886 F.2d 673 (4th Cir. 1989), 88-2897, Combs v. Bakker

Docket Nº:88-2897.
Citation:886 F.2d 673
Party Name:RICO Bus.Disp.Guide 7317 David T. COMBS; Sarah E. Combs, Plaintiffs-Appellants, v. James O. BAKKER; Tammy Faye Bakker; Richard Dortch, Defendants-Appellees.
Case Date:September 26, 1989
Court:United States Courts of Appeals, Court of Appeals for the Fourth Circuit

Page 673

886 F.2d 673 (4th Cir. 1989)

RICO Bus.Disp.Guide 7317

David T. COMBS; Sarah E. Combs, Plaintiffs-Appellants,

v.

James O. BAKKER; Tammy Faye Bakker; Richard Dortch,

Defendants-Appellees.

No. 88-2897.

United States Court of Appeals, Fourth Circuit

September 26, 1989

Argued March 7, 1989.

Page 674

Edward G. Connette, III (Louis L. Lesesne, Jr., Gillespie, Lesesne & Connette on brief) for plaintiffs-appellants.

Mark Timothy Calloway (James, McElroy & Diehl, P.A., on brief); James Huston Toms (Toms & Bazzle, P.A., on brief), for defendants-appellees.

Before ERVIN, Chief Judge, PHILLIPS, Circuit Judge, and WILLIAMS, District Judge for the Eastern District of Virginia, sitting by designation.

PHILLIPS, Circuit Judge:

This is an appeal by David and Sarah Combs from the district court's dismissal of their action asserting civil RICO and pendent state common law and statutory claims against James and Tamara Bakker and Richard Dortch arising from the defendants' allegedly fraudulent sale to the Combs of a "lifetime partnership" in the "PTL" enterprise. On defendants' pretrial motions, the district court dismissed the entire action on the basis that the complaint failed to state a RICO claim, and that there was no basis under state law for personal jurisdiction over the defendants with respect to the remaining pendent state-law claims.

We vacate and remand for further proceedings.

I

Because the case was dismissed at the threshold, the essential factual and procedural background of this appeal can be quickly sketched.

As alleged in considerable factual detail, the gravamen of the Combs' complaint was that the Bakkers and Dortch had fraudulently induced them, essentially by misrepresentations of value, to purchase a "lifetime partnership" in the religious enterprise known popularly as "PTL" of which these defendants were principals. In separate claims the Combs alleged that these fraudulently induced sales constituted civil RICO violations under 18 U.S.C. Secs. 1962(a), (c) and (d) by virtue of interstate mail and wire facilities use and, pendent to that federal claim, violations of state contract, tort and statutory law, whose exact details need not be elaborated for purposes of this appeal.

The defendants, by separate Rule 12(b) motions, raised across-the-board objections to the action, challenging the court's subject matter jurisdiction, venue, and jurisdiction over their persons, the sufficiency of process and the service of process, the sufficiency of the complaint to state a claim, and the failure to join "PTL" as an indispensable party. Addressing directly only the personal jurisdiction challenge under Rule 12(b)(2) and the sufficiency of statement challenge under Rule 12(b)(6), the district court, ruling on the basis of the complaint, the motions to dismiss and the Combs' response with supporting legal memoranda, dismissed the action on grounds that intermixed these two bases of challenge. In rough summary, the court's reasoning, adopting the defendants' contentions,

Page 675

ran as follows. First, the complaint fails to state facts sufficient to show the existence of the "pattern" of racketeering activity which is an essential element of a civil RICO claim under each of the subsections, (a), (c), and (d), invoked by plaintiffs. That requires dismissal of the RICO claims under Rule 12(b)(6). With the sole federal claim therefore out of the case, only the pendent state tort, contract, and statutory claims remain, and as to them, personal jurisdiction can only be based upon state (here North Carolina) statutes asserting grounds for jurisdiction. Looking to the North Carolina statutory grounds specifically suggested by plaintiffs, none is applicable to the state claims, hence all those claims must be dismissed under Rule 12(b)(2) for lack of personal jurisdiction. On this basis, judgment dismissing the action--on the merits as to the RICO claim, without prejudice as to the pendent state claims--was entered.

This appeal followed.

II

We start with some awkwardness resulting from the district court's approach, which instead of addressing first the more fundamental challenge under Rule 12(b)(2) to personal jurisdiction with respect to all defendants and all claims, addressed first the challenge under Rule 12(b)(6) to the merits of the RICO claims as pleaded. As is evident from the court's analysis of both challenges, it thought, though it did not expressly so rule, that it lacked personal jurisdiction with respect to the RICO claim as well as the pendent state-law claims. While we think that perception was incorrect, if it had been correct, as the district court obviously thought, it would have precluded the court's reaching the merits of the RICO claim on the 12(b)(6) challenge to its sufficiency as pleaded.

Nevertheless, given the posture in which we receive the case, we think our proper course in review is to consider first whether the district court had grounds for personal jurisdiction as to all or any of the claims, that being the actual breadth of the defendants' Rule 12(b)(2) motion, and also the more fundamental challenge. We can then appropriately address whether the RICO claim was sufficiently well-pleaded to survive the Rule 12(b)(6) motion, if the jurisdictional challenge as to that claim should first have been rejected.

A

We see two basic errors in the district court's approach to and resolution of the Rule 12(b)(2) challenge to the court's personal jurisdiction. First, tainting the overall approach, was the court's apparent perception that the only basis for personal jurisdiction in respect of the RICO claims was that embodied in the nationwide service of process provisions of 18 U.S.C. Sec. 1965(b). 1 That perception is of course wrong. Personal jurisdiction of federal courts of course may be grounded in state long-arm (or other) jurisdiction statutes in civil RICO cases as in federal question cases generally. Fed.R.Civ.P. 4(c)(2)(C)(i), (e); see ex rel. Long v. Alexander & Alexander Services, Inc., 680 F.Supp. 746 (E.D.N.C.1988). See generally Wright & Miller, Federal Practice & Procedure: Civil Secs. 1075, 1113 (1987).

Here, having first concluded that no cognizable RICO claim had been sufficiently pleaded, the...

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