Brennan v. Chestnut, Civ. No. 4-91-288.
| Decision Date | 04 November 1991 |
| Docket Number | Civ. No. 4-91-288. |
| Citation | 777 F. Supp. 1469 |
| Parties | Donald BRENNAN, Martin Connaughton, Tad Derf, Howard Dobbins, Duane Evavold, Thomas Ojard, and John Soderquist, Plaintiffs, v. Jack L. CHESTNUT; Chestnut and Brooks, P.A.; Anthony F. Rico; Edward J. Senff, George Luckenbill; Richard E. Olsen; Andrew J. Sciullo; Jan Ziegler, Robert W. O'Brien, William T. Rogers; Seaway Services Corporation; General Business Services, Inc.; Central Dispatch, Inc.; and, Upper Great Lakes Pilots, Inc., Defendants. |
| Court | U.S. District Court — District of Minnesota |
Gaylord W. Swelbar, Robin C. Merritt, Hanft, Fride, O'Brien, Harries, Swelbar & Burns, P.A., Duluth, Minn., for plaintiffs.
Phillip Cole, Paul C. Peterson, Linda G. Axelrod, Lommen, Nelson, Cole & Stageberg, P.A., Minneapolis, Minn., for defendants.
This matter is before the court on plaintiffs' motion to transfer venue and defendants' motion to dismiss. Based on the file, record and proceedings herein, and for the reasons stated below, defendants' motion to dismiss is granted and plaintiffs' motion to transfer venue is denied.
Defendant Upper Great Lakes Pilots, Inc. ("UGLP") is a Minnesota corporation with its principal place of business in Duluth, Minnesota. UGLP is a government financed monopoly and it was established pursuant to the Great Lakes Pilotage Act of 1960. 46 U.S.C. § 9301 et seq. ("Pilotage Act"). The Pilotage Act requires vessels operating on certain waterways on Lake Superior, Lake Huron, Lake Michigan, the St. Mary's River, the Sault Ste. Marie Locks and approaches into these locks to hire a UGLP pilot. These waterways collectively are known as the Great Lakes District Three ("District Three").
The United States Department of Transportation ("DoT") regulates the UGLP and is responsible for setting pilot rates.1 DoT determines those rates by analyzing projected amounts of traffic and the anticipated pilotage expenses incurred to serve the traffic. The UGLP provides DoT with the financial and accounting information DoT uses to make those determinations.
The other defendants named in this case are companies and individuals who do business with or are intricately tied in with UGLP. Defendant Seaway Services Corporation is a Minnesota Corporation that was created to lease equipment to UGLP. Defendant Central Dispatch, Inc., an Illinois Corporation, dispatches and assigns pilots to vessels for UGLP. Central Dispatch is a wholly-owned subsidiary of Seaway Services Corporation. Defendant General Business Services, Inc., a Minnesota corporation, provides clerical and accounting services to UGLP, Seaway Services Corporation and Central Dispatch, Inc. Defendants Anthony Rico, Edward Senff, George Luckenbill, Richard Olsen and Andrew Sciullo comprise the board of directors and officers of UGLP. Defendants Jack Chestnut, Jan Ziegler, Anthony Rico, Andrew Sciullo, Robert O'Brien and William Rogers comprise the board of directors and officers of Seaway Services Corporations. Defendants Chestnut and Brooks, P.A. provide legal services for UGLP.
Plaintiffs are pilots who presently perform or in the past have performed pilotage services on behalf of UGLP. Some of these pilots also are minority shareholders of UGLP. All the plaintiffs claim a loss of compensation resulting from defendants' fraudulent schemes. Some of the plaintiffs also allege a loss of their pilot jobs as a result of defendants' fraudulent activities. In particular, plaintiffs allege that UGLP acted with the other defendants named in this suit to fraudulently increase the expenses that UGLP must report on the financial and accounting information it submits to DoT, in an attempt to force the government to increase UGLP's rates. Plaintiffs allege that through common control of the boards of directors and ownership of the UGLP, defendants have entered into contracts and declined to discontinue contractual arrangements between UGLP and the other defendants that are unreasonable, unnecessary and that charge excessive fraudulent fees to UGLP. In so doing, plaintiffs allege that defendants are fraudulently siphoning off UGLP's profits, some of which would be distributed to plaintiffs if available.
Plaintiffs also allege that defendants have maintained their fraudulent scheme through threats, coercion and extortion occurring over a number of years. Plaintiffs allege that the threats included threats of physical violence as well as threats against the plaintiffs' professional and economic interests. Plaintiffs further allege that the threats, coercion and extortion were directed and intended to force plaintiffs to refrain from objecting to the defendants' scheme, seeking assistance from the government, or questioning the financial information provided to plaintiffs as shareholders and employees of UGLP.
Plaintiffs' complaint consists of two counts. The first count asserts claims against defendants for various violations of § 1962(a), (b), (c) and (d) of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. §§ 1961-68.2 Plaintiffs rely upon mail fraud, 18 U.S.C. § 1341, wire fraud, 18 U.S.C. § 1343, extortion, 18 U.S.C. § 1951, and violations of state law that amount to coercion as the predicate acts of racketeering that bring defendants' activities within the proscription of RICO. See 18 U.S.C. § 1961(1). As such, plaintiffs ask for treble damages and reasonable attorney's fees. 18 U.S.C. § 1964(c). Count II of the complaint asserts a claim against defendants for common law fraud.
Plaintiffs filed the complaint in the Minnesota District Court, Sixth Judicial District, located in Duluth, Minnesota. Defendants petitioned for removal, pursuant to 28 U.S.C. § 1441, on the basis of federal question jurisdiction. Defendants directed their Petition For Removal "to the Judges of the United States District Court for the District of Minnesota, Fifth Division". Defendants' Notice of Filing of Petition and Bond for Removal also designated that defendants "filed their Petition and Bond for Removal ... in the office of the Clerk of the United States District Court for the District of Minnesota Fifth Division". Defendants' Bond on Removal, which designated that the action commenced in the Minnesota District Court, Sixth Judicial District, County of St. Louis, also was petitioned for removal to the Fifth Division. Plaintiffs allege that these filings dictate that this action properly should be tried in the Fifth Division of the United States District Court for the District of Minnesota, and not in the Fourth Division, located in Minneapolis, Minnesota, to which the case is currently assigned.
Consequently, plaintiffs move the court to transfer venue of this case to the Fifth Judicial Division of the United States District Court for the District of Minnesota. Defendants oppose that motion and move to dismiss the case pursuant to Rules 9(b), 12(b)(1), 12(b)(6) and 56 of the Federal Rules of Civil Procedure.3
On a motion to dismiss, the court must construe the complaint in the light most favorable to the plaintiff and the complainant's allegations must be accepted as true. In addition, the court must resolve any ambiguities concerning the sufficiency of the claims in favor of the plaintiff. Hughes v. Rowe, 449 U.S. 5, 10, 101 S.Ct. 173, 176, 66 L.Ed.2d 163 (1980) (per curiam); Cruz v. Beto, 405 U.S. 319, 322, 92 S.Ct. 1079, 1081, 31 L.Ed.2d 263 (1972) (per curiam). The court must give the plaintiffs "the benefit of every reasonable inference" drawn from the "well-pleaded" facts and allegations in the complaint. Retail Clerks Int'l Ass'n v. Schermerhorn, 373 U.S. 746, 753 n. 6, 83 S.Ct. 1461, 1465 n. 6, 10 L.Ed.2d 678 (1963). Plaintiffs need not necessarily plead a particular fact if that fact may be reasonably inferred from facts properly alleged. See id.; see also Wheeldin v. Wheeler, 373 U.S. 647, 648, 83 S.Ct. 1441, 1443, 10 L.Ed.2d 605 (1963) (). Thus, courts favorably construe a complaint for the benefit of the pleader. Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 1686, 40 L.Ed.2d 90 (1974).
So construed, the "court may dismiss a complaint only if it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations." Hishon v. King & Spalding, 467 U.S. 69, 73, 104 S.Ct. 2229, 2232, 81 L.Ed.2d 59 (1984), citing Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 101-02, 2 L.Ed.2d 80 (1957). However, despite the deference the court gives to plaintiffs' allegations, it is not proper for the court to assume that plaintiffs "can prove facts that it has not alleged or that the defendants have violated the ... laws in ways that have not been alleged." Associated General Contractors v. California State Council of Carpenters, 459 U.S. 519, 526, 103 S.Ct. 897, 902, 74 L.Ed.2d 723 (1983).
Defendants contend that plaintiffs' complaint must be dismissed because (1) plaintiffs' complaint fails to plead fraud with the particularity required by Rule 9(b) of the Federal Rules of Civil Procedure; (2) plaintiffs lack standing to bring this action; (3) plaintiffs' claims are preempted by federal labor laws; and (4) plaintiffs have not adequately pled a RICO claim. The court finds that the disposition of this motion requires it to address only defendants' third argument that the National Labor Relations Act ("NLRA"), 29 U.S.C. § 151 et seq., preempts plaintiffs' RICO claims. The court finds that preemption is proper. Accordingly, the court need not discuss defendants' other arguments for dismissal or plaintiffs' motion to transfer venue.
A. Preemption by the National Labor Relations Act
Defendants argue that the NLRA preempts plaintiffs' RICO claims because the complaint amounts to nothing more than an allegation of a labor dispute regarding management of a corporation. Defendants argue that the...
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Brennan v. Chestnut
...Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. §§ 1961-1968 (1988), and common law fraud. See Brennan v. Chestnut, 777 F.Supp. 1469 (D.Minn.1991). We UGLP is a government-franchised monopoly established pursuant to the Great Lakes Pilotage Act of 1960, 46 U.S.C. §§ 930......