 (N.D.Ill.1986); Technology Exchange Corp. of America, Inc. v. Grant County State Bank, 646 F.Supp. 179, 183 (D.Colo.1986). As stated by the United States Court of Appeals for the Seventh Circuit in Morgan v. Bank of Waukegan, 804 F.2d 970, 975 (7th Cir.1986), "relationship implies that the predicate acts were committed somewhat closely in time to one another, involve the same victim, or involve the same type of misconduct." Morgan, 804 F.2d at 975.

In this case, it is clear that plaintiffs have alleged a "relationship" among and between the predicate acts of racketeering enumerated in their amended complaint. Plaintiffs have identified common perpetrators, Northwestern Bell and certain of its officers and agents; common victims, Northwestern Bell's ratepayers; and a common motive or purpose, improper influence of MPUC commissioners through bribes, gifts and assorted emoluments. Plaintiffs have alleged that the acts of racketeering are related to the operation of the enterprise, and that each of these acts was directed toward a similar end. In this case, as in most reported RICO decisions, plaintiffs have little difficulty surmounting the "relationship" barrier.

2. Continuity

As the Court noted in its November 21 order, continuity presents a more problematic analysis, both on the facts of this case and in general. At a minimum, continuity means that plaintiffs must allege "more than sporadic or isolated activity." Graham, 624 F.Supp. at 225. The term pattern "connotes a multiplicity of events: ... The continuity inherent in the term presumes repeated criminal activity, not merely repeated acts to carry out the same criminal activity." Northern Trust Bank/O'Hare, N.A. v. Inryco, Inc., 615 F.Supp. 828, 831 (N.D.Ill.1985). In this respect, ongoing criminal activity or at least a threat of ongoing criminal activity is a key indicium of continuity. Ghouth v. Conticommodity Services, Inc., 642 F.Supp. 1325, 1337 (N.D.Ill.1986). One court has stated that in determining whether continuity exists, courts should look to "the purposes, results, participants, victims and methods of commission." Technology Exchange, 646 F.Supp. at 183-84. Quite obviously, these are identical to the factors to be assessed in gauging "relatedness." The "inherent contradiction" which exists between the dual requirements of relatedness and continuity is perhaps resolved by recognizing that relatedness requires proof that the predicate acts are "sufficiently connected," while, in contrast, continuity requires proof that the predicate acts are "sufficiently differentiated." Freshie, 639 F.Supp. at 445; Allington, 619 F.Supp. at 478. To prove relatedness, plaintiffs must demonstrate that the predicate acts evince common perpetrators, victims, methods, motive or purpose. To prove continuity, plaintiffs must demonstrate that the racketeering acts are "sufficiently unconnected in time or substance to warrant consideration as separate criminal episodes." Allington, 619 F.Supp. at 478. As stated in Freshie:

An inherent tension exists between the dual requirements of relatedness and continuity. Viewed on a continuum, these two requirements must

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