Medallion TV Enterprises v. SelecTV of California

• Citation: 627 F. Supp. 1290
• Decision Date: 31 January 1986
• Docket Number: No. CV 82-5195 PAR (MCx).,CV 82-5195 PAR (MCx).
• Parties: MEDALLION TV ENTERPRISES, INC., et al., Plaintiffs, v. SELECTV OF CALIFORNIA, INC., et al., Defendants.
• Court: U.S. District Court — Central District of California

627 F. Supp. 1290

MEDALLION TV ENTERPRISES, INC., et al., Plaintiffs, v. SELECTV OF CALIFORNIA, INC., et al., Defendants.

No. CV 82-5195 PAR (MCx).

United States District Court, C.D. California.

January 31, 1986.

COPYRIGHT MATERIAL OMITTED

Avery H. Einhorn, Flax and Rosenfeld, Beverly Hills, Cal., for plaintiffs.

Louis R. Miller, Wyman, Bautzer, Rothman, Kuchel & Silbert, Los Angeles, Cal., for defendants.

AMENDED MEMORANDUM OF DECISION AND ORDER

RYMER, District Judge.

Plaintiffs Medallion TV Enterprises, Inc. ("Medallion") and its owner, John Ettlinger, have brought this action against SelecTV of California ("SelecTV"), and its officers and directors James LeVitus, Lionel Schaen, and Richard Kulis for violation of the Racketeer Influenced and Corrupt Organizations ("RICO") Act, 18 U.S.C. §§ 1962(b), (c), (d), as well as for various state law claims. The Court has jurisdiction over this action pursuant to 18 U.S.C. § 1964(c) and the doctrine of pendent jurisdiction.

Defendants move for summary judgment under Fed.R.Civ.P. 56, essentially asking the Court to reconsider its June 28, 1984 Memorandum Of Decision And Order ("Order") denying defendants' previous motion for summary judgment, in light of the United States Supreme Court's recent decision in Sedima, S.P.R.L. v. Imrex Co., ___ U.S. ___, 105 S.Ct. 3275, 87 L.Ed.2d 346 (1985) and this Court's decision in Allington v. Carpenter, 619 F.Supp. 474 (C.D. Cal.1985). For the reasons stated below, defendants' motion is granted.

I. INTRODUCTION

To be liable under 18 U.S.C. § 1962(b), a defendant must (1) acquire or maintain (2) any interest in or control of any enterprise (3) through a "pattern" (4) of "racketeering activity." To be liable under Section 1962(c), a defendant must (1) participate (2) in the affairs of an "enterprise" (3) through a "pattern" (4) of "racketeering activity." In addition, Section 1962(d) renders a defendant liable for conspiring to violate Sections 1962(b) and 1962(c). "Racketeering activity" is defined as any act indictable under several provisions of Title 18 of the United States Code. 18 U.S.C. § 1961(1)(B). The acts, enumerated in the RICO Act, are commonly called "predicate acts" and include the conduct alleged by plaintiffs: mail fraud, 18 U.S.C. § 1341; wire fraud, id. § 1343; and interstate transportation of stolen property, id. § 2314.

The facts of this case, described in the Court's Order and not genuinely controverted by the parties in this motion,¹ are as follows. Plaintiffs and defendants sought to obtain the rights to and to telecast the heavyweight prizefight between Muhammed Ali and Trevor Berbick in the Bahamas on December 11, 1981. In September or October 1981, Ettlinger obtained from the fight promoter the right of first refusal for television rights to the fight. In early October, Ettlinger and the individual defendants, who controlled SelecTV, met to discuss the possibility of joining together to telecast the fight. Eventually, plaintiff Medallion and defendant SelecTV entered into a joint venture, called Medsel, to acquire and exploit the rights by selling the telecast to cable and pay television stations. The agreement was later reduced to writing.² In late October, Medsel obtained the telecast rights from Sports Internationale, the Bahamian fight promoter. As part of the Medsel joint venture agreement, SelecTV agreed to sell the television rights to pay and cable television stations in the United States and Canada. Medallion assumed responsibility for selling telecast rights throughout the rest of the world.

Although SelecTV and Medallion attempted to sell the rights, the sales results were disappointing. Both SelecTV and Medallion lost money on the joint venture. On October 6, 1982, plaintiffs filed their Complaint, seeking to hold defendants responsible for their losses in the fight.

In denying defendants' motion for summary judgment in its June 28, 1984 Order, the Court relied on pre-Sedima law that allowed a civil RICO claim to be based on two or more predicate acts, even if those predicate acts arose from the same criminal transaction. The Court found that there was a genuine controversy of fact regarding the existence of a scheme to defraud by defendants that resulted in the following predicate acts: wire fraud, in connection with telephone calls by Schaen to Ettlinger on October 8 and 9 regarding a face-to-face meeting at a restaurant to discuss entering into the venture, at which Schaen allegedly made fraudulent representations; mail fraud, in connection with Schaen's and LeVitus's causing Ettlinger to use the telephone on November 9 to transfer letters of credit from his Chicago bank to the Bahamas; and transportation of stolen property, also in connection with Schaen's and LeVitus's causing Ettlinger to make the transfer.³ In addition, the Court specified two issues to be without substantial controversy. First, it found that an internal memorandum of November 30, 1981 from Schaen to LeVitus, which was mailed to Ettlinger and which allegedly contained misrepresentations of sales figures, was not mailed in furtherance of the scheme to defraud. Second, the Court ruled that phone calls and mailings by defendants to television stations in their sales efforts, including letters, contracts, and offers, were not made in furtherance of the scheme to defraud.⁴

II. LIABILITY UNDER 18 U.S.C. §§ 1962(b), (c)

Viewing the facts in the light most favorable to the plaintiffs in this motion for summary judgment, the following predicate acts may exist: the telephone calls on October 8 and 9, 1981 between Schaen and Ettlinger; and Ettlinger's transfer of the letters of credit on November 9 as a result of those conversations. In its previous Order, the Court relied on pre-Sedima law holding that the predicate acts alleged by plaintiffs, if proved, could support RICO liability. In light of Sedima, however, the Court concludes that the predicate acts, even if proved, could not support a finding of a "pattern" as required for liability under Section 1962(c).

1. Enterprise.

Plaintiffs allege that SelecTV and Medsel were both enterprises for the purposes of 18 U.S.C. §§ 1961(4), 1962(b), (c) (Complaint ¶¶ 26, 27). Defendants argues that plaintiffs cannot satisfy the "enterprise" requirement. Two elements are necessary to establish an "enterprise" under 18 U.S.C. §§ 1961(4), 1962(b), (c). First, there must be "evidence of an ongoing organization, formal or informal, and ... evidence that the various associates function as a continuing unit." United States v. Turkette, 452 U.S. 576, 583, 101 S.Ct. 2524, 2528, 69 L.Ed.2d 246 (1981). Second, the enterprise must have an existence separate and apart from the pattern of activity in which it engaged. Id.; compare United States v. Tillett, 763 F.2d 628, 632 (4th Cir.1985); United States v. Riccobene, 709 F.2d 214, 221-24 (3d Cir.), cert. denied, 464 U.S. 849, 104 S.Ct. 157, 78 L.Ed.2d 145 (1983); United States v. Bledsoe, 674 F.2d 647, 665 (8th Cir.1982), cert. denied, 459 U.S. 1040, 103 S.Ct. 456, 74 L.Ed.2d 608 (1982) (a RICO enterprise must have "`an ascertainable structure' distinct from that inherent in the conduct of a pattern of racketeering activity") with United States v. Bagaric, 706 F.2d 42, 55 (2d Cir.), cert. denied, 464 U.S. 840, 104 S.Ct. 133, 78 L.Ed.2d 128 (1983); United States v. Weinstein, 762 F.2d 1522, 1536-37 (11th Cir. 1985) (upholding RICO's application to situations "where the enterprise is, in effect, no more than the sum of the predicate racketeering acts").

In the instant case, defendant SelecTV cannot be the "enterprise" for purposes of RICO, since it cannot at the same time be the "person" sued under 18 U.S.C. §§ 1962(b), (c). Rae v. Union Bank, 725 F.2d 478, 481 (9th Cir.1984); see also Bennett v. United States Trust Co., 770 F.2d 308, 314-15 (2d Cir.1985); Haroco, Inc. v. American National Bank & Trust Co., 747 F.2d 384, 400-02 (7th Cir.1984), aff'd per curiam, 473 U.S. ___, 105 S.Ct. 3291, 87 L.Ed.2d 437 (1985); Bennett v. Berg, 685 F.2d 1053, 1061 (8th Cir.1982), aff'd in part and rev'd in part on other grounds, 710 F.2d 1361 (8th Cir.), cert. denied, 464 U.S. 1008, 104 S.Ct. 527, 78 L.Ed.2d 710 (1983); Willamette Savings & Loan v. Blake & Neal Finance Co., 577 F.Supp. 1415, 1426-27 (D.Ore.1984). Neither can Medallion argue that the culpable person in this case is not SelecTV but its individual officers, employees, or agents: LeVitus, Schaen, and Kulis. "These attempts at factual distinctions do not make any real difference since a corporation cannot operate except through its officers and agents." Tarasi v. Dravo Corp., 613 F.Supp. 1235, 1237 (W.D.Pa. 1985). RICO's use of the term "enterprise" "was meant to refer to a being different from, not the same as or part of, the person whose behavior the act was designed to prohibit...." United States v. Computer Sciences Corp., 689 F.2d 1181, 1190 (4th Cir.1982), cert. denied, 459 U.S. 1105, 103 S.Ct. 729, 74 L.Ed.2d 953 (1983), cited in Rae, 725 F.2d at 481.

Nevertheless, plaintiffs could contend that Medsel' the joint enterprise entered into by Medallion and SelecTV to broadcast the Ali-Berbick fight, was the "enterprise" for purposes of RICO. Medsel is not a named defendant in this case. The facts indicate that it had an existence and purpose apart from those of the predciate acts alleged by plaintiffs; it was, in essence, more than the sum of the predicate acts. The Court therefore assumes that the "enterprise" requirement of RICO is satisfied for purposes of this summary judgment motion.⁵

2. Pattern.

The October 8 and 9 telephone calls and November 9 transfer of the letters of credit satisfy 18 U.S.C. § 1961(5)'s threshold requirement that a "pattern" include at least two acts of racketeering activity. However, as the Supreme Court noted in Sedima, "proof of two acts of racketeering activity, without more, does not establish a pattern." Sedima, 105 S.Ct. at 3285 n. 14 (quoting ...