897 F.2d 21 (2nd Cir. 1990), 418, Hecht v. Commerce Clearing House, Inc.

Docket Nº:418, Docket 89-7515.
Citation:897 F.2d 21
Party Name:Bus.Disp.Guide 7411, 5 Indiv.Empl.Rts.Cas. 78 Jeffrey HECHT, Appellant, v. COMMERCE CLEARING HOUSE, INC., William Miller, Louis Ceccoli, and Stanley Stephens, Appellees.
Case Date:January 25, 1990
Court:United States Courts of Appeals, Court of Appeals for the Second Circuit

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897 F.2d 21 (2nd Cir. 1990)

Bus.Disp.Guide 7411,

5 Indiv.Empl.Rts.Cas. 78

Jeffrey HECHT, Appellant,



Ceccoli, and Stanley Stephens, Appellees.

No. 418, Docket 89-7515.

United States Court of Appeals, Second Circuit

January 25, 1990

Argued Nov. 20, 1989.

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Michael Flomenhaft, New York City, for appellant.

David F. Graham, Sidley & Austin, New York City, for appellees Commerce Clearing House, Inc., William Miller, and Louis Ceccoli.

Before OAKES, Chief Judge, CARDAMONE, Circuit Judge, and POLLACK, District Judge. [*]

OAKES, Chief Judge:

Jeffrey Hecht appeals an April 28, 1989, judgment of the United States District Court for the Southern District of New York, Shirley Wohl Kram, Judge, dismissing his complaint seeking civil remedies under the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. Secs. 1961-68 (1988), for failure to state a claim upon which relief can be granted and failure to plead with sufficient particularity. Assuming, as we must, that the allegations of the complaint are true, we nevertheless affirm the order of the district court.

In this case, we primarily consider whether an employee has civil RICO standing for injuries from loss of employment and business commissions resulting from his failure to aid or abet alleged RICO violations by his employer and co-employees targeted at the employer's customers.

Hecht began working in January 1985 at Commerce Clearing House ("CCH"), a publisher of various law and business publications, as a Candidate Sales Representative. Assuming the position previously held by defendant Stanley Stephens, and working under the supervision of defendants Louis Ceccoli and William Miller, Hecht was responsible for servicing existing subscriptions and promoting new business in an assigned geographical area.

After beginning work at CCH, Hecht allegedly learned of various fraudulent acts committed by defendants and their agents, including forging customer signatures on orders, billing customers for fabricated or improperly confirmed orders, and disregarding subscription cancellation requests. Some customers advised Hecht that they would make no further purchases from CCH until the allegedly irregular practices were rectified. Hecht demanded that these practices be corrected, but was told by Ceccoli and Miller that he must either cooperate with the concealment of these frauds or lose his job. Upon refusing to cooperate, Hecht was terminated for insubordination.

Hecht filed a complaint on December 24, 1986, and an amended complaint on August 3, 1987, seeking recovery against CCH and the individual defendants under RICO's civil liability treble damages provision, 18 U.S.C. Sec. 1964(c) (1988), as well as under common law theories of prima facie tort

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and fraud. He based his RICO claim on allegations that the defendants violated 18 U.S.C. Sec. 1962 (1988) 1 through participation as an enterprise in fraudulent acts constituting mail fraud under 18 U.S.C. Sec. 1341 (1988) and wire fraud under 18 U.S.C. Sec. 1343 (1988) and qualifying as RICO predicate acts of "racketeering activity" under 18 U.S.C. Sec. 1961(1) (1988).

The district court, in Hecht v. Commerce Clearing House, Inc., 713 F.Supp. 72 (S.D.N.Y.1989), found that whether or not Hecht's injuries resulted from his "blowing the whistle" and insisting on correction of defrauded customer accounts or from his simple refusal not to participate in the frauds, his injuries were not proximately caused by either defendants' racketeering conduct in violation of 18 U.S.C. Sec. 1962(a)-(c) or defendants' racketeering conspiracy in violation of 18 U.S.C. Sec. 1962(d). On this basis, the district court concluded Hecht had no standing to assert civil claims. In the alternative, the district court found that Hecht failed to plead a RICO conspiracy adequately. Finally, the district court dismissed the pendent common law claims as lacking sufficient federal jurisdictional basis.

On appeal, Hecht advances two theories of standing. First, he argues that defendants' racketeering conduct violating section 1962(c) proximately caused him to lose not only his job but also business commissions, thus distinguishing his case from the line of cases relied on by the district court. Second, he argues that an overt act in furtherance of defendants' conspiracy to racketeer was his discharge from employment and that such an act suffices to create civil liability under section 1962(d). Hecht also argues that he properly pleaded a RICO conspiracy, and that, even if he did not, he should be permitted to amend his complaint.


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