Anderson v. Ayling

• Citation: 396 F.3d 265
• Decision Date: 24 January 2005
• Docket Number: No. 04-1180.,04-1180.
• Parties: William F. ANDERSON, Jr.; Barry F. Breslin, Appellants v. Jack AYLING; Brian Kada; Paul Vanderwoude; Thomas H. Kohn; International Brotherhood of Teamsters; John Does 1-20; James P. Hoffa; Markowitz & Richman.
• Court: United States Courts of Appeals. United States Court of Appeals (3rd Circuit)

396 F.3d 265

William F. ANDERSON, Jr.; Barry F. Breslin, Appellants v. Jack AYLING; Brian Kada; Paul Vanderwoude; Thomas H. Kohn; International Brotherhood of Teamsters; John Does 1-20; James P. Hoffa; Markowitz & Richman.

No. 04-1180.

United States Court of Appeals, Third Circuit.

Argued December 13, 2004.

Filed January 24, 2005.

John F. Innelli (Argued), Philadelphia, PA, for Appellants.

Samuel L. Spear (Argued), Spear, Wilderman, Borish, Endy, Spear & Runckel, Philadelphia, PA, for Appellees Vanderwoude and Kada.

Robert M. Baptiste, Susan Boyle, Baptiste & Wilder, P.C., Washington, D.C., for Appellees Hoffa and International Brotherhood of Teamsters.

Marc L. Bogutz, William F. McDevitt, Christie, Pabarue, Mortensen and Young, Philadelphia, PA, for Appellee Kohn.

Before NYGAARD, ROSENN and BECKER, Circuit Judges.

BECKER, Circuit Judge.

Plaintiffs William Anderson and Barry Breslin appeal from a final order of the District Court dismissing their civil RICO complaint for failure to state a claim upon which relief may be granted. Anderson and Breslin's extremely detailed twelve-page complaint alleges a convoluted conspiracy involving coercion, intimidation, and power struggles among competing factions in the International Brotherhood of Teamsters (IBT), arising from the rivalry between the late John Morris, former principal officer of Teamsters Local 115, and James Hoffa, the president of the IBT. Anderson and Breslin are Morris loyalists whose opposition to Hoffa allegedly cost them their jobs as special coating operators at Kurz-Hastings, a Local 115 Teamsters shop in Philadelphia. Defendants are Brian Kada and Paul Vanderwoude, Local 115 members allegedly involved in cigarette smuggling, drug sales, illegal gambling, and extortion; Jack Ayling, a member of Teamsters Local 107 who was also allegedly involved in Local 115's racketeering; James Hoffa, president of the IBT; Thomas Kohn, an attorney who numbers the IBT among his clients; and the IBT itself.

The critical issue on appeal is the existence vel non of a proximate causal relationship between the alleged racketeering acts and the claimed injury, which is necessary to satisfy the RICO standing requirement. See 18 U.S.C. § 1964(c). The appeal thus requires us to explore some of the contours of that doctrine. Because we conclude that the proximate cause test is not met, we will affirm the order of the District Court dismissing the complaint.¹

I.

Because this is an appeal from a Rule 12(b)(6) dismissal, we treat all of the allegations in the complaint as true. See Hishon v. King & Spalding, 467 U.S. 69, 73, 104 S.Ct. 2229, 81 L.Ed.2d 59 (1984); Malia v. Gen. Elec. Co., 23 F.3d 828, 830 (3d Cir.1994). We describe in the margin those allegations that are most essential to the plaintiffs' RICO theory, which tell a seamy and confusing story of union corruption and power struggles.²

As the detailed description suggests, plaintiffs allege that the defendants were involved in a protean racketeering conspiracy. The true gravamen of plaintiffs' allegations, however, is that two of the defendants, Ayling and Kada, committed wire fraud by placing telephone calls to IBT investigator Thomas Schatz in which they made various false accusations against Morris, Anderson, and Breslin's brother Michael. Schatz included these accusations in a report to the IBT. According to plaintiffs, Hoffa relied on this report in imposing an emergency trusteeship on Local 115, and Kurz-Hastings relied on the trusteeship notice in terminating plaintiffs' employment. Plaintiffs allege that these acts of wire fraud, as well as other acts of intimidation and coercion, constitute predicate offenses under the Racketeer Influenced and Corrupt Organizations Acts, 18 U.S.C. § 1961-1968 (RICO).

At the outset, we judicially notice the fact that a panel of this Court has approved the IBT's decision to impose a trusteeship on Local 115. See Morris v. Hoffa, 361 F.3d 177 (3d Cir.2004). We found there that Hoffa's investigation had discovered evidence that Morris and other members of his faction had committed violent attacks against union members (including Kada), and that Morris had been involved in "financial malpractice," nepotism, threats, assaults, extortion, and embezzlement. Id. at 183-84. The panel therefore had no difficulty in finding that the emergency trusteeship was justified.

Defendants moved to dismiss the complaint under Federal Rule of Civil Procedure 12(b)(6). The District Court found that, even if plaintiffs could show that defendants violated RICO, their allegations were insufficient to create standing for a civil RICO action, and therefore granted the motion to dismiss. Plaintiffs timely appealed.

II.

The civil RICO statute allows "[a]ny person injured in his business or property by reason of a violation of section 1962 of this chapter [to] sue therefor in any appropriate United States district court." 18 U.S.C. § 1964(c). Section 1962, in turn, provides in relevant part that:

(c) It shall be unlawful for any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise's affairs through a pattern of racketeering activity or collection of unlawful debt.

(d) It shall be unlawful for any person to conspire to violate any of the provisions of subsection (a), (b), or (c) of this section.

18 U.S.C. § 1962(c)-(d). The term "racketeering activity" is defined in 18 U.S.C. § 1961(l) to include a long list of state and federal crimes, among them the wire fraud alleged here.

A.

The District Court dismissed the suit on the grounds that plaintiffs' allegations do not give rise to standing under § 1964(c), which requires a plaintiff to show (1) that he was injured (2) by reason of a violation of § 1962. Civil RICO "standing" is usually viewed as a 12(b)(6) question of stating an actionable claim, rather than as a 12(b)(1) question of subject matter jurisdiction. See Maio v. Aetna, Inc., 221 F.3d 472, 482 n. 7 (3d Cir.2000).

In Holmes v. Sec. Investor Prot. Corp., 503 U.S. 258, 268, 112 S.Ct. 1311, 117 L.Ed.2d 532 (1992), the Supreme Court interpreted § 1964(c) to mean that a RICO plaintiff must show that defendant's RICO violation was not only a "but for" cause of his injury, but also that it was the proximate cause. Then, in Beck v. Prupis, 529 U.S. 494, 507, 120 S.Ct. 1608, 146 L.Ed.2d 561 (2000), the Court held "that a person may not bring suit under § 1964(c) predicated on a violation of § 1962(d) for injuries caused by an overt act that is not an act of racketeering or otherwise unlawful under the statute." The Court held that a plaintiff needed to allege that he or she was injured by "an act that is independently wrongful under RICO," id. at 505-06, 120 S.Ct. 1608, and not merely by a non-racketeering act in furtherance of a broader RICO conspiracy.

The plaintiff in Beck was the president of an insurance company, some of whose directors and officers were engaged in financial fraud. Id. at 498, 120 S.Ct. 1608. On discovering this activity, Beck contacted regulators to attempt to correct the fraud. Id. The defendant conspirators then hired a consultant to write a false report suggesting that Beck was remiss in his duties, and the board of directors fired him upon receiving this report. Id. Beck alleged that the conspirators committed several violations of § 1962(a)-(c); moreover, he claimed that his termination was an overt act of a § 1962(d) conspiracy, and therefore gave rise to a § 1964(c) cause of action. The Supreme Court disagreed, finding that only a direct § 1962(a)-(c) act of racketeering could serve as a predicate for a civil RICO suit.

The District Court read Beck, and Shearin v. E.F. Hutton Group, Inc., 885 F.2d 1162 (3d Cir.1989), to stand for the proposition that "there is an insufficient nexus between the injuries caused by employment termination and a § 1962 violation to satisfy the proximate cause requirement of § 1964(c) standing."³ We think that this is too broad a reading of those cases; it is possible that a predicate act of racketeering that directly caused a plaintiff to lose his job could create civil RICO standing.

Nonetheless, the District Court was surely correct to follow Beck as a factually analogous precedent. In Beck, as here, the plaintiff described a complex pattern of racketeering, but alleged only one act that directly harmed him: his termination. But whereas the defendants in Beck apparently controlled the board of directors that fired the plaintiff, and their falsified report was directly relied on by the board, defendants here had no connection to Kurz-Hastings, and their alleged falsehoods were filtered through the following long chain of intervening causes.

Kurz-Hastings did not rely directly on Ayling's or Kada's statements in firing Anderson and Breslin; in fact, Kada's statement did not mention the plaintiffs at all. Rather, Schatz, a non-party, used their statements as but one source for his own report. According to the pleadings, Hoffa then relied in part on that report in imposing an emergency trusteeship-a trusteeship which, as noted above, a panel of this Court has already found to have been proper, and which was based on significant evidence of violence and corruption. See Morris v. Hoffa, supra, 361 F.3d at 183-84. Kurz-Hastings then relied on the Notice of Trusteeship in firing the plaintiffs. This chain of causation is far more attenuated than that involved in Beck, where the Supreme Court found no proximate cause and therefore no RICO standing. We are therefore satisfied that the District Court was justified in relying on Beck to dismiss plaintiffs' complaint.

B.

The proximate cause factors discussed in Steamfitters Local Union No. 420 Welfare Fund v. Philip Morris, Inc., 171 F.3d 912 (3d Cir.1999), also undermine the plaintiffs' case. In Steamfitters, we...