Gould, Inc. v. Mitsui Min. & Smelting Co., Ltd.

• Decision Date: 02 May 1990
• Docket Number: No. 85-3199.,85-3199.
• Citation: 750 F. Supp. 838
• Parties: GOULD, INC., Plaintiff, v. MITSUI MINING & SMELTING CO., LTD., et al., Defendants.
• Court: U.S. District Court — Northern District of Ohio

750 F. Supp. 838

GOULD, INC., Plaintiff, v. MITSUI MINING & SMELTING CO., LTD., et al., Defendants.

No. 85-3199.

United States District Court, N.D. Ohio, E.D.

May 2, 1990.

Maynard F. Thomson, Jones Day Reavis & Pogue, Cleveland, Ohio, for plaintiff.

Lance Gotthoffer, Marks Murase & White, New York City, John D. Joliffe, Black McCluskey Souers & Arbaugh, Canton, Ohio, for Mitsui Min.

Brice M. Clagett, Covington & Bulring, Washington, D.C., Patricia Hemann, Hahn

Loeser & Parks, Cleveland, Ohio, for Pechiney.

MEMORANDUM OPINION AND ORDER

JOINER, District Judge.

This matter comes before the court on motions by defendants Mitsui Mining & Smelting Company, Ltd. (Mitsui) and Pechiney Ugine Kuhlmann/Trefimetaux (Pechiney/Trefimetaux), to dismiss the complaint filed by Gould, Inc. (Gould). The parties having fully briefed the issues, the court will rule on these motions, in part, without conducting oral argument. See Local Rule 3.01. This order is limited to arguments made in both motions to dismiss concerning Gould's claims under the Racketeer Influenced and Corrupt Organizations provisions of the Organized Crime Control Act of 1970 (RICO), 18 U.S.C. §§ 1961 et seq.¹

A motion to dismiss will be granted only if, treating all well-pled allegations as true, the non-movant will be unable to recover under the pleading in question. Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 101-02, 2 L.Ed.2d 80 (1957); Windsor v. The Tennessean, 719 F.2d 155, 158 (6th Cir.1983), cert. denied, 469 U.S. 826, 105 S.Ct. 105, 83 L.Ed.2d 50 (1984). According to the allegations found in and pertaining to claim Nos. 5 (RICO, against Mitsui) and 6 (RICO, against Pechiney/Trefimetaux) in Gould's complaint, the following constitutes the basis for Gould's RICO claims:

In August 1983, Dale C. Danver left his employment with Gould in its copper foil division and created a company called Danver Technologies Group, Inc. (DTG). Prior to leaving Gould, Danver copied and removed Gould proprietary information which included Gould trade secrets involving the manufacture of copper foil and through DTG, proceeded to attempt to sell this information to other companies. As early as September 1983, DTG and Mitsui began to discuss the sale of copper foil technology to Mitsui. Miyakoshi Machine Tools Co., Ltd. (Miyakoshi), allegedly a Mitsui engineering subsidiary, and DTG signed an agreement for the transfer of this information in the summer of 1984, and at that time Gould trade secrets were allegedly transferred to Mitsui and Miyakoshi. This relationship continued at least until March of 1985 when Gould sued Danver in federal court. Meanwhile, in June of 1984, DTG met with representatives of Pechiney and its then wholly-owned subsidiary, Trefimetaux, regarding Pechiney/Trefimetaux's desire to construct a new copper foil plant in France. While a joint venture between DTG and Pechiney/Trefimetaux never materialized, some Gould trade secrets were allegedly transferred to Pechiney/Trefimetaux, and Danver did communicate that he was also dealing with Mitsui and Miyakoshi. After terminating its relationship with DTG in 1985, Pechiney/Trefimetaux formed a joint venture with Mitsui to construct a copper foil plant in Normandy, France, and this joint venture is ongoing currently. The joint venture is allegedly utilizing Gould trade secrets obtained from Danver and DTG.

In order to recover damages for a RICO violation, Gould must establish that defendants are associated with an enterprise engaged in interstate or foreign commerce and that defendants participated in the conduct of that enterprise's affairs through a pattern of racketeering activity. 18 U.S.C. § 1962(c). A "pattern" entails at least two acts of racketeering activity. 18 U.S.C. § 1961(5). DTG is identified as the RICO "enterprise" in Gould's complaint and Mitsui, Pechiney, and Trefimetaux, are the "persons" associated with that enterprise.² The complaint alleges nine acts of mail or wire fraud that were committed by Mitsui, and another nine committed by Pechiney/Trefimetaux, which form the basis for the alleged "pattern of racketeering activity." Defendants raise four arguments against Gould's RICO claims in the two pending motions to dismiss, and each will be discussed below. The first three arguments are made by Mitsui and Pechiney/Trefimetaux, and the last argument is made only by Pechiney/Trefimetaux.

I. Improper RICO Service of Process

Defendants argue that RICO authorizes service only on persons within the United States and, in this case, defendants were served in France and Japan and, as a result, the RICO claims against them should be dismissed. Gould responds that this is irrelevant because defendants were also served pursuant to Ohio's long-arm statute and there is no need to dismiss the RICO claim since service was proper under this statute.

RICO specifically authorizes service of process throughout the United States, 18 U.S.C. § 1965, but there is no specific authorization in the Act for service outside the United States. Therefore, foreign service of process cannot be justified under RICO. Avianca, Inc. v. Corriea, 705 F.Supp. 666, 684 (D.D.C.1989); Soltex Polymer Corp. v. Fortex Indus., Inc., 590 F.Supp. 1453 (E.D.N.Y.1984), aff'd, 832 F.2d 1325 (2d Cir.1987). However, Fed.R. Civ.P. 4(i) and the advisory committee's notes indicate that the authority for effecting foreign service can be found under federal or state law (of the state where the district court is located). Therefore, foreign service for a RICO claim can be maintained when state law authorizes the foreign service. Avianca, 705 F.Supp. at 684; North Carolina ex rel. Long v. Alexander & Alexander, 680 F.Supp. 746, 749 (E.D.N. C.1988); Soltex, 590 F.Supp. at 1460. Here, foreign service on Mitsui was allegedly justified by Ohio long-arm statute procedures and service on Pechiney/Trefimetaux was allegedly justified by the Foreign Sovereign Immunities Act (FSIA). 28 U.S.C. §§ 1601 et seq., 1608. Whether service was indeed proper under these other state and federal statutes will be determined in subsequent orders by the court on other aspects of the instant motions to dismiss. Until these determinations are made, it is premature to dismiss the RICO claims based on improper service.

II. Pattern of Racketeering Activity-Continuity

Defendants argue that in order to have a pattern of racketeering activity, there must be a threat that the activity will continue or that there was repeated conduct in the past over an extended period of time. Their contention is that neither of these alternatives has been alleged by Gould in its complaint. Gould responds that it has alleged the threat of continuing activity by reference in the complaint to the Mitsui/Pechiney joint venture to build a plant in France which will use Gould trade secrets and will damage Gould's business.³

In order to establish a pattern of racketeering activity, a plaintiff must demonstrate that the predicate acts are related to, amount to, or pose a threat of, continuing criminal activity. H.J., Inc. v. Northwestern Bell Tel. Co., ___ U.S. ___, 109 S.Ct. 2893, 2900, 106 L.Ed.2d 195 (1989); see also Callanan v. United States, 881 F.2d 229, 234 (6th Cir.1989). In H.J., Inc., the Court used the standard from Title X of the Organized Crime Control Act of 1970 to define relatedness that standard, located at 18 U.S.C. § 3575, states that "criminal conduct forms a pattern if it embraces criminal acts that have the same or similar purposes, results, participants, victims, or methods of commission, or otherwise are interrelated by distinguishing characteristics and are not isolated events." H.J., Inc., 109 S.Ct. at 2901. The Court held that continuity can be established by showing either a closed period of repeated conduct or a continuing period of repeated conduct. A closed period is a series of related predicates over a substantial period of time — more than a few weeks or months — that has come to an end. An open-ended period of repeated conduct is conduct that by its nature projects into the future with a threat of repetition. H.J., Inc., 109 S.Ct. at 2902.

Having analyzed the allegations in the complaint, the court concludes that Gould has sufficiently alleged a pattern of racketeering activity. The relatedness element is not in dispute, and it is clear from the complaint that the predicate acts by Mitsui, Pechiney/Trefimetaux, and the Mitsui joint venture, are all related to the alleged misappropriation of Gould trade secrets by Danver. It seems that the 13 months of predicate acts by Mitsui and the ten months of predicate acts by Pechiney/Trefimetaux are, by themselves, sufficient to establish continuity by establishing a closed period of repeated conduct. In addition, there are allegations of a threat of continued activity, in reference to the Mitsui/Pechiney joint venture. This joint venture allegedly will be using Gould trade secrets and, as this joint venture is constructed and operated, there will be an alleged continuing misappropriation of trade secrets that will continue to harm Gould. This certainly qualifies as a threat of continued wrongdoing as defined by H.J., Inc., Therefore, Gould has adequately alleged a pattern of racketeering activity.

III. Predicate Acts-Insufficient Allegations

Defendants argue that fraud underlies allegations of mail or wire fraud, therefore it must be alleged that defendants made material misrepresentations or omissions of fact to Gould which Gould relied upon to its own detriment. They contend that since no such allegations can be found in the complaint, the RICO predicate acts of mail and wire fraud have not been sufficiently pled. As a result, there are no predicate acts to support the RICO claims and dismissal is warranted. Gould responds that an allegation of a scheme to defraud is sufficient, and since such an allegation is present in the complaint, there is no need to dismiss the RICO claims.

The mail...