Monterey Plaza v. Local 483

• Decision Date: 11 April 2000
• Docket Number: No. 99-16714,AFL-CI,D,99-16714
• Citation: 215 F.3d 923
• Parties: (9th Cir. 2000) MONTEREY PLAZA HOTEL LIMITED PARTNERSHIP, Plaintiff-Appellant, v. LOCAL 483 OF THE HOTEL EMPLOYEES AND RESTAURANT ORDER AND EMPLOYEES UNION,efendant-Appellee
• Court: U.S. Court of Appeals — Ninth Circuit

Page 923

215 F.3d 923 (9th Cir. 2000)

MONTEREY PLAZA HOTEL LIMITED PARTNERSHIP, Plaintiff-Appellant, v. LOCAL 483 OF THE HOTEL EMPLOYEES AND RESTAURANT ORDER AND EMPLOYEES UNION, AFL-CIO, Defendant-Appellee.

No. 99-16714

U.S. Court of Appeals for the Ninth Circuit

Argued and Submitted April 11, 2000--San Francisco, California

Memorandum Filed April 24, 2000

Filed June 7, 2000

Neil O. Andrus, Jeffer, Mangels, Butler & Marmaro, San Francisco, California, Martin E. Crandall, Crandall & Associates, Dearborn Heights, Michigan, for the plaintiff-appellant.

Michael T. Anderson, Davis, Cowell & Bowe, San Francisco, California, for the defendant-appellee.

Thomas Wetterer, Greenpeace USA, Washington, D.C., for amicus curiae Greenpeace USA.

Appeal from the United States District Court for the Northern District of California; Ronald M. Whyte, District Judge, Presiding. D.C. No. CV 97-20800-RMW/EAI

Before: Alfred T. Goodwin, Melvin Brunetti and Sidney R. Thomas, Circuit Judges.

ORDER

The appellee's request for publication is GRANTED. The memorandum disposition filed April 24, 2000, is redesignated as an authored opinion by Judge Goodwin, with modifications.

OPINION

GOODWIN, Circuit Judge:

Monterey Plaza Hotel Limited Partnership (the "Hotel") appeals the district court's dismissal of its complaint against Local 483 of the Hotel Employees and Restaurant Employees Union, AFL-CIO (the "Union"). The Hotel alleges that the Union violated the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. S 1961 et seq. by waging a campaign of violent picketing, extortion and intimidation against the employees and customers of the Hotel. The appeal challenges the district court's ruling that the Hotel failed to state predicate acts of mail and wire fraud under RICO, and that this federal action is barred by the doctrine of resjudicata. The Union agrees with the court's ultimate dismissal of the case, but urges us to reverse the district court's statement of its reasons. The district court expressed the opinion that the Hotel had sufficiently stated an extortion claim under the Hobbs Act, 18 U.S.C. S 1951 but was barred by resjudicata from pursuing the claim in federal court.

FACTUAL & PROCEDURAL BACKGROUND

The case before us is the latest chapter in a long controversy. In June 1995, the Union filed an unfair labor practices charge with the National Labor Relations Board ("NLRB") asserting that the Hotel improperly threatened and questioned Hotel employees regarding their desire to support the Union. This charge was dismissed on December 17, 1996. In the meantime, the Hotel had filed a complaint against the Union in California state court seeking damages and injunctive relief against violent picketing by the Union in front of the Hotel. See Appellee's Motion for Judicial Notice, Ex. B. That action was resolved on December 3, 1996 by a stipulation of the parties which imposed time, place and manner restrictions on the picketing. Acrimony continued, however, as the Hotel filed a second suit in state court in March of 1997 claiming that the Union and its agent Maya Holmes defamed the Hotel in a television news broadcast. Holmes stated (incorrectly) during the live TV interview that "the federal government has found that, you know, the firings [of two Hotel employees] were illegal" because they were allegedly attempting to organize Hotel employees. The Hotel states that as a result of this statement, it suffered substantial negative publicity and a loss of potential business amounting to $1,635,339.

Before the California Court of Appeal could rule on the defamation claim, the Hotel filed a RICO action in federal district court on September 10, 1997. The Hotel contends that the Union has engaged in a highly sophisticated "coordinated corporate campaign" designed to effect the Hotel's economic ruin rather than to advance any legitimate bargaining agenda. The Hotel states that the Union has engaged "in a pattern of illegal acts, including violence, extortion, illegitimate economic coercion, mail and wire fraud, and intimidation, that amounted to racketeering activity" prohibited by RICO, specifically the Hobbs Act and the mail and wire fraud statutes. The Hotel alleges that the Union used the U.S. mail and interstate wire communications in furtherance of its scheme to defraud the Hotel. The Union disputes the charges, and responds that it was simply exercising its constitutional right to free speech in the context of a labor dispute.

The district court held that the Hotel failed to state predicate acts of mail and wire fraud under 18 U.S.C.SS 1341 and 1343, but said in interlocutory language that the hotel had alleged enough to raise an extortion claim under the Hobbs Act, 18 U.S.C. S 1951. With respect to the mail and wire fraud charges, the court reasoned that the statutes protect only property interests, and not misrepresentations made to a business' current and potential customers. In response to the Union's contention that this action should be barred by the resjudicata effect of the Hotel's two prior actions in California state court, the district court initially stayed the federal case pending the resolution of the state court defamation claim. The defamation claim was subsequently dismissed by the California Court of Appeal, as a meritless SLAPP suit (Strategic Lawsuit Against Public Participation) aimed at preventing citizens from exercising their political rights. However, the Hotel failed to amend its federal complaint, or otherwise to argue why res-judicata should not bar this action. Accordingly, the district court held in favor of the Union that the "primary rights theory" of res-judicata operated to bar the Hotel's federal claim. The court found that at the crux of this RICO action lay the same harm to customer relations and business interests as was previously ruled on by the California state courts, and ordered the whole case dismissed.

The Hotel timely filed this appeal, arguing that it did indeed state predicate acts of mail and wire fraud under RICO by alleging the Union's actions caused harm to the Hotel's goodwill, a recognized property interest in the state of California. Additionally, the Hotel maintains that the district court misapplied the "primary rights test" of resjudicata doctrine because neither the facts nor the harm suffered by the Hotel here are the same as alleged in the prior injunction or defamation state lawsuits. The Union urges that the district court's holding regarding resjudicata and mail and wire fraud was correct, but that it wrongly announced that the Hotel had sufficiently stated an extortion claim under the Hobbs Act. This was a misstatement of the applicable law, but it was harmless, as the case was correctly dismissed for other good and sufficient reasons.

STANDARD OF REVIEW

A dismissal for failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6) is reviewed de novo. TwoRivers v. Lewis, 174 F.3d 987, 991 (9th Cir. 1999).

DISCUSSION

1. Mail and Wire Fraud

The Hotel contends that the district court erred in concluding that its complaint failed to state predicate acts of mail and wire fraud under 18 U.S.C. SS 1341 and 1343. The statutes at issue, SS 1341 and 1343, are designed to prevent deceptive communications by wire, radio or television. They explicitly require an intent to obtain "money or property[from the one who is deceived] by means of false or fraudulent pretenses, representations, or promises." SS 1341 and 1343; see U.S. v. Lew, 875 F.2d 219, 221 (9th Cir. 1989).

The district court held that a business entity's customers or prospective customers do not constitute a "property" interest protected by the mail and wire fraud statutes, and hence dismissed the Hotel's claims. While the district court's reasoning that customer goodwill is not a recognized property interest, was stated too broadly to have any value as precedent, the Hotel vainly expected a case involving aS 1983 action to control one alleging mail or wire fraud. See Sorranno's Gasco v. Morgan, 874 F.2d 1310, 1316 (9th Cir. 1989) (plaintiff's business reputation alone was insufficient to establish a protected liberty interest, but "[t]he goodwill of one's business is a property interest entitled to protection"). Section 1983 provides a remedy for deprivation of federal rights, whereas the mail and wire fraud statutes, SS 1341 and 1343, prohibit use of the mails and wires to obtain money or property from the one who is deceived. See Lew, 875 F.2d at 221. Thus, accepting the business usage that a hotel's goodwill can be, for some purposes, a recognized property right, the Hotel has failed to prove that the Union sought to obtain that property through deceptive means.

More damaging to the Hotel's mail and wire fraud claims is WMX Technologies v. Miller, 197 F.3d 367, 374-376 (9th Cir. 1999) (en banc). We held there that the dissemination of a defamatory government report did not deprive a California business of "property" in its customer goodwill. Id. In fact, we held that while "[t]his would present a classic case for a state court defamation action," it would not support an action under S 1983. Id. at 375. The policy rationale behind the court's opinion was intended to prohibit plaintiffs from using S 1983 to remedy property deprivation or a decline in value caused by the publication of defamatory remarks. The court said that to do otherwise "would have the anomalous effect of extending constitutional protection to the reputation of business concerns, while denying the same protection to the reputation of individuals." Id. at 376.

Hence, we affirm the district court's conclusion that the Hotel failed to state the requisite predicate acts of mail and wire fraud. The Union did not obtain property by deceiving the Hotel or its customers the Union was simply carrying on a strategy in a protracted labor dispute. The Union's conduct may have been vexatious or...