Bowman v. Western Auto Supply Co.

• Decision Date: 30 March 1993
• Docket Number: No. 92-1050,92-1050
• Citation: 985 F.2d 383
• Parties: , 125 Lab.Cas. P 10,643, RICO Bus.Disp.Guide 8210, 8 IER Cases 566 Richard N. BOWMAN, Appellee, v. WESTERN AUTO SUPPLY COMPANY and John Leach, Appellants.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 383

985 F.2d 383

61 USLW 2495, 125 Lab.Cas. P 10,643, RICO

Bus.Disp.Guide 8210,

8 IER Cases 566

Richard N. BOWMAN, Appellee, v. WESTERN AUTO SUPPLY COMPANY and John Leach, Appellants.

No. 92-1050.

United States Court of Appeals Eighth Circuit.

Submitted Sept. 18, 1992.

Decided Jan. 29, 1993.

Rehearing and Rehearing En Banc

Denied March 30, 1993.

Dennis D. Palmer, Kansas City, MO, argued (Dennis D. Palmer, William E. Quirk and Bradley D. Holmstrom, on the brief), for appellants.

David Robert Morris, Overland Park, KS (David R. Morris and Lisa Noel Gentleman on the brief), for appellees.

Before HANSEN, Circuit Judge, HEANEY and ROSS, Senior Circuit Judges.

HANSEN, Circuit Judge.

Richard Bowman ("Bowman") filed a suit against Western Auto Supply Company and John Leach (collectively "Western Auto") pursuant to the civil action provision of the Racketeer Influenced and Corrupt Organizations Act (RICO), alleging that he was discharged from his employment for speaking out against Western Auto's alleged RICO violations. Western Auto moved to dismiss on the grounds that Bowman lacked standing to bring a civil RICO suit. The district court denied Western Auto's motion and certified the issue for appeal. We now reverse.

I.

Richard Bowman was an employee of Western Auto Supply Company when he allegedly discovered that the company was "double billing" its merchandise suppliers by charging them for advertising and promotional services they never received. On August 22, 1986, Bowman was discharged from his job. On August 20, 1990, he filed this suit, seeking recovery pursuant to RICO's civil action provision contained in 18 U.S.C. § 1964(c). He contended that his discharge came because he protested, spoke out against, and criticized his employer's allegedly fraudulent scheme. Specifically, he alleged that he was injured as a result of Western Auto's violations of 18 U.S.C. § 1962(a), (b), (c), and (d).

Western Auto filed a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6), taking the position that Bowman lacked standing to bring a § 1964(c) civil RICO suit because any injuries he sustained as a result of being discharged from his employment were not a result of RICO activity. The district court denied the motion but granted Western Auto's motion to certify the issue for interlocutory appeal. 773 F.Supp. 174. On appeal, Bowman contends that he has standing to sue based on injuries arising from both alleged substantive violations of RICO as delineated in 18 U.S.C. § 1962(a), (b), and (c), and an alleged conspiracy to violate RICO as prohibited in 18 U.S.C. § 1962(d).

We review de novo the district court's denial of Western Auto's motion to dismiss. See Klett v. Pim, 965 F.2d 587, 589 (8th Cir.1992) ("The complaint must reveal an insuperable bar to relief to warrant a Rule 12(b)(6) dismissal," and such a dismissal is subject to de novo review.).

II.

RICO contains a civil enforcement scheme that permits private individuals harmed by criminal RICO activity to recover civil damages. The Act provides as follows:

Any person injured in his business or property by reason of a violation of section 1962 of this chapter may sue therefor in any appropriate United States district court and shall recover threefold the damages he sustains and the cost of the suit, including a reasonable attorney's fee.

18 U.S.C. § 1964(c). This provision confers standing on any individual who has experienced injury to his or her business or property that occurred "by reason of" a RICO violation. ¹ At issue in this appeal is whether Bowman's alleged injuries resulted from a RICO violation such that he has standing to bring a suit for civil damages against his employer.

III.

Although this court has not before been presented with this issue, the circuit courts that have are in agreement that an employee discharged for criticizing or refusing to participate in the employer's racketeering activity lacks standing to bring a civil suit when the underlying violation is based on section 1962(a)-(c) of RICO. See Kramer v. Bachan Aerospace Corp., 912 F.2d 151 (6th Cir.1990) (Because his injuries were a result of being fired, not of RICO violation, plaintiff discharged after reporting employer's RICO scheme lacked standing to bring suit.); Reddy v. Litton Industries, Inc., 912 F.2d 291 (9th Cir.1990), cert. denied, --- U.S. ----, 112 S.Ct. 332, 116 L.Ed.2d 272 (1991) (Employee discharged for refusing to participate in cover-up of illegal scheme lacked standing to recover under § 1962(a) and (c).); O'Malley v. O'Neill, 887 F.2d 1557 (11th Cir.1989), cert. denied, 496 U.S. 926, 110 S.Ct. 2620, 110 L.Ed.2d 641 (1990) (Plaintiffs lacked standing to bring civil RICO action because their injuries were caused by the decision to fire them, not by RICO activity.); Shearin v. E.F. Hutton Group, Inc., 885 F.2d 1162 (3d Cir.1989) (Plaintiff discharged to prevent her from reporting fraudulent scheme lacked standing to pursue civil RICO suit for alleged violations of § 1962(a) and (c) because her injury was not a result of a predicate act.); Burdick v. American Express Co., 865 F.2d 527 (2d Cir.1989) (per curiam) (Plaintiff who complained of and refused to participate in corrupt activity was injured as a result of employer's decision to fire him, not as a result of predicate RICO act, and thus lacked standing.); Cullom v. Hibernia National Bank, 859 F.2d 1211 (5th Cir.1988) (Plaintiff discharged for refusing to participate in fraudulent activity lacked standing to recover under civil RICO, as injury resulting from discharge did not flow from RICO predicate acts.); Nodine v. Textron, Inc., 819 F.2d 347 (1st Cir.1987) (Plaintiff fired for reporting employer's illegal scheme lacked standing to bring civil RICO suit).

We agree with the weight of the authority. The Supreme Court has held that in order for a litigant to establish standing to bring a suit under § 1964(c) of RICO, the injury alleged must be a result of a violation of § 1962. Sedima S.P.R.L. v. ImRex Co., 473 U.S. 479, 105 S.Ct. 3275, 87 L.Ed.2d 346 (1985). In that opinion, the Court stated as follows:

A violation of § 1962(c) ... requires (1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity.... [T]he plaintiff only has standing if, and can only recover to the extent that, he has been injured in his business or property by the conduct constituting the violation. As the Seventh Circuit has stated, "[a] defendant who violates section 1962 is not liable for treble damages to everyone he might have injured by other conduct, nor is the defendant liable to those who have not been injured." Haroco, Inc. v. American National Bank & Trust Co. of Chicago, 747 F.2d 384, 398 (1984), aff'd, post, [473 U.S.] p. 606 [105 S.Ct. 3291, 87 L.Ed.2d 437].

But the statute requires no more than this. Where the plaintiff alleges each element of the violation, the compensable injury necessarily is the harm caused by predicate acts sufficiently related to constitute a pattern, for the essence of the violation is the commission of those acts in connection with the conduct of an enterprise.... Any recoverable damages occurring by reason of a violation of § 1962(c) will flow from the commission of the predicate acts.

Sedima, 473 U.S. at 496-97, 105 S.Ct. at 3285 (footnotes omitted). When the underlying RICO violation alleged is either section 1962(a), (b), or (c), the analysis is fairly straightforward. The simple act of discharging an employee as alleged in this case does not constitute racketeering activity as defined in RICO, and thus does not fall within the definition of what the Supreme Court has termed "predicate acts" under RICO. See Shearin, 885 F.2d at 1167 ("[T]he Court specified 'predicate acts' to mean those included as racketeering activities in the catalogue of crimes found in section 1961(1).") (citing [Sedima,] 473 U.S. at 495, 105 S.Ct. at 3284). Accordingly, as a matter of law, Bowman lacks standing to bring a "whistle blower" wrongful discharge suit under 18 U.S.C. § 1964(c) when the underlying RICO violation is based on § 1962(a), (b), or (c).

IV.

While Sedima determined that a civil action based on a violation of § 1962(c), a substantive RICO violation, must allege the commission of a predicate RICO act, the Court did not address the same question with respect to a civil action based on a § 1962(d) conspiracy claim. ² As a result, the more difficult question is whether a plaintiff such as Bowman may sue under § 1964(c) when he alleges a conspiracy to violate RICO. Specifically, Bowman contends he suffered injury to his business or property as a result of a conspiracy on the part of Western Auto to violate RICO. See 18 U.S.C. § 1962(d).

Despite their agreement regarding civil actions based on violations of § 1962(a)-(c), the circuits disagree as to the requirements that must be met to establish standing to bring a civil suit when the underlying violation is an alleged § 1962(d) RICO conspiracy claim. Some courts have held that in order to establish standing to recover civil damages in such a case, the act that caused the harm must be an act specifically delineated as a RICO predicate act in § 1961(1). See Miranda v. Ponce Federal Bank, 948 F.2d 41, 48 (1st Cir.1991) ("An actionable claim under § 1962(d), like one under section 1962(c), requires that the complainant's injury stem from a predicate act within the purview of 18 U.S.C. § 1961(1)."); Reddy v. Litton Industries, 912 F.2d 291 (9th Cir.1990) (Conspiratorial act that causes the injury must be a predicate act as defined in § 1961 in order to satisfy standing requirement of civil RICO provision.); Hecht v. Commerce Clearing House, 897 F.2d 21 (2d Cir.1990) (same). Other courts, however, have determined that the statute places no such limitation on civil RICO standing, and that so long as the overt act was done in furtherance of a conspiracy to violate RICO, the act need not be a § 1961(1) predic...