Hale v. Burkhardt

• Decision Date: 22 November 1988
• Docket Number: No. 18426,18426
• Parties: , RICO Bus.Disp.Guide 7083 Preston Q. HALE, Appellant, v. Joe E. BURKHARDT and Joe E. Burkhardt and Associates, Respondents.
• Court: Nevada Supreme Court

Page 866

764 P.2d 866

104 Nev. 632, RICO Bus.Disp.Guide 7083

Preston Q. HALE, Appellant, v. Joe E. BURKHARDT and Joe E. Burkhardt and Associates, Respondents.

No. 18426.

Supreme Court of Nevada.

Nov. 22, 1988.

Osborne, Jenkins & Gamboa, Thomas J. Gaffney and Cathy L. Bradford, Reno, for appellant.

Stephen C. Mollath and Patricia F. Winnie, Reno, for respondents.

OPINION

PER CURIAM:

Appellant, Preston Q. Hale, a real estate broker, entered into an oral agreement with respondents, Joe E. Burkhardt and Joe E. Burkhardt and Associates (hereinafter "Burkhardt"), in which Hale was to assist Burkhardt in purchasing real property comprising an entire city block in Reno, Nevada, for a development project to be known as Liberty Center. Hale claims that as a result of his efforts, Burkhardt was able to purchase the property for his project. Burkhardt refused to pay Hale, and Hale sued for broker's commissions and fees claimed to be due to him. Hale's fourth cause of action ¹ was brought under Nevada's civil racketeering statute, NRS 207.470, and alleged that Burkhardt violated Nevada's criminal racketeering statute, NRS 207.400, sections (1)(a)(1)-(2), (1)(b) and (1)(c)(1)-(2), by obtaining services, money or property by false pretenses. After first allowing Hale to file an amended complaint, the trial court dismissed Hale's civil RICO claim with prejudice, pursuant to NRCP 12(b)(5). We affirm the dismissal.

Nevada's Civil RICO Statute

Nevada's anti-racketeering statutes, NRS 207.350 through NRS 207.520, inclusive, were enacted in 1983 ² and are patterned after the federal Racketeer Influenced and Corrupt Organizations, or "RICO," statutes, 18 U.S.C. §§ 1961-1968. Like their federal counterparts, Nevada's anti-racketeering statutes provide for a civil cause of action for injuries resulting from racketeering activities under which a plaintiff may recover treble damages, attorney's fees and litigation costs. See NRS 207.470. ³

Pursuant to NRS 207.470 and NRS 207.400, a civil RICO cause of action may be based upon allegations and proof that the defendants

engag[ed] in at least two crimes related to racketeering that have the same or similar pattern, intents, results, accomplices, victims or methods of commission, or are otherwise interrelated by distinguishing characteristics and are not isolated incidents, if at least one of the incidents occurred after July 1, 1983, and the last of the incidents occurred within 5 years after a prior commission of a crime related to racketeering.

NRS 207.390. "Crimes related to racketeering" are enumerated in NRS 207.360 and include the crime of obtaining money or property valued at $100 or more by false pretenses, the crime that Hale has attempted to charge in his fourth cause of action. See NRS 207.360(26).

Prior Criminal Convictions and Racketeering Injuries

Hale's amended complaint appears to center on his claim that Burkhardt engaged in three different criminal "schemes." Following oral argument in this case, we ordered further briefing on two questions which have assumed importance in comparable RICO cases and which were not addressed in the parties' briefs. We asked: (1) whether proof of conviction of crimes related to racketeering (i.e. "predicate crimes") or of a RICO violation is a prerequisite to a civil RICO cause of action; and (2) whether it is necessary to demonstrate a "racketeering injury" different from that caused by the "predicate crimes" themselves. While these questions have been resolved in the federal courts, ⁴ we note that Nevada's civil RICO statute differs in some respects from the federal civil RICO statute.

After careful consideration of the parties' arguments on these issues, we decide that proof of prior convictions of "predicate crimes" or of a RICO violation is not a prerequisite to a civil RICO cause of action brought pursuant to NRS 207.470. We note that NRS 207.470(2) provides that "[a] final judgment or decree rendered in favor of the state in any criminal proceeding under NRS 205.322 or 207.400 estops the defendant in any subsequent civil action or proceeding from denying the essential allegations of the criminal offense." We are persuaded by Hale's argument that to require proof of a prior conviction would render NRS 207.470(2) superfluous, in violation of well-settled principles of statutory construction. See e.g. McCrackin v. Elko Cty. School Dist., 103 Nev. 655, 747 P.2d 1373 (1987). We further agree with Hale that the legislature's omission of the term "conviction" in the text of NRS 207.360, NRS 207.390, NRS 207.400 and NRS 207.470 raises the presumption that it was not the legislature's intent to require proof of a conviction as a prerequisite to a civil RICO claim in Nevada's courts. Cf. 4447 Corp. v. Goldsmith, 504 N.E.2d 559 (Ind.1987).

We further decide that a plaintiff bringing a civil RICO action under NRS 207.470 need not allege an injury separate and distinct from the harm caused by the predicate acts themselves. Again, we agree with appellant Hale that NRS 207.400 and NRS 207.470--when read in conjunction with their ancillary provisions--are sufficiently clear in specifying the type of racketeering injury contemplated by the legislature that it is unnecessary for this court to attempt to create or define judicially a special racketeering injury.

Failure to State a Claim Upon Which Relief Can Be Granted

Having decided that a civil RICO plaintiff need not plead and prove either criminal convictions or separate "racketeering injuries," we next consider Hale's principal issue on appeal, namely, whether the trial court erred in dismissing Hale's fourth cause of action on the ground that it does not state a claim upon which relief can be granted. In so doing, we are mindful that the trial court's NRCP 12(b)(5) dismissal of the RICO cause of action must be carefully reviewed. A claim should not be dismissed on this ground unless it appears to a certainty that the plaintiff is not entitled to relief under any set of facts which could be proved in support of the claim. Edgar v Wagner, 101 Nev. 226, 699 P.2d 110 (1985). It is for this reason that we analyze in some detail the three criminal "schemes" which plaintiff has set forth in support of his RICO claim. We conclude that Hale has failed to charge the requisite predicate crimes and thus fails to state a claim upon which relief can be granted.

Presumably (although not specifically charged) the "predicate crimes" upon which the RICO cause of action is based are violations of NRS 205.380, obtaining money, property or labor under false pretenses. A false pretense is a representation of some fact or circumstance which is not true and is calculated to mislead; it may consist of any words or actions intended to deceive. Buckner v. State, 95 Nev. 117, 590 P.2d 628 (1979).

The principal defect in Hale's pleading is that no false pretense is averred. In reading each of the three supposedly criminal schemes set forth in the complaint, we are unable to determine just what, if any, untrue representations Burkhardt is charged with having criminally made to Hale. Even where conclusory statements hint at what might relate to some kind of misrepresentation, the statements are so lacking in content as to render them unintelligible as accusatory averments. Absent allegations of false pretenses, pleading of the so-called predicate crimes is jurisdictionally deficient, and Hale is not entitled to any RICO relief under this pleading.

Even had the narration of the three supposed "schemes" stated the elements of a false pretenses crime and thus charged criminal violation of NRS 205.380, the pleading lacks the kind of specificity that is called for in making such allegations. Not only is there a basic failure to articulate any misrepresentation on the part of respondents, there is no information provided in the complaint as to when, where or how such false representations are claimed to have been made.

The federal courts have demanded specificity in pleading the racketeering acts in a civil RICO cause of action. For example, the court in Bache Halsey Stuart Shields v. Tracy Collins Bank, 558 F.Supp. 1042 (C.D.Utah 1983), ruled that the "factual basis" of acts of racketeering must be "set out with particularity." Bache Halsey, 558 F.Supp. at 1045-46; see also Bamco 18 v. Reeves, 675 F.Supp. 826 (S.D.N.Y.1987); Banco de Desarrollo Agropecuario v. Gibbs, 640 F.Supp. 1168 (S.D.Fla.1986); Laterza v. American Broadcasting Co., Inc., 581 F.Supp. 408 (S.D.N.Y.1984). As in federal jurisprudence, an action brought under NRS 207.470, although civil in nature, nevertheless may involve the pleading of racketeering-related predicate crimes; and there is no reason the requirement of pleading with particularity should not apply in state actions just as it does in the federal context.

In addition to recognizing the quasi-criminal nature of the civil RICO cause of action, the court in Bache Halsey expressed two other reasons for its insistence on specificity in a civil RICO pleading. First, the courts need sufficient facts in the pleading to enable them to distinguish between well founded and frivolous claims in order to prevent the "overenthusiastic" use of RICO. Second, and of equal importance, such specificity is necessary to enable the RICO defendant to prepare a defense against a treble damages claim.

While Nevada has yet to deal with the explosion of RICO litigation experienced in the federal courts, we nevertheless have a present concern that civil RICO actions be pleaded with sufficient specificity because of the very serious consequences attached to the allegations of criminal conduct that are the essence of this kind of law suit. Not only is a civil RICO defendant accused of committing a criminal offense--which carries with it the potential for considerable social stigma--such a defendant is also confronted with the possibility of an adverse treble damages judgment.

Because the present civil ...