Genty v. Resolution Trust Corp.

• Decision Date: 08 July 1991
• Docket Number: No. 90-5521,90-5521
• Citation: 937 F.2d 899
• Parties: , 21 Fed.R.Serv.3d 121, RICO Bus.Disp.Guide 7788, 33 Fed. R. Evid. Serv. 1233 Frank and Seba GENTY and Jamie and Frank Genty, Jr., infants, by their parents and natural guardians, Frank and Seba Genty, Appellants, v. RESOLUTION TRUST CORPORATION, Receiver of City Federal Savings Bank (successor in interest to City Federal Savings and Loan Association; Diamond Crest Inc.; Anna Oliveri; Vicky Gonzales; Realty Abstract Company; Estate of Thomas Oliveri; Township of Gloucester; and Estate of James Joyce.
• Court: U.S. Court of Appeals — Third Circuit

Page 899

937 F.2d 899

60 USLW 2057, 21 Fed.R.Serv.3d 121, RICO

Bus.Disp.Guide 7788,

33 Fed. R. Evid. Serv. 1233

Frank and Seba GENTY and Jamie and Frank Genty, Jr., infants, by their parents and natural guardians, Frank and Seba Genty, Appellants, v. RESOLUTION TRUST CORPORATION, Receiver of City Federal Savings Bank (successor in interest to City Federal Savings and Loan Association; Diamond Crest Inc.; Anna Oliveri Vicky Gonzales; Realty Abstract Company; Estate of Thomas Oliveri; Township of Gloucester; and Estate of James Joyce.

No. 90-5521.

United States Court of Appeals Third Circuit.

Argued April 9, 1991.

Decided July 8, 1991.

Rogert J. Sugarman (argued), Sugarman & Associates, Philadelphia, Pa., for appellants.

Ann S. Duross, Asst. Gen. Counsel, Colleen B. Bombardier, Sr. Counsel, Maria Beatrice Valdez, Counsel (argued), Resolution Trust Corp., Washington, D.C., for Victoria Gonzalez and Resolution Trust Corp. as Receiver for City Federal Sav. & Loan Assn.; Thomas W. Sweet, Sweet & Connelly, Clinton, N.J., of counsel.

Robert V. Paschon (argued), Paschon and Feurey, Toms River, N.J., for Township of Gloucester.

Kevin M. Hart (argued), Stark & Stark, Princeton, N.J., for Yei-Shong Shieh.

Before STAPLETON, COWEN, and ROSENN, Circuit Judges

OPINION OF THE COURT

ROSENN, Circuit Judge.

The major question in this appeal, a matter of first impression in this court, is whether civil liability under the Racketeer Influenced and Corrupt Organizations (RICO) statute, 18 U.S.C. Secs. 1961-1968, can be imposed on a municipality for the predicate acts of its officers or agents. The plaintiffs, who purchased property in a development near a toxic landfill, in 1983 brought suit in the United States Court for the District of New Jersey, alleging that a developer and mortgage lender conspired with Gloucester Township, which owned the land leased as a landfill, to promote fraudulently the sale of property despite their knowledge of the landfill's toxic nature. The plaintiffs asserted liability against the defendants under RICO, 42 U.S.C. Sec. 1983, and state common law fraud.

In 1984, the district court dismissed the RICO claims against the Township as untimely, based on its application of a two-year limitations period to RICO actions. Following the holding of the United States Supreme Court in 1987 that a uniform four-year limitations period applied to RICO actions, the RICO claims against the Township were reinstated. Prior to the reinstatement of the claims against the Township, the remaining parties tried their case to a jury in 1986. The district court granted a directed verdict in favor of the mortgage lender and several other defendants.

The jury returned a verdict of $3,000 for the plaintiffs against the principal developers. The district court entered final judgment on plaintiffs' RICO claims in favor of the Township, ruling that "a municipality cannot form the requisite mental state to commit an act of racketeering activity." The trial court also ruled that personal injuries were not compensable under RICO and that a two-year limitations period barred the plaintiffs' 42 U.S.C. Sec. 1983 claims. The plaintiffs challenge these holdings and also maintain that the district court erred during trial in excluding the testimony of two of the plaintiffs' proposed expert witnesses and in directing a verdict for all the remaining defendants except the principal developers. We affirm. ¹

I. THE BACKGROUND

The plaintiffs purchased property near a municipal landfill in Gloucester Township, Camden County, New Jersey between 1978 and 1982. The district court consolidated the several homeowners suits for trial; only the Gentys, however, filed this appeal. The primary defendants include the developers of the land near the dump, Diamond Crest, Inc., and its principals, Thomas and Anna Oliveri; the mortgage lender which arranged financing for some prospective purchasers of the lots, City Federal Savings and Loan (City Federal); Victoria Gonzalez, an officer at City Federal; the Township of Gloucester, owner of the land leased as a landfill; and James Joyce, deceased, the Township Committee Chairman. However, Gloucester Environmental Management Services, Inc. (GEMS), the operator of the landfill which leased the property from the Township, is not a defendant.

With a construction loan from City Federal in 1979 and the permission of Gloucester Township, the developer Diamond Crest and the Oliveris commenced building houses on land known as Briar Lake tract in the Township located near the GEMS landfill. The Gentys, on March 24, 1981, with a $7,000 down payment, entered into a contract with Diamond Crest for the purchase of a home at Briar Lake. The Gentys moved into their new home on July 4, 1981, about a quarter mile from the dump and shortly thereafter received a mortgage commitment from City Federal. They never received title to the property, however, because in October 1981, Diamond Crest filed a petition in bankruptcy, the mortgage commitment expired, and the Gentys never closed on their house. Moreover, they failed to obtain a certificate of occupancy for the property from the Township.

The essence of the Gentys' complaint is that the defendants failed to warn the Gentys about known dangers associated with living near the allegedly toxic landfill ("GEMS landfill") and, in the case of some defendants, fraudulently assured the Gentys that the landfill posed no serious harm. The Gentys allege that the defendants used the mail in furtherance of their fraudulent scheme in violation of 18 U.S.C. Sec. 1341.

In September 1981, the Gentys allege that they first discovered for themselves the hazardous nature of the GEMS landfill when a neighbor informed them that the federal government had "redlined" an area around the landfill because it was toxic and hazardous to area homeowners. In 1982, the Gentys noticed foul smells emanating from the dump; they remained, however, at the Briar Lake house until September 1983.

On October 13, 1983, the plaintiffs filed a complaint in federal court based on real estate fraud alleging RICO violations, civil rights infringement, and various pendent state law claims. Thereafter, the plaintiffs filed a second round of suits against the generators and transporters of the toxic waste deposited at the GEMS landfill. In an opinion and order dated November 1, 1985, the district court divided the suit into two phases. The court stayed the Phase Two suits against the waste generators and transporters until disposition of the Phase One real estate fraud suits.

This Phase One suit was tried in April 1986. The trial court previously had dismissed the RICO claims against the Township as untimely believing that a two-year limitations period governed. The court also dismissed the 42 U.S.C. Sec. 1983 civil rights claims as time-barred. The plaintiffs on February 7, 1986, entered a stipulation dismissing the remaining non-RICO claims against the Township.

At trial, the district court excluded the proposed testimony of two of the plaintiffs' expert witnesses, and at the close of the plaintiffs' case, the court entered a directed verdict for all the remaining defendants except the developer's principals, the Oliveris. After the trial, the United States Supreme Court held that the uniform limitations period for RICO actions is four years. Agency Holding Corp. v. Malley-Duff & Assoc., 483 U.S. 143, 156, 107 S.Ct. 2759, 2767, 97 L.Ed.2d 121 (1987). This ruling forced the vacatur of the original dismissal of Gloucester Township. The Township is thus the only non-settling party remaining in the Phase One suit.

This court dismissed without prejudice the Gentys' original appeal from the 1986 trial because the defendant Diamond Crest, which had filed a petition in bankruptcy, did not participate at trial. Therefore, we have not reviewed until now the trial court's 1986 evidentiary rulings which the Gentys allege were erroneous. In a related RICO action against the Township, the district court dismissed the homeowners' claims because "a municipality cannot form the requisite mental state to commit an act of racketeering activity." Albanese et al. v. City Federal Savings and Loan et al., 710 F.Supp. 563, 569 (D.N.J.1989).

To achieve finality for the instant appeal, the parties and the district court took several procedural steps. The district court applied its holding in Albanese and, on the plaintiffs' motion, entered a final judgment for the Township under Fed.R.Civ.P. 54(b). Genty v. Township of Gloucester, 736 F.Supp. 1322, 1330 (D.N.J.1990). The court also entered final judgment on the Gentys' non-RICO claims against the Township, in accordance with the parties' 1986 stipulation of dismissal. Id. Finally, the plaintiffs voluntarily dismissed their claims against Diamond Crest, the defendant absent from the 1986 trial, and the district court approved the dismissal.

II. RULE 54(b) CERTIFICATION

The threshold question before us is whether this court has jurisdiction to hear this appeal. Arising out of ongoing litigation involving multiple claims and multiple parties, this appeal comes to us through the district court's entry of final judgment pursuant to Fed.R.Civ.P. 54(b). That Rule allows a district court to enter final judgment as to fewer than all of the claims or parties so long as the court makes an express determination that there is no just cause for delay. ² To qualify for Rule 54(b) certification, an order must constitute a "final judgment"; that is, "[i]t must be a 'judgment' in the sense that it is a decision upon a cognizable claim for relief, and it must be 'final' in the sense that it is 'an ultimate disposition of an individual claim entered in the course of a multiple claims action.' " Curtiss-Wright Corp. v. General Electric Co., 446 U.S. 1, 7, 100 S.Ct. 1460, 1464, 64 L.Ed.2d 1 (1980) (quoting Sears, Roebuck & Co. v. Mackey, 351 U.S. 427, 436, 76 S.Ct. 895, 900, 100 L.Ed. 1297 (195...