Medical Inc. v. Angicor Ltd., 3-85 CIV 625.

• Decision Date: 18 January 1988
• Docket Number: No. 3-85 CIV 625.,3-85 CIV 625.
• Citation: 677 F. Supp. 1000
• Parties: MEDICAL INCORPORATED, Plaintiff, v. ANGICOR LIMITED, and Robert L. Kaster, Defendants.
• Court: U.S. District Court — District of Minnesota

677 F. Supp. 1000

MEDICAL INCORPORATED, Plaintiff, v. ANGICOR LIMITED, and Robert L. Kaster, Defendants.

No. 3-85 CIV 625.

United States District Court, D. Minnesota, Third Division.

January 18, 1988.

Leonard, Street and Deinard by Robert P. Davis and Robert L. DeMay, Minneapolis, Minn., for plaintiff.

Thompson and Lundquist, Ltd. by John W. Lundquist, Minneapolis, Minn., for defendant Robert L. Kaster.

Brenner, Workinger and Thompson by William L. Moran and Joseph G. Thompson, Edina, Minn., for defendant Angicor Ltd.

ORDER

ALSOP, Chief Judge.

This matter comes before the undersigned upon defendant Kaster's motion to dismiss and defendant Angicor's motion to dismiss, or alternatively for summary judgment.¹ Although the motions were submitted to the court at different times, the court will address both motions in this order because the motions involve common issues of law and fact.

I. BACKGROUND.

Because the respective motions are essentially motions to dismiss, all allegations in the amended complaint are assumed to be true and the motions should be denied unless "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Bennett v. Berg, 685 F.2d 1053, 1057 (8th Cir.1982), en banc, 710 F.2d 1361 (1983), cert. denied, 464 U.S. 1008, 104 S.Ct. 527, 78 L.Ed.2d 710 (1983).

In its amended complaint, Medical alleges that defendants formulated and implemented a fraudulent scheme to misappropriate Medical's trade secrets and to wrongfully use such information in competition with Medical. Specifically, plaintiff alleges that while employed with Medical, Kaster was privy to Medical's trade secrets, and that such disclosures were made to Kaster only after he agreed not to disclose them to others or to use them himself except in his employment at Medical. Plaintiff further alleges that following termination of his employment with Medical, Kaster took or retained Medical's proprietary information relating to heart valves and subsequently used such confidential information to manufacture and sell heart valves in unfair competition with Medical. Defendants' alleged use of Medical's trade secrets allegedly violated several federal statutory laws, including 18 U.S.C. § 1341 (mail fraud), § 1343 (wire fraud), and § 2314 (transportation of stolen goods).

Plaintiff's amended complaint contains four counts. In counts I and II, plaintiff asserts a cause of action under the Racketeer Influenced and Corrupt Organization Act ("RICO") against Kaster and Angicor respectively. In count III, plaintiff asserts a pendant state law claim for misappropriation of trade secrets against both Kaster and Angicor. In count IV, plaintiff asserts a pendent state law claim for unjust enrichment against Kaster relating to a state court action entitled Regents of the University of Minnesota v. Medical, Inc.

Defendant Kaster moves for dismissal of the entire amended complaint as against Kaster. Kaster argues that plaintiff failed to state a claim with regard to the RICO and misappropriation of trade secrets counts and that plaintiff's claim of unjust enrichment is collaterally stopped. Alternatively, Kaster requests dismissal of the state law claims without prejudice (counts III and IV) under Gibbs if the court dismisses the RICO claims.

Defendant Angicor also moves to dismiss the entire complaint as against Angicor. Like Kaster, Angicor argues that plaintiff failed to state a claim under RICO.² Angicor argues that the remaining state law claim against Angicor should be dismissed without prejudice under Gibbs.

II. DISCUSSION.

A. RICO.

1. Pattern of Racketeering Activity.

Plaintiff alleges that defendants violated all four provisions of 18 U.S.C. § 1962. Although each of the substantive provisions, (a), (b) and (c), is directed at a particular type of conduct, the provisions have common elements of proof. Under each substantive provision, a plaintiff must allege and prove a pattern of racketeering activity. 18 U.S.C. § 1962(a), § 1962(b) and § 1962(c).

The United States Court of Appeals for the Eighth Circuit has adopted a restrictive interpretation of the pattern requirement. In addition to the universally adopted requirement that a plaintiff must allege and prove several related racketeering or predicate acts in furtherance of a single criminal scheme, the Eighth Circuit requires a plaintiff to allege and prove that a defendant has committed the same or similar racketeering activity in the past, or is engaged in other criminal activities elsewhere. Superior Oil Co. v. Fulmer, 785 F.2d 252, 257 (8th Cir.1986) (interpreting continuity plus relationship requirement of Sedima, S.P.R. L. v. Imrex Co., 473 U.S. 479, 105 S.Ct. 3275, 3285 n. 14, 87 L.Ed.2d 346 (1985)). To satisfy this latter requirement, a plaintiff must allege and prove two or more illegal or criminal schemes.

Although not providing a descriptive definition of what constitutes multiple schemes, the Eighth Circuit has provided a case-by-case definition of what does not constitute multiple criminal schemes through numerous pattern cases decided since Superior Oil. See, e.g., Holmberg v. Morrisette, 800 F.2d 205 (8th Cir.1986); Deviries v. Prudential-Bache Securities, Inc., 805 F.2d 326 (8th Cir.1986); Madden v. Gluck, 815 F.2d 1163 (8th Cir.1987), cert. denied, ___ U.S. ___, 108 S.Ct. 86, 98 L.Ed.2d 48 (1987); Ornest v. Delaware North Companies, 818 F.2d 651 (8th Cir. 1987); Allright Missouri, Inc. v. Billeter, 829 F.2d 631 (8th Cir.1987); H.J., Inc. v. Northwestern Bell Telephone Co., 829 F.2d 648 (8th Cir.1987); Terre Du Lac Assn., Inc. v. Terre Du Lac, Inc., 834 F.2d 148, 149-50 (8th Cir.1987).

These cases instruct that numerous predicate acts occurring over a long period of time do not, standing alone, constitute multiple illegal schemes. H.J., 829 F.2d 648 (8th Cir.1987) (five-year scheme not a pattern); Ornest, 818 F.2d 651 (8th Cir.1987) (eight-year fraudulent scheme to defraud plaintiffs and plaintiff's predecessors of contractual share of vending machine sales commissions not a pattern); Deviries, 805 F.2d 326 (8th Cir.1986) (six-year scheme of alleged misrepresentations and churning of investment account not a pattern). In addition, a "vast array of fraudulent activities," including a check-kiting scheme, diversion of corporate assets, defrauding of creditors by preparing and distributing false financial statements and failure to comply with the terms of a financial agreement do not, standing alone, constitute multiple criminal schemes. Gluck, 815 F.2d 1163 (8th Cir. 1987), cert. denied, ___ U.S. ___, 108 S.Ct. 86, 98 L.Ed.2d 48 (1987). Finally, even the victimization of multiple, unrelated parties over a significant period of time does not, standing alone, constitute multiple criminal schemes. See Gluck, 815 F.2d 1163 (8th Cir.1987) (victims were employees and creditors of defendant); Henning v. First Bank of Worthington, 831 F.2d 299 (8th Cir.1987) (the court stated in dicta that "simply because the Bank's single fraudulent scheme involved victims other than the Hennings, we cannot say that the Bank engaged in similar activities in the past or that it was engaged in other criminal activities elsewhere"); see also Allright Missouri, 829 F.2d 631 (8th Cir.1987).

The closest the Eighth Circuit has come to providing some of the considerations involved in determining whether conduct constitutes multiple schemes was in United States v. Kragness where the court stated:

Here we think it clear that even our more restrictive view of the pattern requirement has been met, for there is evidence of not two but three separate schemes: first, there was a scheme to import marijuana into La Junta; second, there was a cocaine-and-quaalude scheme; and third, there was a scheme to import marijuana into the Phoenix area. The cocaine-and-quaalude project constitutes a separate scheme because, inter alia, it involved drugs different from that in the other schemes, a different drug supplier from a different country, a different United States base of operations (Anadarko/Chickasha), different customers, and the participation of a number of persons, such as Benanti and his associates, who were not involved in the marijuana schemes. While the La Junta and Phoenix schemes both involved marijuana from Oaxaca, Mexico, they nonetheless were separate schemes. They involved different United States bases of operation and different methods of smuggling the marijuana into the country (the La Junta marijuana was generally flown directly from Oaxaca to the United States, while the Phoenix marijuana was first driven to a point near the United States border). Further, there were a number of participants in each scheme who took no part in the other. Finally, the two schemes were separated by a substantial period of time; the last La Junta-based drug activities were in early 1981, while the earliest Phoenix activities were in mid-1982. We consequently have little difficulty in concluding that the pattern requirement was met here.

830 F.2d 842, 858 (8th Cir.1987).

In its responsive memorandum, plaintiff lists three illegal "schemes" that it claims are separate and distinct:

1) the theft, destruction and secretion of Medical's documents and trade secrets; 2) the use of Medical's trade secrets to develop, market and finance a competing heart valve; and 3) the submission of false data to the United States Food and Drug Administration ("FDA") in order to obtain the right to export certain heart valves.

Plaintiff further alleges that defendants violated 18 U.S.C. § 1341 (mail fraud), § 1343 (wire fraud), and § 2314 (transportation of stolen goods) in carrying out the first two schemes, and 18 U.S.C. § 1341 (mail fraud) in carrying out the last scheme. If proved, each of the above-mentioned alleged violations of federal statutes would constitute racketeering activity within the meaning of the RICO statute. 18 U.S.C. § 1961(1). In...