Curley v. Cumberland Farms Dairy, Inc.

• Decision Date: 02 February 1990
• Docket Number: Civ. A. No. 86-5057(SSB).
• Citation: 728 F. Supp. 1123
• Parties: Lance CURLEY, et al., Plaintiffs, v. CUMBERLAND FARMS DAIRY, INC., et al., Defendants.
• Court: U.S. District Court — District of New Jersey

728 F. Supp. 1123

Lance CURLEY, et al., Plaintiffs, v. CUMBERLAND FARMS DAIRY, INC., et al., Defendants.

Civ. A. No. 86-5057(SSB).

United States District Court, D. New Jersey.

December 29, 1989.

As Amended February 2, 1990.

COPYRIGHT MATERIAL OMITTED

Fredric J. Gross, Fredric J. Gross Law Firm, Mount Ephraim, N.J., Philip Stephen Fuoco, Office of Philip Stephen Fuoco, Haddonfield, N.J., and Michael R. Needle, Needle & Feldman, Philadelphia, Pa., for plaintiffs.

Nicholas W. McClear and Kathleen Cavanaugh, Wilenz, Goldman & Spitzer, Woodbridge, N.J., for defendants.

BROTMAN, District Judge.

Presently before the court are several motions. First, plaintiffs move for class certification pursuant to Fed.R.Civ.P. 23(b)(3). In response, defendants have filed a cross-motion to compel discovery on the class certification issue. Second, plaintiffs move to reinstate two types of claims: the claims of specific plaintiffs dismissed as untimely under the applicable statute of limitations, and the claims of all plaintiffs under § 1962(c) and § 1962(d) against the corporate defendants. Third, defendants move to dismiss portions of plaintiffs' complaint. In response, plaintiffs have filed a cross-motion to strike defendants' motion to dismiss. The fourth motion presently pending before the court is plaintiffs' appeal of the magistrate's protective order.

I. FACTS AND PROCEDURE

On December 24, 1986, plaintiffs filed a class action suit asserting claims under federal and state anti-racketeering laws, 18 U.S.C. § 1962 and N.J.Stat.Ann. § 2C:41-2 (West 1982), along with a host of common law tort claims. Plaintiffs are all former employees of Cumberland Farms, Inc., a closely held Delaware corporation, which, through its subsidiaries, operates 1300 retail convenience stores throughout the Northeast and Florida. The crux of plaintiffs' claim is that defendant Cumberland Farms and the individually named defendants, who are present and former officers and employees of Cumberland Farms, carried out a scheme by which low-level employees were wrongfully charged with stealing money and merchandise from the stores. These employees were then allegedly coerced into signing confessions through threats of immediate arrest, notification of family members, other employers, or the media. Plaintiffs allege this activity has gone on for more than twelve years. Second Amended Complaint ¶ 54.

On April 15, 1987, before defendants had filed an answer, plaintiffs amended their complaint and added new parties both as plaintiffs and defendants. A scheduling conference was held before United States Magistrate Jerome Simandle on June 16, 1987, and a scheduling order was issued. That order directed that the class certification issue should await resolution of the defendants' dispositive motions. On July, 30, 1987, all defendants except Colleen Walsh moved to dismiss the amended complaint for failure to state a claim upon which relief could be granted.

In an opinion filed November 17, 1987, this court granted in part and denied in part defendants' motion to dismiss. Specifically, the court found that plaintiffs had failed to allege an "enterprise" distinct from defendant Cumberland Farms under the § 1962(c) claim. Curley v. Cumberland Farms, No. 86-5057(SSB) slip op. at 6-8 (citing, inter alia, B.F. Hirsch v. Enright Manufacturing Co., 751 F.2d 628 (3d Cir.1984)). The court also dismissed the conspiracy claim under § 1962(d) because the court found that a corporation was incapable of conspiring with its own officers or employees. Id. at 18 (citing, inter alia, McLendon v. Continental Group, Inc., 602 F.Supp. 1492, 1510, 1512 (D.V.I. 1987); Yancoski v. E.F. Hutton & Co., Inc., 581 F.Supp. 88, 97 (E.D.Pa.1983)). The court likewise dismissed plaintiffs' claims against Cumberland Farms under the analogous provisions of the New Jersey RICO statute. Id. at 21-22.

Also before the court in November, 1987 were the motions of all defendants to dismiss the RICO claims of plaintiffs Bayer, Cox, Friedman, Gruner, Capner, and Boguslav. The court found that the four year statute of limitations barred these claims because they had occurred more than four years before the filing of the complaint and there had been no fraudulent concealment by defendants.

Finally, also before the court were other motions to dismiss various other claims asserted by plaintiffs. These were all denied, except in that plaintiffs were given thirty days in which to amend the complaint so as to comply with the loose notice-pleading requirement of Fed.R.Civ.P. 8(a). Plaintiffs filed a second amended complaint on December 14, 1987.

The Second Amended Complaint contains the following counts: first, claims under § 1962(c) and § 1962(d) (¶ 386); second, claims under N.J.Stat.Ann. § 2C:41-2(c) and 2C:41-2(d) (¶ 411); third, claims for injunctive and equitable relief under § 1964(a) and § 1964(c) (¶ 414); fourth, claims for injunctive and equitable relief under N.J.Stat.Ann. § 2C:41-4(a), and § 2C:41-4(c) (¶ 416); fifth, a claim for intentional harm based on the Restatement of Torts § 870 (¶ 418); sixth, a claim for extortion (¶ 423); and seventh, a claim for malicious abuse of process (¶ 427). The Second Amended Complaint also contains a "reservation of rights" (¶ 431). Since the filing of the second amended complaint, the parties have proceeded with discovery limited to the class certification issue.

This litigation focuses on the legitimacy and legality of Cumberland's loss-prevention techniques. Cumberland employs approximately 12,000 people at any given time; during the course of a year, the work force turns over three times. Transcript of Commonwealth of Pennsylvania v. Alan Hass, (Feb. 3, 1987) M.C. No. 86-03-3050 (testimony of Arthur Gordon) at 23. The increasingly competitive nature of the industry, due to the influx of stores owned by oil companies, is widely known, see "Rethinking the Convenience Store," (C. Deutsch) N.Y. Times Section 3 p. 1 (Sunday, October 8, 1989), and the profitability of any given store depends in part on the inventory shrinkage that the store experiences. Cumberland loss prevention specialists considered any store experiencing inventory loss that exceeded one percent to be a problem store. See Deposition of Gordon at 18. A loss as high as two percent was considered to be a high loss. Id. at 29.

Inventory loss could be for any of several reasons. Accounting problems, including the misdelivery of goods meant for one store to another, could explain discrepancies between the inventory on paper and the actual inventory in the store. Id. at 22, 24. Included in accounting problems was vendor dishonesty, which occurs when, for example, a soft drink seller bills a store for thirty cases of soda when only twenty-five were delivered. Id. at 24. Shoplifting was not a common source of inventory discrepancies. Id. at 25. Loss prevention specialists were able to resolve as many as fifty percent of the inventory problems through auditing the paperwork. When the problem could not be attributed to accounting problems, suspicion turned to individual employees.

Loss prevention specialists had three basic methods for investigating employees in problem stores. First, loss prevention specialists could send in hired shoppers to make prearranged purchases. At the end of the day, the purchases made would be compared to the purchases recorded, to see if the employee was simply pocketing some of the sales. The second method was physical surveillance from outside the store. A loss prevention specialist would station himself¹ outside the store and watch through high powered binoculars the employee under investigation. Id. at 47-48. The third method of investigation was internal surveillance from a hidden observation space with which most stores were equipped.

If an investigation produced evidence of dishonesty, the loss prevention specialist would confront the employee. The other bases for an interview with an employee were failing to observe company policy with respect to filling out drop sheets, keeping too much cash in the drawer, failing to inventory cigarettes on a daily basis, and bank deposit irregularities. Id. at 81-93. Interviews typically were conducted in a back room with no one present except the employee and the loss prevention specialist, although on occasion a loss prevention specialist in training would listen from outside the door.

II. DISCUSSION

As a threshold matter, the court must discuss the order in which it will address the motions. Defendants have correctly indicated to the court that the issue of the class certification depends in large part on the status of the complaint. The court cannot determine whether "questions of law or fact common to the members of the class predominate over any questions affecting only individual members," Fed.R. Civ.P. 23(b)(3), until the court has first determined what law, as alleged in the complaint, shall govern the class certification inquiry.

By letter dated September 28, 1989, the court directed the parties to address the certification issue with respect to the complaint as it then stood. The court also informed the parties that it would explain in a more formal manner the reasons for its selection of such a schedule for briefing. Those reasons are as follows.

Fed.R.Civ.P. 23(c)(1) provides:

As soon as practicable after the commencement of an action brought as a class action, the court shall determine by order whether it is to be so maintained. An order under this subdivision may be conditional, and may be altered or amended before the decision on the merits.

Rule 23(c) is mandatory. It directs the district court to determine as soon as practicable whether to certify a class. It is now past the third anniversary of the filing of the original complaint. Discovery limited solely to class certification has proceeded since June 18, 1987, when Judge Simandle entered an order limiting discovery to class certification. As...