Oceanic Cablevision, Inc. v. MD ELECTRONICS

• Decision Date: 08 February 1991
• Docket Number: Civ. No. 89-0-802.
• Citation: 771 F. Supp. 1019
• Parties: OCEANIC CABLEVISION, INC., a Hawaii corporation, Plaintiff, v. M.D. ELECTRONICS and Joseph Abboud, Defendants.
• Court: U.S. District Court — District of Nebraska

771 F. Supp. 1019

OCEANIC CABLEVISION, INC., a Hawaii corporation, Plaintiff, v. M.D. ELECTRONICS and Joseph Abboud, Defendants.

Civ. No. 89-0-802.

United States District Court, D. Nebraska.

February 8, 1991.

COPYRIGHT MATERIAL OMITTED

Soren S. Jensen, J. Russell Derr, Erickson & Sederstrom, Omaha, Neb., and Kevin S.C. Chang, Honolulu, Hawaii, for plaintiff.

Michael G. Connery, Tory M. Bishop, Kutak Rock & Campbell, Omaha, Neb., for defendants.

MEMORANDUM OPINION

STROM, Chief Judge.

This matter is before the Court on defendants M.D. Electronics (hereinafter M.D.) and Joseph Abboud's motion to dismiss plaintiff's cause of action for failure to state a claim upon which relief can be granted, Fed.R.Civ.P. 12(b)(6) (Filing No. 11). Defendants also move the Court for an order dismissing plaintiff's first and second claims for relief for failure to plead fraud with the particularity required by Fed.R.Civ.P. 9(b), or, in the alternative, pursuant to Fed.R.Civ.P. 12(e), requiring more definite and certain allegations pertaining to the predicate acts allegedly constituting violations of 18 U.S.C. §§ 1961 and 1964.

Jurisdiction is premised on 28 U.S.C. §§ 1331, 1332, 1337(a), 1338, and 18 U.S.C. §§ 1964(a) and 1964(c).

Plaintiff's amended complaint alleges the following facts. Oceanic Cablevision, Inc. (hereinafter Oceanic) is in the business of supplying cable television programming to subscribers in the Honolulu, Hawaii, area. Oceanic maintains that it has invested considerable sums in setting up and maintaining the system which receives cable programming from suppliers and transmits the programs to individual subscribers.

Oceanic's customers may purchase differing levels of service; however, the customer's access to the different levels of service available is controlled by the programming of the converter box used by the customer. Certain premium channels, such as HBO, are transmitted in a scrambled form, which is descrambled only by the equipment used by those customers who pay for the premium stations.

Oceanic has asserted a property interest in the signals it transmits to its subscribers. Defendants allegedly sold equipment which may be used in place of the equipment Oceanic provides to its customers for a monthly fee. According to Oceanic, the equipment sold by the defendants is capable of decoding or unscrambling the signals transmitted by Oceanic on its premium channels without Oceanic's knowledge or consent.

The alleged sale of the aforementioned equipment by defendants forms the basis of thirteen (13) claims for relief asserted by Oceanic:

1) Civil violation of 18 U.S.C. § 1962(c);

2) Violation of 18 U.S.C. § 1962(d) (conspiracy to violate § 1962(c));

3) Violation of 47 U.S.C. § 553(a)(1);

4) Violation of 47 U.S.C. § 605(a);

5) Violation of 18 U.S.C. § 2511(1)(a);

6) Violation of 18 U.S.C. § 2512(1);

7) Tortious interference with the contractual relationship between Oceanic and its subscribers;

8) Tortious interference with the contractual relationship between Oceanic and each of its program suppliers;

9) Tortious interference with prospective advantage;

10) Tortious interference with lawful business;

11) Unfair competition;

12) Aider and abetter liability for violation of Hawaii Rev.Stat. § 708-8200; and

13) Violation of Hawaii Rev.Stat. § 708-8200.

In considering a motion to dismiss under Fed.R.Civ.P. 12(b)(6), allegations in the complaint must be viewed in the light most favorable to plaintiff. Fusco v. Xerox Corp., 676 F.2d 332, 334 (8th Cir.1982). A complaint should not be dismissed for failure to state a claim "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." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 102, 2 L.Ed.2d 80 (1957) (footnote omitted). Thus, a dismissal under Rule 12(b)(6) is likely to be granted "only in the unusual case in which a plaintiff includes allegations which show on the face of the complaint that there is some insuperable bar to relief." Jackson Sawmill Co. v. United States, 580 F.2d 302, 306 (8th Cir.1978), cert. denied, 439 U.S. 1070, 99 S.Ct. 839, 59 L.Ed.2d 35 (1979).

Motions for a more definite statement under Fed.R.Civ.P. 12(e), are generally disfavored. Wheeler v. United States Postal Serv., 120 F.R.D. 487, 488 (M.D.Pa. 1987). Where information sought by the party moving for a more definite statement is available or properly sought through discovery, the motion should be denied. Famolare, Inc. v. Edison Bros. Stores, Inc., 525 F.Supp. 940, 949 (E.D.Cal.1981).

RACKETEER INFLUENCED AND CORRUPT ORGANIZATIONS ACT

Oceanic's first and second claims for relief attempt to bring M.D. and Abboud under the Racketeer Influenced and Corrupt Organizations Act (hereinafter RICO). Oceanic specifically alleges that M.D. is an enterprise engaged in illegal racketeering activity and that M.D. and Abboud have committed mail and wire fraud designed to defraud Oceanic. Finally, plaintiff claims that these acts of mail and wire fraud constitute a pattern of racketeering activity.

"Any person injured in his business or property by reason of a violation of section 1962 of this chapter may sue therefor in any appropriate United States district court and shall recover threefold the damages he sustains and the cost of the suit, including a reasonable attorney's fee." 18 U.S.C. § 1964(c).

Oceanic alleges defendants have violated 18 U.S.C. § 1962(c), which provides:

It shall be unlawful for any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise's affairs through a pattern of racketeering activity or collection of unlawful debt.

"A violation of § 1962(c) * * * requires (1) conduct (2) of an enterprise (3) through a pattern of (4) racketeering activity. The plaintiff must, of course, allege each of these elements to state a claim." Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 496, 105 S.Ct. 3275, 3285, 87 L.Ed.2d 346 (1985) (footnote omitted).

Defendants assert that Oceanic has failed to allege several essential RICO elements requiring the dismissal of the amended complaint, particularly: (1) failure to plead a RICO enterprise (Brief of defendants at 12); (2) failure to plead requisite predicate acts (Brief of defendants at 7); and (3) failure to plead a RICO conspiracy (Brief of defendants at 14).

RICO "proscribes conduct in which one party, the `person' subject to the statute, acts upon an entity, the `enterprise,' in such a manner that the enterprise's affairs are conducted through a pattern of racketeering." Bennett v. Berg, 685 F.2d 1053, 1061 (8th Cir.1982) (footnote omitted), rev'd in part on other grounds, 710 F.2d 1361 (8th Cir.) (en banc), cert. denied, 464 U.S. 1008, 104 S.Ct. 527, 78 L.Ed.2d 710 (1983). While some courts have held that a legal entity or formal enterprise which has actively participated and benefited from a pattern of racketeering activity can be named as both the enterprise and the person, see United States v. Hartley, 678 F.2d 961 (11th Cir.1982), cert. denied, 459 U.S. 1170, 103 S.Ct. 815, 74 L.Ed.2d 1014 (1983), the majority position, and the one adopted in this circuit and district, is that the RICO "enterprise" cannot also be the RICO "person." Atlas Pile Driving Co. v. Di Con Fin. Co., 886 F.2d 986, 995 (8th Cir.1989); Bennett v. Berg, supra; Woodruff v. Merrill Lynch, Pierce, Fenner, & Smith, Inc., No. 88-L-314, 1989 WL 224581 (D.Neb. July 14, 1989).

Defendants contend that because M.D. is identified as an enterprise in plaintiff's complaint and named as a defendant, Oceanic has failed to plead that the enterprise and the person are separate and distinct entities.

"Only a person employed by or associated with an enterprise, not the enterprise itself, may violate § 1962(c)." D. Smith & T. Reed, Civil Rico ¶ 3.07(1)(a) (1990). "The enterprise is mentioned in * * * § 1962(c) as the instrument of the person doing the racketeering, and there is no suggestion that the enterprise also may be liable * * *." Schofield v. First Commodity Corp., 793 F.2d 28, 30 (1st Cir.1986).

The Schofield court further stated:

The legislative history surrounding RICO adds to our conviction that section 1962(c) does not extend liability to the enterprise. "The legislative history forcefully supports the view that the major purpose of Title IX including § 1962(c) is to address the infiltration of business by organized crime. United States v. Turkett, 452 U.S. 576 (1981)." If the primary purpose of RICO is to "cope with the infiltration of legitimate businesses", id., it is logical that Congress would have designed section 1962(c) so that it reached the criminal but protected the victimized enterprise from liability.

Schofield, at 30-31.

The Eighth Circuit is in accord. "Section 1962(c), * * * has been interpreted as requiring that the person named as the defendant cannot also be the entity identified as the enterprise." Atlas Pile Driving, 886 F.2d at 995 (citing Bennett, 685 F.2d at 1061-62.

By seeking RICO damages against M.D., Oceanic has effectively alleged that M.D. is the RICO "enterprise" as well as the RICO "person." Plaintiff's failure to plead that the RICO "enterprise" is a separate entity from the RICO "person" is fatal to its RICO claim. See Bennett v. Berg, supra; Atlas Pile Driving, supra. See also Woodruff v. Merrill Lynch, Pierce, Fenner, & Smith, Inc., 709 F.Supp. 181, 186 (D.Neb.1989) (distinction in RICO cases is whether the enterprise and the person may be the same). In its present form, Oceanic's first cause of action should be dismissed.

Defendants also contend that plaintiff's RICO claim is deficient because Oceanic has failed to adequately plead the required predicate acts necessary to state a civil RICO claim. See 18 U.S.C. §§ 1961, 1962. Having carefully considered defe...