Rectrix Aerodome Centers, Inc. v. Bmac

• Decision Date: 10 July 2009
• Docket Number: Civil Action No. 06-11246-RGS.
• Parties: RECTRIX AERODOME CENTERS, INC. v. BARNSTABLE MUNICIPAL AIRPORT COMMISSION, et al.
• Court: U.S. District Court — District of Massachusetts

632 F.Supp.2d 120

RECTRIX AERODOME CENTERS, INC. v. BARNSTABLE MUNICIPAL AIRPORT COMMISSION, et al.

Civil Action No. 06-11246-RGS.

United States District Court, D. Massachusetts.

July 10, 2009.

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COPYRIGHT MATERIAL OMITTED

Christian T. Becker, Daniel J. Fetterman, Kara H. Headley, Ronald R. Rossi, Kasowitz, Benson, Torres & Friedman LLP, New York, NY, Anne Robbins, Steven L. Schreckinger, Lynch, Brewer, Hoffman & Fink, LLP, Boston, MA, for Rectrix Aerodome Centers, Inc.

Melissa C. Allison, Kevin D. Batt, William L. Lahey, Scott P. Lewis, Anderson & Kreiger LLP, Cambridge, MA, for Barnstable Municipal Airport Commission, et al.

MEMORANDUM AND ORDER ON DEFENDANTS' MOTION FOR SUMMARY JUDGMENT

STEARNS, District Judge.

On July 20, 2006, Rectrix Aerodome Centers, Inc. (Rectrix), filed a thirteen-count Complaint against the Barnstable Municipal Airport Commission (BMAC or Airport), and five individuals.¹ On August 27, 2007, defendants filed a motion to dismiss Rectrix's claims for violation of section 2 of the Sherman Act (Count IV), and the Massachusetts Antitrust Act, Mass. Gen. Laws ch. 93, § 4 (Count V). On February 15, 2008, 534 F.Supp.2d 201 (D.Mass.2008), the court dismissed the claims, finding that the defendants were immune from antitrust liability under the state action doctrine. Now before the court is defendants' motion for summary judgment on the balance of plaintiff's claims: violations of the federal anti-racketeering statute (RICO), 18 U.S.C. § 1962, et seq.; violations of the rights to due process and equal protection, 42 U.S.C. § 1983 (the Federal Civil Rights Act); and retaliation for Rectrix's exercise of its right to free speech.² The court heard oral argument on June 19, 2009.

BACKGROUND

The material facts, viewed in the light most favorable to Rectrix as the nonmoving party, are as follows.³ In 2002, Rectrix entered into a long-term lease with the BMAC to build and operate a private jet hangar at the Airport. The lease permitted Rectrix to apply to become a fixed-base operator (FBO) as it expanded its business.⁴ Article 4 of the lease provided, in part,

2a. It is further agreed that Lessee shall not conduct or permit to be conducted on said premises any flight schools, or aircraft refueling activities specifically relating to, and including resale of aviation or jet fuels, all subject to 2(b) below.

2b. Lessee may at any time during the term of this Lease ... submit in writing to the [BMAC], Lessee's desire to modify or expand its scope of operation. Lessee agrees that any change in its scope of operation may be subject to negotiable rates and charges, with agreed upon terms and conditions to be executed by both parties on separate letters of agreement.

In addition, the lease specifically incorporated the "rules and regulations in effect at the time of the signing...."

The Airport is governed by various rules and regulations, some self-promulgated and others issued by the Federal Aviation Administration (FAA). They include the FBO Standards (Minimum Standards); the Standards of Conduct for Persons and Businesses; the Guidelines for Construction, Alteration, and Improvements at the Airport (Construction Guidelines); and the Airport Self-Service Standards (Self-Service Standards). Under the terms of the Self-Service Standards, FBOs are not permitted to sell jet fuel.⁵ The Minimum Standards, however, offer the possibility that an FBO might obtain permission to sell jet fuel. Article III, paragraph (e) of the Minimum Standards provides:

A fixed base operator shall provide all fuel services, including the sale and storage of 80-octane, 100-octane, and jet fuel, for as long as these grades are normally available for resale. The [BMAC] may limit the types of fuel to be sold.⁶

Defendants did not disclose the Minimum Standards to Rectrix until June of 2004, two years after Rectrix's lease was executed. Rectrix claims that only after it parsed through the Minimum Standards, did it realize that it had a right to sell jet fuel. However, when Rectrix applied to sell jet fuel as an FBO, defendants allegedly responded with a campaign of intimidation, discrimination, and retaliation undertaken to preserve their illegal monopoly.

The Airport on occasion submits applications to the FAA for grants to fund airport development, planning, and aviation-related projects. As a condition of funding, the FAA requires the Airport to comply with certain assurances. Among the pertinent grant guarantees are those relating to the exercise of exclusive rights, use of airport revenues, and economic nondiscrimination.

DISCUSSION

Rectrix's primary claim is that defendants are unlawfully diverting Airport revenues generated by a monopolization of the sale of jet fuel to the Town of Barnstable. According to Rectrix, the BMAC has illegally diverted (over time) $178,000 in Airport revenues to the Town Treasury.

1. RICO

To state a successful RICO claim, a plaintiff must allege four elements: "(1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity." Sedima, S.P.R.L. v. Imrex Co., Inc., 473 U.S. 479, 496, 105 S.Ct. 3275, 87 L.Ed.2d 346 (1985). Under the RICO statute, the term "`enterprise' includes any individual, partnership, corporation, association, or other legal entity, and any union or group of individuals associated in fact although not a legal entity." 18 U.S.C. § 1961(4). The existence of an enterprise is "proved by evidence of an ongoing organization, formal or informal, and by evidence that the various associates function as a continuing unit." United States v. Turkette, 452 U.S. 576, 583, 101 S.Ct. 2524, 69 L.Ed.2d 246 (1981). "Such a group need not have a hierarchical structure or chain of command." Boyle v. United States, ___ U.S. ___, 129 S.Ct. 2237, 2245, 173 L.Ed.2d 1265 (2009). However, "[t]he ... failure to identify any enterprise, distinct from a named person defendant, is fatal under RICO." Doyle v. Hasbro, Inc., 103 F.3d 186, 191 (1st Cir.1996). To conduct or participate, directly or indirectly, in the affairs of an enterprise requires a showing that a defendant took "some part in directing [the enterprise's] affairs." Reves v. Ernst & Young, 507 U.S. 170, 179, 113 S.Ct. 1163, 122 L.Ed.2d 525 (1993).

A "pattern" of racketeering activity means the commission of at least two related predicate acts over a span of years. See Schultz v. Rhode Island Hosp. Trust Nat'l Bank, N.A., 94 F.3d 721, 731-732 (1st Cir.1996). The related predicate acts must have the same or similar purposes, participants, victims, or methods, or otherwise be interrelated by distinguishing characteristics, and not be isolated events. Feinstein v. Resolution Trust Corp., 942 F.2d 34, 44 (1st Cir.1991). "Racketeering activity" includes any predicate act "which is indictable under ... section 1341 (relating to mail fraud)." Bridge v. Phoenix Bond & Indem. Co., ___ U.S. ___, 128 S.Ct. 2131, 2138, 170 L.Ed.2d 1012 (2008).

To have standing under RICO, a plaintiff must show that an injury to its business or property was "caused by the predicate acts [in this case] of wire and mail fraud." Efron v. Embassy Suites (Puerto Rico), Inc., 223 F.3d 12, 17 (1st Cir.2000). RICO causation must be established according to the familiar "proximate" rule of tort law. See Holmes v. Secs. Investor Prot. Corp., 503 U.S. 258, 268, 112 S.Ct. 1311, 117 L.Ed.2d 532 (1992). "When a court evaluates a RICO claim for proximate causation, the central question it must ask is whether the alleged violation led directly to the plaintiff's injuries." Anza v. Ideal Steel Supply Corp., 547 U.S. 451, 461, 126 S.Ct. 1991, 164 L.Ed.2d 720 (2006).

Rectrix sets out three separate enterprise theories for RICO purposes.⁷ Common to each theory is the allegation that defendants perpetrated a scheme

aimed at continuing to perpetuate and maximize [defendants'] unlawful diversion to the Town of Airport revenues (substantially derived from jet fuel sales) through maintaining their monopoly over such sales and preventing Rectrix and others from selling jet fuel at the Airport.

According to Rectrix, defendants furthered their scheme by using the mails, telephone, and facsimile lines to transmit fraudulent material. Rectrix alleges numerous specific instances where defendants committed mail fraud by: (1) representing to Rectrix that only the Self-Service Standards applied, while fraudulently concealing the existence of the Minimum Standards;⁸ (2) falsely reporting to the FAA the amount of the Airport's payments to the Town; and (3) falsely representing to the FAA that it was not diverting revenues or discriminating against tenants. Rectrix argues that defendants' scheme cost it $6.4 million in lost sales of jet fuel, as well as $700,000 in increased construction and permitting costs. The court will address the allegations in turn.

A. Concealment of the Minimum Standards

As Rectrix acknowledged at oral argument, the "central part" of its RICO theory is the alleged concealment of the existence of the Minimum Standards. Rectrix argues that the express terms of the Minimum Standards give it the right to sell jet fuel. Contract interpretation is ordinarily a question of law to be decided by the court. Nadherny v. Roseland Prop. Co., 390 F.3d 44, 48 (1st Cir.2004); Leblanc v. Friedman, 438 Mass. 592, 596, 781 N.E.2d 1283 (2003). A contract is to be construed as a rational business instrument giving effect to the intent of the parties. No part of a contract is to be ignored; words are to be interpreted in the context in which they are used, while measured against the background of other indicia of the parties' intent. Starr v. Fordham, 420 Mass. 178, 190 & n. 11, 648 N.E.2d 1261 (1995). "Whether or not a term as used by parties to a contract is ambiguous is a question of law.... However, where a term is ambiguous, its meaning presents a question of fact." Compagnie de Reassurance D'Ile de France v. New Eng. Reins. Corp., 57...