Snider v. Lone Star Art Trading Co., Inc.

• Decision Date: 09 April 1987
• Docket Number: Civ. A. No. 86-CV-72652-DT.
• Citation: 659 F. Supp. 1249
• Parties: Ira L. SNIDER, Plaintiff, v. LONE STAR ART TRADING CO., INC., a Texas corporation; Art Realties Trading Co., Inc., a Texas corporation; Samuel Shuman, London Arts, Inc., a Michigan corporation; David N. Zelmon, Arnold Klein, Ivo Kirschen, Eugene Schuster and Monis Schuster, Jointly and Severally, Defendants.
• Court: U.S. District Court — Western District of Michigan

659 F. Supp. 1249

Ira L. SNIDER, Plaintiff, v. LONE STAR ART TRADING CO., INC., a Texas corporation; Art Realties Trading Co., Inc., a Texas corporation; Samuel Shuman, London Arts, Inc., a Michigan corporation; David N. Zelmon, Arnold Klein, Ivo Kirschen, Eugene Schuster and Monis Schuster, Jointly and Severally, Defendants.

Civ. A. No. 86-CV-72652-DT.

United States District Court, E.D. Michigan, S.D.

April 9, 1987.

Mayer Morganroth, Southfield, Mich., for plaintiff.

Richard A. Rossman, Detroit, Mich., for defendant Klein.

Noel A. Gage, John K. Parker, Ivy O. Giller, Southfield, Mich., for defendant Lone Star, Art Realties and Shuman.

Richard E. Zuckerman, Thea Marie Sankiewicz, Troy, Mich., for defendant London Arts, Zelmon, and Schusters.

MEMORANDUM OPINION AND ORDER

JULIAN ABELE COOK, Jr., District Judge.

Two groups of Defendants in the instant cause have filed motions to dismiss Plaintiff's Second Amended Complaint.¹ The Complaint alleges that Defendants have violated the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. § 1961, et seq. by committing fraud in the sale of certain art plates and screens. This Court does not believe that an oral argument will facilitate a resolution of these issues. Therefore, it will resolve these motions on the basis of the briefs.

In evaluating Defendants' respective Motions to Dismiss under Fed.R.Civ.P. 12(b)(6), they must show that there is no set of plausible facts under which Plaintiff could state a cause of action. Thus, his well pleaded allegation must be accepted as true. This Court will now address each of the Defendants' several arguments.

I

Defendants allege that Plaintiff has not shown the existence of an "enterprise" as required by the RICO statute. Their argument has two major points. First, they assert that Plaintiff confuses "enterprise" with "pattern of racketeering activity."² See United States v. Turkette, 452 U.S. 576, 101 S.Ct. 2524, 69 L.Ed.2d 246 (1981). Second, Defendants argue that Plaintiff has improperly confused them with the enterprise at numerous points in his Second Amended Complaint. They cite numerous cases to support their viewpoint on this issue. See e.g. Zahra v. Charles, 639 F.Supp. 1405, 1407 (E.D.Mich.1986); Bennett v. United States Trust Company of New York, 770 F.2d 308, 315 (2nd Cir.1985).

Defendants are correct that Plaintiff does identify the enterprise with the pattern of racketeering activity.³ However, this Court must reject those cases, which have been cited by Defendant as holding that the enterprise must be an entity which is separate and apart from the association of persons who commit the RICO violation. The language of the RICO statute does not contain such a requirement. (An "enterprise includes any individual, partnership, corporation, association, or other legal entity, and any union or group of individuals association in fact although not a legal entity." 18 U.S.C. § 1961(4)).

Moreover, the Sixth Circuit has rejected Defendant's view. In United States v. Qaoud, 777 F.2d 1105 (6th Cir.1985), cert. denied, ___ U.S. ___, 106 S.Ct. 1499, 89 L.Ed.2d 899, the Sixth Circuit rejected the view that an enterprise must be distinct from the pattern of racketeering activity:

Although "enterprise" and "pattern of racketeering activity" are separate elements, they may be proved by the same evidence. In United States v. Mazzei, 700 F.2d 85 (2d Cir.), cert. denied, 461 U.S. 945, 103 S.Ct. 2124, 77 L.Ed.2d 1304 (1983), construing United States v. Turkette, 452 U.S. 576, 101 S.Ct. 2524, 69 L.Ed.2d 246 (1981), the court rejected the defendant's contention that a RICO conviction requires proof that the enterprise and pattern of racketeering activity were distinct.

We agree that Turkette requires the government to prove both the existence of an "enterprise" and a "pattern of racketeering activity." We do not, however, read Turkette to hold that proof of these separate elements be distinct and independent, as long as the proof offered is sufficient to satisfy both elements. There is nothing in the language or legislative history of the Act to support the appellant's view. Moreover, it does not make sense to impose a "distinctness" requirement in RICO cases. The appellant would have us rule that his actions are beyond the purview of RICO because he engaged only in point shaving and did not commit criminal acts other than those specifically contemplated in the conspiracy. Mazzei's interpretation would lead to the anomalous result that a large scale underworld operation which engaged solely in trafficking of heroin would not be subject to RICO's enhanced sanctions, whereas small-time criminals jointly engaged in infrequent sale of contraband drugs and illegal handguns arguably could be prosecuted under RICO. The Court will not place its imprimatur on such a counter productive interpretation. Id. at 89.

Other courts have likewise rejected the position that there must be proof of an enterprise distinct from proof of a pattern of racketeering. See, e.g., United States v. Cagnina, 697 F.2d 915, 920-21 (11th Cir.1983) (citing United States v. DeRosa, 670 F.2d 889, 895-96 (9th Cir. 1982), cert. denied, 464 U.S. 856, 104 S.Ct. 175, 78 L.Ed.2d 157 (1983); United States v. Bagnariol, 665 F.2d 877, 890-91 (9th Cir.1981), cert. denied, 456 U.S. 962, 102 S.Ct. 2040, 72 L.Ed.2d 487 (1982).

Also see United States v. Griffin, 660 F.2d 996, 1001 (4th Cir.1981), cert. denied, 454 U.S. 1156, 102 S.Ct. 1029, 71 L.Ed.2d 313 (1982) and United States v. Diecidue, 603 F.2d 535, 545 (5th Cir.1979), cert. denied, 445 U.S. 946, 100 S.Ct. 1345, 63 L.Ed.2d 781 (1980).

Although Griffin and Diecidue are criminal cases, this does not lessen the applicability of these cases to an analysis of disputes relating to civil RICO because the statutory language at issue is the same. See e.g. Eaby v. Richmond, 561 F.Supp. 131 (E.D.Pa.1983). Qaoud's interpretation is supported by the plain language of the RICO statute which refers to "any individual ... association ... and any ... group of individuals associated in fact ..." (emphasis provided). The use of "any" means that the RICO statute should not be construed to say "only" those groups, whose existence is distinct from the pattern of activity, are enterprises. The word "any" does not allow for such a limitation. See United States v. Sutton, 642 F.2d 1001, 1007 (6th Cir.), cert. denied, 453 U.S. 912, 101 S.Ct. 3143, 69 L.Ed.2d 995 (1981) (en banc) ("The use of the term `any' before `enterprise' helps to make clear that `enterprise' is used in an all encompassing sense").

Defendants rely, in part, upon United States v. Turkette, 452 U.S. 576, 101 S.Ct. 2524, 69 L.Ed.2d 246 (1981), where the Supreme Court held that the existence of an enterprise "is proved by evidence of an ongoing organization, formal or informal, and by evidence that the various associates function as a continuing unit." Id. at 583, 101 S.Ct at 2528. However, Qaoud specifically held that Turkette does not oblige this Court to adopt the position which Defendants now advance; to wit, that the enterprise must be separate and continuing apart from the illegalities.

Those cases which have been relied on by the Defendants, such as United States v. Bledsoe, 674 F.2d 647 (8th Cir.), cert. denied, 459 U.S. 1040, 103 S.Ct. 456, 74 L.Ed.2d 608 (1982) often make policy arguments to support the view that an enterprise must have an "ascertainable structure" which is distinct from the association that is necessary to conduct the pattern of racketeering injury. These cases have determined that any criminal or fraudulent collaboration could be called an enterprise and, thus, made subject to a RICO claim. Although sympathetic to such a policy position, this Court is bound by Congress' unambiguous statutory language. Thus, it must, and does, conclude that Plaintiff is permitted to allege an enterprise which consists of an association whose purpose is to make money through repeated fraudulent criminal activity. Moreover, this Court finds numerous allegations to such effect within this somewhat inartfully drafted Complaint.⁴

Defendants next claim that Plaintiff has failed to allege an enterprise which is separate from them, as individuals. They point out that (1) paragraphs 38 and 41 of the Second Amended Complaint state that Defendants are enterprises and vice-versa, and (2) paragraph 40 of the Second Amended Complaint even says that each Defendant is an enterprise. Defendants cite numerous cases which require the two entities to be separate. See e.g. Zahra v. Charles, 639 F.Supp. 1405, 1407 (E.D.Mich. 1986) (Pratt, J.); Barker v. Underwriters at Lloyd's, London, 564 F.Supp. 352, 357 (E.D.Mich.1983) (Freeman, J.); Bennett v. United States Trust Company of New York, 770 F.2d 308, 315 (2d Cir.1985). These cases note that the reason for the separateness requirement is based upon the RICO statute which mandates that "persons" participate in the enterprise. These cases conclude that Defendants cannot participate in the enterprise if, in fact, they are the enterprise.

This Court acknowledges that there is precedent to support the view that a Defendant can be an enterprise under the provisions of RICO. See e.g. United States v. Hartley, 678 F.2d 961, 989 (11th Cir.1982), cert. denied, 459 U.S. 1170, 103 S.Ct. 815, 74 L.Ed.2d 1014 (1983). However, this Court notes that it is somewhat unsympathetic to the reasoning in Hartley, and prefers the interpretation of the issue which is found in Haroco v. American National Bank & Trust, Co. of Chicago, 747 F.2d 384 (7th Cir.1984), aff'd, 473 U.S. 606, 105 S.Ct. 3291, 87 L.Ed.2d 437 (1985). Haroco said that a RICO enterprise could only be the Defendant when the enterprise played an active rather than a passive role in the fraud. Nevertheless, this Court does not need to choose between these two interpretations of this issue. Even accepting Defendants' interpretation for the purpose of resolving this...