Medallion Television Enterprises, Inc. v. SelecTV of California, Inc.

• Decision Date: 26 February 1988
• Docket Number: No. 86-5595,86-5595
• Citation: 833 F.2d 1360
• Parties: RICO Bus.Disp.Guide 6815 MEDALLION TELEVISION ENTERPRISES, INC., John Ettlinger, Plaintiffs-Appellants, v. SelecTV OF CALIFORNIA, INC., James Levitus, Lionel Schaen, Richard Kulis, Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1360

833 F.2d 1360

RICO Bus.Disp.Guide 6815

MEDALLION TELEVISION ENTERPRISES, INC., John Ettlinger Plaintiffs-Appellants, v. SelecTV OF CALIFORNIA, INC., James Levitus, Lionel Schaen Richard Kulis, Defendants-Appellees.

No. 86-5595.

United States Court of Appeals Ninth Circuit.

Argued and Submitted Sept. 10, 1987.

Decided Dec. 9, 1987.

As Amended Feb. 26, 1988.

Avery H. Einhorn, Beverly Hills, Cal., for plaintiffs-appellants.

J. Jay Rakow and Christina Snyder, Wyman, Bautzer, Christensen, Kuchel & Silbert, Los Angeles, Cal., for defendants-appellees.

Appeal from the United States District Court for the Central District of California.

Before SCHROEDER, NELSON and NORRIS, Circuit Judges.

NORRIS, Circuit Judge:

Medallion Television Enterprises, Inc. and its owner John Ettlinger (collectively, "Medallion") appeal the district court's grant of summary judgment in favor of SelecTV of California, Inc. and its officers and directors Lionel Schaen, James LeVitus, and Richard Kulis (collectively, "SelecTV") in this civil suit under the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. Sec. 1964(c). Medallion contends that the district court erred in determining, as a matter of law, that the various allegedly fraudulent acts committed by SelecTV did not constitute a "pattern of racketeering activity" under RICO, 18 U.S.C. Sec. 1961(5). We affirm.

I

Medallion and SelecTV are in the business of broadcasting and distributing television programs. Both believed that a professional boxing match between Muhammed Ali and Trevor Berbick that was to be held in December 1981 in the Bahamas provided the opportunity for a potentially lucrative broadcasting venture. Ettlinger obtained from the match promoter the right of first refusal to acquire the broadcast rights to the fight. Shortly thereafter, Ettlinger spoke by telephone with Schaen, the president of SelecTV, and arranged a meeting to discuss jointly acquiring and exploiting the telecast rights. At the meeting, Schaen allegedly misrepresented to Ettlinger that SelecTV had commitments from pay and cable television stations around the United States to pay a total of at least two million dollars to telecast the fight.

Several days later, Medallion and SelecTV entered into a joint venture to acquire the rights and to sell the telecast to pay and cable television stations. The joint venture purchased the rights from the Bahamanian fight promoter for a price in excess of two million dollars. SelecTV provided a corporate guarantee of payment for part of that sum, and Ettlinger obtained two letters of credit for more than one million dollars from his Chicago bank to cover the balance of the purchase price. Medallion later discovered that SelecTV did not in fact have two million dollars' worth of broadcast licensing agreements with television stations. The parties were unable to sell telecast rights to as many stations as they had anticipated, and both Medallion and SelecTV lost money in the joint venture.

Medallion filed this suit seeking to hold SelecTV responsible for its losses. The complaint alleged, among other things, that SelecTV's representations about the number of licensing agreements it had obtained had induced Medallion to enter into the joint venture and to obtain the letters of credit, and that these representations constituted mail fraud, wire fraud, and interstate transportation of stolen property, in violation of 18 U.S.C. Secs. 1341, 1343, and 2314, respectively. These, the complaint alleged, formed a "pattern of racketeering activity" rendering SelecTV liable for treble damages under the civil liability provisions of RICO, 18 U.S.C. Sec. 1964(c). Medallion also alleged various pendent state claims.

After lengthy discovery and pretrial skirmishing, the district court granted SelecTV's motion for summary judgment on the RICO claims and dismissed the pendent state claims. Medallion TV Enterprises, Inc. v. SelecTV of California, Inc., 627 F.Supp. 1290 (C.D.Cal.1986) [hereinafter Medallion TV ]. The sole issue on appeal is whether the alleged acts of mail fraud, wire fraud, and interstate transportation of stolen property constitute a "pattern of racketeering activity." We agree with the district court that they do not.

II

This court reviews de novo a grant of summary judgment and will affirm if the pleadings and supporting materials show the absence of a genuine issue of material fact and that the moving party is entitled to judgment as a matter of law. California Architectural Bldg. Prods., Inc. v. Franciscan Ceramics, Inc., 818 F.2d 1466, 1468 (9th Cir.1987) [hereinafter California Architectural ], cert. denied, ------ U.S. --------, 108 S.Ct. 698, 699, --- L.Ed.2d ---- (1987).

Civil liability under RICO is premised on violation of one or more of the provisions of section 1962. 18 U.S.C. Sec. 1964(c). The provisions at issue here are section 1962(b), which prohibits a person from acquiring or maintaining any interest in or control of an enterprise through a pattern of racketeering activity, and section 1962(c), which prohibits a person from participating in the conduct of the affairs of an enterprise through a pattern of racketeering activity. 18 U.S.C. Sec. 1962.

The district court determined that the joint venture was an enterprise and that the allegedly fraudulent acts could constitute racketeering activity within the meaning of RICO. Medallion TV, 627 F.Supp. at 1294-95; see 18 U.S.C. Sec. 1961(1) and (4). The predicate acts that the court thought to have been alleged were wire fraud, in the form of telephone calls between Schaen and Ettlinger in which Schaen induced Ettlinger to meet to discuss forming the joint venture, and mail fraud and interstate transportation of stolen property, in connection with SelecTV's having caused Ettlinger to transfer the letters of credit from his Chicago bank to the Bahamas. Medallion TV, 627 F.Supp. at 1293-94. These determinations are not seriously contested on appeal. Accordingly, the only issue for us to decide is whether the predicate acts constitute a "pattern of racketeering activity."

What suffices to establish a pattern of racketeering activity has generated much discussion in the federal courts recently. ¹ The number and diversity of opinions is due, at least in part, to the fact that RICO does not define the term; RICO states only that a " 'pattern of racketeering activity' requires at least two acts of racketeering activity." 18 U.S.C. Sec. 1961(5). The Supreme Court also has not spoken definitively on this question. It has suggested, however, in reliance on the legislative history, that "two isolated acts of racketeering activity do not constitute a pattern.... 'The target of [RICO] is thus not sporadic activity. The infiltration of legitimate business normally requires more than one "racketeering activity" and the threat of continuing activity to be effective. It is this factor of continuity plus relationship which combines to produce a pattern.' " Sedima, S.P.R.L. v. Imrex Co., Inc., 473 U.S. 479, 496 n. 14, 105 S.Ct. 3275, 3285 n. 14, 87 L.Ed.2d 346 (1985) [hereinafter Sedima ] (quoting S.Rep. No. 617, 91 st Cong 2d Sess. 158 (1969)) (emphasis added by the Supreme Court). The Court noted that the definition of pattern given elsewhere in the same bill could provide additional guidance: " '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.' " Id. (quoting 18 U.S.C. Sec. 3575(e)).

The articulation of a coherent definition of "pattern" is essential to the rational development of RICO law. The Court observed in Sedima that the extension of civil RICO to include many fraud claims may be attributable to "the failure of Congress and the courts to develop a meaningful concept of 'pattern.' " 473 U.S. at 500, 105 S.Ct. at 3287. Moreover, as Justice Powell suggested in his dissent in Sedima, a proper construction of the pattern requirement "could go a long way toward limiting the reach of the statute to its intended target--organized crime." Id. at 528, 105 S.Ct. at 3290 (Powell, J., dissenting). See generally Note, Reconsideration of Pattern in Civil RICO Offenses, 62 Notre Dame L.Rev. 83 (1986).

It is on this poorly mapped terrain that this circuit has, in recent cases, explored what constitutes a pattern of racketeering activity. United Energy Owners Comm., Inc. v. United States Energy Management Sys., Inc., 837 F.2d 356, 360--61 (9th Cir.1988)[hereinafter United Energy]; Jarvis v. Regan, 833 F.2d 149, 152-153 (9th Cir.1987); Sun Sav. & Loan Ass'n v. Dierdorff, 825 F.2d 187, 191-94 (9th Cir.1987) [hereinafter Sun Savings ]; California Architectural, 818 F.2d at 1469; Schreiber Distrib. Co. v. Serv-Well Furniture Co., 806 F.2d 1393, 1399 (9th Cir.1986) [hereinafter Schreiber ]; see also Televideo Sys., Inc. v. Heidenthal, 826 F.2d 915, 918 (9th Cir.1987) (per curiam) (finding pattern to be established without discussion of a general definition of pattern). Although we have not adopted Sedima's "continuity plus relationship" dictum as "a determinative two-pronged test," those factors are relevant considerations. Sun Savings, 825 F.2d at 192.

Whether the predicate acts alleged or proven are sufficiently related is seldom at issue, see Sun Savings, 825 F.2d at 192, and this case is no exception. There is no question that the predicate acts were related: all were directed toward inducing Medallion to enter the joint venture and to provide funds to obtain the telecast rights.

The presence or absence of continuity among the acts is the distinguishing factor in our cases and is the factor that most influences our decision in this case. Continuity does not require a showing that the defendants engaged in more than one "scheme" or "criminal episode." United Energy, 837 F.2d at...