Town of Kearny v. Hudson Meadows Urban Renewal Corp.

• Decision Date: 25 September 1987
• Docket Number: No. 87-5044,87-5044
• Citation: 829 F.2d 1263
• Parties: RICO Bus.Disp.Guide 6748 The TOWN OF KEARNY, A Municipal Corporation of New Jersey v. HUDSON MEADOWS URBAN RENEWAL CORP. formerly known as Mimi Urban Renewal Development Corp.; Dolores Turco, Individually, Jeryl Industries, Inc., A Corporation of New Jersey, Mimi Urban Renewal Development Corp., Formerly Mimi Development Corp., A Corporation of New Jersey, Mimi Redevelopment Associates, I, A Partnership of New Jersey, 3rd party Pltfs. v. David ROWLANDS, Edmund Grimes and James Testa, 3rd party Defts. Hartz Mountain Industries, Inc., a New York Corporation (Intervening Pltf.) Appeal of HARTZ MOUNTAIN INDUSTRIES, INC., Plaintiff-Intervenor, Appellant.
• Court: U.S. Court of Appeals — Third Circuit

Page 1263

829 F.2d 1263

RICO Bus.Disp.Guide 6748

The TOWN OF KEARNY, A Municipal Corporation of New Jersey v. HUDSON MEADOWS URBAN RENEWAL CORP. formerly known as Mimi

Urban Renewal Development Corp.; Dolores Turco,

Individually, Jeryl Industries, Inc., A Corporation of New

Jersey, Mimi Urban Renewal Development Corp., Formerly Mimi

Development Corp., A Corporation of New Jersey, Mimi

Redevelopment Associates, I, A Partnership of New Jersey, 3rd party Pltfs. v. David ROWLANDS, Edmund Grimes and James Testa, 3rd party Defts.

Hartz Mountain Industries, Inc., a New York Corporation

(Intervening Pltf.)

Appeal of HARTZ MOUNTAIN INDUSTRIES, INC.,

Plaintiff-Intervenor, Appellant.

No. 87-5044.

United States Court of Appeals,

Third Circuit.

Argued June 24, 1987.

Decided Sept. 25, 1987.

Bruce H. Nagel (argued), David W. Lentz, Nagel & Rice, West Orange, N.J., for Jeryl Industries, Inc. and Jerry Turco.

Michael R. Perle (argued), Hayden and Perle, Hoboken, N.J., for dolores turco.

Alan Dexter Bowman, Newark, N.J., for Mimi Development Corp., et al.

Kenneth D. McPherson, Jr. (argued), Waters, McPherson, McNeill, Secaucus, N.J., for Hartz Mountain Industries, Inc.

Before GIBBONS, Chief Judge, WEIS, Circuit Judge, and GILES, District Judge. ^*

GIBBONS, Chief Judge.

Hartz Mountain Corp. (Hartz), an intervenor, appeals from a summary judgment dismissing its claim for damages under the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. Secs. 1961-1968 (1982 & Supp. IV 1986) (RICO). The original RICO complaint was filed by the Town of Kearny, New Jersey, 648 F.Supp. 1412. ¹ Hartz intervened of right, and filed a four count complaint alleging RICO violations as well as pendant state law fraud claims. The pendant state law claims were dismissed when the Court granted summary judgment on the RICO counts. The defendants significant for this appeal are Hudson Meadows Urban Renewal Corp., formerly known as Mimi Development Corp. (Mimi), Mimi Development Associates I, a partnership, Dolores Turco, Jerry Turco, and Jeryl Industries, Inc. (Jerold). ² We conclude that there are genuine issues of material fact barring summary judgment on the RICO claims. Therefore, the judgment appealed from will be reversed.

Hartz is a major developer of industrial and commercial real estate. Its complaint alleges that Mimi, Jerold, and the Turcos, in violation of 18 U.S.C. Sec. 1962(c), conducted an enterprise through a pattern of racketeering activity that injured Hartz's business or property. The district court, assuming that the conduct alleged in the Complaint is racketeering activity, and assuming further that if such activity occurred, it affected interstate commerce, granted summary judgment on the ground that Hartz could not establish that it was injured by a "pattern," defined as consisting of at least two schemes, of racketeering activity. Absent such proof of racketeering injury, the district court held, there could be no civil RICO recovery under 18 U.S.C. Sec. 1964(c). The district court's opinion purports to apply Sedima, S.P.R.L. v. Imrex Co., Inc., 473 U.S. 479, 105 S.Ct. 3275, 87 L.Ed.2d 346 (1985). We exercise plenary review, guided by the Supreme Court's definitive interpretation of section 1964(c).

A.

On December 15, 1978, pursuant to the Blighted Areas Act, N.J.Stat.Ann. Sec. 40:55-21.1 to 55-21.15 (1967 & Supp.1986), the Town of Kearny and Hartz signed a Master Leasing and Option Agreement under which Hartz agreed to undertake the phased development of a large tract of meadowlands. Paragraph 19 of this agreement granted Hartz "a right of first refusal with regard to the sale, letting or hiring, of any portion of the balance of the 1100-acre tract owned in part by the Town and in part by certain private owners of which the Redevelopment Area is a part." Hartz was to be given written notice of any impending negotiated sale or lease of the Town land, and granted the opportunity to match, within 30 days, any bona fide offer by the prospective purchaser or tenant. The agreement, and an accompanying map, were filed with the Register of Deeds of Hudson County on January 19, 1979. The parties dispute whether the recorded survey map accurately reflects the agreement between Hartz and the Town as to the land included in the Paragraph 19 right of first refusal.

Soon after the Hartz-Kearny agreement was executed, David Rowlands, the Mayor of Kearny, and Edmund Grimes and James Testa, members of the Town Council, met at a restaurant with Jerry and Dolores Turco. Jerry Turco was the principal representative of Mimi, and the sole owner and officer of Jeryl. Dolores Turco, Jerry's wife, was the president of and 20% stockholder in Mimi. At this meeting Jerry Turco agreed to pay Rowlands, Grimes, and Testa $75,000 in exchange for the right to have Mimi develop a part of the Kearny meadowlands. The bribe was to be paid in three $25,000 installments: when the Town Council took official action on Mimi's development rights; when the lease was signed; and when the lease became effective.

On March 14, 1979 the Town Council adopted a Blight Resolution encompassing the tract that Mimi wanted. On July 31, 1979 the Town Council approved Mimi's development proposal for that tract. On August 8, 1979 the Town and Mimi executed a Master Leasing and Option Agreement for the tract. The tract is part of that on which Hartz asserts a right of first refusal on the basis of its recorded survey map. Turco paid two $25,000 installments to Grimes and Rowlands, the second on August 9, 1979. In September of 1979 Hartz became aware of the Mimi lease and notified the Town in writing that it considered that lease to be in violation of Hartz's first refusal right. In early December of 1979 Jerry and Dolores Turco met with Rowlands at a restaurant. When Rowlands requested the third $25,000 installment, Jerry Turco informed him that it would be paid when the Town Council did something to indicate that it was on Mimi's side in the conflict with Hartz.

On December 10, 1979 the Town Council met to discuss the alleged conflict between the Hartz and Mimi leases. Two days later it passed a motion to send a letter to Hartz expressing the view that there was no such conflict. Shortly thereafter, Rowlands and Grimes met with the Turcos and their attorney. The Turcos' attorney drafted a letter to be sent by Kearny to Hartz in accordance with the Town Council resolution. Dolores Turco delivered the final installment of the bribe; but only in the amount of $16,600, representing Rowlands' and Grimes' shares, as the Turcos were dissatisfied with the efforts of Testa to help them.

On June 2, 1980 Hartz filed a lawsuit in the Superior Court of New Jersey against Mimi and Kearny, seeking to invalidate the Mimi-Kearny lease and to enforce Hartz's right of first refusal. In the course of that lawsuit Rowlands, Grimes, Dolores Turco and Jerry Turco submitted affidavits in support of the validity of the Mimi lease. Rowlands and Grimes swore that the Town had never agreed to convey to Hartz any rights in the tract leased to Mimi. Faced with these affidavits and other discovery, on February 3, 1981 Hartz entered into a stipulation of settlement with Mimi and the Town. When this stipulation of settlement was made, Hartz had no knowledge of the bribes paid by the Turcos.

At about the time that Hartz's Superior Court suit was being settled, federal prosecuting authorities were investigating the affairs of the Town of Kearny. Early in 1982 Rowlands and Grimes were convicted of federal offenses relating to their services as Town officials. In May of 1983, after a trial in which Rowlands, Grimes, Jerry Turco and Dolores Turco testified, Testa was similarly convicted. Meanwhile, on February 3, 1983 Jerry Turco pleaded guilty to an information charging that he conspired to defraud the citizens of Kearny in violation of 18 U.S.C. Sec. 1341. That information recounts two incidents of bribery: the Mimi lease payments, and an earlier payment in exchange for action by the Town to alleviate a flooding problem on property belonging to Jeryl.

Thus the summary judgment record would support a finding that three installments of bribes were paid in connection with the Mimi lease and a separate bribe was paid in connection with the Jeryl flooding problem. The Mimi transaction affected Hartz's business or property. The earlier Jeryl flooding transaction did not, except remotely, in the sense that town expenditures for alleviating the flooding problem may have affected all taxpayers in the Town.

B.

In ruling on the motion for summary judgment, the district court recognized that bribing public officials, and accepting such bribes, constitutes racketeering activity, and that such activity affects interstate commerce. The court then looked to whether an enterprise existed, whether the enterprise engaged in a pattern of racketeering activity, and whether that pattern caused Hartz any injury.

(1). Enterprise

The court ruled that an enterprise could be found, consisting of an association in fact among defendants Jerry Turco, Rowlands, Grimes, and Testa. That enterprise, it could be found, was ongoing, in that it met numerous times in connection with more than one scheme; Turco providing the money, while the Town officials took the necessary action. Moreover, the enterprise had a structure for decisionmaking, as evidenced by the circumstances surrounding the drafting by the Turcos' attorney of a letter implementing the decision of the Town Council. Finally, the association in fact could be found to be an enterprise "separate and apart from the pattern of activity in which it [allegedly] engage[d]," United States v. Turkette, 452 U.S. 576, 583, 101 S.Ct. 2524, 69 L.Ed.2d 246 (1981), because those associated in it engaged in more than one similar scheme--to wit, the Mimi bribery scheme and the Jeryl bribery scheme. See United States v. Riccobene, 709 F.2d 214, 223-24 (3d Cir.), cert. denied, 464...