Bowman v. Western Auto Supply Co.

• Decision Date: 16 August 1991
• Docket Number: No. 90-0765-CV-W-9.,90-0765-CV-W-9.
• Citation: 773 F. Supp. 174
• Parties: Richard N. BOWMAN, Plaintiff, v. WESTERN AUTO SUPPLY COMPANY and John R. Leach, Defendants.
• Court: U.S. District Court — Western District of Missouri

773 F. Supp. 174

Richard N. BOWMAN, Plaintiff, v. WESTERN AUTO SUPPLY COMPANY and John R. Leach, Defendants.

No. 90-0765-CV-W-9.

United States District Court, W.D. Missouri, W.D.

August 16, 1991.

David R. Morris, Shamberg, Johnson, Bergman & Morris, Chtd., Overland Park, Kan., for plaintiff.

Todd A. Johnson, Shughart, Thomson & Kilroy, P.C., Kansas City, Mo., for defendants.

ORDER DENYING DEFENDANTS' MOTION TO DISMISS

BARTLETT, District Judge.

Plaintiff Richard N. Bowman (Bowman) has filed a five-count Complaint against Western Auto Supply Company (Western Auto) and one of its employees, John R. Leach (Leach). Plaintiff asserts he was wrongfully discharged from employment with Western Auto for complaining about its alleged practice of double billing merchandise suppliers for advertising. Plaintiff contends that Western Auto employees "conspired to conduct a scheme and conducted a scheme known as `double billing' or `double dipping'" by which merchandise suppliers "were fraudulently billed for advertising and promotional services that were never provided by Western Auto." First Amended Complaint at ¶ 14.

In Count V, plaintiff asserts a common law wrongful discharge claim. In Counts I through IV, plaintiff alleges violations of 18 U.S.C. § 1962(a), (b), (c) and (d) of the Racketeer Influenced and Corrupt Organizations Act (RICO). RICO prohibits a person from employing a pattern of racketeering activity or from employing the proceeds derived from this activity so as to affect an interstate enterprise in one or more of three ways: 1) investing the income derived from a pattern of racketeering in the enterprise, § 1961(a); 2) acquiring or maintaining an interest in an enterprise through a pattern of racketeering, § 1962(b); and 3) conducting the affairs of an enterprise through a pattern of racketeering, § 1962(c). Also, § 1962(d) prohibits conspiring to violate subsection (a), (b) or (c).

Defendants seek dismissal of the Complaint pursuant to Rule 12(b)(6), Federal Rules of Civil Procedure. Defendants argue plaintiff's RICO claims should be dismissed because: 1) the injury alleged by plaintiff (discharge from employment for complaining about alleged RICO violations) is too remote to confer standing under § 1962(a), (b) and (c) and his allegations of conspiracy are insufficient to confer standing independently under § 1962(d); 2) Western Auto, as a RICO enterprise, is not distinct from the defendants; 3) the legitimate business activities of Western Auto and its merchandise suppliers (the Co-op and Extra Effort programs) do not constitute an "association-in-fact" enterprise; and 4) as a matter of law, a RICO conspiracy cannot exist between Western Auto and one of its employees, Leach.

Although defendants originally asserted that plaintiff's RICO claims should be dismissed because he did not plead mail fraud with sufficient specificity, they later abandoned this ground for dismissal.

Defendants argue that plaintiff's common law wrongful discharge claim must be dismissed because plaintiff does not allege that he was discharged for refusing to violate a statute, a regulation based on a statute, or a constitutional provision.

I. Standard of Review

In Conley v. Gibson, the United States Supreme Court stated that "a complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." 355 U.S. 41, 78 S.Ct. 99, 102, 2 L.Ed.2d 80 (1957) (citation omitted). "A complaint must be viewed in the light most favorable to the plaintiff and should not be dismissed merely because the court doubts that a plaintiff will be able to prove all of the necessary factual allegations." Bennett v. Berg, 685 F.2d 1053, 1057-58 (8th Cir.1982), aff'd in part and rev'd in part, 710 F.2d 1361 (1983), cert. denied, 464 U.S. 1008, 104 S.Ct. 527, 78 L.Ed.2d 710 (1983). "`Thus, as a practical matter, a dismissal under Rule 12(b)(6) is likely to be granted only in the unusual case in which a plaintiff includes allegations that show on the face of the complaint that there is some insuperable bar to relief.'" Fusco v. Xerox Corp., 676 F.2d 332, 334 (8th Cir.1982) (quoting Jackson Sawmill Co. v. United States, 580 F.2d 302, 306 (8th Cir.1978)), cert. denied, 439 U.S. 1070, 99 S.Ct. 839, 59 L.Ed.2d 35 (1979).

II. Standing

To meet the standing to sue requirement under RICO, a plaintiff must allege injury to his business or property "by reason of" unlawful predicate acts. 18 U.S.C. § 1964(c). The "by reason of" language "simply imposes a proximate cause requirement on plaintiffs. The criminal conduct in violation of § 1962 must, directly or indirectly, have injured the plaintiff's business or property. A defendant who violates § 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 and Trust Co., 747 F.2d 384, 398 (7th Cir.1984), aff'd, 473 U.S. 606, 105 S.Ct. 3291, 87 L.Ed.2d 437 (1985). The issue of proximate causation is a question of law for the court, taking into consideration such factors as foreseeability of a particular injury, intervention of independent causes and the factual directness of the causal connection. Brandenburg v. Seidel, 859 F.2d 1179, 1189 (4th Cir.1988) (citation omitted).

Defendants contend that, as a matter of law, the alleged illegal RICO activity is not the proximate cause of Bowman's discharge. A number of courts have considered whether an employee who is discharged form his employment for complaining about or reporting illegal acts by his employer has adequately pled facts to establish standing under RICO. Defendants cite an impressive array of decisions from other jurisdictions which hold that a discharged employee does not have standing to sue under RICO because the RICO activity was not the proximate cause of the discharge. These courts have found the act of whistle-blowing, not the illegal RICO activity, to be the cause of the employee's injury. Reddy v. Litton Industries, Inc., 912 F.2d 291 (9th Cir.1990); O'Malley v. O'Neill, 887 F.2d 1557, 1562 (11th Cir. 1989), cert. denied, ___ U.S. ___, 110 S.Ct. 2620, 110 L.Ed.2d 641 (1990); Burdick v. American Express Co., 865 F.2d 527, 529 (2d Cir.1989); Cullom v. Hibernia National Bank, 859 F.2d 1211, 1215 (5th Cir.1988).

Plaintiff acknowledges these authorities but points out that the Eighth Circuit Court of Appeals takes a contrary view. In Komm v. McFliker, 662 F.Supp. 924, 927-28 (W.D.Mo.1987), Judge Sachs considered whether a whistle blower has standing to sue under RICO when the whistle blower's discharge is only indirectly caused by the conduct alleged to be illegal under RICO. Relying on Terre Du Lac Ass'n, Inc. v. Terre Du Lac, Inc., 772 F.2d 467, 472-73 (8th Cir.1985) (citation omitted), cert. denied, 475 U.S. 1082, 106 S.Ct. 1460-61, 89 L.Ed.2d 718 (1986), Judge Sachs stated that "the Eighth Circuit seems to be holding firm in allowing RICO recoveries when the illegal conduct has indirectly harmed the plaintiff.... Therefore, although plaintiff does not claim that he was terminated for refusing to act illegally ... he does now allege a claim for which he could apparently receive relief in the Circuit under RICO." Komm v. McFliker, 662 F.Supp. at 928.

I, too, am bound to follow the guidance of the Eighth Circuit Court of Appeals despite my doubts. Thus, plaintiff has standing to bring § 1962(a), (b) and (c) RICO claims. Because plaintiff's discharge is not too remote to confer standing under these RICO provisions, he also has standing to bring his § 1962(d) conspiracy claim.

III. Separateness of Defendants from the Enterprise

RICO prohibits a person from using a pattern of racketeering activity or the proceeds derived from this activity to affect an enterprise in the ways prohibited under § 1962. A person "includes any individual or entity capable of holding a legal or beneficial interest in property." 18 U.S.C. § 1961(3). The persons or defendants in this action are Western Auto and Leach. An enterprise "includes any individual, partnership, corporation, association, or other legal entity, and any union or group of individuals associated in fact although not a legal entity." 18 U.S.C. § 1961(4). Plaintiff alleges there are two enterprises in this case: 1) Western Auto; and 2) "the legitimate business activities of Western Auto and its merchandise suppliers, including the Co-op and Extra Effort programs." First Amended Complaint at ¶¶ 10-11.

A. Section 1962(c) Claim

Section 1962(c) applies only to "any person employed by or associated with any enterprise" and makes it unlawful for such a person "to conduct or participate ... in the conduct of such enterprise's affairs through a pattern of racketeering activity...." Most courts have held that in a RICO violation based on § 1962(c), the same individual or entity may not be alleged as both the liable person (the defendant) and the enterprise (the victim) "since it makes little sense to speak of a person being `employed' by himself or victimizing himself." J.S. Rakoff and H.W. Goldstein, RICO Civil and Criminal Law and Strategy, § 1053, Exhibit A, Suggestions in Support of Defendants' Motion to Dismiss. The Eighth Circuit Court of Appeals requires that the enterprise be distinct from the person in § 1962(c) RICO claims. Atlas Pile Driving Co. v. DiCon Financial Co., 886 F.2d 986, 995 (8th Cir.1989); Bennett v. Berg, 685 F.2d at 1061-62.

Accordingly, plaintiff cannot bring a § 1962(c) claim against Western Auto in which Western Auto also is alleged to be the enterprise.

Plaintiff argues that he can bring a § 1962(c) RICO claim against Western Auto because he has alleged the existence of an "association in fact" enterprise distinct from Western Auto itself. This enterprise involves the joint effort of Western Auto and its merchandise...