Central Distributors of Beer, Inc. v. Conn

• Citation: 5 F.3d 181
• Decision Date: 25 January 1994
• Docket Number: No. 92-1453,92-1453
• Parties: RICO Bus.Disp.Guide 8407 CENTRAL DISTRIBUTORS OF BEER, INC., Plaintiff-Appellant, v. Donald CONN, an individual; Gloria Conn, an individual; John Nate Beverage, Inc., a Michigan corporation; and John Nate, Jr., an individual, jointly and severally, Defendants-Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (6th Circuit)

Page 181

5 F.3d 181

RICO Bus.Disp.Guide 8407

CENTRAL DISTRIBUTORS OF BEER, INC., Plaintiff-Appellant, v. Donald CONN, an individual; Gloria Conn, an individual;

John Nate Beverage, Inc., a Michigan corporation;

and John Nate, Jr., an individual,

jointly and severally,

Defendants-Appellees.

No. 92-1453.

United States Court of Appeals, Sixth Circuit.

Argued Aug. 9, 1993.

Decided Sept. 23, 1993.

Rehearing and Stay Denied Jan. 25, 1994.

Mark S. Demorest, Hainer & Demorest, Troy, MI (argued and briefed), for plaintiff-appellant.

Michael H. Feiler, Ashley J. Israel (argued and briefed), Paul F. Joelson, Farmington Hills, MI, William E. Rheaume, Fredric J. Abood (argued and briefed), Abood, Abood & Rheaume, Lansing, MI, for defendants-appellees.

Before: MARTIN and SUHRHEINRICH, Circuit Judges; and WELLFORD, Senior Circuit Judge.

BOYCE F. MARTIN, Jr., Circuit Judge.

Central Distributors of Beer, Inc. filed this action against Donald Conn, Gloria Conn, John Nate Beverage, Inc., and John Nate, Jr. for violation of Central Distributors' exclusive beer distribution rights with Anheuser-Busch, Inc. The complaint alleged four state law claims and one claim under the Racketeering Influenced and Corrupt Organizations Act, 18 U.S.C. Sec. 1961 et seq. The district court granted summary judgment in favor of the defendants on the RICO claim, finding that Central Distributors had failed to prove that the defendants had committed any predicate act to support the RICO claim. The district court then dismissed Central Distributors' state law claims for lack of subject matter jurisdiction. We affirm.

Central Distributors is a wholesaler of Anheuser-Busch brands of beer. Pursuant to the Michigan Liquor Control Act and the Wholesaler Equity Agreement between Central Distributors and Anheuser-Busch, Central Distributors has an exclusive territory that includes much of Wayne County, Michigan and part of Oakland County, Michigan. Under the exclusive territory agreement, Central Distributors had the exclusive distribution rights for Anheuser-Busch products to retailers in its territory. John Nate Beverage, Inc., another wholesaler of Anheuser-Busch products, had an exclusive distribution agreement with Anheuser-Busch in another part of Michigan. The Michigan Liquor Control Act also prohibited a distributor with an exclusive distribution territory from selling beer to retailers located outside its exclusive territory, and the Act permits the sale of beer only to licensed retailers.

According to Central Distributors' complaint, Donald and Gloria Conn purchased large quantities of Anheuser-Busch products from Nate Beverage between 1983 and 1989. The Conns are not licensed retailers under the Michigan Liquor Control Act. The Conns allegedly transported the beer they purchased from Nate Beverage to their home, which was located in the Central Distributors exclusive distribution territory. The Conns then sold the beer to retailers and individuals in Central Distributors' exclusive territory. According to the complaint, Nate Beverage sold the beer to the Conns knowing that the Conns intended to sell and did sell the beer in Central Distributors' distribution territory. Central Distributors argues that the defendants engaged in this scheme to defraud Central Distributors by usurping sales that otherwise would have been made by Central Distributors or one of its retailers.

Central Distributors also alleged that Nate Beverage and the Conns engaged in an illegal scheme under the Michigan Bottle Bill to defraud Central Distributors. Under the Bottle Bill, a distributor must charge a deposit of ten cents for each bottle or can of beer that it sells to a retailer. The retailer then charges the deposit to the individual purchaser. When the purchaser returns the container, the retailer refunds the deposit and, in turn, seeks a refund from the distributor. According to Central Distributors, Nate Beverage sold empty beverage containers to the Conns for which Nate had already repaid the deposit to the retailer. The Conns then sold the empty containers to retailers within Central Distributors' territory, and the retailers returned the containers to Central Distributors for a refund of a deposit that the retailer never paid to Central Distributors.

Central Distributors filed this action against the Conns, Nate Beverage, and John Nate, Jr., alleging four state law claims and one claim under the Racketeering Influenced and Corrupt Organizations Act, 18 U.S.C. Sec. 1961 et seq. In its RICO claim, Central Distributors alleges that the defendants committed mail and wire fraud by engaging in this scheme to sell beer to retailers within Central Distributors' exclusive territory and to obtain false refunds of deposits from Central Distributors. The defendants filed a motion to dismiss the action for failure to state a claim upon which relief could be granted, Fed.R.Civ.P. 12(b)(6), but the district court denied this motion and afforded Central Distributors an opportunity to amend its complaint.

After Central Distributors filed an amended complaint, the defendants again filed a motion to dismiss or for summary judgment with the district court. The district court granted summary judgment in favor of the defendants on Central Distributors' RICO claim, finding that Central Distributors had failed to present evidence to support its claim that mail or wire fraud were the predicate acts to support its RICO claim. Specifically, the court found (1) undisputed evidence that the Conns were not aware of the existence of Central Distributors before the commencement of this action; (2) no evidence that John Nate, Jr. sold beer to the Conns through Nate Beverage with any intent to defraud Central Distributors; and (3) no evidence that the Conns purchased from Nate any of the beer he distributed in Central Distributors' territory. Because the RICO claim had provided the only basis for the district court's jurisdiction, the court dismissed Central Distributors' remaining state law claims. Central Distributors now appeals, and we affirm.

Under FED.R.CIV.P. 56(c), the district court may grant summary judgment "after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986). "In such a situation, there can be no genuine issue as to any material fact, since a complete failure of proof concerning an essential element of the non-moving party's case necessarily renders all other facts immaterial." Id. at 322-23, 106 S.Ct. at 2552. Our review of a district court's grant of summary judgment is de novo. Brooks v. American Broadcasting Cos., Inc., 932 F.2d 495, 500 (6th Cir.1991). Moreover, we view all evidence in the light most favorable to the non-moving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct. 2505, 2513, 91 L.Ed.2d 202 (1986).

A violation of 18 U.S.C. Sec. 1962(c), the provision of RICO upon which Central Distributors relies to support its claim, consists of the following elements: "(1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity." Sedima, S.P.R.L. V. Imrex Co., 473 U.S. 479, 496, 105 S.Ct. 3275, 3285, 87 L.Ed.2d 346 (1985). " 'Racketeering activity' is defined in 18 U.S.C. Sec. 1961(1)(B) as including any act 'indictable' under certain enumerated federal criminal statutes, including 18 U.S.C. Sec. 1341, which makes mail fraud a criminal offense, and 18 U.S.C. Sec. 1343, which makes wire fraud a crime." Schreiber Distributing Co. v. Serv-Well Furniture Co., 806 F.2d 1393, 1399 (9th Cir.1986). A civil RICO action does not require that there be a prior criminal conviction for the conduct forming the predicate act; however, the conduct used to support a civil RICO action must be indictable. Sedima, 473 U.S. at 481-82, 105 S.Ct. at 3277. See also 18 U.S.C. Sec. 1961(1). Thus, the plaintiff must prove each prong of the predicate offense, or "racketeering activity," to maintain a civil action under the RICO statute. SeeSedima, 473 U.S. at 488-92, 105 S.Ct. at 3280-83. "In addition, the plaintiff only has standing if, and can only recover to the extent that, he has been injured in his business or property by the [predicate act] constituting the violation." Id. at 496, 105 S.Ct. at 3285.

The predicate acts upon which Central Distributors relies to establish racketeering activity by the defendants are mail fraud and wire fraud. To maintain its RICO action, Central Distributors must show that each element of mail fraud or wire fraud has been committed by the defendants. "To allege a violation of the mail fraud statute, it is necessary to show that (1) the defendants formed a scheme or artifice to defraud; (2) the defendants used the United States mails or caused a use of the United States mails in furtherance of the scheme; and (3) the defendants did so with the specific intent to deceive or defraud." Schreiber, 806 F.2d at 1399-1400. "Similarly, a wire fraud violations [sic] consists of (1) the formation of a scheme or artifice to defraud (2) use of the United States wires or causing a use of the United States wires in furtherance of the scheme; and (3) specific intent to deceive or defraud." Id. at 1400. Therefore, Central Distributors cannot maintain a civil RICO claim against these defendants absent evidence that the defendants made misrepresentations or omissions of material fact to Central Distributors and evidence that Central Distributors relied on those misrepresentations or omissions to its detriment. SeeBender v. Southland Corp., 749 F.2d 1205, 1216 (6th Cir.1984). See alsoBlount Financial Svcs., Inc. v. Walter E. Heller & Co., 819 F.2d 151, 152 (6th Cir.1987) (holding that the plaintiff must plead with particularity the false statements of...