Cowan v. Corley

• Citation: 814 F.2d 223
• Decision Date: 13 April 1987
• Docket Number: No. 86-2803,86-2803
• Parties: , 1987-1 Trade Cases 67,527, RICO Bus.Disp.Guide 6601 Vernon COWAN, Plaintiff-Appellant, v. Joe CORLEY, Sheriff of Montgomery County, Texas, et al., Defendants-Appellees. Summary Calendar.
• Court: United States Courts of Appeals. United States Court of Appeals (5th Circuit)

Page 223

814 F.2d 223

55 USLW 2597, 1987-1 Trade Cases 67,527,

RICO Bus.Disp.Guide 6601

Vernon COWAN, Plaintiff-Appellant, v. Joe CORLEY, Sheriff of Montgomery County, Texas, et al.,

Defendants-Appellees.

No. 86-2803

Summary Calendar.

United States Court of Appeals, Fifth Circuit.

April 13, 1987.

Phillip W. Swisher, Peter W. Murphy, Conroe, Tex., for plaintiff-appellant.

Wm. Richard Powell, D.C. Jim Dozier, Houston, Tex., for Corley, et al.

John Roberson, Gregory Jones, Mark A. Carrigan, Houston, Tex., for Montgomery County Wrecker.

Appeal from the United States District Court for the Southern District of Texas.

Before POLITZ, WILLIAMS, and JONES, Circuit Judges.

POLITZ, Circuit Judge:

Granting the motion to dismiss filed by Joe Corley, Sheriff of Montgomery County, Texas and other "public" defendants, the district court dismissed the complaint of Vernon Cowan which alleged violations of the Sherman Antitrust Act, 15 U.S.C. Secs. 1, 2, the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. Secs. 1961, et seq., and 42 U.S.C. Sec. 1983. Concluding that Cowan's pleadings do present claims upon which relief could be granted, we reverse and remand for further proceedings.

Background

Utilizing vehicles registered in his wife's name, Cowan operated a wrecker service in Montgomery County, Texas, a county just north of Houston. According to the undisputed allegations in the pleadings, Montgomery County has a population of nearly 200,000, many of whom are employed in Houston, and is traversed by two major federal highways, Interstate Highway 45 and U.S. Highway 59. These highways carry substantial vehicular traffic, including trucks, buses, and automobiles in interstate travel. I-45 and U.S. 59 are the major north-south traffic arteries in East Texas.

In September 1983, Sheriff Corley met with various persons operating wreckers in Montgomery County and proposed the formation of a trade association. As a consequence, the Montgomery County Wrecker Association was formed. Immediately thereafter, Sheriff Corley issued a set of 31 Emergency Wrecker Requirements. ¹ The requirements mandate that only members of the newly-formed association would be permitted to tow vehicles from public property. An initiation fee of $4,000 and annual dues of $150 ² was established as were, inter alia, rules governing membership, insurance, grievances, and fee charges.

Cowan joined the association, paying the initiation fee and requisite dues. He was limited to three wreckers to be operated totally within a small area of Montgomery County. Other members, alleged to be favorites of Sheriff Corley, were not subjected to such restrictions. All wrecker assignments, including those made on an owner-preference basis were routed through the sheriff's office and the association's dispatcher. Cowan complained to Sheriff Corley that assignments were not being made on an even-handed basis. Because of this challenge, Cowan alleges that he was summarily expelled from the association without warning or hearing.

Following his expulsion Cowan filed suit alleging that: (1) the actions of the sheriff, county officials, and the association and its representatives constituted a combination in restraint of trade in violation of federal antitrust laws; (2) their actions, as a pattern of racketeering activity, constituted a violation of RICO; and (3) their actions deprived him of his constitutional rights, contrary to 42 U.S.C. Sec. 1983.

As noted, certain defendants filed a motion to dismiss for failure to state a claim upon which relief could be granted, Fed.R.Civ.P. 12(b)(6), alternatively seeking summary judgment. In granting the motion to dismiss, the district court concluded that Cowan had not established a jurisdictional basis for the antitrust claims, had not shown a pattern of racketeering activity, and had not shown the deprivation of a right secured by the constitution.

Analysis

1. The antitrust claims

Cowan's antitrust claims are based on sections 1 and 2 of the Sherman Act, ³ legislation adopted pursuant to the Commerce Clause. Conduct deemed violative of that Act must have a substantial connexity to interstate commerce. In dismissing the complaint the district court found such a nexus absent.

We are mindful that Cowan has the burden of establishing the court's jurisdiction to hear the antitrust claim. McLain v. Real Estate Board of New Orleans, Inc., 444 U.S. 232, 100 S.Ct. 502, 62 L.Ed.2d 441 (1980); Aetna Cas. & Sur. Co. v. Hillman, 796 F.2d 770 (5th Cir.1986). The pleadings suffice for this purpose. Cowan's complaint directly involves vehicular travel on two major federal highways in Montgomery County. The district court concluded that the providing of wrecker service to traffic on these traffic arteries did not bear a sufficient relationship to interstate commerce to implicate federal antitrust laws. We disagree.

In enacting the Sherman Act, Congress exercised the full panoply of power authorized by the Commerce Clause. California Retail Liquor Dealers Association v. Midcal Aluminum, Inc., 445 U.S. 97, 100 S.Ct. 937, 63 L.Ed.2d 233 (1980). And as the Supreme Court elucidated in McLain v. Real Estate Board of New Orleans, Inc., 444 U.S. at 241, 100 S.Ct. at 508, citing Wickard v. Filburn, 317 U.S. 111, 63 S.Ct. 82, 87 L.Ed. 122 (1942): ⁴ "The broad authority of Congress under the Commerce Clause has, of course, long been interpreted to extend beyond activities actually in interstate commerce to reach other activities that, while wholly local in nature, nevertheless substantially affect interstate commerce." The McLain court applied the Sherman Act to a real estate brokerage operation, a quintessentially local activity, declaring that for the establishment of federal jurisdiction "there remains only the requirement that respondents' activities which allegedly have been infected by a price-fixing conspiracy be shown 'as a matter of practical economics' to have a not insubstantial effect on the interstate commerce involved." 444 U.S. at 246, 100 S.Ct. at 511. Applying this expansive standard, and after surveying similar relevant cases, ⁵ we conclude that the Sherman Act is applicable to the scenario alleged by Cowan.

It cannot be gainsaid that travel to and through Texas involves interstate commerce. Actions directly related to the competitive pricing, marketing, and furnishing of towing services to the interstate vehicular movement of people and goods through Montgomery County, substantially affect interstate commerce. It is within the power of Congress to eradicate or dampen activities which pose a threat to the free flow of any aspect of interstate commerce, including that which might appear to be totally local in nature. See, e.g., Heart of Atlanta Motel v. United States, 379 U.S. 241, 85 S.Ct. 348, 13 L.Ed.2d 258 (1964); Katzenbach v. McClung, 379 U.S. 294, 85 S.Ct. 377, 13 L.Ed.2d 290 (1964). Cowan's complaint alleges a sufficient intrusion into the interstate marketplace to implicate the Sherman Act. The district court has jurisdiction to hear this claim and the pleadings advance a claim upon which relief could be granted.

2. The RICO claims

Cowan's complaint alleges that the manner in which the Montgomery County Wrecker Association was formed and operated, the initiation and periodic dues, the restrictions imposed on his business operation, the refusal of the defendants to consider his complaints, and his expulsion from the association without the semblance of due process, all constitute a pattern of racketeering activity within the meaning of 18 U.S.C. Sec. 1962. Citing Sedima, S.P.R.L. v. Imrex Co., Inc., 473 U.S. 479, 105 S.Ct. 3275, 87 L.Ed.2d 346 (1985), the district court found that Cowan had not alleged a pattern of racketeering activity, but rather relied on alleged violations of 18 U.S.C. Secs. 1951 and 1952(b)(2). The trial court concluded that "two isolated acts of racketeering activity do not constitute a pattern."

"A pattern of racketeering activity is defined as at least two acts of racketeering activity, one of which occurred within ten years after the commission of a prior act of racketeering activity." United States v. Carlock, 806 F.2d 535, 542 (5th Cir.1986); 18 U.S.C. Sec. 1961(5). As Sedima teaches, two acts of racketeering activity may constitute a RICO pattern, but such will not always be the case.

Indeed, in common parlance two of anything do not form a "pattern." As the Senate Report explained: "The target of [RICO] is thus not sporadic activity. The infiltration of legitimate business normally requires more than one 'racketeering activity' and the threat of continuing activity to be effective. It is this factor of continuity plus relationship which combines to produce a pattern." S.Rep. No. 91-617, p. 158 (1969)....

Sedima, 473 U.S. at 496 n. 14, 105 S.Ct. at 3285 n. 14, 87 L.Ed.2d at 358 n. 14 (emphasis by Supreme Court).

We read this language in Sedima to direct a narrower definition of pattern than had been sometimes employed. ⁶ Consistent therewith, the district court correctly concluded that two illegal acts will not constitute a RICO pattern in every instance. In the case at bar, however, Cowan's complaint contains not only allegations of the two specific alleged criminal acts, but a litany of other predicate acts involved in the formation, organization, and operation of the association, including the manner of the organization, the setting and use of dues, the allocation of wrecker business, his expulsion from the association, and the concomitant exclusion from all wrecker calls originating on public property, calls which purportedly are the source of most wrecker business. Assuming without deciding that some of these acts were criminal violations, the combination of these activities suffices to constitute a pattern within the intendment of RICO.

As with the antitrust claims, RICO must relate to interstate commerce. But the connexity required is minimal. R.A.G.S....