Farmers Bank of State of Del. v. Bell Mtg. Corp.

• Citation: 452 F. Supp. 1278
• Decision Date: 12 June 1978
• Docket Number: Civ. A. No. 76-122.
• Parties: FARMERS BANK OF the STATE OF DELAWARE, Plaintiff, v. BELL MORTGAGE CORPORATION et al., Defendants.
• Court: U.S. District Court — District of Delaware

452 F. Supp. 1278

FARMERS BANK OF the STATE OF DELAWARE, Plaintiff, v. BELL MORTGAGE CORPORATION et al., Defendants.

Civ. A. No. 76-122.

United States District Court, D. Delaware.

June 12, 1978.

Wayne N. Elliott, James L. Holzman, and Charles S. Ernst, of Prickett, Ward, Burt & Sanders, Wilmington, Del., for plaintiff.

W. Leigh Ansell, of Ansell, Butler & Canada, Virginia Beach, Va., for defendant Giglia.

Robert M. Price, pro se.

Nathan H. Cohen, pro se.

Lyle L. Lathrop, pro se.

William R. Hester, Jr., of Hester, Robison & Townsend, Orange Park, Fla., for defendants Hester and Killebrew.

Leanne Orlove, pro se.

Allen C. D. Scott, II, of Maxwell & Scott, Jacksonville, Fla., for defendant Liebert.

Marie L. Stachowski, pro se.

James D. Pennington, pro se.

OPINION

STAPLETON, District Judge:

In this action, plaintiff Farmers Bank ("Farmers") accuses the fifty-one corporate and individual defendants of violating Sections 5(a), 5(c), 12 and 17(a) of the Securities Act of 1933, 15 U.S.C. §§ 77e(a), 77e(c), 77l and 77q(a), Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, 15 U.S.C. §§ 78j(b) and 78t(a), and Rule 10b-5 promulgated thereunder, 17 C.F.R. § 240.10b-5, the Organized Crime Control Act of 1970, 18 U.S.C. § 1961, et seq., as well as of breaching their fiduciary duties and of acting fraudulently under state law. Jurisdiction over the federal claims is conferred by Section 22(a) of the Securities Act, 15 U.S.C. § 77v(a), Section 27 of the Securities Exchange Act, 15 U.S.C. § 78aa, 18 U.S.C. § 1964, and 28 U.S.C. §§ 1331 and 1337. Plaintiff brings the state law claims under the principle of pendent jurisdiction.

Defendant James Dale Pennington ("Pennington") has moved to dismiss the complaint. Because his motion attacks only Count II of the complaint, that arising under the Organized Crime Control Act of 1970, 18 U.S.C. § 1961, et seq., this Opinion will be limited to a discussion of that cause of action. Pennington has made several arguments in support of his motion. First, he claims that Count II does not state a claim upon which relief may be granted. Second, Pennington argues that pursuant to 18 U.S.C. § 1965, venue does not exist in this District. Third, he claims that the complaint does not inform him of the claim against him with sufficient certainty, because it does not allege facts showing how he was involved in the alleged conspiracy. Finally, he avers that there are factual errors in the complaint.

In a previous Opinion in this case, dated April 25, 1978, on a motion to dismiss by defendant Nathan H. Cohen, I held that under the Organized Crime Control Act of 1970, "Farmers has stated a claim for which relief may be granted". For the reasons stated in that Opinion, I reach the same conclusion here. Pennington makes an argument here not raised in the earlier motion, however. He contends that he was not convicted of violating the Act,¹ and cannot, therefore, be held civilly liable under the Act. I do not find any merit in this argument.

Section 1962 of Title 18 of the United States Code makes it unlawful for any person to engage in certain "racketeering activities", or to conspire to engage in those activities. 18 U.S.C. § 1963 provides criminal penalties for violations of Section 1962. 18 U.S.C. § 1964 provides for civil remedies. Section 1964(c) provides:

Any person injured in his business or property by reason of a violation of section 1962 of this chapter may sue therefor in any appropriate United States district court and shall recover threefold the damages he sustains and the cost of the suit, including a reasonable attorney's fee.

This provision for a private cause of action arising out of the Organized Crime Control Act of 1970 does not condition that cause of action in any way upon a previous conviction under the criminal provisions of the statute. It is only necessary that the plaintiff prove the elements of the Act by a preponderance of the evidence in order to be awarded damages in a civil action. Cf. United States v. Capetto, 502 F.2d 1351 (7th Cir. 1974), cert. denied, 420 U.S. 925, 95 S.Ct. 1121, 43 L.Ed.2d 395 (1975). Accordingly, Count II will not be dismissed based on the failure of Farmers to allege a claim upon which relief may be granted.

18 U.S.C. § 1965 provides for the venue of actions under the Organized Crime Control Act of 1970. That section provides:

(a) Any civil action or proceeding under this chapter against any person may be instituted in the district court of the United States for any district in which such person resides, is found, has an agent, or transacts his affairs.

Pennington claims that he does not reside in, is not found in, does not have an agent in and transacts no affairs in this district. Farmers does not dispute this. Therefore, it appears that there is no specific grant of venue for Count II found in Section 1965(a).²

However, the venue provisions of Section 1965 are not necessarily exclusive. The language of that provision merely says that an action "may" be brought in that district. The legislative history of Section 1965 reveals that it was patterned after the venue provisions of the antitrust laws.³See King v. Vesco, 342 F.Supp. 120 (N.D. Cal.1972). Under the antitrust laws, it has been held in this and other circuits that the general venue provisions of 28 U.S.C. § 1391, et seq. are meant to supplement the antitrust venue provisions of 15 U.S.C. §§ 15, 22. T-M Parts, Inc. v. The Charles Machine Works, Inc., C.A. 74-174 (D.Del. Dec. 29, 1976); State of Mew York v. Morton Salt Co., 266 F.Supp. 570 (E.D.Pa.), affirmed, 385 F.2d 122 (3rd Cir. 1967), cert. denied, 390 U.S. 995, 88 S.Ct. 1195, 20 L.Ed.2d 94 (1968); School District of Philadelphia v. Harper & Row Publishers, Inc., 267 F.Supp. 1006 (E.D.Pa.1967); Adams Dairy Co. v. National Dairy Products Corp., 293 F.Supp. 1135 (E.D.Pa.1968); Philadelphia Housing Authority v. American Radiator, 291 F.Supp. 252 (E.D.Pa.1968). See also Board of County Commissioners v. Wilshire Oil Co., 523 F.2d 125 (10th Cir. 1975); Albert Levine Associates v. Berton & Cotti, 314 F.Supp. 169 (S.D.N.Y.1970); 1 Moore's Federal Practice (1977 Ed.), ¶ 0.14414.-15. Cf. Pure Oil Co. v. Suarez, 384 U.S. 202, 86 S.Ct. 1394, 16 L.Ed.2d 474 (1966) (general venue provisions supplement venue provisions of Jones Act). Given the language and legislative history of Section 1965,⁴ I conclude that its provisions were not intended to be exclusive, but rather, were intended to liberalize the already existent venue provisions found in Title 28.

28 U.S.C. § 1391(b) provides:

A civil action wherein jurisdiction is not founded solely on diversity of citizenship may be brought only in the judicial district where all defendants reside, or in which the claim arose, except as otherwise provided by law.

Pursuant to this general provision, there is venue to hear Count II in the district "in which the claim arose".

In determining in which district a claim arose, this Court has adopted the "weight of the contacts" test in ascertaining the propriety of venue under the antitrust laws, upon which the venue provisions now at hand were based. T-M Parts, Inc. v. The Charles Machine Works, Inc., supra. See also Philadelphia Housing Authority v. American Radiator & Standard Sanitary Corp., supra; Grappone, Inc. v. Subaru of America, Inc., 403 F.Supp. 123 (D.N.H. 1975); Redmond v. Atlantic Coast Football League, 359 F.Supp. 666 (S.D.Ind.1973); Fox-Keller, Inc. v. Toyota Motor Sales, U.S.A., Inc., 338 F.Supp. 812 (E.D.Pa.1972); California Clippers, Inc. v. United States Soccer Football Association, 314 F.Supp. 1057 (N.D.Cal.1970); ABC Great States, Inc. v. Globe Ticket Co., 310 F.Supp. 739 (N.D.Ill.1970). I believe that the "weight of the contacts" test should also be applied in this action arising under 18 U.S.C. § 1962.

In T-M Parts, supra, I also held that before the Court must determine the "weight of the contacts", it must be alleged that each participant in the conspiracy, as to whom the impropriety of venue in a particular district is asserted, has engaged in some significant or substantial act pursuant to the conspiracy in that district.⁵ See also Philadelphia Housing Authority v. American Radiator & Standard Sanitary Corporation, supra; Weinstein v. Norman M. Morris Corp., 432 F.Supp. 337 (E.D.Mich. 1977); San Antonio Telephone Co. v. American Telephone & Telegraph Co., 499 F.2d 349 (5th Cir. 1974); ABC Great States, Inc. v. Globe Ticket Co., supra. Since the venue provisions at issue here are modeled after the antitrust venue provisions, I conclude that it must be shown that there is venue over Pennington, under Section 1391(b), due to his own contacts with this district.

The complaint may allege facts indicating that the claim against some of the co-conspirators arose in this district, due to conspiratorial acts occurring in Delaware.⁶ However, even if such facts are alleged, Pennington is not alleged to have had any substantial or significant contacts with this district in connection with the conspiracy. Accordingly, it has not been alleged that the claim against Pennington arose in this district and proper venue has not been asserted as to him under 28 U.S.C. § 1391(b).⁷

Unless plaintiff amends its complaint by alleging that the claim arose in this district and that Pennington engaged in some substantial act pursuant to the conspiracy in this district, moves to transfer the action, insofar as it relates to Pennington, to another district, or makes an appropriate showing that there is venue here under 18 U.S.C. § 1965(b),⁸ within twenty days, Pennington's motion to dismiss for lack of venue will be granted.

Pennington's third argument in support of his motion is that insufficient facts have been alleged to inform him of the claim against him. Specifically, he claims that the complaint does not demonstrate how he participated in the alleged fraudulent scheme. Rule 8 of the Federal Rules of Civil Procedure...